<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
CUMULUS MEDIA INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
ILLINOIS 4832 36-4159663
(State or other jurisdiction of (Primary standard industrial (IRS employer
incorporation or organization) classification code number) identification number)
</TABLE>
----------------------------
330 EAST KILBOURN AVE.
MILWAUKEE, WI 53202
(414) 283-4500
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
----------------------------
RICHARD W. WEENING
EXECUTIVE CHAIRMAN
LEWIS W. DICKEY, JR.
EXECUTIVE VICE CHAIRMAN
CUMULUS MEDIA INC.
330 EAST KILBOURN AVE.
MILWAUKEE, WI 53202
(414) 283-4500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------------
COPIES TO:
<TABLE>
<S> <C>
WILLIAM F. SCHWITTER, ESQ. GEORGE R. KROUSE, JR., ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP SIMPSON THACHER & BARTLETT
399 PARK AVENUE 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017
(212) 318-6000 (212) 455-2000
</TABLE>
----------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective. If any of the securities
being registered on this Form are to be offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933, check the following
box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
----------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
AMOUNT PROPOSED MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Class A Common Stock, par value $.01 per
share.................................... shares(2) $ $115,000,000 $33,925
% Series A Cumulative Exchangeable
Redeemable Preferred Stock due 2009...... shares(3) $ $133,000,000 $39,235
% Subordinated Exchange Debentures due
2009..................................... $ $ $133,000,000 (4)
% Senior Subordinated Notes due
2008..................................... $ $ $100,000,000 $29,500
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Includes shares issuable upon exercise of the Underwriters'
over-allotment option.
(3) Includes $33,000,000 of % Series A Cumulative Exchangeable Redeemable
Preferred Stock due 2009 being issued in exchange for $33,000,000 of the
Registrant's Class A Preferred Stock.
(4) In accordance with Rule 457 (i) the registration fee is calculated and based
solely on the offering price of the % Series A Cumulative Exchangeable
Redeemable Preferred Stock due 2009 and no additional fee is payable on the
% Subordinated Exchangeable Debentures.
----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains four forms of prospectus: one to be
used in connection with the offering of the Class A Common Stock in the United
States and Canada (the "U.S. Common Stock Prospectus"), one to be used in
connection with a concurrent offering of the Class A Common Stock outside the
United States and Canada (the "International Common Stock Prospectus"), one to
be used in connection with a concurrent offering of Senior Subordinated Notes
(the "Notes Prospectus") and one to be used in connection with a concurrent
offering of Series A Cumulative Exchangeable Redeemable Preferred Stock (the
"Preferred Stock Prospectus"). The U.S. Common Stock Prospectus, the
International Common Stock Prospectus, the Preferred Stock Prospectus and the
Notes Prospectus will be identical in all respects except that they will contain
different front and back cover pages, the Notes Prospectus (i) will not contain
the sections entitled "Prospectus Summary -- The Stock Offering," "Dividend
Policy," "Dilution," "Principal and Selling Stockholders," "Description of
Credit Facility and Notes," "Shares Eligible for Future Sales," or "Certain
United States Tax Consequences to Non-United States Holders of Class A Common
Stock," (ii) will contain a different legend following the "Certain Definitions
and Market and Industry Data" section, and a different "Prospectus Summary --
Risk Factors" section, "Risk Factors" section and "Underwriting" section and
(iii) will contain additional sections entitled "Prospectus Summary -- The Debt
Offering," "Principal Stockholders," "Description of Credit Facility,"
"Description of Notes," and "Certain Federal Income Tax Considerations" and the
Preferred Stock Prospectus (i) will not contain the sections entitled
"Prospectus Summary -- The Stock Offerings," "Dilution," "Principal and Selling
Stockholders," or "Certain United States Tax Consequences to Non-United States
Holders of Class A Common Stock," (ii) will contain a different legend following
the "Certain Definitions and Market and Industry Data" section, and a different
"Prospectus Summary -- Risk Factors" section, "Risk Factors" section, "Shares
Eligible for Future Sale" section and "Underwriting" section and (iii) will
contain additional sections entitled "Prospectus Summary -- The Preferred Stock
Offering," "Principal Stockholders," "Description of the Series A Preferred
Stock and Exchange Debentures," and "Certain Federal Income Tax Considerations."
The U.S. Common Stock Prospectus is included herein and is followed by (i)
those pages to be used in the International Common Stock Prospectus which differ
from those in the U.S. Common Stock Prospectus, (ii) those pages to be used in
the Notes Prospectus which differ from those in the U.S. Common Stock
Prospectus, and (iii) those pages to be used in the Preferred Stock Prospectus
which differ from those in the U.S. Common Stock Prospectus. Each of the
additional pages for the International Common Stock Prospectus included herein
has been labeled "Alternate Page for International Common Stock Prospectus."
If required pursuant to Rule 424(b) of the General Rules and the Regulations
under the Securities Act of 1933, as amended, copies of each of the prospectuses
in the forms in which they are used after the Registration Statement becomes
effective will be filed with the Securities and Exchange Commission.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold, nor may
offers to buy be accepted, prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction.
<PAGE>
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED MARCH 30, 1998
<TABLE>
<S> <C> <C>
[LOGO] SHARES
CUMULUS MEDIA INC.
CLASS A COMMON STOCK
</TABLE>
---------------------
Of the shares of Class A Common Stock, par value $.01 per share (the "Class
A Common Stock"), offered hereby, shares are being sold by Cumulus Media
Inc. (the "Company") and shares are being sold by the Selling Stockholder
(as defined herein). Of the shares of Class A Common Stock being offered,
shares are being offered in the United States and Canada (the "U.S.
Offering") by the U.S. Underwriters and shares are being offered in a
concurrent offering outside the United States and Canada (the "International
Offering") by the International Managers (together with the U.S. Underwriters,
the "Underwriters"). The U.S. Offering and the International Offering are
collectively referred to as the "Stock Offerings." The offering price and
underwriting discounts and commissions for each of the Stock Offerings will be
identical.
Upon consummation of the Reorganization (as defined herein), the Company's
authorized capital stock will include Class A Common Stock and Class B Common
Stock, par value $.01 per share (the "Class B Common Stock" and, together with
the Class A Common Stock, the "Common Stock"). Except with respect to voting and
conversion, the rights of holders of Class A Common Stock and Class B Common
Stock are identical. Except upon the occurrence of certain events, holders of
Class B Common Stock are not entitled to vote, whereas each share of Class A
Common Stock entitles its holder to one vote. Under certain conditions and
subject to prior governmental approval, shares of Class B Common Stock are
convertible into shares of Class A Common Stock on a one-for-one basis at the
option of the holder. Following the Stock Offerings, existing stockholders of
the Company, including the officers and directors of the Company, will continue
to own approximately % of the Common Stock (representing % of the voting
stock) and will have the ability to control the Company. See "Description of
Capital Stock."
Concurrently with the Stock Offerings, the Company is offering $
million of % Series A Cumulative Exchangeable Redeemable Preferred Stock Due
2009 (the "Series A Preferred Stock"), (the "Preferred Stock Offering"),
$ million of which are being offered directly by the Company, and not
through the Underwriters, to The Northwestern Mutual Life Insurance Company, the
sole owner of the NML Preferred Stock (as defined herein), which had an accreted
value as of February 14, 1998 of $33,023,562, at a purchase price equal to the
price to public and $ million of % Senior Subordinated Notes Due 2008
(the "Notes") (the "Debt Offering" and, together with the Stock Offerings and
the Preferred Stock Offering, the "Offerings"). Consummation of each Offering is
contingent upon consummation of each of the other Offerings. A portion of the
proceeds of the Offerings will be used to repay the Credit Facility (as defined
herein) for which affiliates of Lehman Brothers Inc. act as arranger and lender.
Prior to the Stock Offerings, there has been no public market for the Class
A Common Stock of the Company. It is anticipated that the initial public
offering price will be between $ and $ per share. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price.
The Class A Common Stock of the Company is expected to be approved for
inclusion in the Nasdaq National Market system under the symbol "CMLS." There
can be no assurance that an active public market for the Class A Common Stock
will develop or be maintained after the consummation of the Stock Offerings.
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE CLASS A COMMON STOCK.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the U.S. Underwriters and the
International Managers against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Stock Offerings payable by the Company
estimated to be $ .
(3) The Company has granted the U.S. Underwriters a 30-day option to purchase up
to an additional shares of Class A Common Stock on the same terms and
conditions as set forth above solely to cover over-allotments, if any. The
International Managers have been granted a similar option to purchase up to
additional shares solely to cover over-allotments, if any. If both
options are exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting."
---------------------
The shares of Class A Common Stock offered by this Prospectus are offered by
the U.S. Underwriters subject to prior sale, to withdrawal, cancellation, or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of the shares will be made at the offices of Lehman Brothers Inc., New
York, New York, on or about , 1998.
---------------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
BT Alex. Brown
, 1998
<PAGE>
[ARTWORK]
2 page gate fold
Cover page of gate fold--collage of logos of radio stations owned by the
Company.
Inside of gatefold--U.S. map and to the bottom right a Caribbean map showing
the locations of the Company's radio stations.
2
<PAGE>
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA
The terms "Broadcast Cash Flow" and "EBITDA" are referred to in various
places in this Prospectus. Broadcast Cash Flow consists of operating income
(loss) before depreciation and amortization, non-cash stock compensation expense
and corporate general and administrative expenses. EBITDA consists of operating
income (loss) before depreciation and amortization and non-cash stock
compensation expense. Although Broadcast Cash Flow and EBITDA are not measures
of performance calculated in accordance with generally accepted accounting
principles ("GAAP"), management believes that they are useful to an investor in
evaluating the Company because they are measures widely used in the broadcast
industry to evaluate a radio company's operating performance. However, Broadcast
Cash Flow and EBITDA should not be considered in isolation or as substitutes for
net income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP, or as a measure of liquidity or
profitability.
The term "local marketing agreement" ("LMA") is referred to in various
places in this Prospectus. A typical LMA is an agreement under which the Federal
Communications Commission ("FCC") licensee of a radio station makes available,
for a fee, air time on its station to a party which provides programming to be
broadcast during such airtime and collects revenues from advertising it sells
for broadcast during such programming. A station's or station group's "power
ratio" is defined as such station's or station group's revenue market share
divided by audience market share. "MSA" is defined as Metro Survey Area, as
listed in the Arbitron Radio Metro and Television Market Population Estimates
1996-1997.
Unless otherwise indicated herein, (i) market ranking by radio advertising
revenue, radio market advertising revenue and radio market advertising data have
been obtained from BIA'S MASTERACCESS ("BIA") compiled by BIA Research, Inc.,
(ii) total industry listener and revenue levels have been obtained from the
Radio Advertising Bureau ("RAB"), (iii) all audience share data and audience
rankings, including ranking by population, except where otherwise stated to the
contrary, have been derived from surveys of people ages 12 and over ("Adults
12+"), listening Monday through Sunday, 6 a.m. to 12 midnight, and are based on
the Fall 1997 Arbitron Market Report pertaining to each market, as reported by
BIA, and (iv) revenue share data in each market presented have been obtained
from BIA as adjusted for market information available to and known by the
Company.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF CLASS A COMMON
STOCK FOLLOWING THE PRICING OF THE STOCK OFFERINGS TO COVER A SYNDICATE SHORT
POSITION IN THE CLASS A COMMON STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE
OF THE CLASS A COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
3
<PAGE>
THIS PROSPECTUS CONTAINS STATEMENTS WHICH CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. SUCH STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS PROSPECTUS AND
INCLUDE STATEMENTS (INCLUDING, WITHOUT LIMITATION, THE STATEMENTS CONTAINED
UNDER THE CAPTION "UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS") REGARDING
THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY, ITS DIRECTORS OR ITS
OFFICERS PRIMARILY WITH RESPECT TO THE FUTURE OPERATING PERFORMANCE OF THE
COMPANY. PROSPECTIVE PURCHASERS OF CLASS A COMMON STOCK ARE CAUTIONED THAT ANY
SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND MAY
INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER FROM THOSE
IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS (INCLUDING,
WITHOUT LIMITATION, RISKS AND UNCERTAINTIES RELATING TO LEVERAGE, THE NEED FOR
ADDITIONAL FUNDS, CONSUMMATION OF THE PENDING ACQUISITIONS, INTEGRATION OF THE
PENDING ACQUISITIONS, THE ABILITY OF THE COMPANY TO ELIMINATE CERTAIN COSTS, THE
MANAGEMENT OF RAPID GROWTH, THE POPULARITY OF RADIO AS A BROADCASTING AND
ADVERTISING MEDIUM AND CHANGING CONSUMER TASTES), MANY OF WHICH ARE BEYOND THE
CONTROL OF THE COMPANY. THE INFORMATION UNDER THE CAPTIONS "RISK FACTORS" AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" IDENTIFIES IMPORTANT FACTORS THAT COULD CAUSE SUCH DIFFERENCES. THE
OCCURRENCE OF ANY SUCH FACTORS NOT CURRENTLY EXPECTED BY THE COMPANY WOULD
SIGNIFICANTLY ALTER THE RESULTS SET FORTH IN THESE STATEMENTS.
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED OR THE CONTEXT
OTHERWISE REQUIRES, (I) THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES
THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED AND THE
REORGANIZATION HAS BEEN CONSUMMATED; (II) REFERENCES TO THE "COMPANY" INCLUDE
THE COMPANY AND ITS SUBSIDIARIES; AND (III) ALL PRO FORMA INFORMATION CONTAINED
IN THIS PROSPECTUS GIVES EFFECT TO THE REORGANIZATION, BORROWINGS UNDER THE
CREDIT FACILITY AND THE APPLICATION OF PROCEEDS THEREFROM, ACQUISITIONS
COMPLETED AS OF THE DATE HEREOF (THE "COMPLETED ACQUISITIONS"), THE PENDING
ACQUISITIONS (AS DEFINED HEREIN), AND THE OFFERINGS AND THE APPLICATIONS OF
PROCEEDS THEREFROM (COLLECTIVELY, THE "TRANSACTIONS").
THE COMPANY
Cumulus Media Inc. ("Cumulus" or the "Company") is a radio broadcasting
company focused on the acquisition, operation and development of radio stations
in mid-size and smaller radio markets in the U.S. The Company currently owns and
operates, or provides sales and marketing services under LMA agreements (pending
FCC approval of acquisition) to, 94 stations in 19 markets. Upon consummation of
the Pending Acquisitions, the Company will be one of the five largest radio
broadcasting companies based on number of stations, and among the fifteen
largest based on net revenues, in the U.S. and will own and operate 167 radio
stations (119 FM and 48 AM) clustered in 32 markets. The Company has assembled
market-leading clusters with stations comprising the first or second ranked
radio group, in terms of revenue share and/or audience share, in all of its 32
U.S. markets. On a pro forma basis after giving effect to the Transactions, the
Company would have generated net revenues of approximately $106.2 million and
Broadcast Cash Flow of approximately $27.7 million for the year ended December
31, 1997.
Cumulus operates and develops clusters of stations in demographically
attractive and fast growing mid-size and smaller markets. Relative to the 100
largest markets in the U.S., the Company believes that the mid-size and smaller
markets (MSA 100-267) represent attractive operating environments and generally
are characterized by: (i) a greater reliance on radio advertising as evidenced
by the greater percentage of total media revenues captured by radio than the
national average; (ii) rising advertising revenues as the larger national and
regional retailers expand into these markets; (iii) small independent operators,
many of whom lack the capital to produce high quality locally-originated
programming and/or to employ more sophisticated research, marketing, management
and sales techniques; and (iv) lower overall susceptibility to economic
downturns.
The Company believes that the attractive operating characteristics of
mid-size and smaller markets coupled with the relaxation of FCC ownership limits
create significant opportunities to form clusters within markets and regions
that will enable the Company to achieve revenue growth and cost efficiencies. As
a result, management believes that the Company can grow revenues at rates equal
to or better than larger market growth rates and generate Broadcast Cash Flow
margins that are comparable to the higher margins that previously were generally
achievable only in the top 100 markets. The Company believes that mid-size and
smaller radio markets provide an excellent opportunity to acquire attractive
properties at favorable purchase prices due to the size and fragmented nature of
ownership in these markets and to the historically greater attention given to
the larger markets by radio station acquirors. According to BIA, there are
approximately 1,600 FM and 1,000 AM stations in the 168 U.S. radio markets
ranked MSA 100-267. These 2,600 stations are owned by approximately 1,100
different operators. In addition, there are nearly 4,700 stations in unranked
markets owned by approximately 2,700 operators.
The Company's principal strategy is to establish its position as a leader in
its markets and regions and to expand into additional mid-size and smaller
markets and regions where it believes a leadership position can be achieved by
assembling clusters. Cumulus seeks to enhance the quality of radio for listeners
and the utility of the radio medium for advertisers in order to maximize the
advertising revenues and Broadcast
5
<PAGE>
Cash Flow of its radio stations. To that end, Cumulus utilizes extensive
research to properly position the formats of stations in a given market and also
significantly increases the amount of locally-originated programming. Upon
consummation of the Pending Acquisitions, the Company's portfolio of stations
will be diversified in terms of format, target audience, geographic location and
stage of development. Because of the size and diversity of its portfolio and its
individual radio station groups or "clusters", the Company believes it is not
reliant upon the performance of any single station or any specific format.
MANAGEMENT TEAM
Members of the Company's senior management team have an aggregate of over 70
years of experience in the media and radio broadcasting industry. To date,
management has successfully negotiated 58 separate acquisition transactions on
behalf of the Company. The Company's Executive Chairman and Treasurer, Richard
W. Weening, has over 20 years of operating experience in media and information
companies including significant experience in corporate finance and mergers and
acquisitions. Lewis W. Dickey, Jr., Executive Vice Chairman, has over 15 years
of experience in the radio and television broadcasting industry and is a
successful owner-operator of radio stations in larger and mid-size markets. Mr.
Dickey is also a nationally regarded business strategy and marketing consultant
to the radio and television broadcasting industry. William M. Bungeroth, the
Company's President, has over 20 years of experience in the radio broadcasting
industry and has developed an expertise in enhancing revenue at stations under
his management. Mr. Bungeroth manages the broadcasting business along with the
General Managers of each market, the Director of Programming and the regional
Directors of Sales. The Company's Vice President and Chief Financial Officer,
Richard J. Bonick, Jr., has 20 years of experience in the radio broadcasting
industry. Mr. Bonick manages the financial reporting and control systems as well
as the operational aspects of the Company's broadcasting business.
STATION PORTFOLIO
The Company has four regions in the U.S. as its primary focus: the Midwest,
Southeast, Southwest and Northeast. The following chart sets forth certain
information with respect to the Company's stations in these regions, before and
after giving effect to the Pending Acquisitions:
<TABLE>
<CAPTION>
PENDING ACQUISITIONS (1) NUMBER OF
NUMBER OF STATIONS --------------------------------------------------- STATIONS
NUMBER OF NUMBER OF NUMBER OF FOLLOWING
CURRENTLY STATIONS STATIONS TO STATIONS TO BE PENDING
OWNED CURRENTLY BE PLACED ACQUIRED ACQUISITIONS
MARKET ----------- UNDER UNDER WITHOUT -------------
MARKET(2) RANK FM AM LMA(3) LMA LMA FM
- ----------------------- --------- ----- ----- --------------- --------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
MIDWEST REGION
Ann Arbor, MI.......... 146 2 2 -- -- -- 2
Appleton-Oshkosh/ Green
Bay, WI.............. 138/182 3 2 2 -- -- 5
Dubuque, IA............ 217 -- -- -- -- 5 4
Marion Carbondale, IL.. 209 -- -- 6 -- -- 4
Bismarck, ND........... 259 -- -- -- -- 4 3
Kalamazoo, MI.......... 172 -- -- -- -- 3 2
Faribault-Owatonna-
Waseca, MN........... -- -- -- -- -- 8 4
Mankato, MN............ -- -- -- -- -- 3 2
Mason City, IA......... -- -- -- -- -- 7 5
New Ulm-Springfield-
Marshall, MN......... -- -- -- -- -- 3 2
Rochester, MN.......... -- -- -- -- -- 4 2
Toledo, OH............. 76 4 2 -- 1 -- 5
SOUTHEAST REGION
Albany, GA............. 205 -- -- -- 4 -- 3
Augusta, GA............ 109 3 1 2 2 1 6
Chattanooga, TN........ 102 -- -- 1 -- -- 1
Columbus, GA........... 166 3 2 -- -- -- 3
Florence, SC........... 198 1 1 5 1 2 7
Montgomery, AL......... 143 -- -- 4 -- -- 2
<CAPTION>
ADULTS
12+ REVENUE
MARKET(2) AM SHARE (%) RANK(5)
- ----------------------- ------------- ------------- -------------
<S> <C> <C> <C>
MIDWEST REGION
Ann Arbor, MI.......... 2 8.7 1
Appleton-Oshkosh/ Green
Bay, WI.............. 2 20.2(4) 2
Dubuque, IA............ 1 34.8 1
Marion Carbondale, IL.. 2 32.4 2
Bismarck, ND........... 1 37.7 1
Kalamazoo, MI.......... 1 22.3 1
Faribault-Owatonna-
Waseca, MN........... 4 -- 1
Mankato, MN............ 1 -- 1
Mason City, IA......... 2 -- 1
New Ulm-Springfield-
Marshall, MN......... 1 -- 1
Rochester, MN.......... 2 -- 2
Toledo, OH............. 2 31.2 2
SOUTHEAST REGION
Albany, GA............. 1 23.2 2
Augusta, GA............ 3 29.3 1
Chattanooga, TN........ 0 22.3 1
Columbus, GA........... 2 32.5 1
Florence, SC........... 3 42.2 1
Montgomery, AL......... 2 34.4 1
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PENDING ACQUISITIONS (1) NUMBER OF
NUMBER OF STATIONS --------------------------------------------------- STATIONS
NUMBER OF NUMBER OF NUMBER OF FOLLOWING
CURRENTLY STATIONS STATIONS TO STATIONS TO BE PENDING
OWNED CURRENTLY BE PLACED ACQUIRED ACQUISITIONS
MARKET ----------- UNDER UNDER WITHOUT -------------
MARKET(2) RANK FM AM LMA(3) LMA LMA FM
- ----------------------- --------- ----- ----- --------------- --------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Myrtle Beach, SC....... 175 3 1 2 -- -- 5
Salisbury-Ocean City,
MD................... 153 4 2 2 -- -- 6
Savannah, GA........... 154 -- -- 5 -- 2 5
Tallahassee, FL........ 165 3 1 1 -- -- 4
Wilmington, NC......... 178 4 1 -- -- -- 4
SOUTHWEST REGION
Abilene, TX............ 224 -- -- 3 1 -- 4
Amarillo, TX........... 188 -- -- 6 -- -- 4
Beaumont-Port Arthur,
TX................... 128 -- -- 1 -- 4 3
Grand Junction, CO..... 247 -- -- -- -- 6 4
Lake Charles, LA....... 203 -- -- -- -- 4 3
Odessa-Midland, TX..... 174 -- -- 5 -- -- 4
Wichita Falls, TX...... 236 3 -- 1 -- -- 4
NORTHEAST REGION
Augusta-Waterville,
ME................... 245 -- -- -- -- 6 5
Bangor, ME............. 263 -- -- -- -- 2 2
--- --- --- --- --- ---
TOTAL 32 MARKETS....... 33 15 46 9 64 119
<CAPTION>
ADULTS
12+ REVENUE
MARKET(2) AM SHARE (%) RANK(5)
- ----------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Myrtle Beach, SC....... 1 20.3 1
Salisbury-Ocean City,
MD................... 2 31.2 1
Savannah, GA........... 2 36.0 2
Tallahassee, FL........ 1 32.8 1
Wilmington, NC......... 1 17.3 2
SOUTHWEST REGION
Abilene, TX............ 0 26.7 2
Amarillo, TX........... 2 30.6 2
Beaumont-Port Arthur,
TX................... 2 29.4 2
Grand Junction, CO..... 2 42.7 1
Lake Charles, LA....... 1 49.7 1
Odessa-Midland, TX..... 1 39.7 1
Wichita Falls, TX...... 0 28.6 2
NORTHEAST REGION
Augusta-Waterville,
ME................... 1 25.6 1
Bangor, ME............. 0 30.4 1
--
TOTAL 32 MARKETS....... 48
</TABLE>
- ------------------------
(1) The Company expects to consummate most of the Pending Acquisitions during
the second and third quarters of 1998, although there can be no assurance
that the transactions will be consummated within that time frame. The
pending acquisition of a Tallahassee FM station presently operated under an
LMA is expected to close by the end of 1998. In two of the markets in which
there are Pending Acquisitions (Augusta, GA and Dubuque, IA), petitions or
informal objections have been filed against the Company's FCC assignment
applications and a third objection is expected to be filed. All such
petitions and objections must be resolved before FCC approval can be
obtained and the acquisitions consummated.
(2) The listed markets correspond to station clusters of the Company, but may
vary from the "markets" defined for purposes of the FCC's multiple-ownership
rules, which are defined by reference to the signal coverages of the
stations involved. Thus, in some instances (E.G., Augusta, GA, Florence, SC,
and Salisbury-Ocean City, MD), the number of stations following the Pending
Acquisitions as listed in the above table exceeds the number of radio
stations specified in the FCC's rules that one person or entity may own,
operate or control within a single market, but is still consistent with FCC
requirements. In Augusta, GA, the Company may not be permitted to acquire
more than five FM and three AM stations unless it succeeds in obtaining FCC
approval to modify the facilities of one or more of its currently owned
stations and/or obtains FCC consent to the use of an alternative engineering
analysis.
(3) Includes radio stations to which the Company currently provides programming
and on which the Company sells advertising pursuant to an LMA.
(4) Indicates Adults 12+ share of Appleton-Oshkosh market.
(5) Market revenue rankings for Faribault-Owatonna-Waseca, MN, Mankato, MN,
Mason City, IA, Rochester, MN and New Ulm-Springfield-Marshall, MN are based
on Company estimates.
The Company also owns and operates five radio stations and one leased
frequency in various locations throughout the English-speaking Eastern
Caribbean, including among other places, Trinidad, St. Kitts and St. Lucia.
ACQUISITION STRATEGY
Cumulus has focused its acquisition strategy on acquiring radio broadcasting
stations in demographically attractive and fast growing mid-size to smaller
markets that it believes offer substantial growth opportunities for the Company.
In executing this strategy, the Company adheres to certain key acquisition
criteria. Primary among these criteria are targeting markets with: (i) growing
economies that are not dependent upon any single industry or employer; (ii) a
regional fit with the Company's overall portfolio concentration in the Midwest,
Southeast, Southwest and Northeast regions of the U.S.; (iii) close proximity to
larger markets that may lead to increased economic expansion into the Company's
markets; (iv) previously unconsolidated markets with fragmented individual
ownership of stations; (v) the opportunity to assemble a cluster of stations
diversified in format to provide a range of target demographic options
7
<PAGE>
for advertisers; and (vi) the opportunity to increase sales performance through
greater coverage of potential advertisers with more sales people per station.
In targeting specific stations, the Company seeks stations with a position
of leadership in their market in terms of ratings and format, with the
opportunity to significantly increase revenues and Broadcast Cash Flow.
Additionally, Cumulus seeks high quality technical and operating facilities,
capable local management and an FCC license which enables coverage of the entire
market.
The Company believes that its acquisition strategy will have a number of
benefits, including: (i) growth and diversification of revenue and Broadcast
Cash Flow across a greater number of stations and markets; (ii) improved
Broadcast Cash Flow margins through the consolidation of facilities and the
elimination of redundant expenses; (iii) enhanced utilization of certain
corporate overhead functions, including its senior management team; (iv)
improved leverage in various key vendor negotiations; (v) greater ability to
recruit top industry management talent; and (vi) increased overall scale, which
should facilitate the Company's future capital raising activities.
INTEGRATION OF ACQUIRED BUSINESSES
The Company has developed, through its 58 Completed and Pending
Acquisitions, an efficient process for the integration of newly acquired
properties into the Cumulus portfolio and respective geographic cluster, as well
as into the overall Cumulus culture and operating philosophy. The Company's
station integration plan consists of six key elements: (i) employ sophisticated
market research to refine station formats, enrich the listener experience and
increase audience and revenue share relative to other stations in the market;
(ii) expand the size and the effectiveness of the sales organization through
active recruitment and in-depth training to enhance demand for the station's
spot inventory to increase both revenue and margin; (iii) add the station to the
Cumulus in-market local area network and install the Company's proprietary
system for real-time monitoring by management of station sales and inventory
performance; (iv) install Cumulus's centralized networked accounting system for
financial reporting, budget control, payables management and cash management;
(v) establish revenue and expense budgets consistent with the programming and
sales strategy and make necessary cost adjustments; and (vi) implement necessary
improvements in transmission facilities, audio processing and studio facilities.
From time to time, in compliance with applicable law, the Company will enter
into an LMA or consulting arrangement with a target property prior to FCC final
approval and the consummation of the acquisition in order to gain a "head start"
on the integration process.
OPERATING STRATEGY
The Company's operating strategy has the following principal components:
ASSEMBLE AND MANAGE MARKET CLUSTERS WITH REGIONAL CONCENTRATIONS. The
Company has assembled the first or second ranked cluster of stations based
on revenue share and/or audience share in all of its U.S. markets in four
regional concentrations, the Midwest, Southeast, Southwest and Northeast.
The Company believes that by offering a diversity of radio formats within a
given market, Cumulus provides customized and efficient marketing solutions
to meet advertisers' needs. By assembling market clusters with a regional
concentration, the Company believes that it will be able to increase
revenues by offering regional coverage of key demographic groups that were
previously unavailable to national and regional advertisers. The Company
also believes that its cluster approach will allow it to operate its
stations with more highly skilled local management teams equipped with
greater resources and to eliminate redundant operating and overhead
expenses.
MAXIMIZE EACH STATION'S POTENTIAL THROUGH POSITIONING AND BRANDING. The
Company utilizes extensive market research to refine the programming of each
of its stations and to position each as a separate brand within a particular
cluster. The objective of this strategy is to optimize each station's
potential in terms of audience ratings and revenue share while providing the
widest possible range of
8
<PAGE>
choice to listeners and advertisers. Such stations can better capitalize on
the operating leverage inherent in the radio industry because the costs of
operating a radio station are generally fixed and, therefore, increased
revenues generally result in disproportionately larger increases in
Broadcast Cash Flow.
FOCUS ON PROGRAMMING. A principal Company operating strategy is to
enhance each station's programming appeal, including both the quality and
quantity of local programming as a means of enriching the listener
experience. The Company believes that adopting this commitment to high
quality, locally originated programming will provide its stations with a
competitive advantage and increase each station's audience share. Moreover,
the Company believes that the efficiencies and scale afforded by the
operation of multiple stations in the same market and region working
together with information technology make it possible to substantially
improve programming and the quality of the listener experience without a
comparable increase in cost.
EXPAND DEDICATED SALES FORCE AND OPTIMIZE INVENTORY
MANAGEMENT. Underpinning the Company's strategy for optimizing the
potential of each station within a cluster is the practice of dedicating a
sales force for each of its stations. The Company believes that many of the
acquired stations have dramatically underperformed in sales, due primarily
to undersized sales staffs responsible for selling air time on multiple
stations, thus diluting their ability to cover all of the potential
advertisers with strong advocates for each station. The Company believes its
practice of utilizing a dedicated sales force for each station will attract
a larger number of advertisers thereby increasing the demand for each
station's commercial spot inventory. Accordingly, the Company has
significantly expanded the number of salespeople for each of its stations.
Salespeople are typically compensated exclusively on a commission basis.
Also, in each of its market clusters, the Company utilizes Internet-based
sales reporting systems to monitor its sales activity and to formulate and
implement rate structure and inventory management on a continual basis.
INCREASE RADIO REVENUE SHARE. The Company believes that its strategy of
larger and dedicated station sales staffs, brand development, regional
concentration, and market clusters will help increase advertising volume and
revenues from existing customers and increase the number and scope of new
advertisers. This strategy enables the Company to compete more effectively
with other local and regional media such as newspapers and cable and
broadcast television stations, because it can now offer a competitively
priced alternative to reach the target audience that advertisers desire. The
Company's sales management team has substantial experience in the areas of
generating new sources of revenues including promotional events, retailer
co-op advertising and other sources including business-to-business
advertising.
IMPLEMENT STRICT COST CONTROLS. The Company's management imposes strict
financial reporting requirements and expense budget limitations on each of
its stations. In addition, management maintains a centralized accounting
system which allows it to monitor the performance and operations of each of
its stations. Management believes such centralization allows the Company to
achieve expense savings in certain areas, including purchasing and
administrative expenses. Management believes that the Company will also
achieve expense savings through the elimination of certain duplicate costs
within its markets and market clusters.
IMPLEMENT INTERNET-BASED MANAGEMENT INFORMATION SYSTEMS. The Company
has implemented a proprietary application using Internet software standards
to support daily sales and inventory performance reporting by station, by
market and by cluster. In addition, the Company employs the same system to
network its centralized accounting and cash management. This allows the
Company to compare each station's actual performance (including revenue and
inventory management) to budget on a regular basis and deploy resources on a
timely basis to those stations not achieving budgetary goals.
9
<PAGE>
RECRUIT AND RETAIN SKILLED MANAGERS. The Company believes that
operating a top-ranked cluster of stations in a market will enable the
Company to recruit and retain high caliber radio management personnel who
might otherwise be attracted to larger markets. The Company believes that
regional management and coordination will enable it to maximize the benefits
of operating a growing number of stations in geographically diverse
locations, while maintaining controls over local operations. Local
management is also central to the Company's strategy and is primarily
responsible for building and developing a sales team capable of converting
the stations' audience rankings into revenues. The Company's general
managers and sales managers are motivated through incentive compensation
based primarily upon their station's cash flow performance and secondarily
on their ability to convert their station's audience share into market
revenue share.
REORGANIZATION AND CORPORATE STRUCTURE
In March 1998, the Company amended its articles of incorporation to change
its name from Cumulus Holdings, Inc. to Cumulus Media Inc. Until immediately
prior to the closing of the Offerings, all of the outstanding common stock of
the Company will have been held by Cumulus Media, LLC, a Wisconsin limited
liability company ("Media LLC"), whose members include State of Wisconsin
Investment Board, NationsBanc Capital Corp., Heller Equity Capital Corporation,
The Northwestern Mutual Life Insurance Company ("NML") and certain members of
the Company's management or affiliates of management. See "Principal and Selling
Stockholders." Immediately prior to the closing of the Offerings, (i) all of the
shares of the NML Preferred Stock will be exchanged for shares of Series A
Preferred Stock as described below; and (ii) Media LLC will be liquidated and
the shares of Class A Common Stock and Class B Common Stock held by Media LLC
will be distributed by Media LLC to its members in liquidation (the
"Reorganization").
All shares of Class A Cumulative Preferred Stock (the "NML Preferred Stock")
which were held by NML immediately prior to the Offerings plus all accrued and
unpaid dividends thereon as of the exchange date will be exchanged for shares of
Series A Preferred Stock having an equivalent aggregate liquidation value
pursuant to the Preferred Stock Offering. As of February 14, 1998, the
liquidation value of the NML Preferred Stock was approximately $33.0 million.
Subject to certain conditions, the Series A Preferred Stock will be exchangeable
on any dividend payment date, at the Company's option, for the % Subordinated
Exchange Debentures due 2009 (the "Exchange Debentures"). The terms of the
Exchange Debentures will be substantially similar to those of the Series A
Preferred Stock. See "Description of Capital Stock."
Upon the consummation of the Reorganization, the capital stock of the
Company will consist of the Class A Common Stock, the Class B Common Stock and
the Series A Preferred Stock.
The Company's U.S. radio operations are conducted through Cumulus
Broadcasting, Inc., a Nevada corporation ("Broadcasting") and a wholly-owned
subsidiary of the Company, which owns the radio stations acquired pursuant to
asset purchase agreements. The Company will also own the stock of radio groups
or stations acquired pursuant to stock purchase or merger agreements. Cumulus
Licensing Corp., a Nevada corporation ("Licensing") and a wholly-owned
subsidiary of Broadcasting, holds virtually all the FCC licenses for the
Company's stations. Certain other FCC licenses are held by wholly-owned
subsidiaries of the Company, and the Company intends to transfer those to
Licensing or to a newly created subsidiary that holds only FCC licenses in the
near future. Caribbean Communications Company Ltd., a corporation organized
under the laws of Montserrat ("CCC") and a wholly-owned subsidiary of the
Company, owns radio stations throughout the English-speaking Eastern Caribbean,
including among other places, Trinidad, St. Kitts and St. Lucia. CCC is
currently constructing an FM station in Barbados and Tortola, BVI. The Company
will be the issuer of the Class A Common Stock, the Series A Preferred Stock and
the Notes, and is the borrower under the Credit Facility. Broadcasting and
Licensing are guarantors of the Company's obligations under the Credit Facility.
See "Description of the Credit Facility and Notes."
10
<PAGE>
PENDING ACQUISITIONS
The Company has entered into definitive purchase agreements to acquire 119
stations in 29 markets for an aggregate purchase price of approximately $260.2
million in transactions which have not yet been consummated (the "Pending
Acquisitions"). Aggregate net revenues and Broadcast Cash Flow for the Pending
Acquisitions would have been $65.9 million and $16.7 million, respectively, on a
pro forma basis for the year ended December 31, 1997. The Company expects to
consummate most of the Pending Acquisitions during the second and third quarters
of 1998, although there can be no assurance that the transactions will be
consummated within that time frame. The pending acquisition of a Tallahassee FM
station presently operated under an LMA is expected to close by the end of 1998.
In two of the markets in which there are Pending Acquisitions (Augusta, GA and
Dubuque, IA), petitions or informal objections have been filed against the
Company's FCC assignment applications and a third objection is expected to be
filed. All such petitions and objections must be resolved before FCC approval
can be obtained and the acquisitions consummated. There can be no assurances
that the Pending Acquisitions will be consummated. The Company believes that the
proceeds of the Offerings will be sufficient to finance the consummation of the
Pending Acquisitions.
In addition, the Company has entered into letters of intent to purchase
three stations in two markets. The letters of intent are non-binding and are
subject to certain conditions, and there can be no assurance that the Company
will enter into definitive purchase agreements with respect to such stations or
will consummate such transactions.
FINANCING PLAN
The Company intends to use the proceeds of the Offerings to finance the
Pending Acquisitions and to repay certain indebtedness as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
---------------------
<S> <C>
SOURCES OF FUNDS:
Stock Offerings...................................................... $
Debt Offering........................................................
Preferred Stock Offering.............................................
--------
Total............................................................ $
--------
--------
USES OF FUNDS:
Purchase price of the Pending Acquisitions........................... $
Repayment of Credit Facility (1).....................................
Fees and expenses....................................................
--------
Total............................................................
--------
--------
</TABLE>
- ------------------------------
(1) Affiliates of Lehman Brothers Inc. act as arranger and lender under the
Credit Facility.
The Company is an Illinois corporation with its principal executive offices
located at 330 East Kilbourn Ave., Milwaukee, Wisconsin 53202, telephone number
(414) 283-4500.
11
<PAGE>
THE STOCK OFFERINGS
<TABLE>
<S> <C>
Class A Common Stock Offered by the Company
U.S. Offering.............................. shares
International Offering..................... shares
Total.................................... shares
Class A Common Stock offered
by the Selling Stockholder................. shares
Common Stock Outstanding after the
Stock Offerings:
Class A Common Stock(1).................... shares
Class B Common Stock....................... shares
Voting Rights................................ Except with respect to voting and conversion,
the rights of holders of Class A Common Stock
and Class B Common Stock are identical. Each
share of Class A Common Stock is entitled to
one vote and, except upon the occurrence of
certain events the Class B Common Stock is
not entitled to vote. Under certain
conditions and subject to prior governmental
approval, each share of Class B Common Stock
is convertible into one share of Class A
Common Stock at the option of the holder. See
"Description of Capital Stock."
Use of Proceeds.............................. Approximately $ million of the net
proceeds of the Offerings will be used to
finance the Pending Acquisitions. The balance
of the net proceeds of the Offerings will be
used to repay the principal amount of
indebtedness currently outstanding under the
Credit Facility for which affiliates of
Lehman Brothers Inc. act as arranger and
lender. See "Use of Proceeds" and
"Description of Credit Facility and Notes."
Proposed Nasdaq National Market
Symbol..................................... CMLS
Concurrent Offerings......................... Concurrently with the Stock Offerings, the
Company is offering shares of its %
Series A Cumulative Exchangeable Redeemable
Preferred Stock due 2009 (with a liquidation
preference of $1,000 per share) and $
million aggregate principal amount of its
% Senior Subordinated Notes due 2008. Each
Offering is conditioned upon consummation of
each of the other Offerings. See "Risk
Factors -- Significant Capital Requirements;
Concurrent Offerings" and "Use of Proceeds."
</TABLE>
- ------------------------
(1) If the Underwriters' over-allotment options were exercised in full,
shares of Class A Common Stock would be outstanding after the Stock
Offerings. See "Underwriting" and "Description of Capital Stock."
12
<PAGE>
RISK FACTORS
An investment in the Class A Common Stock offered hereby involves a high
degree of risk. Prospective purchasers of the Class A Common Stock offered
hereby should carefully consider the factors set forth in "Risk Factors", as
well as the other information set forth in this Prospectus, before making an
investment in the Class A Common Stock.
13
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following summary pro forma financial data are derived from the
Unaudited Pro Forma Combined Financial Statements of the Company included
elsewhere in this Prospectus. The pro forma combined statement of operations
data give effect to the Transactions as if they had occurred on January 1, 1997.
The pro forma combined balance sheet data give effect to the Transactions as if
they had occurred on December 31, 1997 (except for Completed Acquisitions
consummated prior to December 31, 1997, in which case the pro forma combined
balance sheet data give effect to such transactions as of the date of their
consummation). The unaudited pro forma information is presented for illustrative
purposes only and is not indicative of the operating results or financial
position that would have occurred if the Transactions had been consummated on
the dates indicated, nor is it indicative of future operating results or
financial positions if the aforementioned transactions are completed. The
Summary Unaudited Pro Forma Financial Data are based on certain assumptions and
adjustments described in the Notes to the Unaudited Pro Forma Combined Financial
Statements and should be read in conjunction therewith. See also "Management's
Discussion and Analysis of Financial Condition and Results of Operations", "Risk
Factors -- Substantial Leverage", and the Consolidated Financial Statements of
the Company included elsewhere in the Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997
---------------------------
<S> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net revenues......................................................................... $ 106,176
Station operating expenses excluding depreciation and amortization................... 78,427
Depreciation and amortization........................................................ 19,844
Corporate general and administrative expenses........................................ 2,742
Non-cash stock compensation expense.................................................. 1,689
Operating income (loss).............................................................. 3,474
Interest expense..................................................................... 14,623
Net income (loss).................................................................... (11,512)
Preferred stock dividends............................................................ 16,175
Net income (loss) attributable to common stockholders................................ (27,687)
Basic and diluted earnings (loss) per share..........................................
OTHER FINANCIAL DATA(1):
Broadcast Cash Flow.................................................................. $ 27,749
Broadcast Cash Flow margin........................................................... 26.1%
EBITDA............................................................................... 25,007
EBITDA margin........................................................................ 23.6%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1997
----------------------
<S> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Total assets.............................................................................. $ 458,963
Long-term debt, including current portion................................................. 157,658
Preferred stock subject to mandatory redemption........................................... 132,740
Total stockholders' equity................................................................ 149,679
</TABLE>
- ------------------------
(1) Broadcast Cash Flow consists of operating income (loss) before depreciation
and amortization, non-cash stock compensation expense and corporate general
and administrative expenses. EBITDA consists of operating income (loss)
before depreciation and amortization and non-cash stock compensation
expense. Broadcast Cash Flow margin is Broadcast Cash Flow as a percentage
of net revenues. EBITDA margin is EBITDA as a percentage of net revenues.
Although Broadcast Cash Flow, EBITDA, Broadcast Cash Flow margin and EBITDA
margin are not measures of performance calculated in accordance with GAAP,
management believes that they are useful to an investor in evaluating the
Company because they are measures widely used in the broadcast industry to
evaluate a radio company's operating performance. However, Broadcast Cash
Flow and EBITDA should not be considered in isolation or as substitutes for
net income, cash flows from operating activities and other income or cash
flow statement data prepared in accordance with GAAP, or as a measure of
liquidity or profitability.
14
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following sets forth summary historical financial data for the Company
for the period from inception on May 22, 1997 to December 31, 1997. The
information presented below is qualified in its entirety by, and should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of the
Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
ON
MAY 22, 1997(1)
TO DECEMBER 31, 1997
-----------------------
<S> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net revenues............................................................................. $ 9,163
Station operating expenses excluding depreciation and amortization....................... 7,147
Depreciation and amortization............................................................ 1,736
Corporate general and administrative expenses............................................ 1,276
Non-cash stock compensation expense...................................................... 1,689
Operating income (loss).................................................................. (2,685)
Net interest expense..................................................................... 772
Net income (loss)........................................................................ (3,578)
Preferred stock dividends................................................................ 274
Net income (loss) attributable to common stockholders.................................... (3,852)
Basic and diluted earnings (loss) per share..............................................
OTHER FINANCIAL DATA:
Broadcast Cash Flow(2)................................................................... $ 2,016
EBITDA(2)................................................................................ 740
Net cash used in operating activities.................................................... 1,887
Net cash used in investing activities.................................................... 95,100
Net cash provided by financing activities................................................ 98,560
Ratio of earnings to fixed charges and preferred stock dividend requirements(3).......... --
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1997
----------------------
<S> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Total assets.............................................................................. $ 110,441
Long-term debt, including current portion................................................. 42,801
Preferred stock subject to mandatory redemption........................................... 13,426
Total stockholders' equity................................................................ 49,976
</TABLE>
- ------------------------------
(1) The Company was incorporated on May 22, 1997. Between the date of
incorporation of Media LLC, which was April 18, 1997, and May 22, 1997,
Media LLC undertook certain activities on behalf of the Company pending its
incorporation, including the incurrence of expenses and the funding of
escrow deposits for acquisitions. Upon the incorporation of the Company,
these activities and the related expenses were transferred to the Company.
(2) Broadcast Cash Flow consists of operating income (loss) before depreciation
and amortization, non-cash stock compensation expense and corporate general
and administrative expenses. EBITDA consists of operating income (loss)
before depreciation and amortization and non-cash stock compensation
expense. Although Broadcast Cash Flow and EBITDA are not measures of
performance calculated in accordance with GAAP, management believes that
they are useful to an investor in evaluating the Company because they are
measures widely used in the broadcast industry to evaluate a radio company's
operating performance. However, Broadcast Cash Flow and EBITDA should not be
considered in isolation or as substitutes for net income, cash flows from
operating activities and other income or cash flow statement data prepared
in accordance with GAAP, or as a measure of liquidity or profitability.
(3) For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividend requirements, earnings consists of earnings before
income taxes and fixed charges and preferred stock dividend requirements.
"Fixed charges and preferred stock dividend requirements" consists of
interest on all indebtedness, amortization of debt expense and preferred
stock dividends. As a result of the net loss attributable to common
stockholders, earnings were insufficient to cover fixed charges and
preferred stock dividend requirements by $3,785.
15
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY INVOLVES
A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS, BEFORE MAKING AN INVESTMENT IN THE CLASS A COMMON STOCK OFFERED
HEREBY.
RISKS OF ACQUISITION STRATEGY
The Company intends to pursue growth through internal expansion and the
acquisition of radio broadcasting companies, radio station groups and individual
radio stations in mid-size and smaller markets. The Company cannot predict
whether it will be successful in pursuing such acquisition opportunities or what
the consequences of any such acquisitions would be. The Company is currently
evaluating certain acquisitions; however, other than as described in "Pending
Acquisitions", the Company currently has no binding commitments to acquire any
specific business or other material assets. Consummation of the Pending
Acquisitions and any subsequent acquisitions is subject to various conditions,
including FCC and other regulatory approvals including, in some cases,
expiration or termination of applicable waiting periods and possible review by
the U.S. Department of Justice ("DOJ") and the Federal Trade Commission ("FTC")
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). There can be no assurance that any of these conditions will be
satisfied. Consummation of the Pending Acquisitions and any subsequent
acquisitions will also be subject to FCC limits on the number of stations a
broadcaster may own in a given local market and other FCC rules or policies such
as the cross-interest policy, which may limit the Company's ability to acquire
stations in certain markets where one or more of the Company's shareholders has
other media interests. In addition, in two markets in which there are Pending
Acquisitions (Augusta, GA and Dubuque, IA), petitions or informal objections
have been filed against the Company's FCC assignment applications and a third
objection is expected to be filed. All such petitions and objections must be
resolved before FCC approval can be obtained and the Pending Acquisitions can be
consummated.
The consummation of the Offerings is not conditioned on the consummation of
any of the Pending Acquisitions. No assurances can be given that such
transactions will be consummated or that, if completed, they will be successful.
The Company's acquisition strategy involves numerous risks, including
difficulties in identifying targets and negotiating definitive purchase
agreements on satisfactory terms, the integration of operations and systems and
the management of a large and geographically diverse group of stations, the
diversion of management's attention from other business concerns and the
potential loss of key employees at acquired stations. See "Business --
Integration of Acquired Businesses." There can be no assurance that the
Company's management will be able to manage effectively the resulting business
or that such acquisitions will benefit the Company. In addition, there can be no
assurance that the Company will be able to acquire properties at valuations as
favorable as previous acquisitions. Depending upon the nature, size and timing
of future acquisitions, the Company may be required to raise financing in
addition to the financing necessary to consummate the Pending Acquisitions.
There can be no assurance that the Credit Facility, the Indenture (as defined
herein), the Certificate of Designation (as defined herein) or the Exchange
Debenture Indenture (as defined herein) or any other agreements to which the
Company may become a party will permit such additional financing or that such
additional financing will be available to the Company or, if available, that
such financing would be on terms acceptable to its management. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
LIMITED OPERATING HISTORY; NET LOSS; MANAGEMENT OF RAPID GROWTH
The Company began operations in May 1997 and, consequently, has a limited
operating history and limited historical financial information upon which
investors may base their evaluation of the Company's performance. The Company
has grown very rapidly, through acquisitions, which will place significant
demands on its administrative, operational and financial resources. Although the
Company has been
16
<PAGE>
successful to date in completing the integration of many new properties, future
performance and profitability, if any, will depend in part on the Company's
continued ability to integrate successfully the operations and systems of
acquired radio stations and radio groups, to hire additional personnel, and to
implement necessary enhancements to its management systems to respond to changes
in its business. The inability of the Company to do any of the foregoing could
have a material adverse effect on the Company. See "Business." The Company had a
net loss attributable to common stockholders of approximately $3.9 million for
the period from inception on May 22, 1997 to December 31, 1997, and additional
losses can be expected to continue while the Company pursues its strategy of
acquiring and developing radio stations. Pro forma for the Transactions, net
loss attributable to common stockholders was approximately $27.7 million for the
year ended December 31, 1997. There can be no assurance that the Company will be
profitable in the future.
SIGNIFICANT CAPITAL REQUIREMENTS; CONCURRENT OFFERINGS
If consummated, the Pending Acquisitions and other acquisitions for which
the Company has entered into letters of intent will require substantial capital.
The Company estimates that it will have significant capital requirements for the
remainder of 1998, including approximately $260.2 million for the consummation
of the Pending Acquisitions. The Company expects that the net proceeds from the
Offerings, together with internally generated cash flows and borrowings under
the Credit Facility, will provide sufficient funds for the Company to complete
the Pending Acquisitions. The amount of the Company's future capital
requirements will depend upon many factors, however, including the volume of
future acquisitions, as well as regulatory, technological and competitive
developments in the radio broadcasting industry, and may differ materially from
the Company's current estimates.
The Company is currently offering Class A Common Stock, Series A Preferred
Stock and the Notes pursuant to the Offerings. Consummation of each Offering is
contingent upon consummation of each of the other Offerings and there can be no
assurance that the Offerings will be consummated and, if so, on what terms.
SUBSTANTIAL LEVERAGE
After giving effect to the Transactions, the Company will have consolidated
indebtedness that is substantial in relation to its cash flow and stockholders'
equity. As of December 31, 1997, on a pro forma basis after giving effect to the
Transactions, the Company would have had outstanding, on a consolidated basis,
long-term indebtedness (including current portion) of approximately $157.7
million, preferred stock subject to mandatory redemption of approximately $132.7
million and stockholders' equity of approximately $149.7 million. See
"Capitalization." The Credit Facility, the Indenture, the Certificate of
Designation and the Exchange Debenture Indenture limit the incurrence of
additional indebtedness by the Company and its subsidiaries, in each case
subject to certain significant exceptions.
The level of the Company's indebtedness could have several important
consequences to the holders of the Class A Common Stock, including, but not
limited to, the following: (i) a substantial portion of the Company's cash flow
from operations will be dedicated to debt service and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing for
working capital, capital expenditures, acquisitions and general corporate or
other purposes may be impaired in the future; (iii) certain of the Company's
borrowings will be at variable rates of interest (including any borrowings under
the Credit Facility), which will expose the Company to the risk of increased
interest rates; (iv) the Company's leveraged position and the covenants
contained in the Credit Facility, the Indenture, the Certificate of Designation
and the Exchange Debenture Indenture could limit the Company's ability to
compete, expand and make capital improvements; (v) the Company's level of
indebtedness could make it more vulnerable to economic downturns, limit its
ability to withstand competitive pressures and reduce its flexibility in
responding to changing business and economic conditions; and (vi) certain
restrictive covenants contained in the Credit Facility, the Indenture, the
Certificate of Designation and the Exchange Debenture Indenture limit the
ability of Cumulus to pay dividends and make other distributions to its
stockholders.
17
<PAGE>
ABILITY TO SERVICE DEBT OBLIGATIONS
The Company's ability to satisfy its debt service obligations will depend
upon its future financial and operating performance, which, in turn, is subject
to prevailing economic conditions and financial, business and other factors,
certain of which are beyond its control. If the Company's cash flow and capital
resources are insufficient to fund its debt service obligations, the Company may
be forced to reduce or delay planned acquisitions, expansion and capital
expenditures, sell assets, obtain additional equity capital or restructure its
debt. There can be no assurance that the Company's operating results, cash flow
and capital resources will be sufficient for payment of its debt service and
other obligations in the future. In the absence of such operating results and
resources, the Company could face substantial liquidity problems and might be
required to sell material assets or operations to meet its debt service and
other obligations, and there can be no assurance as to the timing of such sales
or the proceeds that the Company could realize therefrom or that such sales
could be effected on terms satisfactory to the Company or at all. As a result of
the net loss attributable to common stockholders, earnings were insufficient to
cover fixed charges and preferred stock dividend requirements by $3,785 for the
period from inception on May 22, 1997 to December 31, 1997. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition --
Liquidity and Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS AND PREFERRED STOCK
The Credit Facility, the Indenture, the Certificate of Designation and the
Exchange Debenture Indenture contain certain covenants that restrict, among
other things, the ability of the Company and its subsidiaries to incur
additional indebtedness, pay dividends or make certain other restricted
payments, enter into certain transactions with affiliates, merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company. In addition,
the Credit Facility, the Indenture and the Exchange Debenture Indenture also
restrict the ability of the Company to incur liens or to consummate certain
asset sales. The Credit Facility also requires the Company to maintain specified
financial ratios and to satisfy certain financial condition tests. The Company's
ability to meet those financial ratios and financial condition tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet those tests. A breach of any of these covenants could result
in a default under the Credit Facility, the Indenture, the Certificate of
Designation and/or the Exchange Debenture Indenture. Upon the occurrence of an
event of default under the Credit Facility, the lenders thereunder could elect
to declare all amounts outstanding thereunder, together with accrued interest,
to be immediately due and payable. If Cumulus were unable to repay those
amounts, the lenders under the Credit Facility could proceed against the
collateral granted to them to secure that indebtedness. If the Credit Facility
indebtedness were to be accelerated, there can be no assurance that the assets
of Cumulus would be sufficient to repay in full such indebtedness and the other
indebtedness of the Company. The ability of the Company to comply with the
restrictions and covenants in the Credit Facility, the Indenture, the
Certificate of Designation and the Exchange Debenture Indenture will be
dependent upon the Company's future performance and various other factors,
including factors beyond its control. If the Company fails to comply with the
restrictions and covenants in the Credit Facility, the Indenture, the
Certificate of Designation or the Exchange Debenture Indenture, the Company's
obligation to repay the Notes, the Exchange Debentures and its indebtedness
under the Credit Facility may be accelerated.
BUSINESS RISKS
Future operations of the Company are subject to many variables which could
have a material adverse effect upon the Company's financial performance. These
variables include economic conditions, both generally and relative to the radio
broadcasting industry; shifts in population and other demographics; shifts in
audience tastes; the level of competition for advertising dollars with other
radio stations, television stations and other entertainment and communications
media; fluctuations in operating costs; technological changes and innovations;
changes in labor conditions; and changes in laws and governmental regulations
and policies and actions of federal regulatory bodies, including the DOJ, the
FTC and the FCC. Although
18
<PAGE>
the Company believes that substantially all of its radio stations, now owned or
to be acquired upon completion of the Pending Acquisitions, are positioned to
compete effectively in their respective markets, there can be no assurance that
any such station will be able to maintain or increase its current audience
ratings and advertising revenues. See "Business -- Competition." Radio
broadcasting 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 the introduction of digital audio broadcasting
("DAB"). DAB may deliver by satellite to nationwide and regional audiences
multi-channel, multi-format digital radio services with sound quality equivalent
to compact discs and may sell advertising. The Company cannot predict the
effect, if any, that any such new technologies may have on the radio
broadcasting industry or the Company. See "Business -- Competition."
COMPETITION
Radio broadcasting is a highly competitive business. The Company's radio
stations, now owned or to be acquired upon completion of the Pending
Acquisitions, compete for audiences and advertising revenues within their
respective markets directly with other radio stations, as well as with other
media such as newspapers, magazines, cable and broadcast television, outdoor
advertising and direct mail. In addition, certain of the Company's stations
compete, and in the future other of the Company's stations may compete, with
groups of two or more stations operated by a single operator. Audience ratings
and market shares are subject to change, and any adverse change in a particular
market could have a material adverse effect on the revenue of stations located
in that market. While the Company already competes with other stations with
comparable programming formats in many of its markets, if another radio station
in the market were to convert its programming format to a format similar to one
of the Company's stations or launch aggressive promotional campaigns, or if a
new station were to adopt a competitive format, or if an existing competitor
were to strengthen its operations, the Company's stations could suffer a
reduction in ratings and/or advertising revenue and could require increased
promotional and other expenses, and consequently would have a lower Broadcast
Cash Flow. The Telecommunications Act of 1996 (the "Telecom Act") facilitates
the consolidation of ownership of other radio broadcasting stations in the
markets in which the Company operates or may operate in the future. Some of such
competing in-market consolidated owners may be larger and have substantially
more financial and other resources than the Company. In addition, increased
consolidation in mid-size and smaller markets may result in greater competition
for acquisition properties and a corresponding increase in purchase prices for
such properties paid by the Company. See "Business --Competition."
GOVERNMENTAL REGULATION OF BROADCASTING INDUSTRY
The broadcasting industry is subject to extensive and changing federal
regulation that, among other things, requires approval by the FCC for the
issuance, renewal, modification, transfer of control, or assignment of
broadcasting station operating licenses, limits the number of broadcasting
properties that the Company may acquire in any market, and regulates certain
operating practices of radio stations. Additionally, the Communications Act of
1934, as amended (the "Communications Act") and FCC rules impose limitations on
alien ownership and voting of the capital stock of the Company. The Telecom Act
creates significant new opportunities for broadcasting companies but also
creates uncertainties as to how the FCC and the courts will enforce and
interpret the Telecom Act.
The number of radio stations the Company may acquire or operate pursuant to
an LMA in any market, overall and in each service (i.e., AM or FM), is limited
by the Telecom Act and FCC rules and may vary depending upon whether the
interests in other radio stations or certain other media properties of certain
individuals or entities affiliated with the Company are attributable to those
individuals or entities under FCC rules. The FCC generally applies its ownership
limits to "attributable" interests held by an individual, corporation,
partnership or other association. The interests of the Company's officers,
directors and 5% or greater voting stockholders are generally attributable to
the Company. Certain of the Company's officers and directors, and at least one
stockholder of the Company, have attributable broadcast interests outside of
their involvement with the Company, which will limit the number of radio
19
<PAGE>
stations that the Company may acquire or own in any market in which such
officers or directors (or stockholders) hold or acquire such outside
attributable broadcast interests. Moreover, under the FCC's cross-interest
policy, the FCC, in certain instances, may prohibit one party from acquiring an
attributable interest in one media outlet and a substantial non-attributable
interest in another media outlet in the same market, thereby prohibiting a
particular acquisition by the Company. The markets in which the Company may be
subject to restrictions on ownership include Atlanta, GA, Nashville, TN and
Rochester, MN.
The consummation of radio broadcasting acquisitions requires prior approval
of the FCC with respect to the transfer of control or assignment of the
broadcast licenses of the acquired stations. Certain of the Pending Acquisitions
have not yet received FCC approval. Two Pending Acquisitions are being
challenged before the FCC by a competitor, and another is expected to be
challenged. There can be no assurance that the FCC will approve future
acquisitions by the Company (including the Pending Acquisitions). The
consummation of certain of the Pending Acquisitions is also subject to
applicable waiting periods and possible review by the DOJ or the FTC under the
HSR Act and acquisitions that are not required to be reported under the HSR Act
may still be investigated by the FTC or the DOJ under the antitrust laws before
or after consummation. The DOJ has been active in reviewing radio broadcasting
acquisitions and has challenged a number of such transactions, some of which
have resulted in consent decrees requiring divestitures of certain stations,
terminations of LMAs and other relief. In general, the DOJ has more closely
scrutinized radio mergers and acquisitions that result in local market shares in
excess of 35% of radio advertising revenues, depending on format, signal
strength and other factors, although there is no hard-and-fast numerical rule
and certain transactions resulting in more than 35% market shares have not been
challenged. The DOJ can be expected to continue to enforce the antitrust laws in
this manner, and there can be no assurance that one or more of the Pending
Acquisitions will not be the subject of an investigation or enforcement action
by the DOJ or the FTC. If the DOJ or the FTC investigates or challenges one or
more of the Pending Acquisitions or any subsequent acquisitions, the Company may
need to restructure such transactions or divest other existing stations in a
particular market. However, the Company believes that its operating and sales
practices and demand-driven pricing policies serve to expand advertising volume
and increase competition in a market while providing more choice to advertisers
and to listeners.
The Company's business will be dependent upon maintaining its broadcasting
licenses issued by the FCC, which are ordinarily issued for a maximum term of
eight years. Although it is rare for the FCC to deny a license renewal
application, there can be no assurance that the future renewal applications of
the Company will be approved or that such renewals will not include conditions
or qualifications that could adversely affect the Company. Moreover,
governmental regulations and policies may change over time and there can be no
assurance that such changes would not have a material adverse impact upon the
Company. See "Business -- Federal Regulation of Radio Broadcasting."
REGULATORY APPROVAL
The Company believes that the consummation of the Reorganization and the
Offerings will require the prior consent of the FCC. The process of obtaining
such consent will involve the application therefore being placed on public
notice, and the public may file objections to such application. In addition, the
FCC itself may decline to grant the application based upon its own review. There
can be no assurance that such consent ultimately will be granted. While the
Company believes that it might be able to obtain the required FCC consent on a
so-called "short-form" application, there is no assurance that the FCC will not
require a "long-form" application. A "long-form" application, if required, will
involve a longer processing period, will be subject to formal petitions to deny
by other parties, and will involve a more detailed review by the FCC, all of
which would increase the risk that FCC consent would be delayed or denied.
20
<PAGE>
POTENTIAL CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES
Mr. Weening and Mr. Dickey each have direct interests in entities that have
entered into service agreements with the Company. These interests may give rise
to certain conflicts of interest with respect to transactions between these
entities and the Company.
QUAESTUS, an entity controlled by Mr. Weening, and Stratford Research, an
entity controlled by Mr. Dickey, have acted as the Company's financial and
strategic advisor and market research and programming advisor, respectively,
since the Company's inception. New advisory agreements between each of QUAESTUS
and Stratford Research and the Company will be entered into immediately prior to
the consummation of the Offerings. See "Certain Relationships and Related
Transactions."
EFFECTS OF ECONOMIC RECESSION
The Company derives substantially all of its revenue from the sale of
advertising time on its radio stations. The Company's broadcasting revenue could
be adversely affected by a future national recession, although in the most
recent national recession, in 1991, radio revenues in small radio markets ranked
below 100 were impacted less severely on average than those in the larger
markets. In addition, because a substantial portion of the Company's revenue is
derived from local advertisers, the Company's ability to generate advertising
revenue in specific markets could be adversely affected by local or regional
economic downturns. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Advertising Sales."
YEAR 2000 RISK
The Company has implemented a Year 2000 program to ensure that the Company's
computer systems and applications will function properly beyond 1999. The
Company believes that it has allocated adequate resources for this purpose and
expects its Year 2000 date conversion program to be successfully completed on a
timely basis. There can, however, be no assurance that this will be the case.
The Company does not expect to incur significant expenditures to address this
issue. The ability of third parties with whom the Company transacts business to
adequately address their Year 2000 issues is outside of the Company's control.
There can be no assurance that the failure of the Company or such third parties
to adequately address their respective Year 2000 issues will not have a material
adverse effect on the Company's business, financial condition, cash flows and
results of operations.
RELIANCE ON KEY PERSONNEL
The Company's business is managed by a small number of key management and
operating personnel, the loss of certain of whom could have a material adverse
effect on the Company. The Company believes that its future success will depend
in large part on its ability to attract and retain highly skilled and qualified
personnel and to expand, train and manage its employee base. The Company has
entered into employment agreements with Messrs. Weening, Dickey, Bungeroth and
Bonick which include provisions restricting the ability of Messrs. Weening,
Dickey, Bungeroth and Bonick to compete against the Company in certain
circumstances. The Company intends to arrange for "key-man" insurance on the
lives of Messrs. Weening, Dickey and Bungeroth. See "Management --Employment
Agreements."
The Company also employs several on-air personalities with large loyal
audiences in their respective markets. The loss of one of these personalities
could result in a short-term loss of audience share, but the Company does not
believe that any such loss would have a material adverse effect on the Company's
financial condition or results of operations, taken as a whole.
DILUTION
Persons purchasing shares of Class A Common Stock in the Stock Offerings
will incur immediate and substantial dilution in the net tangible book value per
share of Class A Common Stock of approximately $ per share. See
"Dilution."
21
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Stock Offerings, the Company will have outstanding
shares of Class A Common Stock and shares of Class B Common Stock.
In addition, the Company will have outstanding options to purchase shares
of Class A Common Stock. Of these shares, the shares of Class A Common
Stock offered hereby will be freely transferable without restriction (subject to
any FCC consent that might be required) under the Securities Act of 1933, as
amended (the "Securities Act") or further registration under the Securities Act,
except that shares purchased by "affiliates" of the Company, as that term is
defined in Rule 144 promulgated under the Securities Act ("Rule 144"), may
generally only be sold subject to certain restrictions as to timing, manner and
volume.
The Company, its directors, and certain officers of the Company, who will
directly or indirectly own shares of Class A Common Stock and options to
purchase shares of Class A Common Stock upon completion of the Stock
Offerings, have, subject to certain exceptions, agreed not to, directly or
indirectly, offer for sale, sell or otherwise dispose of, or announce the
offering of, any shares of Class A Common Stock or any securities convertible
into or exercisable or exchangeable for shares of Class A Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of Lehman Brothers Inc. See "Shares Eligible for Future Sale" and
"Underwriting."
Future sales of substantial amounts of Common Stock, or the perception that
such sales could occur, may affect the market price of the Common Stock
prevailing from time to time. See "Shares Eligible for Future Sale" and
"Underwriting."
NO PRIOR PUBLIC MARKET
Prior to the Stock Offerings, there has been no public market for the Class
A Common Stock and there can be no assurance that an active public market will
develop or be sustained after the Offering or that the initial public offering
price corresponds to the price at which the Class A Common Stock will trade in
the public market subsequent to the Stock Offerings. The initial public offering
price for the Class A Common Stock will be determined by negotiations among
Cumulus and the representatives of the Underwriters based upon the consideration
of certain factors set forth herein under "Underwriting." After completion of
the Stock Offerings, the market price of the Class A Common Stock will be
subject to fluctuations in response to various factors and events including,
among other things, the liquidity of the market for the Class A Common Stock,
variations in the Company's operating results, regulatory or other changes, both
domestic and international, affecting the radio broadcasting industry generally
or the Company specifically, announcements of business developments by the
Company or its competitors, changes in operating results and changes in general
market conditions.
DIVIDEND POLICY
The Company does not anticipate paying any dividends except for the payment
of scheduled dividends on the Series A Preferred Stock. The Company has never
declared or paid any cash dividends on its common stock and does not anticipate
paying cash dividends in the foreseeable future. In addition, the Credit
Facility, the Indenture, the Certificate of Designation and the Exchange
Debenture Indenture will restrict the ability of the Company to pay dividends.
See "Dividend Policy."
22
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Stock Offerings are estimated to be
$92.0 million ($ million if the Underwriters' over-allotment options are
exercised in full) after deducting underwriting discounts and commissions and
other offering expenses payable by the Company.
The net proceeds to the Company from the Preferred Stock Offering are
estimated to be approximately $95.8 million after deducting estimated
underwriting discounts and commissions and other offering expenses payable by
the Company.
The net proceeds to the Company from the Debt Offering are estimated to be
approximately $96.5 million, after deducting estimated underwriting discounts
and commissions and other offering expenses payable by the Company.
The Company intends to use a portion of the net proceeds from the Offerings
to finance the Pending Acquisitions. See "Pending Acquisitions." The balance of
the net proceeds will be used to repay approximately $ million principal
amount of indebtedness currently outstanding under the Credit Facility for which
affiliates of Lehman Brothers Inc. act as arranger and lender. At ,
1998 the blended interest rate on the outstanding borrowings under the Credit
Facility was %. See "Description of Credit Facility and Notes."
Consummation of each Offering is contingent upon consummation of each of the
other Offerings.
Pending the above uses, the net proceeds of the Offerings will be invested
in U.S. government securities or other interest bearing short-term investment
grade securities.
DIVIDEND POLICY
The Company does not anticipate paying any dividends except for the payment
of scheduled dividends on the Series A Preferred Stock. The Company has never
declared or paid any cash dividends on its common stock and does not anticipate
paying cash dividends in the foreseeable future. In addition, the Credit
Facility, the Indenture, the Certificate of Designation and the Exchange
Debenture Indenture will restrict the ability of the Company to pay dividends.
23
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 on a historical basis and as adjusted to give effect to the
Completed Acquisitions consummated subsequent to December 31, 1997 (the "1998
Completed Acquisitions"), the Offerings and the Pending Acquisitions. This table
should be read in conjunction with the Pro Forma Combined Financial Statements
and the Consolidated Financial Statements of the Company included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
<CAPTION>
PRO FORMA
PRO FORMA AS ADJUSTED
AS ADJUSTED FOR THE 1998
PRO FORMA FOR COMPLETED
AS ADJUSTED THE 1998 ACQUISITIONS,
FOR THE COMPLETED THE OFFERINGS
1998 ACQUISITIONS AND
THE COMPANY COMPLETED AND THE PENDING
HISTORICAL ACQUISITIONS THE OFFERINGS ACQUISITIONS
------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Cash and cash equivalents................................. $ 1,573 $ 1,573 $ 204,084 $ 1,573
------------- ----------- -------------- ---------------
------------- ----------- -------------- ---------------
Long-term debt, including current maturities:
Old Credit Facility..................................... 42,801 -- -- --
Credit Facility(1)...................................... -- 81,776 12 57,658
Notes................................................... -- -- 100,000 100,000
------------- ----------- -------------- ---------------
Total long-term debt.................................. 42,801 81,776 100,012 157,658
------------- ----------- -------------- ---------------
Preferred stock subject to mandatory redemption:
NML Preferred Stock..................................... 13,426 32,740 -- --
Series A Preferred Stock................................ -- -- 132,740 132,740
------------- ----------- -------------- ---------------
Total preferred stock................................. 13,426 32,740 132,740 132,740
------------- ----------- -------------- ---------------
Stockholders' equity:
Class A Common Stock, par value $.01 per share;
shares authorized; shares outstanding;
shares as adjusted for the Stock Offerings...... -- -- 1 1
Class B Common Stock, par value $.01 per share;
shares authorized; shares outstanding;
shares as adjusted for the Stock Offerings...... -- 1 1 1
Additional paid-in capital................................ 53,549 65,484 153,250 153,250
Accumulated deficit....................................... (3,573) (3,573) (3,573) (3,573)
------------- ----------- -------------- ---------------
Total stockholders' equity............................ 49,976 61,912 149,679 149,679
------------- ----------- -------------- ---------------
Total capitalization.................................. $ 106,203 $ 176,428 $ 382,431 $ 440,077
------------- ----------- -------------- ---------------
------------- ----------- -------------- ---------------
</TABLE>
- ------------------------------
(1) Affiliates of Lehman Brothers Inc. act as arranger and lender under the
Credit Facility.
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<PAGE>
DILUTION
Dilution is the amount by which the initial public offering price paid by
the purchasers of the shares of Class A Common Stock will exceed the net
tangible book value per share of Class A Common Stock after the Stock Offerings.
The net tangible book value per share of Class A Common Stock is determined by
subtracting the total liabilities of the Company from the total book value of
the tangible assets of the Company and dividing the difference by the number of
shares of Class A Common Stock deemed to be outstanding on the date of which
such book value is determined.
At December 31, 1997, on a pro forma basis after giving effect to the
Transactions, the Company had a net tangible book value (deficit) of
approximately $ or $ per share. After giving effect to the sale
by the Company of shares of Class A Common Stock offered hereby, and
application of the estimated net proceeds therefrom, the pro forma net tangible
book value (deficit) of the Company as of December 31, 1997 would have been
approximately $ , or $ per share. This represents an immediate
increase in such net tangible book value of $ per share to existing
stockholders and an immediate dilution to new investors of $ per share.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share................................. $
Pro forma net tangible book value (deficit) before the Stock
Offerings........................................................... $
Increase in net tangible book value (deficit) per share attributable
to new investors....................................................
---------
Pro forma net tangible book value (deficit) per share after the Stock
Offerings.............................................................
---------
Dilution per share to new investors..................................... $
---------
---------
</TABLE>
The following table sets forth, as of December 31, 1997, the number of
shares of Class A Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid to the
Company by existing stockholders and the investors purchasing shares of Class A
Common Stock (before deducting underwriting discounts and commissions and
offering expenses) in the Stock Offerings:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
----------------------- ----------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).................................. % $ % $
New investors.............................................
---------- ----- ---------- -----
Total................................................. 100.0% $ 100.0%
---------- ----- ---------- -----
---------- ----- ---------- -----
</TABLE>
- ------------------------
(1) If the Underwriters' over-allotment options were exercised in full,
shares of Class A Common Stock would be outstanding after the Stock
Offerings.
25
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements reflect the
results of operations for the year ended December 31, 1997 and the combined
balance sheet as of December 31, 1997 of the Company after giving effect to the
Transactions.
For pro forma purposes, the Company's pro forma combined statement of
operations for the year ended December 31, 1997 has been adjusted to give effect
to the Transactions as if they had occurred on January 1, 1997. For pro forma
purposes, the Company's combined balance sheet as of December 31, 1997 has been
adjusted to give effect to the Transactions (except for Completed Acquisitions
consummated prior to December 31, 1997, in which case the pro forma combined
balance sheet gives effect to such transactions as of the date of their
consummation) as if they had occurred on December 31, 1997.
The pro forma combined financial statements are based on the historical
consolidated financial statements of the Company and the financial statements of
those entities acquired, or from which assets were acquired, in conjunction with
the Completed Acquisitions and the Pending Acquisitions. The unaudited combined
pro forma financial information reflects the use of the purchase method of
accounting for all acquisitions. For purposes of the unaudited pro forma
combined financial statements, the purchase prices of the stations acquired and
to be acquired in the Completed Acquisitions and Pending Acquisitions have been
allocated based primarily on information furnished by management of the acquired
stations. The final allocation of the relative purchase prices of the stations
acquired and to be acquired in the Completed Acquisitions and Pending
Acquisitions are determined a reasonable time after consummation of such
transactions and are based on complete evaluations of the assets acquired and
liabilities assumed. Accordingly the information presented herein may differ
from the final purchase price allocation; however, in the opinion of the
Company's management, the final purchase price allocation will not differ
significantly from the information presented herein. In the opinion of the
Company's management, all adjustments have been made that are necessary to
present fairly the pro forma data.
The information set forth under the heading "The Company Historical"
reflects acquisitions made by the Company and the LMAs entered into by the
Company in 1997, which totaled 38 stations in eight U.S. markets. The
information set forth under the heading "Pro Forma as Adjusted for the 1998
Completed Acquisitions" reflects all acquisitions made and consummated by the
Company as of March 27, 1998. As of this date the Company owned and operated, or
provided sales and marketing services to, 94 stations in 19 markets. Upon
consummation of the Pending Acquisitions, the Company will be one of the five
largest radio broadcasting companies based on number of stations, and among the
fifteen largest based on net revenues in the U.S. and will own and operate 167
radio stations (119 FM and 48 AM) clustered in 32 markets.
Broadcast Cash Flow consists of operating income (loss) before depreciation
and amortization, non-cash stock compensation expense and corporate general and
administrative expenses. EBITDA consists of operating income (loss) before
depreciation and amortization and non-cash stock compensation expense. Broadcast
Cash Flow margin is Broadcast Cash Flow as a percentage of net revenues. EBITDA
margin is EBITDA as a percentage of net revenues. Although Broadcast Cash Flow,
EBITDA, Broadcast Cash Flow margin and EBITDA margin are not measures of
performance calculated in accordance with GAAP, management believes that they
are useful to an investor in evaluating the Company because they are measures
widely used in the broadcast industry to evaluate a radio company's operating
performance. However, Broadcast Cash Flow and EBITDA should not be considered in
isolation or as substitutes for net income, cash flows from operating activities
and other income or cash flow statement data prepared in accordance with GAAP,
or as a measure of liquidity or profitability.
The unaudited pro forma information is presented for illustrative purposes
only and is not indicative of the operating results or financial position that
would have occurred if the Transactions had been consummated on the dates
indicated, nor is it indicative of future operating results or financial
positions if
26
<PAGE>
the aforementioned transactions are completed. The failure of the aforementioned
transactions to be completed would significantly alter the unaudited pro forma
information.
All pro forma financial information should be read in conjunction with the
Company's Consolidated Financial Statements and the financial statements of
certain of the other acquired companies appearing elsewhere in this Prospectus.
See also "Risk Factors--Substantial Leverage" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
27
<PAGE>
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(D)
PRO FORMA
(B) ADJUSTMENTS FOR THE (A)+(B)+(C)+
PRO FORMA COMPANY (D)=(E)
ADJUSTMENTS HISTORICAL PRO FORMA AS
(A) FOR (C) AND THE 1998 ADJUSTED FOR
THE COMPANY THE COMPANY 1998 COMPLETED COMPLETED THE 1998 COMPLETED
HISTORICAL HISTORICAL(2) ACQUISITIONS ACQUISITIONS ACQUISITIONS
-------------- ------------- ---------------- ------------------- ---------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................... $ 10,134 $ 21,414 $ 12,667 $ -- $ 44,215
Less: agency commissions...... (971) (1,756) (1,178) -- (3,905)
------- ------------- ------- -------- --------
Net revenues.................. 9,163 19,658 11,489 -- 40,310
Station operating expenses
excluding depreciation and
amortization................. 7,147 14,217 9,032 (1,110)(3) 29,286
Depreciation and
amortization................. 1,736 2,864 1,440 1,415(4) 7,455
Corporate general and
administrative expenses...... 1,276 430 526 (832)(5) 2,009
609(6)
Non-cash stock compensation
expense...................... 1,689(1) -- -- -- 1,689
------- ------------- ------- -------- --------
Operating income (loss)....... (2,685) 2,147 491 (82) (129)
------- ------------- ------- -------- --------
Interest expense.............. 772 1,041 864 4,647(7) 7,324
Gain (loss) on sale of asset.. -- 12,261 -- (12,261)(8) --
Other (income) expense........ 54 4 (8) -- 50
------- ------------- ------- -------- --------
Income (loss) before income
taxes........................ (3,511) 13,363 (365) (16,990) (7,503)
Income tax (expense)
benefit...................... (67) (84) (44) -- (195)
------- ------------- ------- -------- --------
Net income (loss)............. (3,578) 13,279 (409) (16,990) (7,698)
Preferred stock dividends..... 274 -- -- 4,087(9) 4,361
------- ------------- ------- -------- --------
Net income (loss) attributable
to common stockholders....... $ (3,852) $ 13,279 $ (409) $ (21,077) $ (12,059)
------- ------------- ------- -------- --------
------- ------------- ------- -------- --------
Basic and diluted earnings
(loss) per share............. $ $
OTHER FINANCIAL DATA:
Broadcast Cash Flow........... $ 2,016 $ 5,441 $ 2,457 $ 1,110 $ 11,024
------- ------------- ------- -------- --------
------- ------------- ------- -------- --------
Broadcast Cash Flow margin.... 22.0% 27.7% 21.4% -- 27.4%
EBITDA........................ $ 740 $ 5,011 $ 1,931 $ 1,333 $ 9,015
------- ------------- ------- -------- --------
------- ------------- ------- -------- --------
EBITDA margin................. 8.1% 25.5% 16.8% -- 22.4%
<CAPTION>
(E)+(F)=(G)
PRO FORMA AS
ADJUSTED FOR (I)
(F) THE 1998 PRO FORMA
PRO FORMA COMPLETED ADJUSTMENTS (G)+(H)+(I)
ADJUSTMENTS ACQUISITIONS (H) FOR THE =(J)
FOR THE AND THE PENDING PENDING PRO FORMA
OFFERINGS OFFERINGS ACQUISITIONS ACQUISITIONS COMBINED
------------ -------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................... $ -- $ 44,215 $ 72,318 $ -- $ 116,533
Less: agency commissions...... -- (3,905) (6,452) -- (10,357)
------------ -------------- ------------ ------------- -------------
Net revenues.................. -- 40,310 65,866 -- 106,176
Station operating expenses
excluding depreciation and
amortization................. -- 29,286 51,960 (2,819)( 78,427
Depreciation and
amortization................. -- 7,455 6,751 5,638(4) 19,844
Corporate general and
administrative expenses...... -- 2,009 2,529 (2,092)( 2,742
296(6)
Non-cash stock compensation
expense...................... -- 1,689 278 (278)(14) 1,689
------------ -------------- ------------ ------------- -------------
Operating income (loss)....... -- (129) 4,348 (745) 3,474
------------ -------------- ------------ ------------- -------------
Interest expense.............. 2,400 (10 9,724 4,820 79 (15 14,623
Gain (loss) on sale of asset.. -- -- 1,462 (1,462)( --
Other (income) expense........ -- 50 240 (122)(17) 168
------------ -------------- ------------ ------------- -------------
Income (loss) before income
taxes........................ (2,400) (9,903) 750 (2,164) (11,317)
Income tax (expense)
benefit...................... -- (195) -- -- (195)
------------ -------------- ------------ ------------- -------------
Net income (loss)............. (2,400) (10,098) 750 (2,164) (11,512)
Preferred stock dividends..... 11,814 (11 16,175 -- -- 16,175
------------ -------------- ------------ ------------- -------------
Net income (loss) attributable
to common stockholders....... $ (14,214) $ (26,273) $ 750 $ (2,164) $ (27,687)
------------ -------------- ------------ ------------- -------------
------------ -------------- ------------ ------------- -------------
Basic and diluted earnings
(loss) per share............. $ $
OTHER FINANCIAL DATA:
Broadcast Cash Flow........... $ -- $ 11,024 $ 13,906 $ 2,819 $ 27,749
------------ -------------- ------------ ------------- -------------
------------ -------------- ------------ ------------- -------------
Broadcast Cash Flow margin.... -- 27.4% 21.1% -- 26.1%
EBITDA........................ $ -- $ 9,015 $ 11,377 $ 4,615 $ 25,007
------------ -------------- ------------ ------------- -------------
------------ -------------- ------------ ------------- -------------
EBITDA margin................. -- 22.4% 17.3% -- 23.6%
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Statement of Operations.
28
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
(1) Amount represents a non-recurring, non-cash stock compensation expense on
common stock issued to certain employees and managers upon formation of the
Company.
(2) Adjustments reflect historical revenues and expenses of stations acquired by
the Company in 1997 for the period from January 1, 1997 through the date the
stations were acquired by the Company.
(3) Includes adjustments to reflect ongoing expense eliminations which are
directly attributable to the Completed Acquisitions and will have an ongoing
impact on the Company. These include (i) $734 from the elimination of
duplicate general and administrative, programming and technical personnel
functions; (ii) $218 related to the consolidation of station facilities;
(iii) $133 from a completed contractual change in the national sales
representation contracts; and (iv) $25 from the cancellation of duplicate
vendor contracts.
(4) Adjustments reflect (i) the change in depreciation and amortization expense
resulting from conforming the estimated useful lives of the Completed and
Pending Acquisitions' assets to the Company's policies and (ii)the
additional depreciation and amortization expense resulting from the
allocation of the purchase price to the estimated fair market value of the
assets acquired. On a pro forma basis, depreciation expense is $3,778 and
amortization expense is $16,066 after giving effect to the Completed and
Pending Acquisitions. Depreciation expense has been calculated on a straight
line basis using a weighted average life of ten years for property and
equipment. Goodwill and other intangible assets amortization has been
calculated on a straight line basis over 25 years.
(5) Reflects the elimination of duplicate corporate office and related expense
including $541 of previous excess owner compensation and related expenses,
$70 of expenses related to the elimination of non-recurring LMA fees, $163
of professional fees incurred by the acquired stations in connection with
the completed sale of the stations to the Company and $58 of expense related
to certain pension and profit sharing plans specific to previous owners of
the acquired stations in connection with the consummation of the Completed
Acquisitions.
(6) Adjustment reflects incremental corporate expenditures required to reflect
the annualized costs of the Company's corporate office assuming formation of
the Company on January 1, 1997 and certain additional corporate expenditures
related to expansion through acquisitions. The incremental costs have been
allocated to the Completed and Pending Acquisitions based upon the nature
and timing of the costs incurred or committed to be incurred.
(7) Adjustment to reflect increased interest expense resulting from:
<TABLE>
<S> <C>
Sources of funds:
Amount financed by the Credit Facility $ 81,764
NML Preferred Stock investment 16,250
Private equity investment in common stock 15,000
---------
Total $ 113,014
---------
---------
Uses of funds:
Purchase price of the 1998 Completed Acquisitions $ 67,225
Repayment of the Old Credit Facility 42,789
Credit Facility transaction costs 3,000
---------
Total $ 113,014
---------
---------
Interest on the Credit Facility assumed at 8.50% $ 6,949
Amortization of $3,000 in debt issuance costs over 8 years 375
---------
Total interest expense 7,324
Less: Historical interest recorded by the Company and the
Completed Acquisitions (2,677)
---------
Net adjustment $ 4,647
---------
---------
</TABLE>
29
<PAGE>
(8) Adjustment recorded to eliminate a non-recurring gain of $12,261 recognized
by HVS Partners on the 1997 sales of radio stations in Salisbury, MD and
Wilmington, NC to the Company prior to the acquisition by the Company of the
remainder of HVS Partners' stations.
(9) Reflects (i) the additional accretion of the NML Preferred Stock dividends
and (ii) the amortization of the $3,098 discount to liquidation value on the
NML Preferred Stock.
<TABLE>
<S> <C>
Accretion of NML Preferred Stock dividends (compounded quarterly
at 12.00%)...................................................... $ 4,079
Amortization of discount (over 11 years).......................... 282
---------
4,361
Less: Historical dividends recorded by the Company................ (274)
---------
Net adjustment $ 4,087
---------
---------
</TABLE>
(10) Adjustment to reflect increased interest expense resulting from:
<TABLE>
<S> <C>
Interest on the Notes assumed at 9.00% $ 9,000
Amortization of $3,492 debt issuance costs over 10 years 349
Amortization of $3,000 Credit Facility transaction costs over 8
years 375
---------
Total interest expense 9,724
Less: Interest expense recorded pro forma as adjusted for the
Completed Acquisitions (7,324)
---------
Net adjustment $ 2,400
---------
---------
</TABLE>
(11) To reflect additional accretion related to Series A Preferred Stock
dividend:
<TABLE>
<S> <C>
Accretion of Series A Preferred Stock dividend (compounded daily
at 11.50%)...................................................... $ 16,175
Less: Pro forma dividends on NML Preferred Stock exchanged into
Series A Preferred Stock........................................ (4,361)
---------
Net adjustment.................................................... $ 11,814
---------
---------
</TABLE>
(12) Includes adjustments to reflect ongoing expense eliminations which are
directly attributable to the Pending Acquisitions and will have an ongoing
impact on the Company. These include (i) $1,876 from elimination of
duplicate general and administrative, programming and technical personnel
functions; (ii) $600 related to the consolidation of station facilities;
(iii) $263 from a completed contractual change in the national sales
representation contracts; and (iv) $80 from the cancellation of duplicate
vendor contracts.
(13) Adjustment reflects the elimination of duplicate corporate office and
related expense including $1,304 of previous excess owner compensation and
related expenses, $235 of expense related to professional fees incurred by
the acquired stations in connection with the sale of the stations to the
Company, $271 of expenses related to the elimination of non-recurring LMA
fees and $282 related to certain pension and profit sharing plans specific
to previous owners of the acquired stations in connection with the Pending
Acquisitions.
(14) Adjustment to eliminate non-cash stock compensation expense of $278 related
to the previous owners of one of the stations included in the Pending
Acquisitions.
30
<PAGE>
(15) Adjustment to reflect increased interest expense resulting from:
<TABLE>
<S> <C>
Sources of funds:
Amount financed by the Notes ($100,000 net of fees of $3,492)... $ 96,508
Preferred Stock Offering to the public ($100,000 net of fees of
$4,242)....................................................... 95,758
Stock Offerings ($100,000 to the Company net of fees of
$7,991)....................................................... 92,009
Amount financed by the Credit Facility.......................... 57,646
NML Preferred Stock investment.................................. 16,250
Private equity investment in common stock....................... 15,000
---------
Total........................................................... $ 373,171
---------
---------
Uses of funds:
Purchase price of the Completed Acquisitions and the Pending
Acquisitions.................................................. $ 327,382
Repayment of the Old Credit Facility............................ 42,789
Credit Facility transaction costs............................... 3,000
---------
Total........................................................... $ 373,171
---------
---------
Interest on the Notes assumed at 9.00%............................ $ 9,000
Interest on the Credit Facility assumed at 8.50%.................. 4,899
Amortization of $3,492 debt issuance costs over 10 years.......... 349
Amortization of $3,000 Credit Facility transaction costs over 8
years........................................................... 375
---------
Total interest expense.......................................... 14,623
Less: Interest expense recorded pro forma as adjusted for the
Pending Acquisitions and pro forma as adjusted for the
Offerings..................................................... (14,544)
---------
Net adjustment.................................................. $ 79
---------
---------
</TABLE>
(16) Adjustment recorded to eliminate a non-recurring gain of $1,462 recognized
by Communications Properties, Inc., a Pending Acquisition of the Company, on
a sale by Communications Properties, Inc. of two radio stations not acquired
by the Company.
(17) Elimination of interests of minority shareholders in connection with a
Pending Acquisition.
The Company will record an extraordinary loss of approximately $1,800 in the
first quarter of 1998 related to the early extinguishment of the Old Credit
Facility.
Upon the consummation of the Offerings, the Company will record the
accretion of the discount on the NML Preferred Stock of $3,064 when exchanged
into Series A Preferred Stock.
31
<PAGE>
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(A)+(B)=(C)
(B) PRO FORMA AS
PRO FORMA ADJUSTMENTS ADJUSTED FOR
(A) FOR THE 1998 THE 1998
THE COMPANY COMPLETED COMPLETED
HISTORICAL ACQUISITIONS(1) ACQUISITIONS
------------- --------------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents....................................... $ 1,573 $ -- $ 1,573
Accounts receivable............................................. 5,241 -- 5,241
Prepaid expenses and other current assets....................... 288 60 348
------------- -------- -------------
Total current assets........................................ 7,102 60 7,162
Property and equipment, net..................................... 8,120 5,005 13,125
Intangible assets, net.......................................... 90,217 63,318 153,535
Other assets.................................................... 5,002 34 8,036
3,000(2)
------------- -------- -------------
Total assets................................................ $ 110,441 $ 71,417 $ 181,858
------------- -------- -------------
------------- -------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other liabilities.......................... $ 3,838 $ $ 3,838
Current portion of long-term debt............................... 12 12
------------- -------- -------------
Total current liabilities................................... 3,850 -- 3,850
Long-term debt:
Notes......................................................... -- -- --
Credit Facility............................................... 81,764(2) 81,764
Old Credit Facility........................................... 42,789 (42,789)(2)
Other long-term liabilities:
Deferred tax liability........................................ -- 1,192 1,192
Other long-term liabilities................................... 400 -- 400
------------- -------- -------------
Total liabilities........................................... 47,039 40,167 87,206
------------- -------- -------------
Preferred stock subject to mandatory redemption................. 13,426 19,314(3) 32,740
------------- -------- -------------
Stockholders' equity:
Class A Common Stock.......................................... -- -- --
Class B Common Stock.......................................... -- 1(2) 1
Additional paid in capital.................................... 53,549 14,999(2) 65,484
(3,064)(3)
Retained earnings (deficit)................................... (3,573) -- (3,573)
------------- -------- -------------
Total stockholders' equity.................................. 49,976 11,936 61,912
------------- -------- -------------
Total liabilities and stockholders' equity.................. $ 110,441 $ 71,417 $ 181,858
------------- -------- -------------
------------- -------- -------------
<CAPTION>
(C)+(D)=(E)
PRO FORMA AS
ADJUSTED FOR
(D) THE 1998 (F)
PRO FORMA COMPLETED PRO FORMA
ADJUSTMENTS ACQUISITIONS ADJUSTMENTS FOR (E)+(F)=(G)
FOR THE AND THE THE PENDING PRO FORMA
OFFERINGS OFFERINGS ACQUISITIONS(10) COMBINED
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents....................................... $ 202,511(4) $ 204,084 $(202,511)(11) $ 1,573
Accounts receivable............................................. -- 5,241 -- 5,241
Prepaid expenses and other current assets....................... -- 348 37 385
--------------- --------------- --------------- -------------
Total current assets........................................ 202,511 209,673 (202,474) 7,199
Property and equipment, net..................................... -- 13,125 24,658 37,783
Intangible assets, net.......................................... -- 153,535 248,119 401,654
Other assets.................................................... 3,492(5) 11,528 799 12,327
--------------- --------------- --------------- -------------
Total assets................................................ $ 206,003 $ 387,861 $ 71,102 $ 458,963
--------------- --------------- --------------- -------------
--------------- --------------- --------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other liabilities.......................... $ -- $ 3,838 $ -- $ 3,838
Current portion of long-term debt............................... -- 12 12
--------------- --------------- --------------- -------------
Total current liabilities................................... -- 3,850 -- 3,850
Long-term debt:
Notes......................................................... 100,000(6) 100,000 -- 100,000
Credit Facility............................................... (81,764)(7) -- 57,646 (11 57,646
Old Credit Facility........................................... -- -- -- --
Other long-term liabilities:
Deferred tax liability........................................ -- 1,192 13,456 14,648
Other long-term liabilities................................... -- 400 -- 400
--------------- --------------- --------------- -------------
Total liabilities........................................... 18,236 105,442 71,102 176,544
--------------- --------------- --------------- -------------
Preferred stock subject to mandatory redemption................. 100,000(8) 132,740 -- 132,740
--------------- --------------- --------------- -------------
Stockholders' equity:
Class A Common Stock.......................................... 1(9) 1 -- 1
Class B Common Stock.......................................... -- 1 -- 1
Additional paid in capital.................................... 92,008(9) 153,250 -- 153,250
(4,242)(9)
Retained earnings (deficit)................................... -- (3,573) -- (3,573)
--------------- --------------- --------------- -------------
Total stockholders' equity.................................. 87,767 149,679 -- 149,679
--------------- --------------- --------------- -------------
Total liabilities and stockholders' equity.................. $ 206,003 $ 387,861 $ 71,102 $ 458,963
--------------- --------------- --------------- -------------
--------------- --------------- --------------- -------------
</TABLE>
See accompanying notes to the unaudited combined pro forma balance sheet
32
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
(1) To record the allocation of the $67,225 purchase price paid for transactions
consummated subsequent to December 31, 1997 and the recording of related
deferred tax of $1,192.
(2) Adjustment reflects the change in capital structure for the 1998 Completed
Acquisitions as follows:
<TABLE>
<S> <C>
Sources of funds:
Amount financed by the Credit Facility $ 81,764
NML Preferred Stock investment 16,250
Private equity investment in common stock 15,000
---------
Total $ 113,014
---------
---------
Uses of funds:
Purchase price of the 1998 Completed Acquisitions $ 67,225
Repayment of the Old Credit Facility 42,789
Credit Facility transaction costs 3,000
---------
Total $ 113,014
---------
---------
</TABLE>
(3) In addition to the NML Preferred Stock investment of $16,250 in note 2
above, an amount of $3,064 has been recorded for the accretion of the
discount on the NML Preferred Stock when exchanged into Series A Preferred
Stock.
(4) To reflect the net cash proceeds, after repayment of the Credit Facility,
from the Offerings. These net cash proceeds, plus additional monies
available from the Credit Facility will be used to finance the Pending
Acquisitions referred to in note 10 below.
(5) To reflect the capitalization of $3,492 in costs related to the issuance of
the Notes.
(6) To reflect the issuance of $100,000 principal amount of Notes pursuant to
the Debt Offering.
(7) To reflect the repayment of the Credit Facility with the proceeds from the
Offerings.
(8) To reflect issuance of $100,000 principal amount of Series A Preferred Stock
to the public.
(9) To reflect net proceeds of the Stock Offerings to the Company of $92,009
less preferred stock issuance costs of $4,242.
(10) To record the allocation of the $260,157 purchase price paid for
transactions consummated subsequent to December 31, 1997 and the recording
of the related deferred income taxes of $13,456.
(11) To reflect the financing of the $260,157 purchase price of the Pending
Acquisitions through the use of $202,511 of the net proceeds from the
Offerings plus borrowing on the Credit Facility of $57,646.
33
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following selected financial data are derived from the Consolidated
Financial Statements of the Company. The data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
ON
MAY 22, 1997(1)
TO DECEMBER 31, 1997
-----------------------
<S> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net revenues............................................................................. $ 9,163
Station operating expenses excluding depreciation and amortization ...................... 7,147
Depreciation and amortization............................................................ 1,736
Corporate general and administrative expenses............................................ 1,276
Non-cash stock compensation expense...................................................... 1,689
Operating income (loss).................................................................. (2,685)
Net interest expense..................................................................... 772
Income (loss) before income taxes........................................................ (3,511)
Net income (loss)........................................................................ (3,578)
Preferred stock dividends................................................................ 274
Net income (loss) attributable to common stockholders.................................... (3,852)
Basic and diluted earnings (loss) per share..............................................
OTHER FINANCIAL DATA:
Broadcast Cash Flow(2)................................................................... $ 2,016
EBITDA(2)................................................................................ 740
Net cash used in operating activities.................................................... 1,887
Net cash used in investing activities.................................................... 95,100
Net cash provided by financing activities................................................ 98,560
Ratio of earnings to fixed charges and
preferred stock dividend requirements(3)............................................... --
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1997
----------------------
<S> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Total assets.............................................................................. $ 110,441
Long-term debt, including current portion................................................. 42,801
Preferred stock subject to mandatory redemption........................................... 13,426
Total stockholders' equity................................................................ 49,976
</TABLE>
- ------------------------------
(1) The Company was incorporated on May 22, 1997. Between the date of
incorporation of Media LLC, which was April 18, 1997, and May 22, 1997,
Media LLC undertook certain activities on behalf of the Company pending its
incorporation, including the incurrence of expenses and the funding of
escrow deposits for acquisitions. Upon the incorporation of the Company,
these activities and the related expenses were transferred to the Company.
(2) Broadcast Cash Flow consists of operating income (loss) before depreciation
and amortization, non-cash stock compensation expense and corporate general
and administrative expenses. EBITDA consists of operating income (loss)
before depreciation and amortization and non-cash stock compensation
expense. Although Broadcast Cash Flow and EBITDA are not measures of
performance calculated in accordance with GAAP, management believes that
they are useful to an investor in evaluating the Company because they are
measures widely used in the broadcast industry to evaluate a radio company's
operating performance. However, Broadcast Cash Flow and EBITDA should not be
considered in isolation or as substitutes for net income, cash flows from
operating activities and other income or cash flow statement data prepared
in accordance with GAAP, or as a measure of liquidity or profitability.
(3) For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividend requirements, earnings consists of earnings before
income taxes and fixed charges and preferred stock dividend requirements.
"Fixed charges and preferred stock dividend requirements" consists of
interest on all indebtedness, amortization of debt expense and preferred
stock dividends. As a result of the net loss attributable to common
stockholders, earnings were insufficient to cover fixed charges and
preferred stock dividend requirements by $3,785.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto included elsewhere in this
Prospectus. The following discussion contains certain forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in "Risk
Factors," "Business" and elsewhere in this Prospectus, including, without
limitation, risks and uncertainties relating to leverage, the need for
additional funds, consummation of the Pending Acquisitions, integration of the
Pending Acquisitions, the ability of the Company to eliminate certain costs, the
management of growth, the popularity of radio as a broadcasting and advertising
medium and changing consumer tastes.
GENERAL
The Company commenced operations in May 1997. During 1997, the Company
purchased, or entered into LMAs with, a total of 38 stations in 8 U.S. markets
and 5 stations plus additional translators and 1 station under construction in
the Caribbean market (the "Historical Acquisitions"). The following discussion
of the Company's results of operations includes the results of these
acquisitions and LMAs. As the Company has had only one accounting period, no
period to period comparison can be made.
The Company currently owns and operates, or provides sales and marketing
services to, 94 stations in 19 markets. Upon consummation of the Pending
Acquisitions, the Company will be one of the five largest radio broadcasting
companies based on number of stations, and among the fifteen largest based on
net revenues, in the U.S. and will own and operate 167 radio stations (119 FM
and 48 AM) clustered in its 32 U.S. markets.
The Company believes that the financial results for the historical period
from inception at May 22, 1997 to December 31, 1997 are not indicative of the
prospective financial performance of the Company due to the subsequent
completion of the Completed Transactions and the pending completion of the
Pending Transactions, as presented in the Unaudited Pro Forma Combined Financial
Statements. Accordingly, the discussion of the Pending Acquisitions has been
made on a pro forma basis in order to give a more representative view of the
operations of the Company as if they owned the stations for the full year ended
December 31, 1997.
The unaudited pro forma information is presented for illustrative purposes
only and is not indicative of the operating results or financial position that
would have occurred if the Transactions had been consummated on the dates
indicated, nor is it indicative of future operating results or financial
positions if the aforementioned transactions are completed. The failure of the
aforementioned transactions to be completed would significantly alter the
unaudited pro forma information.
ADVERTISING AND BROADCAST CASH FLOW
The primary source of the Company's revenues is the sale of advertising time
on its radio stations. The Company's sales of advertising time are primarily
affected by the demand for advertising time from local and national advertisers
and the advertising rates charged by its radio stations. Advertising demand and
rates are based in large part on a station's ability to attract audiences in the
demographic groups targeted by its advertisers, as measured principally by
Arbitron on a periodic basis, generally once, twice, or four times per year.
Because audience ratings in local markets are crucial to a station's financial
success, the Company endeavors to develop strong listener loyalty. The Company
believes that the diversification of formats on its stations helps to insulate
it from the effects of changes in the musical tastes of the public with respect
to any particular format.
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The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format of
a particular station. The Company's stations strive to maximize revenue by
constantly managing the number of commercials available for sale and adjusting
prices based upon local market conditions. In the broadcasting industry, radio
stations sometimes utilize trade (or barter) agreements which exchange
advertising time for goods or services (such as travel or lodging), instead of
for cash. The Company seeks to minimize its use of trade agreements.
The Company's advertising contracts are generally short-term. The Company
generates most of its revenue from local advertising, which is sold primarily by
a station's sales staff. In fiscal 1997, approximately 89% of the Company's
revenues were from local advertising. To generate national advertising sales,
the Company engages national representative companies.
The Company's revenues vary throughout the year. As is typical in the radio
broadcasting industry, the Company expects its first calendar quarter will
produce the lowest revenues for the year, and the fourth calendar quarter will
generally produce the highest revenues for the year, with the exception of
certain stations such as those of the Company in Salisbury-Ocean City, Maryland,
where the stations generally earn higher revenues in the second and third
quarters of the year because of the higher seasonal population in those
communities. The Company's operating results in any period may be affected by
the incurrence of advertising and promotion expenses that typically do not have
an effect on revenue generation until future periods, if at all.
The Company's most significant station operating expenses are employee
salaries and commissions, programming expenses, advertising and promotional
expenditures, technical expenses, and general and administrative expenses. The
Company strives to control these expenses by working closely with local station
management.
The performance of a radio station group, such as the Company's, is
customarily measured by its ability to generate Broadcast Cash Flow. Broadcast
Cash Flow consists of operating income (loss) before depreciation and
amortization, non-cash stock compensation expense and corporate general and
administrative expenses. EBITDA consists of operating income (loss) before
depreciation and amortization and non-cash stock compensation expense. Although
Broadcast Cash Flow and EBITDA are not measures of performance calculated in
accordance with GAAP, management believes that they are useful to an investor in
evaluating the Company because they are measures widely used in the broadcast
industry to evaluate a radio company's operating performance. However, Broadcast
Cash Flow and EBITDA should not be considered in isolation or as substitutes for
net income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP, or as a measure of liquidity or
profitability.
RESULTS OF OPERATIONS
HISTORICAL. Net revenue for the period from inception at May 22, 1997
through December 31, 1997 was $9,163. Station operating expenses excluding
depreciation and amortization for this same period were $7,147 and depreciation
and amortization for the period was $1,736. Corporate general and administrative
expenses were $1,276 and the operating loss was $2,685 for the period. Interest
expense net of interest income, other expense, and income tax expense were $772,
$54 and $67, respectively, resulting in a net loss of $3,578 for the period. Net
loss attributable to common stockholders and basic and diluted loss per share
for the period from inception through December 31, 1997 were $3,852 and $ ,
respectively. Broadcast Cash Flow and EBITDA for the period from inception
through December 31, 1997 were $2,016 and $740, respectively.
PRO FORMA. On a pro forma basis, after giving effect to the Completed
Acquisitions, the Pending Acquisitions, associated cost eliminations (see
"Certain Effects of the Acquisitions"), and the Offerings, net revenue would
have been $106,176 for the full year from January 1, 1997 through December 31,
1997. Pro forma station operating expenses excluding depreciation and
amortization for the year would have
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<PAGE>
been $78,427 and pro forma depreciation and amortization for the year would have
been $19,844. Pro forma corporate general and administrative expenses would have
been $2,742 and pro forma operating income would have been $3,474 for the year.
Pro forma interest expense, pro forma other expense, and pro forma income tax
expense would have been $14,623, $168 and $195, respectively, resulting in a net
loss of $11,512 for the period. Pro forma net loss attributable to common
stockholders and pro forma basic and diluted loss per share for the year would
have been $27,687 and $ , respectively. Pro forma Broadcast Cash Flow and
pro forma EBITDA for the year would have been $27,749 and $25,007, respectively.
CERTAIN EFFECTS OF THE ACQUISITIONS
CERTAIN COST ELIMINATIONS. The Company expects that operating a cluster of
stations in each of its principal markets will allow the elimination of certain
expenses, by eliminating duplicative functions, facilities, contracts, corporate
office expenses and professional fees and certain non-recurring expenses. The
Company expects that such eliminations will be partially offset by increased
corporate overhead charges to be incurred as a result of the increased size of
the Company. These estimated cost eliminations have been reflected as Pro Forma
Adjustments in the Unaudited Pro Forma Combined Statement of Operations for the
year ended December 31, 1997.
The Company believes that had such cost eliminations been implemented as of
January 1, 1997, they would have approximated $1,942 in the aggregate with
respect to the Completed Acquisitions during the year ended December 31, 1997.
The Company believes these cost eliminations would have consisted of (i) $734
from elimination of duplicate personnel functions; (ii) $58 from elimination of
duplicate corporate related expenses; (iii) $541 from elimination of expenses
related to the previous owner including compensation and other expenses; (iv)
$218 related to the consolidation of station facilities; (v) $133 from a
completed contractual change in the national sales representation contract; (vi)
$25 from the cancellation of duplicate vendor contracts; and (vii) $233 from
elimination of expenses incurred by and for the benefit of the previous owner
and unrelated to the ongoing business.
With respect to the Pending Acquisitions, the Company believes that had such
cost eliminations been implemented as of January 1, 1997, such eliminations
would have approximated $4,911 in the aggregate with respect to the Pending
Acquisitions during the year ended December 31, 1997. The Company believes these
cost eliminations would have consisted of (i) $1,876 from elimination of
duplicate personnel functions; (ii) $282 from elimination of duplicate corporate
related expenses; (iii) $1,304 from elimination of expenses related to the
previous owners including compensation and other expenses; (iv) $600 related to
the consolidation of station facilities; (v) $263 from a completed contractual
change in the national sales representation contract; (vi) $80 from the
cancellation of duplicate vendor contracts; and (vii) $506 from elimination of
one-time expenses incurred by and for the benefit of the previous owner and
unrelated to the ongoing business.
The Company believes that had the Completed and Pending Acquisitions been
completed as of January 1, 1997, pro forma corporate general and administrative
expenses for the year ending December 31, 1997 would have increased by $905,
consisting primarily of increased corporate personnel and other corporate
professional fees. Certain gains from the sales of assets of the previous owners
of the stations in the amount of $13,723 have also been eliminated.
CERTAIN CHARGES. The Company expects that the Pending Acquisitions will be
accounted for using the purchase method of accounting and that the intangible
assets created in the purchase transactions will be amortized against future
earnings of the combined companies, that such amounts will be substantial and
that they will continue to affect the Company's operating results in the future.
These expenses, however, do not result in increased cash outflows by the Company
and do not affect the Company's Broadcast Cash Flow.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal need for funds has been to fund the acquisition of
radio stations, and to a lesser extent, interest and debt service payments and
capital expenditures. The Company's principal sources of funds for these
requirements have been equity financings and borrowings under credit agreements.
Following consummation of the Pending Acquisitions, the Company's principal need
for funds will be to fund future acquisitions, interest and debt service
payments, working capital needs, and capital expenditures. The Company
anticipates that its principal sources of funds will be proceeds from the
Offerings, borrowings under the Credit Facility, and cash flows from operations.
STATEMENT OF CASH FLOWS. Net cash used in operating activities was $1,887
for the period from inception at May 22, 1997 through December 31, 1997. Net
cash used in investing activities was $95,100, and related primarily to the
Historical Acquisitions. Net cash provided by financing activities was $98,560
for the same period.
HISTORICAL ACQUISITIONS. During the period from inception at May 22, 1997
through December 31, 1997, the Company consummated the Historical Acquisitions
for an aggregate purchase price of $91.9 million. Additional acquisitions have
been subsequently completed in 1998 for an aggregate purchase price of $67.2 .
The sources of funds for these acquisitions were primarily the proceeds of the
Company's credit facilities and certain equity financings (see "Sources of
Liquidity").
PENDING ACQUISITIONS. The aggregate purchase price of the Pending
Acquisitions is expected to be approximately $260.2 million, consisting almost
entirely of cash. The Company intends to finance the Pending Acquisitions with
the proceeds of the Credit Facility and the Offerings. See "Use of Proceeds."
The Pending Acquisitions will be accounted for using the purchase method of
accounting, and with respect to asset transactions, the intangible assets
created in the purchase transactions will generally be amortized against future
earnings over a twenty-five year period. The amount of such amortization will be
substantial and will continue to affect the Company's operating results in the
future. These expenses, however, do not result in outflows of cash by the
Company and do not affect Broadcast Cash Flow or EBITDA.
The Company expects to consummate most of the Pending Acquisitions during
the second and third quarters of 1998, although there can be no assurance that
the transactions will be consummated within that time frame. The pending
acquisition of a Tallahassee FM station presently operated under an LMA is
expected to close by the end of 1998. In two of the markets in which there are
Pending Acquisitions (Augusta, GA and Dubuque, IA), petitions or informal
objections have been filed against the Company's FCC assignment applications and
a third objection is expected to be filed. All such petitions and objections
must be resolved before FCC approval can be obtained and the acquisitions
consummated. There can be no assurance that the Pending Acquisitions will be
consummated. The Company believes that the proceeds of the Offerings will be
sufficient to finance the consummation of the Pending Acquisitions.
SOURCES OF LIQUIDITY. The Company financed the Completed Acquisitions
primarily through equity financings and borrowings under a $57.0 million credit
agreement dated as of July 7, 1997 (the "Old Credit Facility"), among the
Company, NationsBanc of Texas, N.A. as Administrative Lender and the Lenders (as
defined therein). The Old Credit Facility included a $32.0 million senior
secured reducing revolver facility and a $25.0 million uncommitted senior
secured acquisition facility. The Old Credit Facility allowed the Company to
draw on its credit line by means of the issuance of letters of credit as well as
cash drawdowns. During 1997, the limit on the committed portion of the Old
Credit Facility was raised from $32.0 million to $70.0 million. At December 31,
1997, the Company had borrowed $42.8 million in cash draws under the senior
secured reducing revolver and $5.5 million in outstanding letters of credit. In
January 1998, the credit limit under the senior secured reducing revolver was
increased to $75.0 million. The Company drew down a total of $42.8 million on
the Old Credit Facility. The Company received from Media LLC equity
contributions totaling $52.2 million for its Common Stock in 1997. These equity
contributions consisted of (i) $45.0 million in cash, (ii) stock of CCC valued
at $7.1 million, and (iii) other non-cash contributions of $0.1 million. The
Company also received cash contributions totalling $15.0 million from Media LLC
on
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January 22, 1998. On November 11, 1997, the Company entered into a Securities
Purchase Agreement with NML pursuant to which NML agreed to purchase 3,250
shares of the NML Preferred Stock for an aggregate consideration of $32.5
million. Of this amount, $16.2 million was received on November 17, 1997 and
$16.3 million was received on February 5, 1998.
In March 1998, the Company entered into a $190.0 million senior credit
facility (the "Credit Facility") with Lehman Brothers Inc., as Arranger and
Lehman Commercial Paper Inc., as Lender, Syndication Agent and Administrative
Agent pursuant to which the Company has available a revolving line of credit of
$110.0 million until March 2, 2006, and an eight-year term loan facility of
$80.0 million. The proceeds of the borrowings under the Credit Facility have
been used to finance acquisitions and to repay the Company's outstanding
indebtedness under the Old Credit Facility, except for outstanding Letters of
Credit in an aggregate amount equal to approximately $10.0 million. Except for
certain provisions regarding the payment of such Letters of Credit, the Old
Credit Facility has been terminated. In the first quarter of 1998, the Company
will record an extraordinary loss related to the early extinguishment of the Old
Credit Facility of $1.8 million. The Company's obligations under the Credit
Facility are secured by substantially all of its assets in which a security
interest may lawfully be granted (including, to the extent permitted by
applicable law and the rules of the FCC, any FCC licenses held by the Company's
subsidiaries), including, without limitation, intellectual property, real
property, and all of the capital stock of the Company's direct and indirect
domestic subsidiaries and 65% of the capital stock of any foreign subsidiaries
and are guaranteed by each of the domestic subsidiaries of the Company. As of
March 27, 1998, approximately $120.0 million was outstanding under the Credit
Facility. See "Use of Proceeds" and "Description of Credit Facility and Notes."
Both revolving credit and term loan borrowings under the Credit Facility
bear interest, at the Company's option, at a rate equal to the Base Rate (as
defined under the terms of the Credit Facility) plus a margin ranging between
0.50% to 1.75%, or the Eurodollar Rate (as defined under the terms of the Credit
Facility) plus a margin ranging between 1.50% to 2.75% (in each case dependent
upon the leverage ratio of the Company). The revolving credit and term loan
borrowings are repayable in equal quarterly installments beginning in 2000. The
scheduled annual amortization of the term loans is $10.0 million in each of the
years 2000 through 2002, $15.0 million in each of the years 2003 through 2005,
and $5.0 million at maturity. The scheduled annual reduction in availability
under the revolving credit loans is $10.0 million in each of the years 2000 and
2001, $15.0 million in 2002, $20.0 million in year 2003, $25.0 million in each
of the years 2004 and 2005, and $5.0 million at maturity in 2006.
Pursuant to the Debt Offering, the Company will issue $100.0 million in
aggregate principal amount of % Senior Subordinated Notes which have a
maturity date of , 2008. The Notes are senior subordinated obligations of
the Company and are subordinated in right of payment to all existing and future
Senior Debt of the Company (including obligations under the Credit Facility).
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to senior debt. Interest on the Notes will be
payable semi-annually in arrears. See "Description of Credit Facility and
Notes."
Pursuant to the Preferred Stock Offering, the Company is offering
approximately $133.0 million of % Series A Cumulative Exchangeable
Redeemable Preferred Stock Due 2009, $ million of which are being offered
directly by the Company, and not through the Underwriters, to NML, the sole
owner of the NML Preferred Stock, which had an accreted value as of February 14,
1998 of approximately $33.0 million, at a purchase price equal to the price to
public. The holders of the Series A Preferred Stock are entitled to receive
cumulative dividends at an annual rate equal to % of the liquidation
preference per share of Series A Preferred Stock, payable quarterly, in arrears.
On or before , 2003, the Company may, at its option, pay dividends in
cash or in additional fully paid and non-assessable shares of Series A Preferred
Stock. After , 2003, dividends may only be paid in cash. The shares of
Series A Preferred Stock are subject to mandatory redemption in , 2009
at a price equal to 100% of the liquidation preference thereof plus any and all
accrued and unpaid cumulative dividends thereon. The Series A Preferred Stock
may be redeemed by the Company prior to such date under certain
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<PAGE>
circumstances. See "Description of Capital Stock--Series A Preferred Stock and
Exchangeable Debentures."
The degree to which the Company is leveraged following the Offerings will
have material consequences to the Company. The Company's ability to obtain
additional financing in the future for acquisitions, working capital, capital
expenditures, general corporate or other purposes will be subject to the
covenants contained in the Indenture, the Credit Facility, the Certificate of
Designation and the Exchange Debenture Indenture. A substantial portion of the
Company's cash flow from operations will be required to be used to pay principal
and interest on its debt and will not be available for other purposes. The
Company is subject to restrictive financial and operating covenants, and the
failure by the Company to comply with those covenants would result in an event
of default under the applicable instruments, which in turn would permit
acceleration of debt under those instruments. Because of these restrictions, the
Company is more vulnerable to economic downturns and is more limited in its
ability to withstand competitive pressures and to react to changes in broadcast
industry or general economic conditions.
The Company's ability to make scheduled payments of principal on, to pay
interest on, or to refinance its debt depends on its future financial
performance, which to a certain extent is subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond its
control, as well as the success of the businesses acquired and to be acquired
and the integration of those businesses into the Company. There can be no
assurance that the Company's business will generate sufficient cash flow from
operations, that anticipated improvements in operating results will be achieved
or that future working capital borrowings will be available in an amount
sufficient to enable the Company to service its debt, or to make necessary
capital or other expenditures. The Company may be required to refinance a
portion of the principal amount of the Notes prior to their maturity, or to
redeem the Company's outstanding Series A Preferred Stock under certain
conditions. There can be no assurance that the Company will be able to raise
additional capital through the sale of securities, the disposition of radio
stations or otherwise for any such refinancing or redemption.
In addition, the Company may require additional financing for future
acquisitions beyond the Pending Acquisitions, if any, and there can be no
assurance that it would be able to obtain such financing or if available, such
financing would be on terms considered favorable by management. Management
evaluates potential acquisition opportunities on an on-going basis and has had,
and continues to have, preliminary discussions concerning the purchase of
additional stations. The Company expects that any additional acquisitions of
radio stations will be financed through funds generated from operations, cash on
hand, funds which may be available under the Credit Facility and additional debt
and equity financing. The availability of additional acquisition financing
cannot be assured, and, depending on the terms of the proposed acquisitions
financing, could be restricted by the Credit Facility and/or the debt incurrence
tests under the Indenture, the Certificate of Designation and the Exchange
Debenture Indenture. The Company expects that it may consider disposing of
certain stations in its markets, although the Company has no current plans or
arrangements to dispose of any of its stations. See "Risk Factors."
Based upon the Company's current level of operations and anticipated
improvements, management believes that cash flow from operations, together with
the net proceeds of the Offerings and available borrowings under the Credit
Facility, will be adequate to meet the Company's anticipated future requirements
for working capital, capital expenditures, and scheduled payments on its debt
service for the foreseeable future.
SEASONALITY
The Company expects that its operations and revenues will be largely
seasonal in nature, with generally lower revenue generated in the first quarter
of the year and generally higher revenue generated in the fourth quarter of the
year, with the exception of certain stations such as those of the Company in
Salisbury-Ocean City, Maryland, where the stations generally earn higher
revenues in the second and third quarters of the year because of the higher
seasonal population in those communities. The seasonality of
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the Company's business causes and will likely continue to cause a significant
variation in the Company's quarterly operating results. Such variations could
have a material adverse effect on the timing of the Company's cash flows and
therefore on its ability to service its obligations with respect to its
indebtedness, including the Indenture and the Credit Facility.
YEAR 2000 RISK
The Company has implemented a Year 2000 program to ensure that the Company's
computer systems and applications will function properly beyond 1999. The
Company believes that it has allocated adequate resources for this purpose and
expects its Year 2000 date conversion program to be successfully completed on a
timely basis. There can, however, be no assurance that this will be the case.
The Company does not expect to incur significant expenditures to address this
issue. The ability of third parties with whom the Company transacts business to
adequately address their Year 2000 issues is outside of the Company's control.
There can be no assurance that the failure of the Company or such third parties
to adequately address their respective Year 2000 issues will not have a material
adverse effect on the Company's business, financial condition, cash flows and
results of operations.
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BUSINESS
The Company is a radio broadcasting company focused on the acquisition,
operation and development of radio stations in mid-size and smaller radio
markets in the U.S. The Company currently owns and operates, or provides sales
and marketing services under LMA agreements (pending FCC approval of
acquisition) to 94 stations in 19 markets. Upon consummation of the Pending
Acquisitions, the Company will be one of the five largest radio broadcasting
companies based on number of stations, and among the fifteen largest based on
net revenues, in the U.S. and will own and operate 167 radio stations (119 FM
and 48 AM) clustered in 32 markets. The Company has assembled market-leading
clusters with stations comprising the first or second ranked radio group, in
terms of revenue share and/or audience share, in all of its 32 U.S. markets. On
a pro forma basis after giving effect to the Transactions, the Company would
have generated net revenues of approximately $106.2 million and Broadcast Cash
Flow of approximately $27.7 million during the period ended December 31, 1997.
Cumulus operates and develops clusters of stations in demographically
attractive and fast growing mid-size and smaller markets. Relative to the 100
largest markets in the U.S., the Company believes that the mid-size and smaller
markets (MSA 100-267) represent attractive operating environments and generally
are characterized by: (i) a greater reliance on radio advertising as evidenced
by the greater percentage of total media revenues captured by radio than the
national average; (ii) rising advertising revenues as the larger national and
regional retailers expand into these markets; (iii) small independent operators,
many of whom lack the capital to produce high quality locally-originated
programming and/or to employ more sophisticated research, marketing, management
and sales techniques; and (iv) lower overall susceptibility to economic
downturns.
The Company believes that the attractive operating characteristics of
mid-size and smaller markets coupled with the relaxation of FCC ownership limits
create significant opportunities to form clusters within markets and regions
that will enable the Company to achieve revenue growth and cost efficiencies. As
a result, management believes that the Company can grow revenues at rates equal
to or better than larger market growth rates and generate Broadcast Cash Flow
margins that are comparable to the higher margins that previously were generally
achievable only in the top 100 markets. The Company believes that mid-size and
smaller radio markets provide an excellent opportunity to acquire attractive
properties at favorable purchase prices due to the size and fragmented nature of
ownership in these markets and to the historically greater attention given to
the larger markets by radio station acquirors. According to BIA, there are
approximately 1,600 FM and 1,000 AM stations in the 168 U.S. radio markets
ranked MSA 100-267. These 2,600 stations are owned by approximately 1,100
different operators. In addition, there are nearly 4,700 stations in unranked
markets owned by approximately 2,700 operators.
The Company's principal strategy is to establish its position as a leader in
its markets and regions and to expand into additional mid-size and smaller
markets and regions where it believes a leadership position can be achieved by
assembling clusters. Cumulus seeks to enhance the quality of radio for listeners
and the utility of the radio medium for advertisers in order to maximize the
advertising revenues and Broadcast Cash Flow of its radio stations. To that end,
Cumulus utilizes extensive research to properly position the formats of stations
in a given market and also significantly increases the amount of
locally-originated programming. Upon consummation of the Pending Acquisitions,
the Company's portfolio of stations will be diversified in terms of format,
target audience, geographic location and stage of development. Because of the
size and diversity of its portfolio and its individual radio station groups or
"clusters," the Company believes it is not reliant upon the performance of any
single station or any specific format.
MANAGEMENT TEAM
Members of the Company's senior management team have an aggregate of over 70
years of experience in the media and radio broadcasting industry. To date,
management has successfully negotiated 58 separate acquisition transactions on
behalf of the Company. The Company's Executive Chairman and
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Treasurer, Richard W. Weening, has over 20 years of operating experience in
media and information companies including significant experience in corporate
finance and mergers and acquisitions. Lewis W. Dickey, Jr., Executive Vice
Chairman, has over 15 years of experience in the radio and television
broadcasting industry and is a successful owner-operator of radio stations in
larger and mid-size markets. Mr. Dickey is also a nationally regarded business
strategy and marketing consultant to the broadcasting industry. William M.
Bungeroth, the Company's President, has over 20 years of experience in the radio
and television broadcasting industry and has developed an expertise in enhancing
revenue at stations under his management. Mr. Bungeroth is President and CEO of
Cumulus Broadcasting Inc. and manages the broadcasting business along with the
General Managers of each market, the Director of Programming and the regional
Directors of Sales. The Company's Vice President and Chief Financial Officer,
Richard J. Bonick, Jr., has 20 years of experience in the radio broadcasting
industry. Mr. Bonick manages the financial reporting and control systems as well
as the operational aspects of the Company's broadcasting business.
STATION PORTFOLIO
The Company has four regions in the U.S. as its primary focus: the Midwest,
Southeast, Southwest and Northeast. The following chart sets forth certain
information with respect to the Company's stations in these regions, before and
after giving effect to the Pending Acquisitions:
<TABLE>
<CAPTION>
PENDING ACQUISITIONS (1)
--------------------------------------------------- NUMBER OF
NUMBER STATIONS
NUMBER OF FOLLOWING
OF STATIONS NUMBER OF STATIONS PENDING
CURRENTLY STATIONS TO BE NUMBER OF ACQUISITIONS
OWNED CURRENTLY PLACED STATIONS TO BE (3)
MARKET ------------------------ UNDER UNDER ACQUIRED -----------
MARKET(2) RANK FM AM LMA (2) LMA WITHOUT LMA FM
- ------------------------- --------- ----------- ----------- --------------- ------------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
MIDWEST REGION
Ann Arbor, MI............ 146 2 2 -- -- -- 2
Appleton-Oshkosh/
Green Bay, WI.......... 138/182 3 2 2 -- -- 5
Dubuque, IA.............. 217 -- -- -- -- 5 4
Marion Carbondale, IL.... 209 -- -- 6 -- -- 4
Bismarck, ND............. 259 -- -- -- -- 4 3
Kalamazoo, MI............ 172 -- -- -- -- 3 2
Faribault-Owatonna-
Waseca, MN............. -- -- -- -- -- 8 4
Mankato, MN.............. -- -- -- -- -- 3 2
Mason City, IA........... -- -- -- -- -- 7 5
New Ulm-Springfield-
Marshall, MN........... -- -- -- -- -- 3 2
Rochester, MN............ -- -- -- -- -- 4 2
Toledo, OH............... 76 4 2 -- 1 -- 5
SOUTHEAST REGION
Albany, GA............... 205 -- -- -- 4 -- 3
Augusta, GA.............. 109 3 1 2 2 1 6
Chattanooga, TN.......... 102 -- -- 1 -- -- 1
Columbus, GA............. 166 3 2 -- -- -- 3
Florence, SC............. 198 1 1 5 1 2 7
Montgomery, AL........... 143 -- -- 4 -- -- 2
Myrtle Beach, SC......... 175 3 1 2 -- -- 5
Salisbury-Ocean City,
MD..................... 153 4 2 2 -- -- 6
Savannah, GA............. 154 -- -- 5 -- 2 5
Tallahassee, FL.......... 165 3 1 1 -- -- 4
Wilmington, NC........... 178 4 1 -- -- -- 4
<CAPTION>
ADULTS 12+ REVENUE
MARKET(2) AM SHARE(%) RANK (5)
- ------------------------- ------------- --------------- ---------------
<S> <C> <C> <C>
MIDWEST REGION
Ann Arbor, MI............ 2 8.7 1
Appleton-Oshkosh/
Green Bay, WI.......... 2 20.2(4) 2
Dubuque, IA.............. 1 34.8 1
Marion Carbondale, IL.... 2 32.4 2
Bismarck, ND............. 1 37.7 1
Kalamazoo, MI............ 1 22.3 1
Faribault-Owatonna-
Waseca, MN............. 4 -- 1
Mankato, MN.............. 1 -- 1
Mason City, IA........... 2 -- 1
New Ulm-Springfield-
Marshall, MN........... 1 -- 1
Rochester, MN............ 2 -- 2
Toledo, OH............... 2 31.2 2
SOUTHEAST REGION
Albany, GA............... 1 23.2 2
Augusta, GA.............. 3 29.3 1
Chattanooga, TN.......... 0 22.3 1
Columbus, GA............. 2 32.5 1
Florence, SC............. 3 42.2 1
Montgomery, AL........... 2 34.4 1
Myrtle Beach, SC......... 1 20.3 1
Salisbury-Ocean City,
MD..................... 2 31.2 1
Savannah, GA............. 2 36.0 2
Tallahassee, FL.......... 1 32.8 1
Wilmington, NC........... 1 17.3 2
</TABLE>
43
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<TABLE>
<CAPTION>
PENDING ACQUISITIONS (1)
--------------------------------------------------- NUMBER OF
NUMBER STATIONS
NUMBER OF FOLLOWING
OF STATIONS NUMBER OF STATIONS PENDING
CURRENTLY STATIONS TO BE NUMBER OF ACQUISITIONS
OWNED CURRENTLY PLACED STATIONS TO BE (3)
MARKET ------------------------ UNDER UNDER ACQUIRED -----------
MARKET(2) RANK FM AM LMA (2) LMA WITHOUT LMA FM
- ------------------------- --------- ----------- ----------- --------------- ------------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SOUTHWEST REGION
Abilene, TX.............. 224 -- -- 3 1 -- 4
Amarillo, TX............. 188 -- -- 6 -- -- 4
Beaumont-Port Arthur,
TX..................... 128 -- -- 1 -- 4 3
Grand Junction, CO....... 247 -- -- -- -- 6 4
Lake Charles, LA......... 203 -- -- -- -- 4 3
Odessa-Midland, TX....... 174 -- -- 5 -- -- 4
Wichita Falls, TX........ 236 3 -- 1 -- -- 4
NORTHEAST REGION
Augusta-Waterville, ME... 245 -- -- -- -- 6 5
Bangor, ME............... 263 -- -- -- -- 2 2
-- -- -- -- --
---
TOTAL 32 MARKETS......... 33 15 46 9 64 119
<CAPTION>
ADULTS 12+ REVENUE
MARKET(2) AM SHARE(%) RANK (5)
- ------------------------- ------------- --------------- ---------------
<S> <C> <C> <C>
SOUTHWEST REGION
Abilene, TX.............. 0 26.7 2
Amarillo, TX............. 2 30.6 2
Beaumont-Port Arthur,
TX..................... 2 29.4 2
Grand Junction, CO....... 2 42.7 1
Lake Charles, LA......... 1 49.7 1
Odessa-Midland, TX....... 1 39.7 1
Wichita Falls, TX........ 0 28.6 2
NORTHEAST REGION
Augusta-Waterville, ME... 1 25.6 1
Bangor, ME............... 0 30.4 1
--
TOTAL 32 MARKETS......... 48
</TABLE>
- ------------------------------
(1) The Company expects to consummate most of the Pending Acquisitions during
the second and third quarters of 1998, although there can be no assurance
that the transactions will be consummated within that time frame. The
pending acquisition of a Tallahassee FM station presently operated under an
LMA is expected to close by the end of 1998. In two of the markets in which
there are Pending Acquisitions (Augusta, GA and Dubuque, IA), petitions or
informal objections have been filed against the Company's FCC assignment
applications and a third objection is expected to be filed. All such
petitions and objections must be resolved before FCC approval can be
obtained and the acquisitions consummated.
(2) The listed markets correspond to station clusters of the Company, but may
vary from the "markets" defined for purposes of the FCC's multiple-ownership
rules, which are defined by reference to the signal coverages of the
stations involved. Thus, in some instances (E.G., Augusta, GA, Florence, SC,
and Salisbury-Ocean City, MD), the number of stations following the Pending
Acquisitions as listed in the above table exceeds the number of radio
stations specified in the FCC's rules that one person or entity may own,
operate or control within a single market, but is still consistent with FCC
requirements. In Augusta, GA, the Company may not be permitted to acquire
more than five FM and three AM stations unless it succeeds in obtaining FCC
approval to modify the facilities of one or more of its currently owned
stations and/or obtain FCC consent to the use of an alternative engineering
analysis.
(3) Includes radio stations to which the Company currently provides programming
and on which the Company sells advertising pursuant to an LMA.
(4) Indicates Adult 12+ share of Appleton-Oshkosh market.
(5) Market revenue rankings for Faribault-Owatonna-Waseca, MN, Mankato, MN,
Mason City, IA, Rochester, MN and New Ulm-Springfield-Marshall, MN are based
on Company estimates.
The Company also owns and operates five radio stations and one leased
frequency in various locations throughout the English-speaking Eastern
Caribbean, including among other places, Trinidad, St. Kitts and St. Lucia.
ACQUISITION STRATEGY
Cumulus has focused its acquisition strategy on acquiring radio broadcasting
stations in demographically attractive and fast growing mid-size to smaller
markets that it believes offer substantial growth opportunities for the Company.
In executing this strategy, the Company adheres to certain key acquisition
criteria. Primary among these criteria are targeting markets with: (i) growing
economies that are not dependent upon any single industry or employer; (ii) a
regional fit with the Company's overall portfolio concentration in the Midwest,
Southeast, Southwest and Northeast regions of the U.S.; (iii) close proximity to
larger markets that may lead to increased economic expansion into the Company's
markets; (iv) previously unconsolidated markets with fragmented individual
ownership of stations; (v) the opportunity to assemble a cluster of stations
diversified in format to provide a range of target demographic options for
advertisers; and (vi) the opportunity to increase sales performance through
greater coverage of potential advertisers with more sales people per station.
44
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In targeting specific stations, the Company seeks stations with a position
of leadership in their market in terms of ratings and format, with the
opportunity to significantly increase revenues and Broadcast Cash Flow.
Additionally, Cumulus seeks high quality technical and operating facilities,
capable local management and an FCC license which enables coverage of the entire
market.
The Company believes that its acquisition strategy will have a number of
benefits, including: (i) growth and diversification of revenue and Broadcast
Cash Flow across a greater number of stations and markets; (ii) improved
Broadcast Cash Flow margins through the consolidation of facilities and the
elimination of redundant expenses; (iii) enhanced utilization of certain
corporate overhead functions including its senior management team; (iv) improved
leverage in various key vendor negotiations; (v) greater ability to recruit top
industry management talent; and (vi) increased overall scale, which should
facilitate the Company's future capital raising activities.
INTEGRATION OF ACQUIRED BUSINESSES
The Company has developed, through its 58 Completed and Pending
Acquisitions, an efficient process for the integration of newly acquired
properties into the Cumulus portfolio and respective geographic cluster, as well
as into the overall Cumulus culture and operating philosophy. The Company's
station integration plan consists of six key elements: (i) employ sophisticated
market research to refine station formats, enrich the listener experience and
increase audience and revenue share relative to other stations in the market;
(ii) expand the size and the effectiveness of the sales organization through
active recruitment and in-depth training to enhance demand for the station's
spot inventory to increase both revenue and margin; (iii) add the station to the
Cumulus in-market local area network and install the Company's proprietary
system for real-time monitoring by management of station sales and inventory
performance; (iv) install Cumulus's centralized networked accounting system for
financial reporting, budget control, payables management and cash management;
(v) establish revenue and expense budgets consistent with the programming and
sales strategy and make necessary cost adjustments; and (vi) implement necessary
improvements in transmission facilities, audio processing and studio facilities.
From time to time, in compliance with applicable law, the Company will enter
into an LMA or consulting arrangement with a target property prior to FCC final
approval and the consummation of the acquisition in order to gain a "head start"
on the integration process.
OPERATING STRATEGY
The Company's operating strategy has the following principal components:
ASSEMBLE AND MANAGE MARKET CLUSTERS WITH REGIONAL CONCENTRATIONS. The
Company has assembled the first or second ranked cluster of stations based
on revenue share and/or audience share in all of its U.S. markets in four
regional concentrations, the Midwest, Southeast, Southwest and Northeast.
The Company believes that by offering a diversity of radio formats within a
given market, Cumulus provides customized and efficient marketing solutions
to meet advertisers' needs. By assembling market clusters with a regional
concentration, the Company believes that it will be able to increase
revenues by offering regional coverage of key demographic groups that were
previously unavailable to national and regional advertisers. The Company
also believes that its cluster approach will allow it to operate its
stations with more highly skilled local management teams equipped with
greater resources and to eliminate redundant operating and overhead
expenses.
MAXIMIZE EACH STATION'S POTENTIAL THROUGH POSITIONING AND BRANDING. The
Company utilizes extensive market research to refine the programming of each
of its stations and to position each as a separate brand within a particular
cluster. The objective of this strategy is to optimize each station's
potential in terms of audience ratings and revenue share while providing the
widest possible range of choice to listeners and advertisers. Such stations
can better capitalize on the operating leverage inherent in the radio
industry because the costs of operating a radio station are generally fixed
and,
45
<PAGE>
therefore, increased revenues generally result in disproportionately larger
increases in Broadcast Cash Flow.
FOCUS ON PROGRAMMING. A principal Company operating strategy is to
enhance each station's programming appeal, including both the quality and
quantity of local programming as a means of enriching the listener
experience. The Company believes that adopting this commitment to high
quality, locally originated programming will provide its stations with a
competitive advantage and increase each station's audience share. Moreover,
the Company believes that the efficiencies and scale afforded by the
operation of multiple stations in the same market and region working
together with information technology make it possible to substantially
improve programming and the quality of the listener experience without a
comparable increase in cost.
EXPAND DEDICATED SALES FORCE AND OPTIMIZE INVENTORY MANAGEMENT.
Underpinning the Company's strategy for optimizing the potential of each
station within a cluster is the practice of dedicating a sales force for
each of its stations. The Company believes that many of the acquired
stations have dramatically underperformed in sales, due primarily to
undersized sales staffs responsible for selling air time on multiple
stations, thus diluting their ability to cover all of the potential
advertisers with strong advocates for each station. The Company believes its
pratice of utilizing a dedicated sales force for each station will attract a
larger number of advertisers thereby increasing the demand for each
station's commercial spot inventory. Accordingly, the Company has
significantly expanded the number of salespeople for each of its stations.
Salespeople are typically compensated exclusively on a commission basis.
Also, in each of its market clusters, the Company utilizes Internet-based
sales reporting systems to monitor its sales activity and to formulate and
implement rate structure and inventory management on a continual basis.
INCREASE RADIO REVENUE SHARE. The Company believes that its strategy of
larger and dedicated station sales staffs, brand development, regional
concentration, and market clusters will help increase advertising volume and
revenues from existing customers and increase the number and scope of new
advertisers. This strategy enables the Company to compete more effectively
with other local and regional media such as newspapers and cable and
broadcast television stations, because it can now offer a competitively
priced alternative to reach the target audience that advertisers desire. The
Company's sales management team has substantial experience in the areas of
generating new sources of revenues including promotional events, retailer
co-op advertising and other sources including business-to-business
advertising.
IMPLEMENT STRICT COST CONTROLS. The Company's management imposes strict
financial reporting requirements and expense budget limitations on each of
its stations. In addition, management maintains a centralized accounting
system which allows it to monitor the performance and operations of each of
its stations. Management believes such centralization allows the Company to
achieve expense savings in certain areas, including purchasing and
administrative expenses. Management believes that the Company will also
achieve expense savings through the elimination of certain duplicate costs
within its markets and market clusters.
IMPLEMENT INTERNET-BASED MANAGEMENT INFORMATION SYSTEMS. The Company has
implemented a proprietary application using Internet software standards to
support daily sales and inventory performance reporting by station, by
market and by cluster. In addition, the Company employs the same system to
network its centralized accounting and cash management. This allows the
Company to compare each station's actual performance (including revenue and
inventory management) to budget on a regular basis and deploy resources on a
timely basis to those stations not achieving budgetary goals.
RECRUIT AND RETAIN SKILLED MANAGERS. The Company believes that operating
a top-ranked cluster of stations in a market will enable the Company to
recruit and retain high caliber radio management personnel who might
otherwise be attracted to larger markets. The Company believes that regional
46
<PAGE>
management and coordination will enable it to maximize the benefits of
operating a growing number of stations in geographically diverse locations,
while maintaining controls over local operations. Local management is also
central to the Company's strategy and is primarily responsible for building
and developing a sales team capable of converting the stations' audience
rankings into revenues. The Company's general managers and sales managers
are motivated through incentive compensation based primarily upon their
station's cash flow performance and secondarily on their ability to convert
their station's audience share into market revenue share.
INDUSTRY OVERVIEW
The primary source of revenues for radio stations is generated from the sale
of advertising time to local and national spot advertisers and national network
advertisers. During the past decade, local advertising revenue as a percentage
of total radio advertising revenue in a given market has ranged from
approximately 72% to 87%. The growth in total radio advertising revenue tends to
be fairly stable and has generally grown at a rate faster than the Gross
National Product ("GNP"). With the exception of 1991, when total radio
advertising revenue fell by approximately 3.1% compared to the prior year,
advertising revenue has risen in each of the past 15 years more rapidly than
both inflation and the GNP.
According to the RAB's Radio Marketing Guide and Fact Book for Advertisers
1997, each week, radio reaches approximately 96% of all Americans over the age
of 12. More than one-half of all radio listening is done outside the home which
reaches three out of four adults by car radio each week. The average listener
spends approximately three hours and 20 minutes per day listening to radio. The
highest portion of radio listenership occurs during the morning, particularly
between the time a listener wakes up and the time the listener reaches work.
This "morning drive time" period reaches more than 80% of people over 12 years
of age, and as a result, radio advertising sold during this period achieves
premium advertising rates.
Radio is considered an efficient, cost-effective means of reaching
specifically identified demographic groups. Stations are typically classified by
their on-air format, such as country, adult contemporary, oldies and news/talk.
A station's format and style of presentation enables it to target certain
demographics. By capturing a specific share of a market's radio listening
audience, with particular concentration in a targeted demographic, a station is
able to market its broadcasting time to advertisers seeking to reach a specific
audience. Advertisers and stations utilize data published by audience measuring
services, such as Arbitron, to estimate how many people within particular
geographical markets and demographics listen to specific stations.
The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format of
a particular station and the local competitive environment. Although the number
of advertisements broadcast during a given time period may vary, the total
number of advertisements broadcast on a particular station generally does not
vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station
usually will engage a firm that specializes in soliciting radio advertising
sales on a national level. National sales representatives obtain advertising
principally from advertising agencies located outside the station's market and
receive commissions based on the revenue from the advertising obtained.
ADVERTISING SALES
Virtually all of the Company's revenue is generated from the sale of local,
regional and national advertising for broadcast on its radio stations. In 1997,
approximately 89% of the Company's net broadcasting revenue was generated from
the sale of local and regional advertising. Additional broadcasting revenue is
generated from the sale of national advertising. The major categories of the
Company's
47
<PAGE>
advertisers include: Automotive, Retail, Healthcare, Telecommunications, Fast
Food, Beverage, Movies, Entertainment, and Services. Each station's local sales
staff solicits advertising either directly from the local advertiser or
indirectly through an advertising agency. The Company employs a tiered
commission structure to focus its individual sales staffs on new business
development. The Company has also, consistent with its operating strategy of
dedicated sales forces for each of its stations, significantly increased the
number of sales persons per station. The Company believes that it can outperform
the traditional growth rates of its markets by expanding its base of advertisers
and providing a higher level of service to its existing base. This requires
larger sales staffs than most of the stations currently employ at the time they
are acquired by the Company. The Company supports its strategy of building local
direct accounts by employing personnel in each of its markets to produce custom
commercials that respond to the needs of, and in turn help sell product for, its
advertisers. In addition, in-house production provides advertisers greater
flexibility in changing their commercial messages with minimal lead time.
National sales are made by two firms specializing in radio advertising sales
on the national level in exchange for a commission from the Company that is
based on the Company's net revenue from the advertising obtained. Regional
sales, which the Company defines as sales in regions surrounding the Company's
markets to buyers that advertise in the Company's markets, are generally made by
the Company's local sales staff. The Company believes that both national and
regional sales represent an attractive growth opportunity for the Company.
Whereas the Company seeks to grow its local sales through larger and more
customer-focused sales staffs, it seeks to grow its national and regional sales
by offering clusters within specific markets and regions which will make the
Company's stations more attractive to key national and regional advertisers.
Many of these large accounts have previously been reluctant to advertise in
these markets because of the logistics involved in buying advertising from
individual stations. Certain of the Company's stations had no national
representation before being acquired by the Company.
Depending on the programming format of a particular station, the Company
estimates the optimum number of advertisements available for sale. The number of
advertisements that can be broadcast without jeopardizing listening levels (and
the resulting ratings) is limited in part by the format of a particular station.
The Company's stations strive to maximize revenue by managing their on-air
inventory of advertising time and adjusting prices up or down based on supply
and demand. The Company seeks to broaden its base of advertisers in each of its
markets by providing a wide array of audience demographic segments across its
cluster of stations, thereby providing each of its potential advertisers with an
effective means of reaching a targeted demographic group. Each of the Company's
stations has a general target level of on-air inventory that it makes available
for advertising. This target level of inventory for sale may be different at
different times of the day but tends to remain stable over time. The Company's
selling and pricing activity is based on demand for its radio stations' on-air
inventory and, in general, the Company responds to this demand by varying prices
rather than by varying its target inventory level for a particular station.
Therefore, most changes in revenue are explained by demand-driven pricing
changes rather than by changes in the available inventory. Advertising rates
charged by radio stations are based primarily on (i) a station's share of
audiences in the demographic groups targeted by advertisers (as measured by
ratings surveys), (ii) the supply of and demand for radio advertising time
generally and for time targeted at particular demographic groups and (iii)
certain qualitative factors. Rates are generally highest during morning and
afternoon commuting hours.
A station's listenership is reflected in ratings surveys that estimate the
number of listeners tuned to the station and the time they spend listening. Each
station's ratings are used by its advertisers and advertising representatives to
consider advertising with the station and are used by the Company to chart
audience growth, set advertising rates and adjust programming. The radio
broadcast industry's principal ratings service is Arbitron, which publishes
periodic ratings surveys for significant domestic radio markets. These surveys
are the Company's primary source of ratings data.
48
<PAGE>
COMPETITION
The radio broadcasting industry is highly competitive. The success of each
of the Company's stations depends largely upon its audience ratings and its
share of the overall advertising revenue within its market. The Company's
audience ratings and advertising revenue are subject to change, and any adverse
change in a particular market affecting advertising expenditures or an adverse
change in the relative market positions of the stations located in a particular
market could have a material adverse effect on the revenue of the Company's
radio stations located in that market. There can be no assurance that any one or
all of the Company's radio stations will be able to maintain or increase current
audience ratings or advertising revenue market share.
The Company's stations compete for listeners and advertising revenue
directly with other radio stations within their respective markets. Radio
stations compete for listeners primarily on the basis of program content that
appeals to a particular demographic group. By building a strong listener base
consisting of specific demographic groups in each of its markets, the Company is
able to attract advertisers seeking to reach those listeners. Companies that
operate radio stations must be alert to the possibility of another station
changing its format to compete directly for listeners and advertisers. Another
station's decision to convert to a format similar to that of one of the
Company's radio stations in the same geographic area or launch an aggressive
promotional campaign may result in lower ratings and advertising revenue,
increased promotion and other expenses and, consequently, lower Broadcast Cash
Flow for the Company.
Factors that are material to a radio station's competitive position include
management experience, the station's local audience rank in its market,
transmitter power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other radio stations in the
market area. The Company attempts to improve its competitive position in each
market by extensively researching its stations' programming, by implementing
advertising campaigns aimed at the demographic groups for which its stations
program and by managing its sales efforts to attract a larger share of
advertising dollars for each station individually. However, the Company competes
with some organizations that have substantially greater financial or other
resources than the Company.
Recent changes in the Communications Act and the FCC's rules and policies
permit increased ownership and operation of multiple local radio stations.
Management believes that radio stations that elect to take advantage of joint
arrangements such as LMAs may in certain circumstances have lower operating
costs and may be able to offer advertisers more attractive rates and services.
Although the Company currently operates multiple stations in each of its markets
and intends to pursue the creation of additional multiple station groups, the
Company's competitors in certain markets include operators of multiple stations
or operators who already have entered into LMAs. The Company also competes with
other radio station groups to purchase additional stations. Some of these groups
are owned or operated by companies that have substantially greater financial and
other resources than the Company.
Although the radio broadcasting industry is highly competitive, and
competition is enhanced to some extent by changes in existing radio station
formats and upgrades of power, among other actions, certain regulatory
limitations on entry exist. The operation of a radio broadcast station requires
a license from the FCC, and the number of radio stations that an entity can
operate in a given market is limited by the availability of FM and AM radio
frequencies allotted by the FCC to communities in that market, as well as by the
FCC's multiple ownership rules regulating the number of stations that may be
owned and controlled by a single entity. The FCC's multiple ownership rules have
changed significantly as a result of the Telecom Act. For a discussion of FCC
regulation and the provisions of the Telecom Act, see " -- Federal Regulation of
Radio Broadcasting."
The Company's stations also compete for advertising revenue with other
media, including newspapers, broadcast television, cable television, magazines,
direct mail, coupons and outdoor advertising. In addition, the radio
broadcasting industry is subject to competition from new media technologies that
are being
49
<PAGE>
developed or introduced, such as the delivery of audio programming by cable
television systems, by satellite and by digital audio broadcasting ("DAB"). DAB
may deliver by satellite to nationwide and regional audiences, multi-channel,
multi-format, digital radio services with sound quality equivalent to compact
discs. The delivery of information through the presently unregulated Internet
also could create a new form of competition. The radio broadcasting industry
historically has grown despite the introduction of new technologies for the
delivery of entertainment and information, such as television broadcasting,
cable television, audio tapes and compact disks. A growing population and
greater availability of radios, particularly car and portable radios, have
contributed to this growth. 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 broadcasting industry.
The FCC has recently authorized spectrum for the use of a new technology,
satellite digital audio radio services ("DARS"), to deliver audio programming.
The FCC has also authorized two companies to provide DARS service. DARS may
provide a medium for the delivery by satellite or terrestrial means of multiple
new audio programming formats to local and national audiences. It is not known
at this time whether this digital technology also may be used in the future by
existing radio broadcast stations either on existing or alternate broadcasting
frequencies.
The Company cannot predict what other matters might be considered in the
future by the FCC, nor can it assess in advance what impact, if any, the
implementation of any of these proposals or changes might have on its business.
See "-- Federal Regulation of Radio Broadcasting."
FEDERAL REGULATION OF RADIO BROADCASTING
INTRODUCTION. The ownership, operation and sale of broadcast stations,
including those licensed to the Company, are subject to the jurisdiction of the
FCC, which acts under authority derived from the Communications Act. The
Communications Act was amended in 1996 by the Telecom Act to make changes in
several broadcast laws. Among other things, the FCC grants permits and licenses
to construct and operate radio stations; assigns frequency bands for
broadcasting; determines whether to approve changes in ownership or control of
station licenses; regulates equipment used by stations and the operating power
and other technical parameters of stations; adopts and implements regulations
and policies that directly or indirectly affect the ownership, operation and
employment practices of stations; regulates the content of some forms of radio
broadcasting programming; and has the power to impose penalties for violations
of its rules under the Communications Act.
The following is a brief summary of certain provisions of the Communications
Act and of specific FCC regulations and policies. Failure to observe these or
other rules and policies can result in the imposition of various sanctions,
including monetary forfeitures, the grant of "short-term" (less than the maximum
term) license renewal or, for particularly egregious violations, the denial of a
license renewal application, the revocation of a license or the denial of FCC
consent to acquire additional broadcast properties. Reference should be made to
the Communications 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. Radio broadcast licenses are granted and renewed
for maximum terms of eight years. Licenses may be renewed through an application
to the FCC. The Communications Act requires that the FCC grant the renewal of a
station's license if the FCC finds that, during the preceding term of the
license, the station has served the public interest, convenience and necessity,
that there have been no serious violations by the licensee of the Communications
Act or the rules and regulations of the FCC, and 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.
Petitions to deny license renewal applications can be filed by interested
parties, including members of the public. Such petitions may raise various
issues before the FCC. The FCC is required to hold hearings on renewal
applications if the FCC is unable to determine that renewal of a license would
serve the public
50
<PAGE>
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. Also, during certain periods when a renewal
application is pending, the transferability of the applicant's license is
restricted. The Company is not currently aware of any facts that would prevent
the timely renewal of its licenses to operate its radio stations, although there
can be no assurance that the Company's licenses will be renewed.
The FCC classifies each AM and FM station. An AM station operates on a clear
channel, a regional channel or a local channel. A clear channel is one on which
certain dominant AM stations are assigned to serve wide areas. Clear channel AM
stations are classified as one of the following: Class A stations, which operate
on an unlimited time basis and are designated to render primary and secondary
service over an extended area; Class B stations, which operate on an unlimited
time basis and are designed to render service only over a primary service area;
and Class D stations, which operate either during daytime hours only, during
limited times only or on an unlimited time basis with low nighttime power. A
regional channel is one on which Class B and Class D AM stations may operate and
serve primarily a principal center of population and the rural areas contiguous
to it. A local channel is one on which AM stations operate on an unlimited time
basis and serve primarily a community and the suburban and rural areas
immediately contiguous thereto. Class C AM stations operate on a local channel
and are designed to render service only over a primary service area that may be
reduced as a consequence of interference.
The area served by AM stations is determined by a combination of frequency,
transmitter power and antenna orientation. Directional antenna arrays are often
employed to avoid or reduce interference to stations in certain locations. AM
stations are often required to reduce power or change directional pattern at
night in order to avoid interference to other licensees. To determine the
effective service area of an AM station, its power, its operating frequency, its
antenna patterns and its day/night operating modes are required.
The area served by FM stations is determined by a combination of transmitter
power and antenna height, with stations divided into classes according to their
anticipated service area. Antenna systems are typically non-directional and
power is the same, day and night.
Class C FM stations operate at 100 kilowatts of power with up to 1,968 feet
of antenna elevation above average terrain ("HAAT"). They are the most powerful
FM stations, providing service to a large area, typically a substantial portion
of a state. Class B FM stations operate at up to 50 kilowatts of power with up
to 500 feet of antenna elevation. These stations typically serve large
metropolitan areas as well as their associated suburbs. Class A FM stations
operate at 6 kilowatts with up to 328 feet of antenna elevation, and serve
smaller cities and towns or suburbs of larger cities.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1 and C.
51
<PAGE>
The following table sets forth the market, call letters, FCC license
classification, antenna height above average terrain ("HAAT") (for FM stations
only), power and frequency of each of the stations owned or operated by the
Company, assuming the consummation of the Pending Acquisitions, and the date on
which each station's FCC license expires. License renewal applications have been
filed for the listed stations showing a license expiration date of August 1,
1997 and April 1, 1998, and the expiration of the licenses is stayed during the
pendency of such applications.
<TABLE>
<CAPTION>
HEIGHT
ABOVE
FREQUENCY AVERAGE
(FM-MHZ) EXPIRATION FCC TERRAIN
MARKET STATIONS CITY OF LICENSE (AM-KHZ) DATE OF LICENSE CLASS (IN FEET)
- -------------------- --------- -------------------- ------------- ----------------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
MIDWEST REGION
Ann Arbor, MI WIQB FM Ann Arbor, MI 102.9 October 1, 2004 B 499
WQKL FM Ann Arbor, MI 107.1 October 1, 2004 A 289
WTKA AM Ann Arbor, MI 1050 October 1, 2004 II N.A.
WDEO AM Saline, MI 1290 October 1, 2004 III N.A.
Appleton Oshkosh/
Green Bay, WI WUSW FM Oshkosh, WI 96.7 December 1, 2004 A 328
WVBO FM Oshkosh, WI 103.9 December 1, 2004 C3 318
WOGB FM Kaukauna, WI 103.1 December 1, 2004 C3 879
WNAM AM Neenah-Menasha, WI 1280 December 1, 2004 III N.A.
WOSH AM Oshkosh, WI 1490 December 1, 2004 IV N.A.
WJLW FM Allouez, WI 106.7 December 1, 2004 C3 509
WEZR FM Brillion, WI 107.5 December 1, 2004 A 328
Dubuque, IA KLYV FM Dubuque, IA 105.3 February 1, 2005 C2 331
KXGE FM Dubuque, IA 102.3 February 1, 2005 A 410
WJOD FM Galena, IL 107.5 February 1, 2005 A 328
WDBQ AM Dubuque, IA 1490 February 1, 2005 IV N.A.
KIKR FM Asbury, IA 103.3 February 1, 2005 C3 643
Bismarck, ND KBYZ FM Bismarck, ND 96.5 April 1, 2005 C 1001
KACL FM Bismarck, ND 98.7 April 1, 2005 C 1093
KKCT FM Bismarck, ND 97.5 April 1, 2005 C1 830
KLXX AM Bismarck, ND 1270 April 1, 2005 III N.A.
Kalamazoo, MI WKFR FM Battle Creek, MI 103.3 October 1, 2004 B 482
WRKR FM Portage, MI 107.7 October 1, 2004 B 489
WKMI AM Kalamazoo, MI 1360 October 1, 2004 III N.A.
Owatonna-Waseca, MN KDHL AM Faribault, MN 920 April 1, 2005 III N.A.
KQCL FM Faribault, MN 95.9 April 1, 2005 A 328
KQPR FM Albert Lea, MN 96.1 April 1, 2005 A 328
KNFX AM Austin, MN 970 April 1, 2005 III N.A.
KRFO FM Owatonna, MN 1390 April 1, 2005 III N.A.
KRFO FM Owatonna, MN 104.9 April 1, 2005 A 174
KOWO AM Waseca, MN 1170 April 1, 2005 II N.A.
KRUE FM Waseca, MN 92.1 April 1, 2005 C3 285
Mankato, MN KXLP FM New Ulm, MN 93.1 April 1, 2005 C1 489
KYSM AM Mankato, MN 1230 April 1, 2005 IV N.A.
KYSM FM Mankato, MN 103.5 April 1, 2005 C1 541
Marion- Carbondale,
IL WDDD FM Marion, IL 107.3 December 1, 2004 B 492
WDDD AM Johnston City, IL 810 December 1, 2004 II N.A.
WFRX AM West Frankfort, IL 1300 December 1, 2004 III N.A.
WTAO FM Murphysboro, IL 105.1 December 1, 2004 B1 308
WVZA FM Herrin, IL 92.7 December 1, 2004 B1 328
WQUL FM West Frankfort, IL 97.7 December 1, 2004 A 433
Mason City, IA KCHA FM Charles City, IA 95.9 February 1, 2005 A 299
KGLO AM Mason City, IA 1300 February 1, 2005 III N.A.
KIAI FM Mason City, IA 93.9 February 1, 2005 C1 791
KLKK FM Clear Lake, IA 103.1 February 1, 2005 A 308
<CAPTION>
POWER
(IN
KILOWATTS)
--------------------
MARKET DAY NIGHT
- -------------------- --------- ---------
<S> <C> <C>
MIDWEST REGION
Ann Arbor, MI 49.0 49.0
3.0 3.0
10.0 0.5
0.5 0.0
Appleton Oshkosh/
Green Bay, WI 6.0 6.0
25.0 25.0
25.0 25.0
20.0 5.0
1.0 1.0
25.0 25.0
6.0 6.0
Dubuque, IA 50.0 50.0
1.7 1.7
3.0 3.0
1.0 1.0
6.6 6.6
Bismarck, ND 100.0 100.0
100.0 100.0
100.0 100.0
1.0 0.3
Kalamazoo, MI 50.0 50.0
50.0 50.0
5.0 1.0
Owatonna-Waseca, MN 5.0 5.0
3.0 3.0
6.0 6.0
5.0 5.0
0.5 0.1
4.7 4.7
1.0 0.0
25.0 25.0
Mankato, MN 100.0 100.0
1.0 1.0
100.0 100.0
Marion- Carbondale,
IL 50.0 50.0
0.3 0.3
1.0 0.1
25.0 25.0
25.0 25.0
3.5 3.5
Mason City, IA 3.0 3.0
5.0 5.0
100.0 100.0
6.0 6.0
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
HEIGHT
ABOVE
FREQUENCY AVERAGE
(FM-MHZ) EXPIRATION FCC TERRAIN
MARKET STATIONS CITY OF LICENSE (AM-KHZ) DATE OF LICENSE CLASS (IN FEET)
- -------------------- --------- -------------------- ------------- ----------------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
KCHA AM Charles City, IA 1580 February 1, 2005 II N.A.
KCZE FM New Hampton, IA 95.1 February 1, 2005 A 338
KCZX FM Osage, IA 103.7 February 1, 2005 A 154
New Ulm-Springfield-
Marshall, MN KNUJ AM New Ulm, MN 860 April 1, 2005 II N.A.
KNUJ FM Sleepy Eye, MN 107.3 April 1, 2005 A 400
KNSG FM Springfield, MN 94.7 April 1, 2005 C2 472
Rochester, MN KRCH FM Rochester, MN 101.7 April 1, 2005 C2 554
KWEB AM Rochester, MN 1270 April 1, 2005 III N.A.
KMFX FM Lake City, MN 102.5 April 1, 2005 C3 528
KMFX AM Wabasha, MN 1190 April 1, 2005 II N.A.
Toledo, OH WKKO FM Toledo, OH 99.9 October 1, 2003 B 499
WRQN FM Bowling Green, OH 93.5 October 1, 2003 A 397
WTOD AM Toledo, OH 1560 October 1, 2003 III N.A.
WWWM FM Sylvania, OH 105.5 October 1, 2003 A 390
WLQR AM Toledo, OH 1470 October 1, 2003 III N.A.
WXKR FM Port Clinton, OH 94.5 October 1, 2003 B 630
WTWR FM Monroe, MI 98.3 October 1, 2004 A 466
SOUTHEAST REGION
Albany, GA WKAK FM Albany, GA 101.7 April 1, 2004 A 299
WEGC FM Sasser, GA 107.7 April 1, 2004 C3 328
WALG AM Albany, GA 1590 April 1, 2004 III N.A.
WJAD FM Leesburg, GA 103.5 April 1, 2004 C3 463
Augusta, GA WEKL FM Augusta, GA 102.3 April 1, 2004 A 666
WRXR FM Aiken, SC 96.3 April 1, 2004 C2 889
WUUS FM Martinez, GA 107.7 April 1, 2004 C2 577
WGUS AM N. Augusta, SC 1380 April 1, 2004 III N.A.
WBBQ FM Augusta, GA 104.3 April 1, 2004 C 1001
WBBQ AM Augusta, GA 1340 April 1, 2004 IV N.A.
WLOV FM Washington, GA 100.1 April 1, 2004 A 322
WLOV AM Washington, GA 1370 April 1, 2004 III N.A.
WZNY FM Augusta, GA 105.7 April 1, 2004 C 1168
Chattanooga, TN WUSY FM Cleveland, TN 100.7 April 1, 2005 C 1191
Columbus, GA WVRK FM Columbus, GA 102.9 April 1, 2004 C 1519
WGSY FM Phenix City, GA 100.1 April 1, 2004 A 328
WMLF AM Columbus, GA 1270 April 1, 2004 III N.A.
WPNX AM Phenix City, GA 1460 April 1, 2004 III N.A.
WAGH FM Ft. Mitchell, GA 98.3 April 1, 2004 A 328
Florence, SC WYNN FM Florence, SC 106.3 December 1, 2003 A 325
WYNN AM Florence, SC 540 December 1, 2003 II N.A.
WHLZ FM Manning, SC 92.5 December 1, 2003 C 1171
WYMB AM Manning, SC 920 December 1, 2003 III N.A.
WCMG FM Latta, SC 94.3 December 1, 2003 C3 502
WHSC AM Hartsville, SC 1450 December 1, 2003 IV N.A.
WHSC FM Hartsville, SC 98.5 December 1, 2003 A 328
WBZF FM Marion, SC 100.5 December 1, 2003 C3 354
WMXT FM Pamplico, SC 102.1 December 1, 2003 C2 479
WWFN FM Lake City, SC 100.1 December 1, 2003 A 433
Montgomery, AL WMSP AM Montgomery, AL 740 April 1, 2004 II N.A.
WNZZ AM Montgomery, AL 950 April 1, 2004 III N.A.
WMXS FM Montgomery, AL 103.3 April 1, 2004 C 1096
WLWI FM Montgomery, AL 92.3 April 1, 2004 C 1096
Myrtle Beach, SC WSYN FM Georgetown, SC 106.5 December 1, 2003 C2 492
WDAI FM Pawley's Island, SC 98.5 December 1, 2003 A 328
WJXY FM Conway, SC 93.9 December 1, 2003 A 420
WXJY FM Georgetown, SC 93.7 December 1, 2003 A 328
WJXY AM Conway, SC 1050 December 1, 2003 II N.A.
<CAPTION>
POWER
(IN
KILOWATTS)
--------------------
MARKET DAY NIGHT
- -------------------- --------- ---------
<S> <C> <C>
0.5 0.0
5.5 5.5
6.0 6.0
New Ulm-Springfield-
Marshall, MN 1.0 0.1
1.9 1.9
50.0 50.0
Rochester, MN 39.0 39.0
5.0 1.0
9.4 9.4
1.0 0.0
Toledo, OH 50.0 50.0
4.1 4.1
5.0 0.0
4.3 4.3
1.0 1.0
30.0 30.0
1.4 1.4
SOUTHEAST REGION
Albany, GA 3.0 3.0
25.0 25.0
5.0 1.0
12.5 12.5
Augusta, GA 1.5 1.5
15.0 15.0
24.5 24.5
4.0 0.1
100.0 100.0
1.0 1.0
2.4 2.4
1.0 0.0
100.0 100.0
Chattanooga, TN 100.0 100.0
Columbus, GA 100.0 100.0
6.0 6.0
5.0 0.2
4.0 0.1
6.0 6.0
Florence, SC 6.0 6.0
0.3 0.2
98.0 98.0
2.3 1.0
10.5 10.5
1.0 1.0
3.0 3.0
21.5 21.5
50.0 50.0
3.3 3.3
Montgomery, AL 10.0 0.0
1.0 0.4
100.0 100.0
100.0 100.0
Myrtle Beach, SC 50.0 50.0
6.0 6.0
3.7 3.7
6.0 6.0
5.0 0.5
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
HEIGHT
ABOVE
FREQUENCY AVERAGE
(FM-MHZ) EXPIRATION FCC TERRAIN
MARKET STATIONS CITY OF LICENSE (AM-KHZ) DATE OF LICENSE CLASS (IN FEET)
- -------------------- --------- -------------------- ------------- ----------------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
WSEA FM Atlantic Beach, SC 100.3 December 1, 2003 A 476
Salisbury--Ocean
City, MD WLVW FM Salisbury, MD 105.5 October 1, 2003 A 384
WLBW FM Fenwick Island, DE 92.1 August 1, 1998 A 308
WQHQ FM Salisbury, MD 104.7 October 1, 2003 B 610
WTGM AM Salisbury, MD 960 October 1, 2003 III N.A.
WOSC FM Bethany Beach, DE 95.9 October 1, 2003 B1 377
WWFG FM Ocean City, MD 99.9 October 1, 2003 B 315
WSBY FM Salisbury, MD 98.9 October 1, 2003 A 325
WJDY AM Salisbury, MD 1470 October 1, 2003 III N.A.
Savannah, GA WJCL FM Savannah, GA 96.5 April 1, 2004 C 1161
WIXV FM Savannah, GA 95.5 April 1, 2004 C1 856
WSGF FM Springfield, GA 103.9 April 1, 2004 A 328
WBMQ AM Savannah, GA 630 April 1, 2004 III N.A.
WEAS FM Savannah, GA 93.1 April 1, 2004 C1 981
WEAS AM Savannah, GA 900 April 1, 2004 II N.A.
WZAT FM Savannah, GA 102.1 April 1, 2004 C 1306
Tallahassee, FL WHBX FM Tallahassee, FL 96.1 February 1, 2004 C2 479
WBZE FM Tallahassee, FL 98.9 February 1, 2004 C1 604
WHBT AM Tallahassee, FL 1410 February 1, 2004 III N.A.
WWLD FM Tallahassee, FL 106.1 February 1, 2004 A 328
WGLF FM Tallahassee, FL 104.1 February 1, 2004 C 1394
Wilmington, NC WWQQ FM Wilmington, NC 101.3 December 1, 2003 C2 545
WQSL FM Jacksonville, NC 92.3 December 1, 2003 C2 725
WXQR FM Jacksonville, NC 105.5 December 1, 2003 C2 794
WAAV FM Leland, NC 94.1 December 1, 2003 A 148
WAAV AM Leland, NC 980 December 1, 2003 III N.A.
SOUTHWEST REGION
Abilene, TX KCDD FM Hamlin, TX 103.7 August 1, 2005 C1 745
KBCY FM Tye, TX 99.7 August 1, 2005 C 984
KHXS FM Abilene, TX 106.3 August 1, 2005 C2 492
KFQX FM Merkel, TX 102.7 August 1, 2005 C1 1148
Amarillo, TX KZRK FM Canyon, TX 107.9 August 1, 2005 C1 476
KZRK AM Canyon, TX 1550 August 1, 2005 II N.A.
KARX FM Claude, TX 95.7 August 1, 2005 C1 390
KPUR AM Amarillo, TX 1440 August 1, 1997 III N.A.
KPUR FM Canyon, TX 107.1 August 1, 1997 A 315
KQIZ FM Amarillo, TX 93.1 August 1, 2005 C1 699
Beaumont--Port
Arthur, TX KAYD FM Beaumont, TX 97.5 August 1, 2005 C 1200
KQXY FM Beaumont, TX 94.1 August 1, 2005 C 1099
KQHN AM Nederland, TX 1510 August 1, 2005 II N.A.
KAYD AM Beaumont, TX 1450 August 1, 2005 IV N.A.
KTCX FM Beaumont, TX 102.5 August 1, 1997 C2 492
Grand Junction, CO KBKL FM Grand Junction, CO 107.9 April 1, 2005 C 1460
KEKB FM Fruita, CO 99.9 April 1, 2005 C 1542
KMXY FM Grand Junction, CO 104.3 April 1, 2005 C 1460
KKNN FM Delta, CO 95.1 April 1, 2005 C 1424
KEXO AM Grand Junction, CO 1230 April 1, 2005 IV N.A.
KQIL AM Grand Junction, CO 1340 April 1, 2005 IV N.A.
Lake Charles, LA KKGB FM Sulphur, LA 101.3 June 1, 2004 C3 289
KBIU FM Lake Charles, LA 103.7 June 1, 2004 C1 469
KYKZ FM Lake Charles, LA 96.1 June 1, 2004 C 1204
KXZZ AM Lake Charles, LA 1580 June 1, 2004 II N.A.
Odessa--Midland, TX KBAT FM Midland, TX 93.3 August 1, 2005 C1 440
<CAPTION>
POWER
(IN
KILOWATTS)
--------------------
MARKET DAY NIGHT
- -------------------- --------- ---------
<S> <C> <C>
2.75 2.75
Salisbury--Ocean
City, MD 2.1 2.1
6.0 6.0
33.0 33.0
5.0 5.0
18.8 18.8
50.0 50.0
6.0 6.0
5.0 0.0
Savannah, GA 100.0 100.0
100.0 100.0
6.0 6.0
5.0 5.0
97.0 97.0
4.4 0.2
100.0 100.0
Tallahassee, FL 37.0 37.0
100.0 100.0
5.0 0.0
6.0 6.0
90.0 90.0
Wilmington, NC 40.0 40.0
22.7 22.7
19.0 19.0
5.0 5.0
5.0 5.0
SOUTHWEST REGION
Abilene, TX 100.0 100.0
98.0 98.0
50.0 50.0
66.0 66.0
Amarillo, TX 100.0 100.0
1.0 0.2
100.0 100.0
5.0 1.0
6.0 6.0
100.0 100.0
Beaumont--Port
Arthur, TX 100.0 100.0
100.0 100.0
5.0 0.0
1.0 1.0
50.0 50.0
Grand Junction, CO 100.0 1.0
79.0 79.0
100.0 100.0
100.0 100.0
1.0 1.0
1.0 1.0
Lake Charles, LA 25.0 25.0
100.0 100.0
97.0 97.0
1.0 1.0
Odessa--Midland, TX 100.0 100.0
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
HEIGHT
ABOVE
FREQUENCY AVERAGE
(FM-MHZ) EXPIRATION FCC TERRAIN
MARKET STATIONS CITY OF LICENSE (AM-KHZ) DATE OF LICENSE CLASS (IN FEET)
- -------------------- --------- -------------------- ------------- ----------------- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
KODM FM Odessa, TX 97.9 August 1, 2005 C1 1000
KNFM FM Midland, TX 92.3 August 1, 2005 C 984
KGEE FM Monahans, TX 99.9 August 1, 2005 C1 574
KMND AM Midland, TX 1510 August 1, 2005 II N.A.
Wichita Falls, TX KLUR FM Wichita Falls, TX 99.9 August 1, 2005 C1 830
KQXC FM Wichita Falls, TX 102.5 August 1, 2005 A 312
KYYI FM Burkburnett, TX 104.7 August 1, 2005 C 1017
KOLI FM Electra, TX 94.9 (1) C2 492
NORTHEAST REGION
Augusta-Waterville,
ME WABK FM Gardiner, ME 104.3 April 1, 1998 B 371
WKCG FM Augusta, ME 101.3 April 1, 1998 B 322
WIGY FM Madison, ME 97.5 April 1, 1998 A 328
WCME FM Boothbay Harbor, ME 96.7 April 1, 1998 B1 417
WFAU AM Gardiner, ME 1280 April 1, 2006 III N.A.
WTOS FM Skowhegan, ME 105.1 April 1, 1998 C 2431
Bangor, ME WQCB FM Brewer, ME 106.5 April 1, 1998 C 1079
WBZN FM Old Town, ME 107.3 April 1, 1998 C2 436
<CAPTION>
POWER
(IN
KILOWATTS)
--------------------
MARKET DAY NIGHT
- -------------------- --------- ---------
<S> <C> <C>
100.0 0.0
100.0 100.0
98.0 98.0
2.4 2.4
Wichita Falls, TX 100.0 100.0
4.5 4.5
100.0 100.0
50.0 50.0
NORTHEAST REGION
Augusta-Waterville,
ME 50.0 50.0
50.0 50.0
6.0 6.0
15.5 15.5
5.0 5.0
50.0 50.0
Bangor, ME 98.0 98.0
50.0 50.0
</TABLE>
- ------------------------
(1) Station has been granted a construction permit and is currently operating
under program test authority. An application for a license is pending before
the FCC.
OWNERSHIP MATTERS. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast license without the
prior approval of the FCC. In determining whether to assign, transfer, grant or
renew 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, financial qualifications of the licensee, the "character"
of the licensee and those persons holding "attributable" interests therein, and
compliance with the Communications Act's limitation on alien ownership, as well
as compliance with other FCC rules and policies, including programming and
filing requirements and equal employment opportunity requirements.
Once a station purchase agreement has been signed, an application for FCC
consent to assignment of license or transfer of control (depending upon whether
the underlying transaction is an asset purchase or stock acquisition) is filed
with the FCC. Approximately 10 to 15 days after this filing, the FCC publishes a
notice assigning a file number to the application and advising the public that
the application has been "accepted for filing." This notice begins a 30-day
statutory waiting period, which provides the opportunity for third parties to
file formal petitions to deny the transaction; informal objections may be filed
any time prior to grant of an application. The FCC staff will normally review
the application in this period and seek further information and amendments to
the application, if the staff has questions.
Once the 30-day public notice period ends, the staff will complete its
processing, assuming that no petitions or informal objections were received and
that the application is otherwise consistent with FCC rules and acceptable to
the staff. The staff often grants the application by delegated authority
approximately 10 to 15 days after the public notice period ends. At this point,
the parties are legally authorized to close the purchase, although the FCC
action is not legally a "final order," as explained below.
Public notice of the FCC staff grant is usually issued about a week after
the grant is made, stating that the grant was effective when the staff made the
grant. On the date of this latter notice, another 30-day period begins, within
which interested parties can file petitions seeking either staff reconsideration
or full FCC review of the staff action. During this time the grant can still be
modified, set aside or stayed, and is not a "final order." In the absence of a
stay, however, the seller and buyer are not prevented from closing
55
<PAGE>
despite the absence of a final order. Also, for a period of 40 days after the
public notice of the grant, the full FCC can review and reconsider the staff's
grant on its own motion. Thus, during the additional 10 days beyond the 30-day
period available to third parties, the grant is still not "final." In the event
that review by the full FCC is requested and the FCC subsequently affirms the
staff's grant of the application, interested parties may thereafter seek
judicial review in the U.S. Court of Appeals for the District of Columbia
Circuit within 30 days of public notice of the full FCC's action. In the event
the Court affirms the FCC's action, further judicial review may be sought by
seeking rehearing en banc from the Court of Appeals or by certiorari from the
U.S. Supreme Court.
In the absence of the submission of a timely request for reconsideration,
administrative review or judicial review, the FCC staff's grant of an
application becomes final by operation of law and generally is no longer subject
to administrative or judicial review, although such action can nevertheless be
set aside in rare circumstances.
The pendency of a license renewal application will alter the aforementioned
timetables, because the FCC will not issue an unconditional assignment grant if
the station's license renewal is pending.
Under the Communications Act, a broadcast license may not be granted to or
held by a corporation that has more than one-fifth of its capital stock owned or
voted by aliens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations. Under the Communications Act, a
broadcast license also may not be granted to or held by any corporation that is
controlled, directly or indirectly, by any other corporation more than
one-fourth of whose capital stock is owned or voted by aliens or their
representatives, by foreign governments or their representatives, or by non-U.S.
corporations. These restrictions apply in modified form to other forms of
business organizations, including partnerships. The Company therefore will be
restricted to having no more than one-fourth of its stock owned or voted by
aliens, foreign governments or non-U.S. corporations. The Company will be
required to take appropriate steps to monitor the citizenship of its
shareholders, such as through representative samplings on a periodic basis, to
provide a reasonable basis for certifying compliance with the foreign ownership
restrictions of the Communications Act.
The Communications Act and FCC rules also generally restrict the common
ownership, operation or control of radio broadcast stations serving the same
local market, of a radio broadcast station and a television broadcast station
serving the same local market, and of a radio broadcast station and a daily
newspaper serving the same local market. Under these "cross-ownership" rules,
absent waivers, the Company would not be permitted to acquire any daily
newspaper or television broadcast station (other than low power television) in a
local market where it then owned any radio broadcast station. The FCC's rules
provide for the liberal grant of a waiver of the rule prohibiting common
ownership of radio and television stations in the same geographic market in the
top 25 television markets if certain conditions are satisfied. The Telecom Act
directed the FCC to extend this waiver policy to stations in the top 50
television markets, although the FCC has not yet implemented this change. For
purposes of these rules, a "market" is defined by reference to the signal
coverage(s) of the station(s) involved.
The Telecom Act and the FCC's broadcast multiple ownership rules restrict
the number of radio stations one person or entity may own, operate or control on
a local level. These limits are:
(i) in a market with 45 or more commercial radio signals, an entity may
own up to eight commercial radio stations, not more than five of
which are in the same service (FM or AM);
(ii) in a market with between 30 and 44 (inclusive) commercial radio
signals, 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
signals, an entity may own up to six commercial radio stations, not
more than four of which are in the same service; and
56
<PAGE>
(iv) in a market with 14 or fewer commercial radio signals, 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.
None of these multiple ownership rules requires any change in the Company's
current ownership of radio broadcast stations or precludes consummation of the
Pending Acquisitions, except that the acquisition of one station in the Augusta,
GA market has been challenged before the FCC on multiple ownership grounds and
an informal objection has been filed against the acquisition of four stations in
the Dubuque, IA market alleging that such acquisition would result in undue
market concentration. However, these rules and policies will limit the number of
additional stations which the Company may acquire in the future in certain of
its markets.
Because of these multiple and cross-ownership rules, a purchaser of voting
stock of the Company which acquires an "attributable" interest in the Company
may violate the FCC's rules if it also has an attributable or a non-attributable
interest in other television or radio stations, or in daily newspapers,
depending on the number and location of those radio or television stations or
daily newspapers. Such a purchaser also may be restricted in the companies in
which it may invest, to the extent that these investments give rise to an
attributable interest. If an attributable shareholder of the Company violates
any of these ownership rules, the Company may be unable to obtain from the FCC
one or more authorizations needed to conduct its radio station business and may
be unable to obtain FCC consents for certain future acquisitions.
The FCC generally applies its television/radio/newspaper cross-ownership
rules and its broadcast multiple ownership rules by considering the
"attributable," or cognizable interests held by a person or entity. A person or
entity can have an interest in a radio station, television station or daily
newspaper by being an officer, director, partner or shareholder of a company
that owns that station or newspaper. Whether that interest is cognizable under
the FCC's ownership rules is determined by the FCC's attribution rules. If an
interest is attributable, the FCC treats the person or entity who holds that
interest as the "owner" of the radio station, television station or daily
newspaper in question, and therefore subject to the FCC's ownership rules.
With respect to a corporation, officers, directors and persons or entities
that directly or indirectly can vote 5% or more of the corporation's stock (10%
or more of such stock in the case of insurance companies, investment companies,
bank trust departments and certain other "passive investors" that hold such
stock for investment purposes only) generally are attributed with ownership of
the radio stations, television stations and daily newspapers the corporation
owns.
With respect to a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. Debt instruments,
nonvoting stock, options and warrants for voting stock that have not yet been
exercised, limited partnership interests where the limited partner is not
"materially involved" in the media-related activities of the partnership and
where the limited partnership agreement expressly "insulates" the limited
partner from such material involvement, and minority (under 5%) voting stock,
generally do not subject their holders to attribution. However, the FCC is
currently reviewing its rules on attribution of broadcast interests, and it may
adopt stricter criteria. See "--Proposed Changes" below.
In addition, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station or daily newspaper from having a "meaningful"
nonattributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, and otherwise
"insulated" limited partnership interests) and significant employment positions.
This policy may limit the permissible investments a purchaser of the Company's
voting stock may make or hold.
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PROGRAMMING AND OPERATION. The Communications Act requires broadcasters to
serve the "public interest." Since 1981, the FCC gradually has relaxed or
eliminated many of the more formalized procedures it developed to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. However, licensees continue to be required to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming will be considered by the FCC when
it evaluates the licensee's renewal application, but such complaints may be
filed and considered at any time.
Stations also must pay regulatory and application fees to the FCC and follow
various FCC rules that regulate, among other things, political advertising, the
broadcast of obscene or indecent programming, sponsorship identification and
technical operations (including limits on radio frequency radiation). In
addition, licensees must develop and implement programs designed to promote
equal employment opportunities and must submit reports to the FCC on these
matters annually and in connection with a renewal application. The broadcast of
contests and lotteries is regulated by FCC rules.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short-term" (less than the maximum term) renewal or, for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.
In 1985, the FCC adopted rules regarding human exposures to levels of radio
frequency ("RF") radiation. These rules require applicants for new broadcast
stations, renewals of broadcast licenses or modifications of existing licenses
to inform the FCC at the time of filing such applications whether a new or
existing broadcast facility would expose people to RF radiation in excess of
certain guidelines. In August 1996, the FCC adopted more restrictive radiation
limits. These limits became effective on September 1, 1997 and govern
applications filed after that date. The Company anticipates that such
regulations will not have a material effect on its business.
LOCAL MARKETING AGREEMENTS. Over the past six years, a number of radio
stations, including certain of the Company's stations, have entered into what
commonly are referred to as "local marketing agreements" or "time brokerage
agreements." In a typical LMA, the licensee of a station makes available, for a
fee, airtime on its station to a party which supplies programming to be
broadcast during that airtime, and collects revenues from advertising aired
during such programming. LMAs are subject to compliance with the antitrust laws
and the FCC's rules and policies, including the requirement that the licensee of
each station maintain independent control over the programming and other
operations of its own station. The FCC has held that such agreements do not
violate the Communications Act as long as the licensee of the station that is
being substantially programmed by another entity maintains complete
responsibility for, and control over, operations of its broadcast stations and
otherwise ensures compliance with applicable FCC rules and policies.
A station that brokers substantial time on another station in its market or
engages in an LMA with a station in the same market will be considered to have
an attributable ownership interest in the brokered station for purposes of the
FCC's ownership rules, discussed above. As a result, a broadcast station may not
enter into an LMA that allows it to program more than 15% of the broadcast time,
on a weekly basis, of another local station that it could not own under the
FCC's local multiple ownership rules. FCC rules also prohibit a station from
simulcasting more than 25% of its programming on another station in the same
broadcast service (i.e., AM-AM or FM-FM) where the two stations serve
substantially the same geographic area, whether the licensee owns the stations
or owns one and programs the other through an LMA arrangement.
PROPOSED CHANGES. In December 1994, the FCC initiated a proceeding to
solicit comment on whether it should revise its radio and television ownership
"attribution" rules by, among other proposals: (i) raising the basic benchmark
for attributing ownership in a corporate licensee from 5% to 10% of the
licensee's voting stock, (ii) increasing from 10% to 20% of the licensee's
voting stock the attribution
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benchmark for "passive investors" in corporate licensees, (iii) restricting the
availability of the attribution exemption when a single party controls more than
50% of the voting stock of a corporate license; and (iv) considering joint sales
agreements ("JSA"), debt and non-voting stock interests to be attributable under
certain circumstances. The FCC has made no decision in these matters. At this
time, no determination can be made as to what effect, if any, this proposed
rulemaking will have on the Company.
From time to time Congress and the FCC have under consideration, and may in
the future consider and adopt, new laws, regulations and policies regarding a
wide variety of matters that could, directly or indirectly, affect the
operation, ownership and profitability of the Company's radio stations, result
in the loss of audience share and advertising revenues for the Company's radio
stations, and affect the ability of the Company to acquire additional radio
stations or finance such acquisitions. Such matters include: proposals to impose
spectrum use or other fees on FCC licensees; the FCC's equal employment
opportunity rules and regulations relating to political broadcasting; technical
and frequency allocation matters; proposals to restrict or prohibit the
advertising of beer, wine and other alcoholic beverages on radio; changes in the
FCC's cross-interest, multiple ownership and cross-ownership policies; changes
to broadcast technical requirements; proposals to allow telephone or cable
television companies to deliver audio and video programming to the home through
existing phone lines; proposals to limit the tax deductibility of advertising
expenses by certain types of advertisers; and proposals to auction the right to
use the radio broadcast spectrum to the highest bidder, instead of granting FCC
licenses and subsequent license renewals without such bidding.
The FCC, on April 2, 1997, awarded two licenses for the provision of DARS.
Under rules adopted for this service, licensees must begin construction of their
space stations within one year, begin operating within four years, and be
operating their entire system within six years. The Company cannot predict
whether the service will be subscription-based or advertiser-supported. Digital
technology also may be used in the future by terrestrial radio broadcast
stations either on existing or alternate broadcasting frequencies, and the FCC
has stated that it will consider making changes to its rules to permit AM and FM
radio stations to offer digital sound following industry analysis of technical
standards. In addition, the FCC has authorized an additional 100 kHz of
bandwidth for the AM band and on March 17, 1997, adopted an allotment plan for
the expanded band which identified the 88 AM radio stations selected to move
into the band. At the end of a five-year transition period, those licensees will
be required to return to the FCC either the license for their existing AM band
station or the license for the expanded AM band station.
The Company cannot predict whether any of the foregoing proposed changes
will be adopted or what other matters might be considered 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 foregoing is a brief summary of certain provisions of the Communications
Act, the Telecom Act and of specific FCC rules and policies. This description
does not purport to be comprehensive and reference should be made to the
Communications Act, the FCC's rules and the public notices and rulings of the
FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
REGULATORY APPROVAL. The Company believes that the consummation of the
Reorganization and the Offerings will require the prior consent of the FCC. The
process of obtaining such consent will involve the application therefor being
placed on public notice, and the public may file objections to such application.
In addition, the FCC itself may decline to grant the application based upon its
own review. There can be no assurance that such consent ultimately will be
granted. While the Company believes that it might be able to obtain the required
FCC consent on a so-called "short-form" application, there is no assurance that
the FCC will not require a "long-form" application. A "long-form" application,
if required, will involve a longer processing period, will be subject to formal
petitions to deny by other parties, and will involve a more detailed review by
the FCC, all of which would increase the risk that FCC consent would be delayed
or denied.
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FEDERAL ANTITRUST CONSIDERATIONS. The Company is aware that the DOJ, which
evaluates transactions to determine whether those transactions should be
challenged under the federal antitrust laws, has been active recently in its
review of radio station acquisitions, particularly where an operator proposes to
acquire additional stations in its existing markets or multiple stations in new
markets.
For an acquisition meeting certain size thresholds, the HSR Act and the
rules promulgated thereunder require the parties to file Notification and Report
Forms with the FTC and the DOJ and to observe specified waiting period
requirements before consummating the transaction. If the agencies determine that
the transaction does not raise significant antitrust issues, then they will
either terminate the waiting period or allow it to expire after the initial 30
days. On the other hand, if either of the agencies determine that the
transaction requires a more detailed investigation, then at the conclusion of
the initial 30 day period, it will issue a formal request for additional
information ("Second Request"). During the initial 30 day period after the
filing, the agencies decide which of them will investigate the acquisition,
which in the case of radio broadcasting has generally been the DOJ. The issuance
of a Second Request extends the waiting period until the twentieth calendar day
after the date of substantial compliance by all parties to the acquisition.
Thereafter, such waiting period may only be extended by court order or with the
consent of the parties. In practice, complying with a Second Request can take a
significant amount of time. In addition, if the investigating agency raises
substantive issues in connection with a proposed transaction, then the parties
frequently engage in lengthy discussions or negotiations with the investigating
agency concerning possible means of addressing those issues, including but not
limited to persuading the agency that the proposed acquisition would not violate
the antitrust laws, restructuring the proposed acquisition, divestiture of other
assets of one or more parties, or abandonment of the transaction. Such
discussions and negotiations can be time-consuming, and the parties may agree to
delay consummation of the acquisition during their pendency.
At any time before or after the consummation of a proposed acquisition, the
DOJ or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
acquisition or seeking divestiture of the business acquired or other assets of
the Company. Acquisitions that are not required to be reported under the HSR Act
also may be investigated by the DOJ or the FTC under the antitrust laws before
or after consummation. In addition, private parties may under certain
circumstances bring legal action to challenge an acquisition under the antitrust
laws.
As part of its increased scrutiny of radio station acquisitions, the DOJ has
stated publicly that it believes that commencement of operations under LMAs,
JSAs and other similar agreements customarily entered into in connection with
radio station ownership transfers prior to the expiration of the waiting period
under the HSR Act could violate the HSR Act. In connection with acquisitions
subject to the waiting period under the HSR Act, the Company will not commence
operation of any affected station to be acquired under an LMA or similar
agreement until the waiting period has expired or been terminated.
SEASONALITY
The Company expects that its operations and revenues will be largely
seasonal in nature, with generally lower revenue generated in the first quarter
of the year and generally higher revenue generated in the fourth quarter of the
year, with the exception of certain stations such as those of the Company in
Salisbury-Ocean City, Maryland, where the stations generally earn higher
revenues in the second and third quarters of the year because of the higher
seasonal population in those communities. The seasonality of the Company's
business causes and will likely continue to cause a significant variation in the
Company's quarterly operating results. Such variations could have a material
adverse effect on the timing of the Company's cash flows and therefore on its
ability to service its obligations with respect to its indebtedness, including
the Indenture and the Credit Facility.
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EMPLOYEES
At December 31, 1997, the Company employed approximately 660 persons. None
of such employees are covered by collective bargaining agreements, and the
Company considers its relations with its employees to be satisfactory.
The Company also employs several on-air personalities with large loyal
audiences in their respective markets. On occasion, the Company enters into
employment agreements with these personalities to protect their interests in
those relationships that it believes to be valuable. The loss of one of these
personalities could result in a short-term loss of audience share, but the
Company does not believe that any such loss would have a material adverse effect
on the Company's financial condition or results of operations, taken as a whole.
PROPERTIES AND FACILITIES
The types of properties required to support each of the Company's radio
stations include offices, studios, transmitter sites and antenna sites. A
station's studios are generally housed with its offices in business districts of
the station's community of license or largest nearby community. The transmitter
sites and antenna sites are generally located so as to provide maximum market
coverage.
On December 31, 1997, the Company owned its studio facilities in four
markets and it owned transmitter and antenna sites in six markets. The Company
leases its remaining studio and office facilities and transmitter and antenna
sites. The Company does not anticipate any difficulties in renewing any facility
leases or in leasing alternative or additional space, if required. The Company
owns substantially all of its other equipment, consisting principally of
transmitting antennae, transmitters, studio equipment and general office
equipment.
No one property is material to the Company's operations. The Company
believes that its properties are generally in good condition and suitable for
its operations; however, the Company continually looks for opportunities to
upgrade its properties and intends to upgrade studios, office space and
transmission facilities in certain markets.
LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business, but the Company is not a party to any
lawsuit or proceeding which, in the opinion of the Company, is likely to have a
material adverse effect on the Company.
REORGANIZATION AND CORPORATE STRUCTURE
In March 1998, the Company amended its articles of incorporation to change
its name from Cumulus Holdings, Inc. to Cumulus Media Inc. Until immediately
prior to the closing of the Offerings, all of the outstanding common stock of
the Company will have been held by Media LLC, whose members include State of
Wisconsin Investment Board, NationsBanc Capital Corp., Heller Equity Capital
Corporation, NML, and certain members of the Company's management or affiliates
of management. See "Principal and Selling Stockholders." Immediately prior to
the closing of the Offerings, (i) all of the shares of NML Preferred Stock will
be exchanged for shares of Series A Preferred Stock as described below; and (ii)
Media LLC will be liquidated and the shares of Class A Common Stock and Class B
Common Stock held by Media LLC will be distributed by Media LLC to its members
in liquidation.
All shares of Class A Cumulative Preferred Stock which were held by NML
immediately prior to the Offerings plus all accrued and unpaid dividends thereon
as of the exchange date will be exchanged for shares of Series A Preferred Stock
having an equivalent aggregate liquidation value pursuant to the Preferred Stock
Offering. As of February 14, 1998, the liquidation value of the NML Preferred
Stock was
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approximately $33.0 million. Subject to certain conditions, the Series A
Preferred Stock will be exchangeable on any dividend payment date, at the
Company's option, for the Exchange Debentures. The terms of the Exchange
Debentures will be substantially similar to those of the Series A Preferred
Stock. See "Description of Capital Stock."
The Company's U.S. radio operations are conducted through Broadcasting,
which owns the radio stations acquired pursuant to asset purchase agreements.
The Company will also own the stock of radio groups or stations acquired
pursuant to stock purchase or merger agreements. Licensing holds virtually all
the FCC licenses for the Company's stations. Certain other FCC licenses are held
by wholly-owned subsidiaries of the Company, and the Company intends to transfer
those to Licensing or to a newly created subsidiary that holds only FCC licenses
in the near future. CCC owns radio stations throughout the English-speaking
Eastern Caribbean, including among other places, Trinidad, St. Kitts and St.
Lucia. CCC is currently constructing an FM station in Barbados and Tortola, BVI.
The Company will be the issuer of the Class A Common Stock, the Series A
Preferred Stock and the Notes, and is the borrower under the Credit Facility.
Broadcasting and Licensing are guarantors of the Company's obligations under the
Credit Facility. See "Description of the Credit Facility and Notes."
Upon the consummation of the Reorganization, the capital stock of the
Company will consist of the Class A Common Stock, the Class B Common Stock and
the Series A Preferred Stock.
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PENDING ACQUISITIONS
The Company has entered into definitive purchase agreements to acquire 119
stations in 29 markets for an aggregate purchase price of approximately $260.2
million in Pending Acquisitions. Aggregate net revenues and Broadcast Cash Flow
for the Pending Acquisitions would have been $65.9 million and $16.7 million,
respectively, on a pro forma basis for the year ended December 31, 1997. The
Company expects to consummate most of the Pending Acquisitions during the second
and third quarters of 1998, although there can be no assurance that the
transactions will be consummated within that time frame. The pending acquisition
of a Tallahassee FM station presently operated under an LMA is expected to close
by the end of 1998. In two of the markets in which there are Pending
Acquisitions (Augusta, GA and Dubuque, IA), petitions or informal objections
have been filed against the Company's FCC assignment applications and a third
objection is expected to be filed. All such petitions and objections must be
resolved before FCC approval can be obtained and the acquisitions consummated.
There can be no assurance that the Pending Acquisitions will be consummated. The
Company believes that the proceeds of the Offerings will be sufficient to
finance the consummation of the Pending Acquisitions.
In addition, the Company has entered into letters of intent to purchase
three stations in two markets. The letters of intent are non-binding and are
subject to certain conditions, and there can be no assurance that the Company
will enter into definitive purchase agreements with respect to such stations or
will consummate such transactions.
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MANAGEMENT
The following table sets forth certain information with respect to the
directors and executive officers and managers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Richard W. Weening(1) 52 Executive Chairman, Treasurer and Director
Lewis W. Dickey, Jr.(1) 36 Executive Vice Chairman and Director
William M. Bungeroth(1) 52 President and Director
Richard J. Bonick, Jr. 47 Vice President and Chief Financial Officer
Terrence Baun 50 Director of Engineering
John Dickey 31 Director of Programming
Terrence Leahy 43 Secretary and General Counsel
Daniel O'Donnell 38 Director of Corporate Finance
Mini Srivathsa 29 Director of Technology
Robert H. Sheridan, III(2)(3) 35 Director
Ralph B. Everett(2)(3) 46 Director
</TABLE>
- ------------------------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
RICHARD W. WEENING has served as Executive Chairman, Treasurer and Director
of the Company since March 1998. Mr. Weening served as Chairman of Cumulus from
its inception on May 22, 1997 until March 1998. Mr. Weening was a founder and an
initial investor in Media LLC through his ownership interest in CML Holdings LLC
("CML"), an investment fund managed by QUAESTUS Management Corporation
("QUAESTUS"), a private equity investment and advisory firm specializing in
information services and media and new media companies. QUAESTUS is also a
Managing Member of Media LLC. Mr. Weening served as Chairman and Chief Executive
Officer of Media LLC from its inception in April 1997 until the Reorganization.
Mr. Weening founded QUAESTUS in 1989 and served as Chairman and Chief Executive
Officer until March 1998. Mr. Weening has over 20 years experience as a chief
executive officer and investor in the information and media industry including
text and reference book publishing and business magazine publishing, radio
broadcasting, interactive information services and electronic commerce software
and services. In 1985, Mr. Weening founded Caribbean Communications Company
Ltd., a radio broadcasting company acquired by the Company in May 1997. He
currently serves as a director of QUAESTUS and ARI Network Services, Inc. He
holds a Bachelor of Arts degree from St. Johns University.
LEWIS W. DICKEY, JR. has served as Executive Vice Chairman and Director of
the Company since March 1998. Mr. Dickey was a founder and an initial investor
in Media LLC through his interest in CML and owns 75% of the outstanding capital
stock of DBBC of Georgia, LLC ("DBBC"), a Managing Member in Media LLC. He
served as Executive Vice Chairman and a Director of Media LLC from its inception
in April 1997 until the Reorganization. Mr. Dickey is the founder and was
President of Stratford Research from September 1985 to March 1998 and owns 25%
of the outstanding capital stock of Stratford Research. Stratford Research is a
strategy consulting and market research firm advising radio and television
broadcasters as well as other media related industries. Mr. Dickey is a
nationally regarded consultant on radio strategy and the author of THE
FRANCHISE--BUILDING RADIO BRANDS, published by the
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National Association of Broadcasters ("NAB"), one of the industry's leading
texts on competition and strategy. From January 1988 until March 1998, Mr.
Dickey served as President and Chief Operating Officer of Midwestern
Broadcasting, which operated two stations in Toledo, Ohio that were acquired by
the Company in November 1997. He also has an ownership interest (along with
members of his family and Mr. Weening) in three stations in Nashville: WQQK-FM,
WNPL-FM and WVOL-AM. He holds Bachelor of Arts and Master of Arts degrees in
English Literature from Stanford University and a Master of Business
Administration degree from Harvard University. Mr. Dickey is the brother of John
Dickey.
WILLIAM M. BUNGEROTH has served as President and Director of Cumulus and
President and Chief Executive Officer of Cumulus Broadcasting Inc. since the
companies began operations in May 1997. Mr. Bungeroth joined Cumulus from WPNT
Radio in Chicago where he was Vice President and General Manager of this
flagship property of Century Broadcasting Corp. Prior to joining Century in
1992, he was President of Consulting Partners, which specialized in improving
the operations of radio stations in mid-size and smaller markets. From August
1989 to July 1990, Mr. Bungeroth was Vice President of Major Market Affiliations
at Unistar Radio Networks. From August 1987 to August 1989, he was President and
Chief Executive Officer of Sunbelt Communications. From 1982 to 1987, he was
Vice President of Sales and Operations at Century Broadcasting. He holds a
Bachelor of Arts degree from Lafayette College.
RICHARD J. BONICK, JR. has served as Vice President and Chief Financial
Officer of Cumulus since May 1997. Prior to joining Cumulus, Mr. Bonick had a
successful 20 year career with Century Broadcasting where he held various
financial and operating positions, most recently as Executive Vice President and
Chief Financial Officer. He began his career with Price Waterhouse. Mr. Bonick
is a Certified Public Accountant and holds a Bachelor of Arts degree from the
University of Dayton and a Master of Management degree in finance from the
Kellogg School at Northwestern University.
TERRENCE M. BAUN has served as Director of Engineering of the Company and
Vice President of Cumulus Broadcasting Inc. since January 1998. Prior to joining
Cumulus, Mr. Baun was President of Criterion Broadcast Services, a broadcast
engineering technical support company serving clients in Wisconsin and Illinois.
He was previously Technical Director of Multimedia Broadcasting's Radio
Division, and a Chief Engineer at several Milwaukee stations. Mr. Baun is
certified by the Society of Broadcast Engineers ("SBE") as a Professional
Broadcast Engineer and recently concluded two years of service as SBE President.
He is a twenty year member of the Audio Engineering Society, and holds a
Bachelor of Sciences degree from Marquette University.
JOHN DICKEY has served as Director of Programming of the Company and Vice
President of Cumulus Broadcasting Inc. since March 1998. Mr. Dickey was
Executive Vice President of Stratford Research from June 1988 until the
Reorganization. He has served as Director of Programming for Midwestern
Broadcasting from January 1990 until March 1998 and is a partner in both
Stratford Research as well as the Nashville stations. Mr. Dickey also owns 25%
of the outstanding capital stock of Stratford Research and 25% of the
outstanding capital stock of DBBC. Mr. Dickey holds a Bachelors of Arts degree
in American History from Stanford University. Mr. Dickey is the brother of Lewis
W. Dickey, Jr.
TERRENCE J. LEAHY has served as Secretary and General Counsel of the Company
and Vice President of Cumulus Broadcasting, Inc. since March 1998. Prior to the
Reorganization Mr. Leahy was serving Cumulus in the same capacity as a Managing
Director of QUAESTUS and Vice President of the Company. Mr. Leahy began his
career practicing media, telecommunications and corporate law and litigation in
Washington, D.C. with the law firms of Wilmer, Cutler & Pickering and Mintz,
Levin, Cohn, Ferris, Glovsky & Popeo. He joined QUAESTUS in April 1992 and
played a key role in the founding of Media LLC. He is an honors graduate of
Princeton University, Harvard Law School, and the Executive MBA program at The
Wharton School at the University of Pennsylvania.
DANIEL O'DONNELL has served as Director of Corporate Finance of the Company
and Vice President of Cumulus Broadcasting Inc. since March 1998. Prior to
joining Cumulus in March, 1998, Mr. O'Donnell was a Senior Vice President in the
Corporate Finance Group of Heller Financial, Inc. Prior to joining
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Heller's Corporate Finance Group in 1992, Mr. O'Donnell held a number of offices
within Heller Financial, Inc., including Vice President, Portfolio Manager for
the Corporate Finance Group's media portfolio, Vice President of Heller's
Corporate Asset Quality Group, and Vice President, Finance for Heller
International Corporation. Prior to joining Heller Financial, Inc., Mr.
O'Donnell was a manager and audit supervisor for Arthur Young & Company in the
Chicago office, which he joined in 1982. Mr. O'Donnell has a Bachelor of Arts
degree in Accounting from Loyola University in Chicago, and is a Certified
Public Accountant.
MINI SRIVATHSA has served as Director of Technology of the Company and Vice
President of Cumulus Broadcasting, Inc. since March 1998. Prior to joining
Cumulus in November 1997, Ms. Srivathsa was a computer consultant for Keane,
Inc. and prior to that she served as a Systems Architect for ARI Network
Services where she served as the lead architect for an object-oriented,
distributed nation-wide ordering system and WWW-based search engine. Ms.
Srivathsa has extensive experience in Internet-based applications,
object-oriented technologies and electronic commerce. She was Vice President of
the Wisconsin Java User Group and is a voting committee member of the Internet
Developers Association. She has also published several articles on Internet
technology. She holds a Bachelor of Science degree in Computer Science from
Bangalore University and a Masters of Science degree in Computer Science from
the University of Wisconsin.
ROBERT H. SHERIDAN, III will be elected to serve as a Director of the
Company upon the consummation of the Offerings. Mr. Sheridan served as a member
of the Investment Committee of Media LLC from April 1997 until the
Reorganization. Mr. Sheridan is a Managing Director of NationsBank Capital
Investors, the principal investment group within NationsBank Corporation, and a
Senior Vice President of NationsBanc Capital Corp., NationsBanc Investment
Corporation and NationsBank, N.A. NationsBanc Capital Corp. is a stockholder of
the Company. Prior to joining NationsBank Capital Investors in January 1994, Mr.
Sheridan worked in the corporate bank division of NationsBank Corporation and
its predecessor from June 1989 to January 1994. Prior to joining NationsBank
Corporation, Mr. Sheridan worked in investment bank and capital markets
positions at PaineWebber, Inc. from 1986 to 1988. Mr. Sheridan holds a Bachelor
of Arts degree from Vanderbilt University and a Master of Business
Administration from Columbia University. See "Principal and Selling
Stockholders."
RALPH B. EVERETT will be elected to serve as a Director of the Company upon
the consummation of the Offerings. Since 1989, Mr. Everett has been a partner
with the Washington, D.C. office of the law firm of Paul, Hastings, Janofsky &
Walker LLP, where he heads the Firm's Federal Legislative Practice Group. Prior
to 1989, he was the Chief Counsel and Staff Director of the United States Senate
Committee on Commerce, Science and Transportation. He is a Director and a member
of the Investment Committee of Shenandoah Life Insurance Company. He is also a
member of the Board of Visitors of Duke University Law School and the Norfolk
Southern Corporation Advisory Board. Mr. Everett graduated with a Bachelor of
Arts degree from Morehouse College and received a Juris Doctor degree from Duke
University.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION OF NAMED EXECUTIVE OFFICERS. The following table provides
certain summary information for the nine months ended December 31, 1997
concerning compensation paid or accrued by the Company to or on behalf of the
persons functioning effectively as executive officers of the Company whose
combined salary and bonus on an annualized basis exceeded $100,000 during such
period (the "Named Executive Officers"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------
OTHER ALL OTHER
ANNUAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (2)
- ---------------------------------------------------- --------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Richard W. Weening(1)............................... 1997 -- -- -- --
Lewis W. Dickey, Jr.(1)............................. 1997 -- -- -- --
William M. Bungeroth................................ 1997 $ 169,000 $ 50,000 $ 8,000 $ 205,000
Richard J. Bonick, Jr............................... 1997 $ 169,000 $ 25,000 $ 8,000 $ 205,000
</TABLE>
For the period from inception on May 22, 1997 to December 31, 1997, the
Company did not grant any options to any party.
- ------------------------
(1) During 1997, Messrs. Weening and Dickey did not receive any compensation
directly from the Company. However, the Company paid fees to QUAESTUS and
Stratford, entities controlled by Mr. Weening and Mr. Dickey, respectively,
for services rendered to the Company.
The Company also paid to Media LLC (i) a non-recurring organizational fee
(with QUAESTUS and DBBC of Georgia, LLC each receiving a portion of such
fee), and (ii) a management fee (with QUAESTUS and DBBC of Georgia, LLC each
receiving a portion of such fee). See "Certain Relationships and Related
Transactions."
(2) During the period from inception on May 22, 1997 to December 31, 1997
Cumulus Media, LLC issued common stock to the following affiliates and
employees of the Company: QUAESTUS Management Corporation, DBBC of Georgia,
LLC, William M. Bungeroth and Richard J. Bonick, Jr. Shares issued to Mr.
Bungeroth and Mr. Bonick were issued in connection with a one-time grant of
shares issued to them upon formation of the Company. The Company has
recognized a non-recurring, non-cash stock compensation expense related to
the issuance of such common stock.
1998 STOCK INCENTIVE PLAN
The Company's Board of Directors intends to adopt the 1998 Stock Incentive
Plan (the "1998 Plan") to provide officers, other key employees and non-employee
directors (other than participants in the Executive Plan (as defined herein)) of
the Company, as well as consultants to the Company, with additional incentives
by increasing their proprietary interest in the Company. An aggregate of
shares of Class A Common Stock will be subject to the 1998 Plan, of
which a maximum of shares of Class A Common Stock will be subject to
incentive stock options and a maximum of shares of Class A Common Stock
are available to be awarded as restricted stock. In addition, no one person will
be eligible to receive options for more than shares in any one calendar
year and the maximum amount of restricted stock which will be awarded to any one
person during any calendar year is $ .
The 1998 Plan will permit the Company to grant awards in the form of stock
options (including both incentive stock options that meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended, and non-qualified
stock options) and restricted shares of the Class A Common Stock
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(individually, an "Award" and collectively, "Awards"). All stock options awarded
under the 1998 Plan will be granted at an exercise price of no less than fair
market value of the Class A Common Stock on the date of grant. No Award will be
granted under the 1998 Plan after , 2008.
The 1998 Plan will be administered by the Compensation Committee of the
Board, which will have exclusive authority to grant Awards under the 1998 Plan
and to make all interpretations and determinations affecting the 1998 Plan. The
Compensation Committee will have discretion to determine the individuals to whom
Awards are granted, the amount of such Award, any applicable vesting schedule,
whether Awards vest upon the occurrence of a Change of Control (as defined in
the Plan) and other terms of any Award. In the event of any changes in the
capital structure of the Company, the Compensation Committee will make equitable
adjustments to outstanding Awards so that the net value of the Award is not
changed.
Prior to completion of the Offering, the Company will have outstanding
options to purchase a total of shares of Class A Common Stock exercisable at
the initial public offering price.
EXECUTIVE STOCK INCENTIVE PLAN
The Company's Board of Directors also intends to adopt the Executive Stock
Incentive Plan (the "Executive Plan") to provide certain key executives of the
Company with additional incentives by increasing their proprietary interest in
the Company. An aggregate of shares of Class A Common Stock will be
subject to the Executive Plan. In addition, no one person will be eligible to
receive options for more than shares in any one calendar year and the
maximum amount of restricted stock which will be awarded to any one person
during any calendar year is $ . It is currently anticipated that Messrs.
Weening and Dickey will be the sole participants in the Executive Plan.
The Executive Plan permits the Company to grant awards in the form of stock
options (including both incentive stock options that meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended, and non-qualified
stock options) and restricted shares of the Class A (individually, an "Executive
Award" and collectively, "Executive Awards").
Stock options under the Executive Plan will be granted upon the consummation
of the Offerings and will be divided into three tranches. Tranche 1 will consist
of options (the "Time Vested Options") with an exercise price equal to the
initial public offering price (the "IPO Price") and will vest quarterly in equal
installments over a four-year period (subject to accelerated vesting in certain
circumstances as described under Employment Agreements), provided the plan
participant is employed by the Company on each of such dates. Tranche 2 and
Tranche 3 will consist of performance based options (the "Performance Options")
which will vest in four equal annual installments on each of the first four
anniversaries of the closing of the Stock Offerings (subject to accelerated
vesting in certain circumstances as described under "Employment Agreements").
The first installment of both the Tranche 2 options and Tranche 3 options will
be exercisable at the IPO Price upon the first anniversary of the closing of the
Offerings and the succeeding installments will be exercisable at a price 15% (or
20% in the case of Tranche 3 options) greater than the prior year's exercise
price for each of the next three years. Vesting of Tranche 2 and Tranche 3
options is conditioned on the employment of the plan participant by the Company
on the vesting date.
The Executive Plan will be administered by the Compensation Committee of the
Board, which will have exclusive authority to grant Executive Awards under the
Executive Plan and to make all interpretations and determinations affecting the
Executive Plan. In the event of any changes in the capital structure of the
Company, the Compensation Committee will make equitable adjustments to
outstanding Executive Awards so that the net value of the Executive Award is not
changed.
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EMPLOYEE STOCK PURCHASE PLAN
A total of shares of the Company's Class A Common Stock will be
reserved for issuance under the Company's proposed 1998 Employee Stock Purchase
Plan (the "Purchase Plan"). None of such shares have been issued. The Purchase
Plan will permit an eligible employee of the Company to purchase common stock at
a discount through payroll deductions not to exceed 10% of the compensation
received by such employee during such pay period ("Employee Purchases").
Employee Purchases will not exceed $25,000 in any plan year. The price at which
the Class A Common Stock is purchased under the Purchase Plan will be set by the
Board of Directors but will not be less than 95% of the fair market value of the
Class A Common Stock on the date of purchase.
DEFINED CONTRIBUTION PLAN
The Company has established a profit sharing plan under Section 401(k) of
the Internal Revenue Code (the "401(k) Plan") for all eligible employees. Under
the 401(k) Plan, all eligible employees are permitted to defer compensation up
to a maximum of the lesser of (a) $10,000 and (b) 15% of their income. The
401(k) Plan provides for a matching contribution by the Company equal to 25% of
the amount contributed by the employee, up to 6% of the employee's total
compensation. The employee's contribution is immediately vested and 20% of the
Company's matching contribution vests every year after the first year of the
employee's participation in the plan. Accordingly, the matching contribution is
fully vested five years after such contribution.
EMPLOYMENT AGREEMENTS
As discussed more particulary below, the Company intends to enter into
employment agreements with certain of the Named Executive Officers. Subject to
certain exceptions, such employment agreements prohibit each of the Named
Executive Officers from competing with the Company for a specified period after
termination of employment (18 months for Messrs. Weening and Dickey and 12
months for Messrs. Bungeroth and Bonick).
Upon the consummation of the Offerings, Mr. Weening will enter into an
employment agreement with the Company pursuant to which he will serve as
Executive Chairman and Treasurer of the Company. Under the terms of Mr.
Weening's employment agreement, he will be entitled to receive an annual base
salary of $300,000. Such base salary will increase by at least 5.0% during each
year of the term of the employment agreement. The agreement will provide that
Mr. Weening may receive a bonus of up to 50% of the base salary, with bonus
targets to be determined by the Compensation Committee. Mr. Weening's employment
agreement will have a three year term with an automatic renewal provision of one
year, subject to non-renewal. The terms of the agreement will also provide that
upon the death or disability of Mr. Weening, the Company shall continue to pay
Mr. Weening's base salary for the twelve month period immediately following such
event. In addition, Time Vested Options will vest and be retained and, subject
to the satisfaction of certain conditions, certain Performance Options will vest
and be retained. The agreement will also provide that in the event Mr. Weening
is terminated by the Company without cause or terminates his employment for good
reason, the Company will pay to Mr. Weening a payment in an amount equal to the
greater of (i) base salary owed to Mr. Weening for the remainder of the term of
the agreement and (ii) one times annual base salary plus last bonus received by
Mr. Weening and all unvested Time Vested Options shall vest. In addition,
subject to the satisfaction of certain conditions and subject to certain
limitations, certain additional options will vest. If, within the one year
period following a change of control, the Company terminates Mr. Weening's
employment for any reason other than death or disability or for cause or Mr.
Weening terminates his employment for good reason, Mr. Weening will be paid the
same amount as if he were terminated without cause if no change of control had
occurred except all options not vested will vest.
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Upon the consummation of the Offerings, Mr. Dickey will enter into an
employment agreement with the Company pursuant to which he will serve as
Executive Vice Chairman of the Company. Under the terms of Mr. Dickey's
employment agreement he will be entitled to receive an annual base salary of
$300,000. Such base salary will increase by at least 5.0% during each year of
the term of the employment agreement. The agreement provides that Mr. Dickey may
receive a bonus of up to 50% of the base salary, with bonus targets to be
determined by the Compensation Committee. Mr. Dickey's employment agreement and
will have a three year term with an automatic renewal provision of one year,
subject to non-renewal. The terms of the agreement will also provide that upon
the death or disability of Mr. Dickey, the Company shall continue to pay Mr.
Dickey's base salary for the twelve month period immediately following such
event. In addition, Time Vested Options will vest and be retained and, subject
to the satisfaction of certain conditions, certain Performance Options will vest
and be retained. The agreement also provides that in the event Mr. Dickey is
terminated by the Company without cause or terminates his employment for good
reason, the Company will pay to Mr. Dickey a payment in an amount equal to the
greater of (i) base salary owed to Mr. Dickey for the remainder of the term of
the agreement and (ii) one times annual base salary plus last bonus received by
Mr. Dickey and all unvested Time Vested Options shall vest. In addition, subject
to the satisfaction of certain conditions and subject to certain limitations,
certain additional options will vest. If, within the one year period following a
change of control, the Company terminates Mr. Dickey's employment for any reason
other than death or disability or for cause or Mr. Dickey terminates his
employment for good reason, Mr. Dickey will be paid the same amount as if he
were terminated without cause if no change of control had occurred except all
options not vested will vest.
Mr. Bungeroth is a party to an employment agreement with Media LLC pursuant
to which he serves as President and Chief Executive Officer of the Company and
President and Chief Executive Officer of Broadcasting. Under the terms of Mr.
Bungeroth's employment agreement, he is entitled to receive
an annual base salary of $250,000 and is eligible to receive a bonus of up to
50% of his annual base salary based on goals agreed upon by Mr. Bungeroth and
QUAESTUS. Mr. Bungeroth's employment agreement is terminable by either party.
Upon the consummation of the Offerings, Mr. Bungeroth will enter into an
employment agreement with the Company with terms comparable to his existing
employment agreement.
Mr. Bonick is a party to an employment agreement with Media LLC pursuant to
which he serves as Vice President and Chief Financial Officer of the Company and
Broadcasting. Under the terms of Mr. Bonick's employment agreement, he is
entitled to receive an annual base salary of $250,000 and is eligible to receive
a bonus of up to 50% of his annual base salary based on goals agreed upon by Mr.
Bonick and QUAESTUS. Mr. Bonick's employment agreement is terminable by either
party. Upon consummation of the Offerings, Mr. Bonick will enter into an
employment agreement with the Company with terms comparable to his existing
employment agreement.
BOARD OF DIRECTORS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Sheridan and Everett will comprise the Company's Compensation
Committee. Prior to the Stock Offerings, the Company did not have a Compensation
Committee and compensation decisions were made primarily by the Board and the
Investment Committee including representatives of NationsBanc Capital Corp.,
Heller Equity Capital Corporation and State of Wisconsin Investment Board.
AUDIT COMMITTEE
Messrs. Sheridan and Everett will serve as the Company's Audit Committee.
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NON-EMPLOYEE DIRECTOR COMPENSATION
Each member of the Board of Directors who is not an officer or an owner, or
the representative of an owner, of more than 5% of the outstanding Class A
Common Stock of the Company receives compensation of $ per meeting for
serving on the Board of Directors. The Company also reimburses Directors for any
expenses incurred in attending meetings of the Board of Directors and the
committees thereof. Upon their election to the Board of Directors or the closing
of the Offering (whichever is later), each non-employee Board member will be
granted options to purchase shares of the Company's Class A Common Stock.
Such options will be exercisable at the fair market value of the common stock at
the date of grant. These options will become vested and exercisable for up to
33% of the total optioned shares upon the first anniversary of the grant of the
options and for an additional 33% of the total optioned shares upon each
succeeding anniversary until the option is fully exercisable at the end of the
third year.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1997, the Company acquired two radio stations (one AM and one FM
station) in Toledo, Ohio from Midwestern Broadcasting, Inc. ("Midwestern"), an
entity controlled by Lewis Dickey, Sr., the father of the Company's Executive
Vice Chairman, Lewis W. Dickey, Jr., and Vice President and Director of
Programming, John Dickey. Lewis W. Dickey, Jr., was Midwestern's President and
Chief Operating Officer. John Dickey served as Director of Programming of
Midwestern from January 1990 until March 1998. The total purchase price of the
stations purchased from Midwestern was $10.0 million.
Richard W. Weening, Lewis W. Dickey, Jr., John Dickey and other members of
the Dickey family have ownership interests in three radio stations (two FM
stations and one AM station) in Nashville, Tennessee which are not affiliates of
the Company.
Lewis W. Dickey, Jr. and John Dickey each have a 25% ownership interest in
Stratford Research, an entity that provides programming and marketing consulting
and market research services to the Company. Historically, Stratford Research
has received a one-time $25,000 per market fee to evaluate programming at target
radio stations prior to acquisition. Annual strategic studies of each market
have been provided at a cost of $25,000 per year, per market. Program consulting
services for acquired stations have been provided on an as needed basis. Total
fees earned by Stratford Research during 1997 totaled $424,000. Under the new
agreement with Stratford Research which takes effect immediately prior to the
consummation of the Offerings, Stratford Research will continue to receive
$25,000 to evaluate programming at target radio stations. The strategic studies
will cost the Company a minimum of $25,000, negotiable depending on competitive
market conditions. Additionally, Stratford Research will provide program
consulting services for $900 per month, per FM station, increasing to $1,100 per
month per FM station over the three years of the agreement.
QUAESTUS, an entity controlled by Mr Weening, provides industry research,
market support and due diligence support services, and transaction management
for the Company's acquisitions and provides certain corporate finance and
related services in support of the Company's treasury function. Prior to March
1998, QUAESTUS received $25,000 for each FM station acquired, from which was
paid additional out-of-pocket expenses for legal, due diligence, and engineering
expenses in connection with each acquisition. During 1997, the Company paid
QUAESTUS $297,000 for acquisition and corporate finance services. Under the new
agreement with QUAESTUS which takes effect immediately prior to the consummation
of the Offerings, QUAESTUS will receive a specified rate per transaction between
$15,000 and $60,000, depending on the number of FM stations acquired in the
transaction, and conditioned on consummation of those transactions. In addition,
the Company is obligated to reimburse QUAESTUS for all of its expenses incurred
in connection with the performance of services under such agreement.
The Company also paid to Media LLC fees in 1997 consisting of (i) a
non-recurring organizational fee of $300,000 (with QUAESTUS receiving $180,000
of such fee and DBBC, receiving $120,000 of such fee) and (ii) a management fee
of $206,000 (with QUAESTUS receiving $123,600 of such fee from Media LLC and
DBBC receiving $82,400 of such fee from Media LLC). Upon the consummation of the
Offerings, the fee paid to Media LLC shall terminate. Lewis W. Dickey, Jr. and
John Dickey have a 75% and 25% ownership interest in DBBC, respectively.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth as of , 1998 and as adjusted to
give effect to the sale of Class A Common Stock offered hereby, certain
information regarding beneficial ownership of the Company's Common Stock by (i)
State of Wisconsin Investment Board ("the Selling Stockholder"), (ii) each
person who is known to the Company to be the beneficial owner of more than 5% of
the outstanding shares of common stock, (iii) each director, (iv) each of the
Named Executive Officers and (v) all directors and executive officers as a
group. All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK
-----------------------------------------------------------------------
PRIOR TO STOCK AFTER STOCK OFFERINGS
OFFERINGS
-------------------------- SHARES BEING --------------------------
NAME NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ------------------------------------------------- ----------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
State of Wisconsin Investment Board
NationsBanc Capital Corp.
Heller Equity Capital Corporation
The Northwestern Mutual Life Insurance Company
CML Holdings, LLC
QUAESTUS Management Corporation
DBBC of Georgia, LLC
Richard W. Weening
Lewis W. Dickey, Jr.
William M. Bungeroth
Richard J. Bonick, Jr.
Robert H. Sheridan, III
Ralph B. Everett
<CAPTION>
CLASS B COMMON STOCK(1)
------------------------------------------------------
PRIOR TO STOCK AFTER STOCK OFFERINGS
OFFERINGS
-------------------------- --------------------------
NAME NUMBER PERCENTAGE NUMBER PERCENTAGE
- ------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
State of Wisconsin Investment Board
NationsBanc Capital Corp.
Heller Equity Capital Corporation
The Northwestern Mutual Life Insurance Company
CML Holdings, LLC
QUAESTUS Management Corporation
DBBC of Georgia, LLC
Richard W. Weening
Lewis W. Dickey, Jr.
William M. Bungeroth
Richard J. Bonick, Jr.
Robert H. Sheridan, III
Ralph B. Everett
</TABLE>
- ------------------------------
(1) Except upon the occurrence of certain events, holders of Class B Common
Stock are not entitled to vote, whereas each share of Class A Common Stock
entitles its holders to one vote. Under certain conditions and subject to
prior governmental approval, shares of Class B Common Stock are convertible
into shares of Class A Common Stock.
(2) Less than 1%.
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DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company is
qualified by reference to the Company's Amended and Restated Articles of
Incorporation and Bylaws, which are filed as exhibits to the Registration
Statement of which this Prospectus is a part and are incorporated herein by
reference.
The Company's authorized capital stock consists of: (i) shares of
Class A Common Stock, $.01 par value per share; (ii) shares of Class B
Common stock, $.01 par value per share and (iii) shares of preferred
stock.
COMMON STOCK
GENERAL. Except with respect to voting and conversion, shares of Class A
Common Stock and Class B Common Stock are identical in all respects. Holders of
shares of Class A Common Stock are entitled to one vote per share, and, except
as provided as below, holders of shares of Class B Common Stock are not entitled
to vote.
VOTING. All actions submitted to a vote of the Company's stockholders are
voted on by holders of Class A Common Stock. Holders of Class A Common Stock are
entitled to one vote per share. Holders of Class B Common Stock are not entitled
to vote, except in the following circumstances: (i) approval of any amendments
to the Company's certificate of incorporation or by-laws; (ii) approval of the
merger, consolidation or other business combination, or the sale, transfer or
other disposition of all or substantially all of the assets of the Company;
(iii) approval of the voluntary liquidation, dissolution or termination of the
Company; and (iv) approval to enter into any transaction resulting in a change
of control. The affirmative vote of the holders of a majority of the outstanding
shares of Class A Common Stock and Class B Common Stock (each voting separately
as a class) is required to approve the above; provided that such voting rights
will cease, with respect to holders of Class B Common Stock and the shares of
Class B Common Stock held by such holder shall not be included in determining
the aggregate number of shares outstanding for voting purposes, upon the failure
of any such holder to beneficially own at least 50% of the shares held by such
holder immediately prior to the consummation of the Offerings.
Upon consummation of the Offerings, the Company's Articles of Incorporation
will be amended to provide that the Company may not take any of the following
actions without the affirmative vote of a majority of the Board of Directors,
including in all cases (so long as NationsBanc Capital Corp. continues to own
not less than 50% of the shares of the Company's common stock held by
NationsBanc Capital Corp. immediately prior to the consummation of the
Offerings) the affirmative vote of the director designated by NationsBanc
Capital Corp.: (i) enter into any transaction with any affiliate of the Company
or amend or modify any existing agreement with any affiliate of the Company;
(ii) issue any Class B Common Stock of the Company; (iii) acquire (by purchase
or otherwise) or sell, transfer or otherwise dispose of assets having a fair
market value in excess of 10% of the stockholders' equity of the Company; or
(iv) amend, terminate or otherwise modify any of the foregoing clauses (i)
through (iii) or any provisions governing the voting rights of Class B Common
Stock.
Notwithstanding the foregoing, in the event that it is determined by the FCC
that any or all of the foregoing rights including the right of NationsBanc
Capital Corp. to designate a director will result in State of Wisconsin
Investment Board's, NationsBanc Capital Corp.'s, Heller Equity Capital
Corporation's or NML's interest being attributable, then the Company will be
obligated to and will immediately effect an amendment to the Articles of
Incorporation (or other appropriate corporate documents) removing (or, if
appropriate, limiting) any such right such that the interest will no longer be
attributable.
The Articles of Incorporation will further provide that the Board of
Directors will be required to consider in good faith any bona fide offer from
any third party to acquire any stock or assets of the Company and to pursue
diligently any transaction determined in good faith to be in the best interests
of the Company's stockholders.
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DIVIDENDS AND OTHER DISTRIBUTIONS (INCLUDING DISTRIBUTIONS UPON LIQUIDATION
OR SALE OF THE COMPANY). Each share of Class A Common Stock and Class B Common
Stock is equal in respect of dividends and other distributions in cash, stock or
property (including distributions upon liquidation of the Company and
consideration to be received upon a sale or conveyance of all or substantially
all of the Company's assets); except that in the case of dividends or other
distributions payable on the Class A Common Stock or Class B Common Stock in
shares of such stock, including distributions pursuant to stock splits or
dividends, only Class A Common Stock will be distributed with respect to Class A
Common Stock and only Class B Common Stock will be distributed with respect to
Class B Common Stock. In no event will any of the Class A Common Stock or Class
B Common Stock be split, divided or combined unless each other class is
proportionately split, divided or combined.
CONVERTIBILITY OF CLASS B COMMON STOCK INTO CLASS A COMMON STOCK. The Class
B Common Stock is convertible at any time, or from time to time, at the option
of the holder of such Class B Common Stock, provided that the prior consent of
any governmental authority required to make such conversion lawful shall have
been obtained and without cost to such holder (except any transfer taxes that
may be payable, as in the case of any transfer of Class A Common Stock, if
certificates are to be issued in a name other than that in which the certificate
surrendered is registered), into Class A Common Stock on a share-for-share
basis.
In addition to conversions into Class A Common Stock as described above, a
record or beneficial owner of shares of Class B Common Stock may transfer such
shares of Class B Common Stock (whether by sale, assignment, gift, bequest,
appointment or otherwise) to any transferee.
REGISTRATION RIGHTS OF CERTAIN HOLDERS. Pursuant to an agreement among the
Company and NationsBanc Capital Corp., State of Wisconsin Investment Board and
certain other holders (collectively, the "Holders of Registrable Stock") of
approximately shares of Class B Common Stock and shares of Class A
Common Stock issuable upon the exercise of conversion rights with respect to the
Class B Common Stock, the Holders of Registrable Stock are entitled to certain
demand and piggyback registration rights with respect to such shares. Pursuant
to this agreement, at any time after the date 180 days after the date of this
Prospectus, persons holding more than 25% of the Registrable Stock may request
that the Company file a registration statement under the Securities Act and,
upon such request and subject to certain conditions, the Company generally will
be required to use its best efforts to effect any such registration. The Company
is not required to effect more than three such demand registrations (subject to
one additional demand registration if all Registrable Stock requested to be
included in prior demand registrations are not so included). In addition, if the
Company proposes to register any of its securities, either for its own account
or for the account of other stockholders (including any Holder of Registrable
Securities), the Company is required, with certain exceptions, to notify all
Holders of Registrable Stock and, subject to certain limitations, to include in
such registration all of the shares of Common Stock requested to be included by
the Holders of Registrable Stock. The Company is generally obligated to bear the
expenses, other than underwriting discounts and sales commissions, of all of
these registrations. The piggyback registration rights expire at such time as a
Holder of Registrable Stock would be able to dispose of all of its registrable
securities in any six-month period under Rule 144 of the Securities Act.
PREEMPTIVE RIGHTS. Neither the Class A Common Stock nor the Class B Common
Stock carry any preemptive rights enabling a holder to subscribe for or receive
shares of stock of the Company of any class or any other securities convertible
into shares of stock of the Company. The Cumulus Board possesses the power to
issue shares of authorized but unissued Class A Common Stock without further
stockholder action.
LIQUIDATION, DISSOLUTION OR WINDING UP. In the event of any liquidation,
dissolution or winding up of Cumulus, whether voluntarily or involuntarily,
after payment or provision for payment of the debts and other liabilities of
Cumulus and the preferential amounts to which the holders of any stock ranking
prior to
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the Class A Common Stock and the Class B Common Stock in the distribution of
assets shall be entitled upon liquidation, the holders of the Class A Common
Stock and the Class B Common Stock shall be entitled to share pro rata in the
remaining assets of Cumulus according to their respective interests.
PREFERRED STOCK
Preferred stock may be issued from time to time by the Company's Board of
Directors, without stockholder approval, in one or more classes or series.
Subject to the provisions of the Amended and Restated Articles of Incorporation
and the limitations prescribed by law, the Board of Directors is expressly
authorized to adopt resolutions to issue the shares of preferred stock, to fix
the number of shares and to change the number of shares constituting any series,
and to provide for or change the voting powers, designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms or redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any class or series of
preferred stock, in each case without any further action or vote by the
stockholders.
One of the effects of undesignated preferred stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the preferred stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, preferred stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of preferred stock may
discourage bids for the Common Stock at a premium or may otherwise adversely
affect the market price of the Common Stock.
SERIES A PREFERRED STOCK AND EXCHANGEABLE DEBENTURES
GENERAL. Concurrently with the Stock Offerings, the Company is offering
shares of % Series A Cumulative Exchangeable Redeemable Preferred Stock
due 2009, with a liquidation preference of $1,000 per share.
DIVIDENDS. The holders of the Series A Preferred Stock are entitled to
receive cumulative dividends at an annual rate equal to % of the liquidation
preference per share of the Series A Preferred Stock, payable quarterly, in
arrears. On or before , 2003, the Company may, at its option, pay
dividends in cash or in additional fully paid and non-assessable shares of
Series A Preferred Stock having a liquidation preference equal to the amount of
such dividends. It is not expected that the Company will pay any dividends in
cash prior to , 2003. After , 2003, dividends may be paid
only in cash. The terms of the Credit Facility and the Indenture restrict, and
future indebtedness of the Company may restrict, the payment of cash dividends
by the Company.
REDEMPTION. The shares of Series A Preferred Stock are subject to mandatory
redemption in , 2009, at a price equal to 100% of the liquidation
preference thereof plus any and all accrued and unpaid cumulative dividends
thereon. Except as provided herein, the Company may not redeem the Series A
Preferred Stock prior to , 2003. On or after such date, the Company
may redeem the Series A Preferred Stock at the redemption prices set forth under
the terms of the Certificate of Designation pursuant to which the Series A
Preferred Stock will be issued together with accumulated and unpaid dividends,
if any, to the date of redemption. Prior to , 2001, the Company may
redeem up to 35% of the original aggregate liquidation preference of the Series
A Preferred Stock with the proceeds of one or more Equity Offerings (as defined
in the Certificate of Designation) at a redemption price equal to % of the
liquidation preference thereof plus accumulated and unpaid dividends thereon.
In the event of a change of control, the Company must offer to redeem the
outstanding
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shares of the Series A Preferred Stock for cash at a purchase price of 101% of
the liquidation preference thereof, together with all accumulated and unpaid
dividends.
VOTING. The holders of the shares of the Series A Preferred Stock will have
no voting rights with respect to general corporate matters except that the
holders of a majority of the then outstanding Series A Preferred Stock, voting
as a class, may elect two directors to the Board of Directors of the Company in
the event of (i) a failure to pay dividends on the Series A Preferred Stock for
four consecutive quarters, (ii) a failure to discharge a redemption obligation
with respect to the Series A Preferred Stock, (iii) a failure to offer to
purchase the outstanding shares of Series A Preferred Stock following a change
of control, (iv) a violation of certain covenants after the expiration of
applicable grace periods, all as set forth in the Certificate of Designation or
(v) a default in the payment of principal, premium or interest in indebtedness
of the Company or certain of its subsidiaries or any other default which results
in the acceleration of such indebtedness prior to its maturity, in each case if
the aggregate principal amount of all such indebtedness exceeds $5.0 million.
The approval of holders of a majority of the outstanding shares of Series A
Preferred Stock, voting as a separate class, will be required for (i) any
merger, consolidation or sale of all or substantially all of the assets of the
Company not specifically permitted by the Certificate of Designation and (ii)
any modification to the Certificate of Designation or the Exchange Debenture
Indenture.
LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution
or winding up of the Company, the holders of the Series A Preferred Stock are
entitled to be paid for each share thereof out of the assets of the Company
before any distribution is made to any shares of junior stock.
EXCHANGE The Company may at its option exchange all, but not less than all,
of the then outstanding shares of Series A Preferred Stock into the Exchange
Debentures on any dividend payment date, subject to certain restrictions
contained in the Certificate of Designation.
EXCHANGE DEBENTURES The Exchange Debentures, if issued, will be issued
under an indenture between the Company and , as trustee. The Exchange
Debentures will be issued in fully registered form only in denominations of
$1,000 and integral multiples thereof. Interest on the Exchange Debentures will
be payable semi-annually in arrears in cash (or on or prior to 2003, in
additional Exchange Debentures, at the option of the Company). The Exchange
Debentures will be unsecured and will be subordinated in right of payment to all
Exchange Debenture Senior Debt (as defined in the Exchange Debenture Indenture),
including debt in respect of the Credit Facility and the Notes and will contain
covenants and events of default and remedies with respect thereto which are
substantially similar to the covenants contained in the Notes. See "Description
of Credit Facility and Notes--The Notes."
The Exchange Debentures are subject to mandatory redemption in
2009, at a price equal to 100% of the principal amount thereof
together with accrued and unpaid interest, if any, to the date of redemption.
Except as provided herein, the Company may not redeem the Exchange Debentures
prior to 2003. On or after such date, the Company may redeem the
Exchange Debentures at the redemption prices set forth in the indenture
governing the Exchange Debentures (the "Exchange Debenture Indenture") together
with accrued and unpaid interest, if any, to the date of redemption. Prior to
2001, the Company may redeem up to 35% of the original aggregate
principal amount of the Exchange Debentures with the proceeds of one or more
Equity Offerings (as defined in the Exchange Debenture Indenture) at a
redemption price equal to % of the principal amount thereof plus accrued and
unpaid interest thereon. In the event of a change of control, the Company must
offer to redeem the outstanding shares of the Exchange Debentures for cash at a
purchase price of 101% of the principal amount thereof, together with all
accrued and unpaid interest.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A Common Stock is .
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DESCRIPTION OF CREDIT FACILITY AND NOTES
THE CREDIT FACILITY
GENERAL. In March 1998, the Company entered into a $190.0 million senior
credit facility with Lehman Brothers Inc., as Arranger and Lehman Commercial
Paper Inc., as Lender, Syndication Agent and Administrative Agent pursuant to
which the Company has available a revolving credit line of $110.0 million until
March 2, 2006, and an eight-year term loan facility of $80.0 million. The
proceeds of the borrowings under the Credit Facility have been used to finance
acquisitions and repay the Company's outstanding indebtedness under the Old
Credit Facility, and to secure outstanding Letters of Credit issued under the
Old Credit Facility in an aggregate amount equal to approximately $10.0 million.
As of March 27, 1998, approximately $120.0 million was outstanding under the
Credit Facility. See "Use of Proceeds."
SECURITY; GUARANTEES. The Company's obligations under the Credit Facility
are secured by substantially all of its assets in which a security interest may
lawfully be granted (including FCC licenses held by the Company's subsidiaries)
including, without limitation, intellectual property, real property, and all of
the capital stock of the Company's direct and indirect domestic subsidiaries and
65% of the capital stock of any foreign subsidiaries. The obligations under the
Credit Facility are also guaranteed by each of the domestic subsidiaries of the
Company and is required to be guaranteed by any additional subsidiaries acquired
by the Company.
INTEREST RATES; FEES; REPAYMENTS. Both revolving credit and term loan
borrowings under the Credit Facility bear interest, at the Company's option, at
a rate equal to the Base Rate (as defined under the terms of the Credit
Facility) plus a margin ranging between 0.50% to 1.75%, or the Eurodollar Rate
(as defined under the terms of the Credit Facility) plus a margin ranging
between 1.50% to 2.75% (in each case dependent upon the leverage ratio of the
Company). A commitment fee calculated at a rate ranging from 0.375% to 0.50% per
annum (depending upon the Company's leverage ratio) of the average daily amount
available under the revolving line of credit and the amount available under the
term loan facility is payable quarterly in arrears and fees in respect of
letters of credit issued under the Credit Facility equal to the lesser of (i)
the interest rate margin then applicable to Eurodollar Rate loans and (ii) 2.50%
is also payable quarterly in arrears. In addition, a fronting fee to be agreed
to by the Company and the issuing bank of such letter of credit calculated at a
rate not to exceed 0.0125% per annum on the maximum amount of each letter of
credit is payable quarterly to the issuing bank.
The revolving credit and term loan borrowings are repayable in equal
quarterly installments beginning in 2000. The scheduled annual amortization of
the term loans is $10.0 million in each of the years 2000 through 2002, $15.0
million in each of the years 2003 through 2005, and $5.0 million at maturity.
The scheduled annual reduction in availability under the revolving credit loans
is $10.0 million in each of the years 2000 and 2001, $15.0 million in 2002,
$20.0 million in year 2003, $25.0 million in each of the years 2004 and 2005,
and $5.0 million at maturity in 2006. Certain mandatory prepayments of the term
loan facility and the revolving credit line and reductions in the availability
of the revolving credit line is required to be made including: (i) subject to
certain exceptions (including the issuance of capital stock or the incurrence of
senior subordinated indebtedness prior to September 2, 1998) 100% of the net
proceeds from any issuance of capital stock in connection with an initial public
offering or incurrence of indebtedness; (ii) 100% of the net proceeds from
certain asset sales; and (iii) between 50% and 75% (dependent on the leverage
ratio of the Company) of the excess cash flow of the Company.
COVENANTS. The terms of the Credit Facility contain operating and financial
covenants, including, without limitation, requirements to maintain minimum
ratios of cash flow to debt service and maximum ratios of total debt to cash
flow and senior debt to cash flow. In addition, the terms of the Credit Facility
restrict, among other things, the ability of the Company and its subsidiaries to
incur additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, consummate certain asset sales,
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enter into certain transactions with affiliates, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the assets of the Company.
EVENTS OF DEFAULT. The terms of the Credit Facility contain events of
default after expiration of applicable grace periods, including failure to make
payments on the Credit Facility, breach of covenants, breach of representations
and warranties, invalidity of the agreement governing the Credit Facility and
related documents, cross default under other agreements or conditions relating
to indebtedness of the Company or its subsidiaries, certain events of
liquidation, moratorium, insolvency, bankruptcy or similar events, enforcement
of security, certain litigation or other proceedings, and certain events
relating to changes in control.
Upon the occurrence of an event of default under the terms of the Credit
Facility, the majority of the banks may declare all amounts under the Credit
Facility to be due and payable and take certain other actions, including
enforcement of rights in respect of the collateral. The majority of the banks
extending credit under the term loan facility and the majority of the banks
under the revolving credit line may terminate the term loan facility and the
revolving credit line, respectively.
THE NOTES
GENERAL. Concurrently with the Common Stock Offerings, the Company is
offering $ of % Senior Subordinated Notes due 2008.
INTEREST. The Notes bear interest at the rate of % per annum, payable
semi-annually in arrears.
REDEMPTION. The Notes mature on , 2008, at a price equal to 100%
of the principal amount thereof together with accrued and unpaid interest, if
any, to the date of redemption. Except as provided herein, the Company may not
redeem the Notes prior to , 2003. On or after such date, the Company
may redeem the Notes at the redemption prices set forth in the indenture
pursuant to which the Notes will be issued (the "Indenture") together with
accrued and unpaid interest, if any, to the date of redemption. Prior to
, 2001, the Company may redeem up to 35% of the original aggregate
principal amount of the Notes with the proceeds of one or more Equity Offerings
(as defined in the Indenture) at a redemption price equal to % of the
principal amount thereof plus accrued and unpaid interest thereon; provided,
however, that at least 65% of the original aggregate principal amount of the
Notes remain outstanding following each such redemption. In the event of a
change of control, the Company must offer to redeem the outstanding shares of
the Notes for cash at a purchase price of 101% of the principal amount thereof,
together with all accrued and unpaid interest.
RANKING. The Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Debt (as
defined in the Indenture), including all obligations of the Company under the
Credit Facility. On a pro forma basis, after giving effect to the Transactions
as if they had occurred on December 31, 1997, the Company would have had
outstanding $ million of Senior Debt.
CERTAIN COVENANTS. The Indenture will contain certain covenants that, among
other things, limit the ability of the Company and its Restricted Subsidiaries
(as defined in the Indenture) to incur additional debt, pay dividends or make
other distributions, repurchase any capital stock or subordinated debt, make
certain investments, create certain liens, enter into certain transactions with
affiliates, sell assets or enter into certain mergers and consolidations. In
addition, the Indenture will contain a covenant limiting the lines of business
of certain Unrestricted Subsidiaries (as defined in the Indenture).
EVENTS OF DEFAULT. The terms of the Indenture contain events of defaults,
including failure to make payments on the Notes, breach of covenants, breach of
representations and warranties, cross default under other agreements or
conditions relating to indebtedness of the Company or its restricted
subsidiaries, certain events of liquidation, moratorium, insolvency, bankruptcy
or similar events and certain litigation or other proceedings.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Stock Offerings, the Company will have outstanding
shares of Class A Common Stock and shares of Class B Common Stock.
In addition, the Company will have outstanding options to purchase shares
of Class A Common Stock. Of these shares, the shares of Class A Common
Stock offered hereby will be freely transferable without restriction (subject to
any FCC consent that might be required) or further registration under the
Securities Act, except that any shares purchased by "affiliates" of the Company,
as that term is defined in Rule 144 may generally only be sold subject to
certain restrictions as to timing, manner and volume.
The Company, its directors, and certain officers of the Company, who will
directly or indirectly own shares of Class A Common Stock and options to
purchase shares of Class A Common Stock upon completion of the Stock
Offerings, have, subject to certain exceptions, agreed not to, directly or
indirectly, offer for sale, sell or otherwise dispose of, or announce the
offering of, any shares of Class A Common Stock or any securities convertible
into or exercisable or exchangeable for shares of Class A Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of Lehman Brothers Inc.
In general, under Rule 144 as currently in effect, a shareholder, including
an Affiliate, who has beneficially owned his or her restricted securities (as
that term is defined in Rule 144) for at least one year from the later of the
date such securities were acquired from the Company or (if applicable) the date
they were acquired from an Affiliate is entitled to sell, within any three-month
period, a number of such shares that does not exceed the greater of 1% of the
then outstanding shares of Class A Common Stock or the average weekly trading
volume in the Class A Common Stock during the four calendar weeks preceding the
date on which notice of such sale was filed under Rule 144, provided certain
requirements concerning availability of public information, manner of sale and
notice of sale are satisfied. In addition, under Rule 144(k), if a period of at
least two years has elapsed between the later of the date restricted securities
were acquired from the Company or (if applicable) the date they were acquired
from an Affiliate of the Company, a stockholder who is not an Affiliate of the
Company at the time of sale and has not been an Affiliate of the Company for at
least three months prior to the sale is entitled to sell the shares immediately
without compliance with the foregoing requirements under Rule 144.
The Company intends to file registration statements on Form S-8 under the
Securities Act immediately following the consummation of the Offering to
register all shares of Class A Common Stock issuable under the Cumulus employee
benefit plans. The registration statements are expected to be filed on or
shortly after the closing date of the Offering and will be effective upon
filing. Shares issued upon the exercise of stock options after the effective
date of the Form S-8 registration statements will be eligible for resale in the
public market without restriction (subject to any FCC consent that might be
required), and subject to Rule 144 limitations applicable to Affiliates and the
lock-up agreements noted above.
Prior to the Offering, there has been no public market for the Class A
Common Stock. No prediction can be made as to the effect, if any, that market
sales of shares of Class A Common Stock or the availability of shares for sale
will have on the market price of the Class A Common Stock prevailing from time
to time. Nevertheless, sales of significant numbers of shares of Class A Common
Stock in the public market could adversely affect the market price of the Class
A Common Stock and could impair the Company's ability to raise capital through
an offering of its equity securities. See "Underwriting."
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UNDERWRITING
Under the terms of and subject to the conditions contained in the
underwriting agreement relating to the offering of shares of Class A Common
Stock in the U.S. and Canada (the "U.S. Underwriting Agreement"), the form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, between the Company and each of the underwriters named
below (the "U.S. Underwriters"), for whom Lehman Brothers Inc., Bear, Stearns &
Co. Inc. and BT Alex. Brown Incorporated are acting as representatives (the
"Representatives"), the U.S. Underwriters have severally agreed to purchase from
the Company, and the Company has agreed to sell to each U.S. Underwriter, the
aggregate number of shares of the Class A Common Stock set forth opposite the
name of such U.S. Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
- ---------------------------------------------------------------------------------- -----------
<S> <C>
Lehman Brothers Inc...............................................................
Bear, Stearns & Co. Inc...........................................................
BT Alex. Brown Incorporated.......................................................
-----------
Total...........................................................................
-----------
-----------
</TABLE>
Under the terms of and subject to the conditions contained in the
underwriting agreement relating to the offering of shares of Class A Common
Stock outside of the U.S. and Canada (the "International Underwriting Agreement"
and together with the U.S. Underwriting Agreement, the "Underwriting
Agreements"), the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, between the Company and each of
the international managers named below (the "International Managers" and
together with the U.S. Underwriters, the "Underwriters"), for whom Lehman
Brothers International (Europe), Bear, Stearns International Limited, BT Alex.
Brown International, division of Bankers Trust International PLC and Credit
Lyonnais Securities are acting as lead managers (the "Lead Managers"), the
International Managers have severally agreed to purchase from the Company, and
the Company has agreed to sell to each International Manager, the aggregate
number of shares of Class A Common Stock set forth opposite the name of such
International Manager below:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
- ---------------------------------------------------------------------------------- -----------
<S> <C>
Lehman Brothers International (Europe)............................................
Bear, Stearns International Limited...............................................
BT Alex. Brown International......................................................
Credit Lyonnais Securities........................................................
-----------
Total.............................................................................
-----------
-----------
</TABLE>
The Company has been advised by the Representatives and the Lead Managers
that the U.S. Underwriters and the International Managers propose to offer part
of the shares to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ per share under the public offering price (the
"selling concession"). The Underwriters may allow, and such dealers may reallow,
a concession not in excess of $ per
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share to certain other Underwriters, or to certain other brokers or dealers.
After the initial offering to the public, the offering price and other selling
terms may be changed by the Representatives and the Lead Managers.
The Underwriting Agreements provide that the obligations of the several U.S.
Underwriters and the International Managers, respectively, to pay for and accept
delivery of the shares of Class A Common Stock offered hereby are subject to the
approval of certain legal matters by counsel and to certain other conditions and
that, if any of the shares of Class A Common Stock are purchased by the U.S.
Underwriters pursuant to the U.S. Underwriting Agreement or by the International
Managers pursuant to the International Underwriting Agreement, all the shares of
Class A Common Stock agreed to be purchased by either the U.S. Underwriters or
the International Managers, as the case may be, pursuant to their respective
Underwriting Agreements, must be so purchased. The initial public offering price
and underwriting discounts and commissions for each of the U.S. Offering and the
International Offering are identical. The closing of each Offering is
conditioned upon the closing of each of the other Offerings.
The Company has agreed in the Underwriting Agreements to indemnify the U.S.
Underwriters and the International Managers against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the U.S. Underwriters and the International Managers may be required to
make in respect thereof.
The Company has granted to the U.S. Underwriters and the International
Managers options to purchase up to an additional shares and shares
of Class A Common Stock, respectively, exercisable solely to cover
over-allotments, at the initial offering price to the public, less the
underwriting discounts and commissions, shown on the cover page of this
Prospectus. Any or all of such options may be exercised at any time until 30
days after the date of the U.S. Underwriting Agreement and the International
Underwriting Agreement, as the case may be. To the extent that an option is
exercised, each U.S. Underwriter or International Manager, as the case may be,
will be committed, subject to certain conditions, to purchase a number of the
additional shares of Class A Common Stock proportionate to such Underwriter's
initial commitment as indicated in the preceding tables.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers (the "Agreement
Between") pursuant to which each U.S. Underwriter has agreed that, as part of
the distribution of the shares of Class A Common Stock offered in the U.S. and
Canada (plus any of the shares of Class A Common Stock to cover
over-allotments), (a) it is not purchasing any of such shares for the account of
anyone other than a U.S. or Canadian Person (as defined below) and (b) it has
not offered or sold, and will not offer, sell, resell or deliver, directly or
indirectly, any of such shares or distribute any prospectus relating to such
shares to anyone other than a U.S. or Canadian Person. In addition, pursuant to
the Agreement Between, each International Manager has agreed that, as part of
the distribution of the shares of Class A Common Stock offered outside the U.S.
and Canada (plus any of the shares of Class A Common Stock to cover
over-allotments), (a) it is not purchasing any of such shares for the account of
any U.S. or Canadian Person and (b) it has not offered or sold, and will not
offer, sell, resell or deliver, directly or indirectly, any of such shares or
distribute any prospectus relating to such shares to any U.S. or Canadian
Person. Each International Manager also has agreed that it will offer to sell
shares of Class A Common Stock only in compliance with all relevant requirements
of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between, including (i) certain purchases and sales between the U.S.
Underwriters and the International Managers; (ii) certain offers, sales,
resales, deliveries or distributions to or through investment advisors or other
persons exercising investment discretion; (iii) purchases, offers or sales by a
U.S. Underwriter who is also acting as an International Manager for the account
of a Person other than a U.S. or Canadian Person and by an International Manager
who is also acting as a U.S. Underwriter for the account of a U.S. or Canadian
Person; and (iv) other transactions specifically approved by the U.S.
Underwriters and International Managers. As used
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herein, (a) the term "U.S." means the U.S. of America (including the District of
Columbia) and its territories, its possessions and other areas subject to its
jurisdiction, (b) the term "Canada" means Canada, its provinces, territories and
possessions and other areas subject to its jurisdiction and (c) the term "U.S.
or Canadian Person" means any resident or citizen of the U.S. or Canada, any
corporation, partnership or other entity created or organized in or under the
laws of the U.S. or Canada or any political subdivision thereof or any estate or
trust, the income of which is subject to U.S. federal income taxation or
Canadian income taxation regardless of the source (other than the foreign branch
of any U.S. or Canadian Person), and includes any U.S. or Canadian branch of a
person other than a U.S. or Canadian Person.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Managers of such number of shares of Class A
Common Stock as may be mutually agreed. Unless otherwise agreed, the price of
any shares so sold shall be the public offering price as then in effect for
Class A Common Stock being sold by the U.S. Underwriters and International
Managers, less the selling concession allocable to such shares of Class A Common
Stock. To the extent that there are sales pursuant to the Agreement Between, the
number of shares of Class A Common Stock initially available for sale by the
U.S. Underwriters or by the International Managers may be more or less than the
amount appearing on the cover page of this Prospectus.
This Prospectus is not, and under no circumstances is to be construed as, an
advertisement or a public offering of the Class A Common Stock in Canada or any
province or territory thereof. Any offer or sale of the shares of Class A Common
Stock in Canada may only be made pursuant to an exemption from the prospectus
and registration statement requirements in the province or territory of Canada
in which such offer or sale is made.
Each International Manager has represented and agreed that (i) it has not
offered or sold and prior to the date six months after the latest closing date
will not offer or sell any shares of Class A Common Stock to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 (the "1986 Act") with respect to anything done by it in
relation to the shares of Class A Common Stock in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on, and will only
issue and pass on to any person in the United Kingdom, any investment
advertisement (within the meaning of the 1986 Act) relating to the shares of
Class A Common Stock if that person falls within Article II(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a
person to whom such document may otherwise lawfully be issued or passed on.
No action has been taken or will be taken in any jurisdiction by the Company
or the Underwriters that would permit a public offering of the shares of Class A
Common Stock in any jurisdiction where action for that purpose is required,
other than the U.S. Persons into whose possession this Prospectus comes are
required by the Company and the Underwriters to inform themselves about, and to
observe any restrictions as to, the offering of the shares of Class A Common
Stock and the distribution of this Prospectus.
Purchasers of the shares of Class A Common Stock offered hereby may be
required to pay stamp taxes and other charges in accordance with the laws and
practices of the country of purchase in addition to the offering price set forth
on the cover page hereof.
The Representatives and the Lead Managers have informed the Company that the
Underwriters do not intend to confirm sales to accounts over which they exercise
discretionary authority.
The Company and the directors, officers and stockholders of the Company have
generally agreed not to offer, sell, contract to sell or otherwise issue any
Class A Common stock or other capital stock prior to the expiration of 180 days
from the date of this Prospectus without the prior written consent of Lehman
Brothers Inc. on behalf of the Representatives and the Lead Managers.
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Until the distribution of the Class A Common Stock is completed, rules of
the Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase shares of Class A
Common stock. As an exception to these rules, the Representatives and the Lead
Managers are permitted to engage in certain transactions that stabilize the
price of the Class A Common Stock. Such transactions may consist of bids or
purchases for the purpose pegging, fixing or maintaining the price of the Class
A Common Stock.
If the Underwriters create a short position in the Class A Common Stock in
connection with the Stock Offerings (i.e., if they sell more shares of Class A
Common Stock than are set forth on the cover page of this Prospectus), the
Representatives and the Lead Managers may reduce that short position by
purchasing Class A Common Stock in the open market. The Representatives and the
Lead Managers also may elect to reduce any short position by exercising all or
part of the over-allotment options described herein.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could also cause the price of the security to
be higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
this Offering.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Class A Common stock. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Representatives or Lead Managers will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
Application has been made for the inclusion of the Class A Common Stock on
the Nasdaq National Market. In order to meet one of the requirements for listing
of the Class A Common Stock on the Nasdaq National market, the Underwriters have
agreed to sell lots of 100 or more shares to a minimum of beneficial
holders.
Lehman Brothers Inc. and Lehman Brothers Commercial Paper Inc., an affiliate
of Lehman Brothers Inc., act as Arranger, and Syndication Agent and
Administrative Agent, respectively, in connection with the Credit Facility and
will receive any repayment by the Company of amounts outstanding under the
Credit Facility from the proceeds of the Offerings. Lehman Brothers Inc. and
Bear, Stearns & Co. Inc. will act as representatives of the underwriters in the
concurrent Debt Offering and the concurrent Preferred Stock Offering. Each of
the Representatives has engaged from time to time and may in the future engage
in general financing and banking transactions with the Company or affiliates
thereof.
The Stock Offerings are being made pursuant to the provisions of Section
2710(c)(8) of the Conduct Rules of the National Association of Securities
Dealers, Inc. Bear, Stearns & Co. Inc. ("Bear Stearns") has agreed to act as
Qualified Independent Underwriter for the Stock Offerings, and as such has
assumed responsibilities of conducting due diligence and has reviewed and
participated in the preparation of the Registration Statement. The public
offering price of the Class A Common Stock will not be higher than the price
recommended by Bear Stearns.
DETERMINATION OF THE OFFERING PRICE
Prior to the Stock Offerings, there has been no public market for the Class
A Common Stock. The initial public offering price for the Class A Common Stock
was determined by negotiations between the Company and the Representatives.
Among the factors considered in such negotiations were prevailing market
conditions, the market values of publicly traded companies that the Underwriters
believed to be somewhat comparable to the Company, the demand for the Class A
Common Stock and for similar securities of companies comparable to the Company,
the current state of the Company's development and other factors deemed
relevant. There can, however, be no assurance that the prices at which the Class
A Common Stock will sell in the public market after the Stock Offerings will not
be lower than the price at which it will be sold in the Stock Offerings.
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CERTAIN UNITED STATES TAX CONSEQUENCES TO
NON-UNITED STATES HOLDERS OF CLASS A COMMON STOCK
The following is a general discussion of certain U.S. federal income and
estate and gift tax consequences of the ownership and sale or other disposition
of Class A Common Stock by a holder that, for U.S. federal income tax purposes,
is not a "U.S. person" (a "Non-U.S. Holder"). For purposes of this discussion, a
"U.S. person" means a citizen or resident (as determined for U.S. federal income
tax purposes) of the U.S.; a corporation created or organized in the U.S. or
under the laws of the U.S. or of any political subdivision thereof; an estate
the income of which is subject to U.S. federal income taxation regardless of its
source or a trust if both (i) a U.S. court is able to exercise primary
supervision over the administration of the trust and (ii) one or more U.S.
persons have the authority to control all substantial decisions of the trust.
Resident alien individuals will be subject to U.S. federal income tax with
respect to the Class A Common Stock as if they were U.S. citizens.
The Company does not intend to treat the Class A Common Stock, the Notes and
the Series A Preferred Stock, all of which are being offered concurrently, as an
investment unit for United States federal income tax purposes.
THIS DISCUSSION IS BASED ON THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"), AND THE ADMINISTRATIVE INTERPRETATIONS AS OF THE DATE HEREOF, ALL
OF WHICH MAY BE CHANGED EITHER RETROACTIVELY OR PROSPECTIVELY. THIS DISCUSSION
IS FOR GENERAL INFORMATION ONLY, DOES NOT CONSIDER ANY SPECIFIC FACTS OR
CIRCUMSTANCES THAT MAY APPLY TO A PARTICULAR NON-UNITED STATES HOLDER AND DOES
NOT ADDRESS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, MUNICIPALITY, FOREIGN
COUNTRY OR OTHER TAXING JURISDICTION. PROSPECTIVE INVESTORS ARE URGED TO CONSULT
THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL TAX CONSEQUENCES OF
OWNING AND DISPOSING OF CLASS A COMMON STOCK (INCLUDING THE INVESTOR'S STATUS AS
A UNITED STATES PERSON OR NON-UNITED STATES HOLDER), AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE, MUNICIPALITY, FOREIGN
COUNTRY OR OTHER TAXING JURISDICTION.
DIVIDENDS
Dividends paid to a Non-U.S. Holder will generally be subject to withholding
tax at the rate of 30%, unless the dividend is effectively connected with the
conduct of a trade or business (or, if an income tax treaty applies, is
attributable to a "permanent establishment", as defined therein) within the U.S.
of the Non-U.S. Holder, in which case the dividend will be subject to the rules
described in the next paragraph. Non-U.S. Holders should consult any applicable
income tax treaties, which may provide for a reduced withholding rate or other
rules different from those described above. For purposes of determining whether
tax is to be withheld at a 30% rate or a reduced rate as specified by an income
tax treaty, current law permits the Company to presume that dividends paid to an
address in a foreign country are paid to a resident of such country absent
definite knowledge that such presumption is not warranted. However, under
recently finalized U.S. Treasury regulations, in the case of dividends paid
after December 31, 1999, a Non-U.S. Holder generally would be subject to U.S.
backup withholding tax at a 31% rate under the backup withholding rules
described below, rather than at a 30% rate or a reduced rate under an income tax
treaty, unless certain certification procedures (or, in the case of payments
made outside the U.S. with respect to an offshore account, certain documentary
evidence procedures) are satisfied, directly or through an intermediary.
Further, in order to claim the benefit of an applicable tax treaty rate for
dividends paid after December 31, 1999, a Non-U.S. Holder must comply with IRS
certification requirements. Certain IRS certification and disclosure
requirements must be complied with in order to be exempt from withholding under
the effectively connected income exemption. The new regulations also provide
special rules for dividend payments made to foreign intermediaries, U.S. or
foreign wholly owned entities that are disregarded for U.S. federal income tax
purposes and entities that are treated as fiscally transparent in the
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U.S., the applicable income tax treaty jurisdiction, or both. Prospective
investors should consult with their own tax advisers concerning the effect, if
any, of the adoption of these new Treasury regulations on an investment in the
Class A Common Stock. A Non-U.S. Holder who is eligible for a reduced
withholding rate may obtain a refund of any excess amounts withheld by filing a
tax return with the Internal Revenue Service (the "IRS").
U.S. withholding tax will not apply to dividends paid to a Non-U.S. Holder
if the company receives the appropriate IRS form (currently Form 4224) from that
Non-U.S. Holder, establishing that such income is effectively connected with the
conduct of a trade or business (or, if an income tax treaty applies, is
attributable to a "permanent establishment", as defined therein) of the Non-U.S.
Holder within the U.S., unless the Company has knowledge to the contrary.
Dividends paid to a Non-U.S. Holder that are effectively connected with the
conduct of a trade or business (or, if an income tax treaty applies, are
attributable to a "permanent establishment", as defined therein) of the Non-U.S.
Holder within the U.S. are generally taxed on a net income basis (that is, after
allowance for applicable deductions) at the graduated rates that are applicable
to U.S. persons. In the case of a Non-U.S. Holder that is a corporation, such
income may also be subject to a branch profits tax (which is generally imposed
on a foreign corporation upon the deemed repatriation from the U.S. of
effectively connected earnings and profits) at a 30% rate, unless the rate is
reduced or eliminated by an applicable income tax treaty and the Non-U.S. Holder
is a qualified resident of the treaty country.
GAIN ON SALE OR OTHER DISPOSITION
Subject to special rules applicable to individuals as described below, a
Non-U.S. Holder will generally not be subject to regular U.S. federal income or
withholding tax on gain recognized on a sale or other disposition of Class A
Common Stock, unless (i) the gain is effectively connected with the conduct of a
trade or business (or, if an income tax treaty applies, is attributable to a
"permanent establishment", as defined therein) of the Non-U.S. Holder within the
U.S. or of a partnership, trust or estate in which the Non-U.S. Holder is a
partner or beneficiary within the U.S., or (ii) the Company has been, is or
becomes a "U.S. real property holding corporation" within the meaning of Section
897(c) (2) of the Code at any time within the shorter of the five-year period
preceding such sale or other disposition or such Non-U.S. Holder's holding
period for the Class A Common Stock.
A corporation is generally considered to be a U.S. real property holding
corporation if the fair market value of its "U.S. real property interests"
within the meaning of Section 897(c)(1) of the Code equals or exceeds 50% of the
sum of the fair market value of its worldwide real property interests plus the
fair market value of any other of its assets used or held for use in a trade or
business. The Company believes that it has not been, is not currently and is not
likely to become a U.S. real property holding corporation. Further, even if the
Company were to become a U.S. real property holding corporation, any gain
recognized by a Non-U.S. Holder still would not be subject to U.S. federal
income tax if the Class A Common Stock were considered to be "regularly traded"
(within the meaning of applicable U.S. Treasury regulations) on an established
securities market (e.g., the New York Stock Exchange, on which the Class A
Common Stock will be listed), and the Non-U.S. Holder did not own, directly or
indirectly, at any time during the five-year period ending on the date of the
sale or other disposition, more than 5% of the Class A Common Stock.
Gains realized by a Non-U.S. Holder of Class A Common Stock that are
effectively connected with the conduct of a trade or business (or, if an income
tax treaty applies, are attributable to a "permanent establishment", as defined
therein) within the U.S. of the Non-U.S. Holder are generally taxed on a net
income basis (that is, after allowance for applicable deductions) at the
graduated rates that are applicable to U.S. persons. In the case of a Non-U.S.
Holder that is a corporation, such income may also be subject to a branch
profits tax (which is generally imposed on a foreign corporation upon the deemed
repatriation from the U.S. of effectively connected earnings and profits) at a
30% rate, unless the rate is reduced or
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eliminated by an applicable income tax treaty and the Non-U.S. Holder is a
qualified resident of the treaty country.
In addition to being subject to the rules described above, an individual
Non-U.S. Holder who holds Class A Common Stock as a capital asset will generally
be subject to tax at a 30% rate on any gain recognized on the sale or other
disposition of such stock if (i) such gain is not effectively connected with the
conduct of a trade or business (or, if an income tax treaty applies, is not
attributable to a "permanent establishment", as defined therein) of the Non-U.S.
Holder within the U.S., and (ii) such individual is present in the U.S. for 183
days or more in the taxable year of the sale or other disposition and either (A)
has a "tax home" in the U.S. (as specially defined for purposes of the U.S.
federal income tax), or (B) maintains an office or other fixed place of business
in the U.S. and the income from the sale of the stock is attributable to such
office or other fixed place of business. Individual Non-U.S. Holders may also be
subject to tax pursuant to provisions of U.S. federal income tax law applicable
to certain U.S. expatriates.
FEDERAL ESTATE AND GIFT TAXES
Class A Common Stock owned or treated as owned by an individual (regardless
of whether such an individual is a citizen or a resident of the U.S.) on the
date of death will be included in such individual's estate for U.S. federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.
A Non-U.S. Holder will not be subject to U.S. federal gift tax on a transfer of
Class A Common Stock, unless such person is a domiciliary of the U.S., or such
person is an individual subject to provisions of U.S. federal gift tax law
applicable to certain U.S. expatriates.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to, and the tax withheld with respect to, such Non-U.S.
Holder, regardless of whether tax was actually withheld and whether withholding
was reduced or eliminated by an applicable income tax treaty. Pursuant to
certain income tax treaties and other agreements, that information may also be
made available to the tax authorities of the country in which the Non-U.S.
Holder resides.
U.S. federal backup withholding (which generally is withholding imposed at
the rate of 31% on certain payments to persons not otherwise exempt who fail to
furnish certain identifying information) will generally not apply to (i)
dividends paid to a Non-U.S. Holder that is subject to withholding at the 30%
rate (or that is subject to withholding at a reduced rate under an applicable
income tax treaty), or (ii) before January 1, 2000, dividends paid to a Non-U.S.
Holder at an address outside of the U.S. (unless the payor has knowledge that
the payee is a U.S. person). However, under recently finalized U.S. Treasury
regulations, in the case of dividends paid after December 31, 1999, a Non-U.S.
Holder generally would be subject to U.S. withholding tax at a 31% rate, unless
certain certification procedures (or, in the case of payments made outside the
U.S. with respect to an offshore account, certain documentary evidence
procedures) are satisfied, directly or through an intermediary.
Backup withholding and information reporting generally will apply to
dividends paid to addresses inside the U.S. on shares of Class A Common Stock to
beneficial owners that are not "exempt recipients" and that fail to provide in
the manner required certain identifying information.
The backup withholding and information reporting requirements also apply to
the gross proceeds paid to a Non-U.S. Holder upon the sale or other disposition
of Class A Common Stock by or through a U.S. office of a U.S. or foreign broker,
unless the Non-U.S. Holder certifies to the broker under penalties of perjury as
to, among other things, its name, address and status as a Non-U.S. Holder by
filing the Service's Form W-8 with the broker, or unless the Non-U.S. Holder
otherwise establishes an exemption. In general, backup withholding and
information reporting will not apply to a payment of the proceeds of a sale or
other disposition of Class A Common Stock effected at a foreign office of a
broker. Before January 1, 1999, however, information reporting requirements (but
not backup withholding) will apply to a payment
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of the proceeds of a sale or other disposition of Class A Common Stock effected
at a foreign office of (i) a U.S. broker; (ii) a foreign broker 50% or more of
whose gross income for certain periods is effectively connected with the conduct
of a trade or business within the U.S.; or (iii) a foreign broker that is a
"controlled foreign corporation" for U.S. federal income tax purposes, unless
the broker has documentary evidence in its records that the Non-U.S. Holder is a
Non-U.S. Holder (and the broker has no knowledge to the contrary) and certain
other conditions are met, or unless the Non-U.S. Holder otherwise establishes an
exemption. Further, after December 31, 1999, under the newly issued Treasury
regulations referred to above, information reporting and backup withholding may
apply to payments of the gross proceeds from the sale or redemption of Class A
Common Stock effected through foreign offices of brokers having any of a broader
class of connections with the U.S. unless certain IRS certification requirements
are complied with. Prospective investors should consult with their own tax
advisers regarding these Treasury regulations, and in particular with respect to
whether the use of a particular broker would subject the investor to these
rules.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-U.S.
Holder's U.S. federal income tax liability, provided that the Non-U.S. Holder
files a tax return with the IRS.
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LEGAL MATTERS
Certain legal matters with respect to the shares of Class A Common Stock
offered hereby will be passed upon for the Company by Paul, Hastings, Janofsky &
Walker LLP, New York, New York. Ralph B. Everett, who will be elected to serve
as a Director of the Company upon the consummation of the Offerings, is a
partner in the Washington, D.C. office of Paul, Hastings, Janofsky & Walker,
LLP. Simpson Thacher & Bartlett, New York, New York, has acted as counsel to the
Underwriters in connection with the Offerings.
EXPERTS
The financial statements included in this Prospectus have been audited by
various independent accountants. The companies and periods covered by these
audits are indicated in the individual accountants' reports. Such financial
statements have been so included in reliance on the reports of the various
independent accountants given on the authority of such firms as experts in
auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement (which
terms shall include any amendment thereto) on Form S-1 under the Securities Act
with respect to the Class A Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, omits certain of the
information contained in the Registration Statement and the exhibits and
schedules thereto on file with the Commission pursuant to the Securities Act and
the rules and regulations of the Commission thereunder. The Registration
Statement, including exhibits and schedules thereto, may be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, Room 1024, N.W., Washington, D.C. 20549 and copies may be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office in Washington, D.C., and may be electronically accessed at the
Commission's site on the World Wide Web at http://www.sec.gov. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CUMULUS MEDIA INC.
Report of Independent Accountants................................................... F-7
Consolidated Balance Sheet as of December 31, 1997.................................. F-8
Consolidated Statement of Operations for the period from inception on May 22, 1997
to December 31, 1997.............................................................. F-9
Consolidated Statement of Stockholder's Equity for the period from inception on May
22, 1997 to December 31, 1997..................................................... F-10
Consolidated Statement of Cash Flows for the period from inception on May 22, 1997
to December 31, 1997.............................................................. F-11
Notes to Consolidated Financial Statements.......................................... F-12
ARBOR RADIO LP
Report of Independent Accountants................................................... F-23
Balance Sheets as of December 31, 1997 and 1996..................................... F-24
Statements of Operations and Partners' Capital for the years ended December 31,
1997, 1996 and 1995............................................................... F-25
Statements of Cash Flows for the years ended December 31 1997, 1996 and 1995........ F-26
Notes to Financial Statements....................................................... F-27
BEAUMONT SKYWAVE, INC. (A WHOLLY-OWNED SUBSIDIARY OF PACIFIC BROADCASTING OF
BEAUMONT, INC.)
Report of Independent Accountants................................................... F-32
Balance Sheet as of December 31, 1997............................................... F-33
Statement of Operations for the year ended December 31, 1997........................ F-34
Statement of Changes in Stockholder's Equity for the year ended December 31,
1997.............................................................................. F-35
Statement of Cash Flows for the year ended December 31, 1997........................ F-36
Notes to Financial Statements....................................................... F-37
CARIBBEAN COMMUNICATIONS COMPANY LIMITED
Report of Independent Accountants................................................... F-41
Consolidated Balance Sheet as of April 30, 1997..................................... F-42
Consolidated Statement of Operations for the four month period ended April 30,
1997.............................................................................. F-43
Consolidated Statement of Changes in Stockholder's Equity (Deficit) for the four
month period ended April 30, 1997................................................. F-44
Consolidated Statement of Cash Flows for the four month period ended April 30,
1997.............................................................................. F-45
Notes to Consolidated Financial Statements.......................................... F-46
CAROLINA BROADCASTING, INC. AND GEORGETOWN RADIO, INC.
Report of Independent Accountants................................................... F-50
Combined Balance Sheet as of December 31, 1997...................................... F-51
Combined Statement of Operations for the year ended December 31, 1997............... F-52
Combined Statement of Changes in Stockholders' Deficit for the year ended December
31, 1997.......................................................................... F-53
Combined Statement of Cash Flows for the year ended December 31, 1997............... F-54
Notes to Combined Financial Statements.............................................. F-55
CASTLE BROADCASTING LIMITED PARTNERSHIP
Report of Independent Accountants................................................... F-59
Balance Sheets as of December 31, 1997 and 1996..................................... F-60
Statements of Operations for the years ended December 31, 1997 and 1996............. F-61
Statements of Changes in Partners' Deficit for the years ended December 31, 1997 and
1996.............................................................................. F-62
Statements of Cash Flows for the years ended December 31, 1997 and 1996............. F-63
Notes to Financial Statements....................................................... F-64
</TABLE>
F-1
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<TABLE>
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CLEARLY SUPERIOR RADIO PROPERTIES
Report of Independent Accountants................................................... F-68
Combined Balance Sheets as of December 31, 1997 and 1996............................ F-69
Combined Statements of Operations for the years ended December 31, 1997 and 1996.... F-70
Combined Statement of Changes in Owner's Equity in Stations for the years ended
December 31, 1997 and 1996........................................................ F-71
Combined Statements of Cash Flows for the years ended December 31, 1997 and 1996.... F-72
Notes to Combined Financial Statements.............................................. F-73
COMMUNICATIONS PROPERTIES, INC.
Report of Independent Accountants................................................... F-78
Balance Sheets as of August 31, 1997 and 1996....................................... F-79
Statements of Operations for the years ended August 31, 1997 and 1996............... F-80
Statements of Changes in Stockholders' Equity (Deficit) for the years ended August
31, 1997 and 1996................................................................. F-81
Statements of Cash Flows for the years ended August 31, 1997 and 1996............... F-82
Notes to Financial Statements....................................................... F-83
CRYSTAL RADIO GROUP, INC.
Report of Independent Accountants................................................... F-89
Balance Sheets as of December 31, 1997 and 1996..................................... F-90
Statements of Operations for the years ended December 31, 1997, 1996, and 1995...... F-91
Statements of Changes in Stockholders' Equity (Deficit) for the years ended December
31, 1997, 1996 and 1995........................................................... F-92
Statements of Cash Flows for the years ended December 31, 1997, 1996, and 1995...... F-93
Notes to Financial Statements....................................................... F-94
FORJAY BROADCASTING CORPORATION
Report of Independent Accountants................................................... F-97
Balance Sheet as of December 31, 1997............................................... F-98
Statement of Operations for the year ended December 31, 1997........................ F-99
Statement of Changes in Shareholder's Equity for the year ended December 31, 1997... F-100
Statement of Cash Flows for the year ended December 31, 1997........................ F-101
Notes to Financial Statements....................................................... F-102
FRITZ BROADCASTING, INC. TOLEDO DIVISION
Independent Auditor's Report........................................................ F-105
Divisional Balance Sheet as of December 29, 1996 and December 31, 1995.............. F-106
Statements of Divisional Income for the years ended December 29, 1996 and December
31, 1995.......................................................................... F-107
Statements of Changes in Divisional Equity for the years ended December 29, 1996 and
December 31, 1995................................................................. F-108
Statements of Divisional Cash Flows for the years ended December 29, 1996 and
December 31, 1995................................................................. F-109
Notes to Financial Statements....................................................... F-110
HVS PARTNERS
Report of Independent Accountants................................................... F-114
Balance Sheets as of December 31, 1997 and 1996..................................... F-115
Statements of Operations for the years ended December 31, 1997, 1996 and 1995....... F-116
Statements of Changes in Partners' Equity for the years ended December 31, 1997,
1996 and 1995..................................................................... F-117
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995....... F-118
Notes to Financial Statements....................................................... F-119
</TABLE>
F-2
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<TABLE>
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JKJ BROADCASTING, INC., MISSOURI RIVER BROADCASTING, INC., INGSTAD MANKATO, INC.,
JAMES INGSTAD BROADCASTING, INC., AND HOMETOWN WIRELESS, INC.
Independent Auditor's Report........................................................ F-124
Combined Balance Sheets as of December 31, 1997 and 1996............................ F-125
Combined Statements of Income for the years ended December 31, 1997, 1996 and
1995.............................................................................. F-127
Combined Statements of Stockholders' Equity for the years ended December 31, 1997,
1996 and 1995..................................................................... F-128
Combined Statements of Cash Flows for the years ended December 31, 1997, 1996 and
1995.............................................................................. F-129
Notes to Combined Financial Statements.............................................. F-130
JAN-DI BROADCASTING, INC.
Report of Independent Accountants................................................... F-138
Balance Sheets as of June 30, 1997 and 1996......................................... F-139
Statements of Operations for the years ended June 30, 1997 and 1996................. F-140
Statements of Changes in Shareholders' Equity for the years ended June 30, 1997 and
1996.............................................................................. F-141
Statements of Cash Flows for the years ended June 30, 1997 and 1996................. F-142
Notes to Financial Statements....................................................... F-143
K--COUNTRY, INC.
Report of Independent Accountants................................................... F-147
Combined Balance Sheet as of June 30, 1997.......................................... F-148
Combined Statement of Income and Retained Earnings for the year ended June 30,
1997.............................................................................. F-149
Combined Statement of Cash Flows for the year ended June 30, 1997................... F-150
Notes to Combined Financial Statements.............................................. F-151
LESNICK COMMUNICATIONS, INC.
Report of Independent Accountants................................................... F-155
Balance Sheets as of December 31, 1997 and 1996..................................... F-156
Statements of Operations for the years ended December 31, 1997 and 1996............. F-157
Statements of Changes in Stockholders' Equity (Deficit) for the years ended December
31, 1997 and 1996................................................................. F-158
Statements of Cash Flows for the years ended December 31, 1997 and 1996............. F-159
Notes to Financial Statements....................................................... F-160
LOUISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
Report of Independent Accountants................................................... F-163
Consolidated Balance Sheets as of December 31, 1997 and 1996........................ F-164
Consolidated Statements of Operations for the years ended December 31, 1997, 1996
and 1995.......................................................................... F-165
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1997, 1996 and 1995.................................................. F-166
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996
and 1995.......................................................................... F-167
Notes to Consolidated Financial Statements.......................................... F-168
M&M PARTNERS
Report of Independent Accountants................................................... F-174
Balance Sheets as of November 30, 1997 and December 31, 1996........................ F-175
Statements of Operations for the eleven months ended November 30, 1997 and the years
ended December 31, 1996 and 1995.................................................. F-176
Statements of Changes in Partners' Capital for the eleven months ended November 30,
1997 and the years ended December 31, 1996 and 1995............................... F-177
Statements of Cash Flows for the eleven months ended November 30, 1997 and the years
ended December 31, 1996 and 1995.................................................. F-178
Notes to Financial Statements....................................................... F-179
</TABLE>
F-3
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<TABLE>
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THE MIDWESTERN BROADCASTING COMPANY, RADIO STATIONS WWWM-FM AND WLQR-AM
Report of Independent Accountants................................................... F-184
Combined Balance Sheets as of October 31, 1997 and December 31, 1996................ F-185
Combined Statements of Income and Retained Earnings for the period January 1, 1997
to October 31, 1997 and the years ended December 31, 1996 and 1995................ F-187
Combined Statements of Cash Flows for the period January 1, to October 31, 1997 and
the years ended December 31, 1996 and 1995........................................ F-188
Notes to Combined Financial Statements.............................................. F-189
MUSTANG BROADCASTING COMPANY
Report of Independent Accountants................................................... F-192
Balance Sheet as of December 31, 1997............................................... F-193
Statement of Operations for the year ended December 31, 1997........................ F-194
Statement of Changes in Stockholder's Equity for the year ended December 31, 1997... F-195
Statement of Cash Flows for the year ended December 31, 1997........................ F-196
Notes to Financial Statements....................................................... F-197
</TABLE>
<TABLE>
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NEW FRONTIER COMMUNICATIONS, INC.
Report of Independent Certified Public Accountants................................... F-200
Balance Sheets as of December 31, 1997 and 1996...................................... F-201
Statements of Operations for the years ended December 31, 1997, 1996 and 1995........ F-202
Statements of Stockholders' Deficit for the years ended December 31, 1997, 1996 and
1995............................................................................... F-203
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995........ F-204
Notes to Financial Statements........................................................ F-205
NINETY FOUR POINT ONE, INC. (A SUBSIDIARY OF PETRACOM BROADCASTING, INC.) AND KAYD
AM/FM (A DIVISION OF PETRACOM BROADCASTING OF ROCKFORD, INC.)
Report of Independent Accountants.................................................... F-214
Combined Balance Sheet as of December 31, 1997 and 1996.............................. F-215
Combined Statement of Operations for the years ended December 31, 1997, 1996 and
1995............................................................................... F-216
Combined Statement of Changes in Net Investment of Parent for the years ended
December 31, 1997, 1996 and 1995................................................... F-217
Combined Statement of Cash Flows for the years ended December 31, 1997, 1996 and
1995............................................................................... F-218
Notes to Financial Statements........................................................ F-219
PAMPLICO BROADCASTING, L.P.
Report of Independent Accountants.................................................... F-222
Balance Sheet as of December 31, 1997................................................ F-223
Statement of Operations for the year ended December 31, 1997......................... F-224
Statement of Cash Flows for the year ended December 31, 1997......................... F-225
Notes to Financial Statements........................................................ F-226
PHOENIX BROADCAST PARTNERS, INC.
Report of Independent Accountants.................................................... F-229
Balance Sheets as of December 31, 1997 and 1996...................................... F-230
Statements of Operations and Accumulated Deficit for the years ended December 31,
1997 and 1996...................................................................... F-231
Statements of Cash Flows for the years ended December 31, 1997 and 1996.............. F-232
Notes to Financial Statements........................................................ F-233
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
Report of Independent Accountants.................................................... F-240
Consolidated Balance Sheets as of December 31, 1997 and 1996......................... F-241
Consolidated Statements of Income for the years ended December 31, 1997, 1996 and
1995............................................................................... F-242
Consolidated Statements of Changes in Stockholder's Equity for the years ended
December 31, 1997, 1996 and 1995................................................... F-243
</TABLE>
F-4
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<TABLE>
<S> <C>
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and
1995............................................................................... F-244
Notes to Consolidated Financial Statements........................................... F-245
SAVANNAH COMMUNICATIONS, L.P.
Report of Independent Accountants.................................................... F-251
Balance Sheets as of December 31, 1997 and 1996...................................... F-252
Statements of Operations for the years ended December 31, 1997 and 1996.............. F-253
Statements of Partners' Capital for the years ended December 31, 1997 and 1996....... F-254
Statements of Cash Flows for the years ended December 31, 1997 and 1996.............. F-255
Notes to Financial Statements........................................................ F-256
SAVANNAH VALLEY BROADCASTING RADIO PROPERTIES
Report of Independent Accountants.................................................... F-260
Combined Balance Sheets as of December 31, 1997 and 1996............................. F-261
Combined Statements of Operations for the years ended December 31, 1997, 1996 and
1995............................................................................... F-262
Combined Statements of Changes in Owner's Equity (Deficit) in Stations for the years
ended December 31, 1997, 1996 and 1995............................................. F-263
Combined Statements of Cash Flows for the years ended December 31, 1997, 1996 and
1995............................................................................... F-264
Notes to Combined Financial Statements............................................... F-265
SEACOAST RADIO COMPANY, LLC
Report of Independent Accountants.................................................... F-269
Balance Sheets as of December 31, 1997 and 1996...................................... F-270
Statements of Operations for the years ended December 31, 1997 and 1996.............. F-271
Statements of Changes in Members' Equity for the years ended December 31, 1997 and
1996............................................................................... F-272
Statements of Cash Flows for the years ended December 31, 1997 and 1996.............. F-273
Notes to Financial Statements........................................................ F-274
SUNNY BROADCASTERS, INC.
Report of Independent Accountants.................................................... F-278
Balance Sheets as of December 31, 1997 and 1996...................................... F-279
Statements of Operations for the years ended December 31, 1997 and 1996.............. F-280
Statements of Changes in Stockholders' Equity for the years ended December 31, 1997
and 1996........................................................................... F-281
Statements of Cash Flows for the years ended December 31, 1997 and 1996.............. F-282
Notes to Financial Statements........................................................ F-283
TALLAHASSEE BROADCASTING, INC.
Report of Independent Accountants.................................................... F-288
Balance Sheet as of December 31, 1997................................................ F-289
Statement of Operations for the year ended December 31, 1997......................... F-290
Statement of Changes in Stockholders' Equity (Deficit) for the year ended December
31, 1997........................................................................... F-291
Statement of Cash Flows for the year ended December 31, 1997......................... F-292
Notes to Financial Statements........................................................ F-293
TRYON-SEACOAST COMMUNICATIONS, INC.
Report of Independent Accountants.................................................... F-297
Balance Sheets as of December 31, 1997 and 1996...................................... F-298
Statements of Operations for the years ended December 31, 1997 and 1996.............. F-299
Statements of Changes in Stockholders' Deficit for the years ended December 31, 1997
and 1996........................................................................... F-300
Statements of Cash Flow for the years ended December 31, 1997 and 1996............... F-301
Notes to Financial Statements........................................................ F-302
</TABLE>
F-5
<PAGE>
<TABLE>
<S> <C>
VALUE RADIO CORPORATION
Report of Independent Accountants.................................................... F-307
Balance Sheets as of August 30, 1997 and August 31, 1996............................. F-308
Statements of Operations for the years ended August 30, 1997 and August 31, 1996 and
1995............................................................................... F-309
Statements of Changes in Stockholders' Equity for the years ended August 30, 1997,
and August 31, 1996 and 1995....................................................... F-310
Statements of Cash Flows for the years ended August 30, 1997, and August 31, 1996 and
1995............................................................................... F-311
Notes to Financial Statements........................................................ F-312
WILKS BROADCAST ACQUISITIONS, INC.
Report of Independent Accountants.................................................... F-317
Balance Sheets as of August 31, 1997 and December 31, 1996........................... F-318
Statements of Operations for the eight months ended August 31, 1997 and for the years
ended December 31, 1996 and 1995................................................... F-319
Statements of Changes in Stockholders' Equity (Deficit) for the eight months ended
August 31, 1997 and for the years ended December 31, 1996 and 1995................. F-320
Statements of Cash Flows for the eight months ended August 31, 1997 and for the years
ended December 31, 1996 and 1995................................................... F-321
Notes to Financial Statements........................................................ F-322
WJCL-FM (A DIVISION OF LEWIS BROADCASTING CORPORATION)
Report of Independent Accountants.................................................... F-326
Balance Sheets as of December 31, 1997 and 1996...................................... F-327
Statements of Income for the years ended December 31, 1997 and 1996.................. F-328
Statements of Cash Flows for the years ended December 31, 1997 and 1996.............. F-329
Statements of Changes in Owners' Net Investment for the years ended December 31, 1997
and 1996........................................................................... F-330
Notes to Financial Statements........................................................ F-331
WKKO-FM, WRQN-FM, WTOD-AM AND WIMX-FM (A WHOLLY OWNED ENTITY OF 62ND STREET
BROADCASTING LLC)
Report of Independent Accountants.................................................... F-333
Combined Balance Sheet as of November 9, 1997........................................ F-335
Combined Statements of Income for the period June 30, 1997 to November 9, 1997 and
for the period January 1, 1997 to June 29, 1997.................................... F-336
Combined Statements of Changes in Owner's Equity for the period June 30, 1997 to
November 9, 1997 and for the period January 1, 1997 to June 29, 1997............... F-337
Combined Statements of Cash Flows for the period June 30, 1997 to November 9, 1997
and for the period January 1, 1997 to June 29, 1997................................ F-338
Notes to Combined Financial Statements............................................... F-339
</TABLE>
F-6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of Cumulus
Media Inc. (formerly, Cumulus Holdings, Inc.) at December 31, 1997, and the
results of their operations and their cash flows for the period from inception
on May 22, 1997 to December 31, 1997, in conformity with generally accepted
accounting principles. 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 audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 18, 1998
F-7
<PAGE>
CUMULUS MEDIA INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 1,573
Accounts receivable, less allowance for doubtful accounts of $106............... 5,241
Prepaid expenses and other current assets....................................... 288
---------
Total current assets.......................................................... 7,102
Property and equipment, net....................................................... 8,120
Intangible assets, net............................................................ 90,217
Other assets...................................................................... 5,002
---------
Total assets.................................................................. $ 110,441
---------
---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses........................................... $ 3,643
Current portion of long-term debt............................................... 12
Other current liabilities....................................................... 195
---------
Total current liabilities..................................................... 3,850
Long-term debt, excluding current portion......................................... 42,789
Other liabilities................................................................. 400
---------
Total liabilities............................................................. 47,039
---------
Preferred stock subject to mandatory redemption, stated value $10,000 per share,
12,000 shares authorized, 1,625 shares outstanding.............................. 13,426
---------
Commitments and contingencies (Note 10)
Stockholder's equity:
Common stock, $.01 par value; authorized 10,000 shares; issued 1,000 shares --
Additional paid-in-capital...................................................... 53,549
Accumulated other comprehensive income.......................................... 5
Accumulated deficit............................................................. (3,578)
---------
Total stockholder's equity.................................................... 49,976
---------
Total liabilities and stockholder's equity.................................... $ 110,441
---------
---------
</TABLE>
See Notes to Consolidated Financial Statements
F-8
<PAGE>
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION ON
MAY 22, 1997 TO DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<S> <C>
Revenues........................................................................... $ 10,134
Less: agency commissions........................................................... (971)
---------
Net revenues.................................................................. 9,163
Operating expenses:
Station operating expenses, excluding depreciation and amortization.............. 7,147
Depreciation and amortization.................................................... 1,736
Corporate general and administrative............................................. 1,276
Non-cash stock compensation...................................................... 1,689
---------
Operating expenses.............................................................. 11,848
---------
Operating loss................................................................ (2,685)
---------
Nonoperating income (expense):
Interest expense................................................................. (927)
Interest income.................................................................. 155
Other income (expense), net...................................................... (54)
---------
Nonoperating expenses, net..................................................... (826)
---------
Loss before income taxes....................................................... (3,511)
Income tax expense................................................................. 67
---------
Net loss....................................................................... (3,578)
Preferred stock dividend........................................................... 274
---------
Net loss attributable to common stockholders................................... $ (3,852)
---------
---------
Basic and diluted loss per share................................................... $ (3,852)
---------
---------
Average shares outstanding......................................................... 1,000
---------
---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-9
<PAGE>
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN COMPREHENSIVE ACCUMULATED COMPREHENSIVE
SHARES STOCK CAPITAL INCOME DEFICIT LOSS
----------- --------- ----------- ------------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock........... 1,000 $ 52,134
Comprehensive income
(cumulative translation $ 5 $ 5
adjustment)......................
Preferred stock dividend and (274)
accretion of discount............
Non-cash stock compensation........ 1,689
Net loss........................... (3,578) (3,578)
----- --------- ----------- -- ------------ -------
Balance at December 31, 1997....... 1,000 $ $ 53,549 $ 5 $ (3,578) $ (3,573)
----- --------- ----------- -- ------------ -------
----- --------- ----------- -- ------------ -------
</TABLE>
See Notes to Consolidated Financial Statements.
F-10
<PAGE>
CUMULUS MEDIA INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION ON
MAY 22, 1997 TO DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................................ $ (3,578)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation.................................................................. 391
Amortization of goodwill, intangible assets and other assets.................. 1,064
Provision for doubtful accounts............................................... 76
Non-cash stock compensation................................................... 1,689
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable........................................................... (4,622)
Prepaid expenses and other current assets..................................... (235)
Accounts payable and accrued expenses......................................... 3,401
Other assets.................................................................. (166)
Other liabilities............................................................. 93
---------
Net cash used in operating activities............................................. (1,887)
---------
Cash flows from investing activities:
Acquisitions.................................................................... (91,289)
Escrow deposits on pending acquisitions......................................... (1,999)
Capital expenditures............................................................ (869)
Other........................................................................... (943)
---------
Net cash used by investing activities............................................. (95,100)
---------
Cash flows from financing activities:
Net proceeds from revolving line of credit...................................... 74,525
Payments on revolving line of credit............................................ (31,990)
Payments on promissory notes.................................................... (4)
Proceeds from issuance of common stock.......................................... 44,631
Proceeds from issuance of preferred stock....................................... 13,152
Payments for debt issuance costs................................................ (1,754)
---------
Net cash provided by financing activities......................................... 98,560
---------
Increase in cash and cash equivalents............................................. 1,573
Cash and cash equivalents at beginning of year.................................... --
---------
Cash and cash equivalents at end of year.......................................... $ 1,573
---------
---------
Supplemental disclosures of cash information:
Interest paid................................................................... $ 25
---------
---------
Non-cash operating and financing activities:
Trade revenue................................................................... $ 757
---------
---------
Trade expense................................................................... $ 712
---------
---------
Assets acquired through notes payable........................................... $ 520
---------
---------
Capital contribution from Cumulus Media, LLC.................................... $ 7,503
---------
---------
</TABLE>
See Notes to Consolidated Financial Statements.
F-11
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Cumulus Media Inc., formerly known as Cumulus Holdings, Inc., ("Cumulus" or
the "Company") is a radio broadcasting corporation incorporated in the state of
Illinois on May 22, 1997 to own and operate commercial radio stations in
mid-size and smaller radio markets in the United States and the Eastern
Caribbean. The Company has four regions as its primary focus in the United
States: the Midwest, Southeast, Southwest and Northeast. Cumulus is controlled
by Cumulus Media, LLC (a Wisconsin limited liability company) through the
ownership of all of its outstanding common stock. Between the date of
incorporation of Cumulus Media, LLC, which was April 18, 1997, and May 22, 1997,
Cumulus Media, LLC undertook certain activities upon behalf of the Company
pending its incorporation, including the incurrence of expenses and the funding
of escrow deposits for acquisitions. Upon the incorporation of the Company,
these activities were transferred to the Company.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Cumulus and
its wholly-owned subsidiaries. Significant intercompany balances and
transactions have been eliminated in consolidation.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
ORGANIZATION COSTS
Costs related to organizing the Company including incorporation and
recording fees and legal fees are capitalized and amortized to expense over a
three year period. During the period ended December 31, 1997, the Company
recognized amortization expense of organization costs of approximately $22.
INTANGIBLE ASSETS
Intangible assets consist primarily of broadcast licenses, goodwill and
other identifiable intangible assets. The Company amortizes such intangible
assets using the straight-line method over their estimated useful lives. The
Company evaluates the carrying value of broadcast licenses, goodwill and other
intangible assets in relation to the projected future undiscounted net cash
flows, in order to determine if an impairment has occurred.
DEBT ISSUANCE COSTS
The costs related to the issuance of debt are capitalized and amortized to
interest expense over the life of the related debt. During the period ended
December 31, 1997, the Company recognized amortization expense of debt issuance
costs of approximately $65.
F-12
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
TRADE AGREEMENTS
The Company trades commercial air time for goods and services used
principally for promotional, sales and other business activities. An asset and
liability is recorded at the fair market value of the goods or services
received. Trade revenue is recorded and the liability relieved when commercials
are broadcast and trade expense is recorded and the asset relieved when goods or
services are received or used.
INCOME TAXES
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts based on enacted tax laws and statutory tax rates.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount more likely than not to be realized.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
LOCAL MARKETING AGREEMENTS
In certain circumstances, the Company enters into a local marketing
agreement ("LMA") or time brokerage agreement with a Federal Communications
Commission licensee of a radio station. In a typical LMA, the licensee of the
station makes available, for a fee, airtime on its station to a party which
supplies programming to be broadcast on that airtime, and collects revenues from
advertising aired during such programming.
Fees paid pursuant to a LMA are amortized to expense over the term of the
agreement using the straight-line method. LMA fees of $281 are included in
amortization expense in the statement of operations.
CASH AND CASH EQUIVALENTS
The Company considers all cash balances and highly liquid investments with
original maturities of three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISKS
In the opinion of management, credit risk with respect to accounts
receivable is limited due to the large number of diversified customers and the
geographic diversification of the Company's customer base.
F-13
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The Company performs ongoing credit evaluations of its customers and believes
that adequate allowances for any uncollectible accounts receivable are
maintained.
The change in the allowance for doubtful accounts for the period ended
December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Balance at inception.............................................. $ --
Provision for doubtful accounts................................... 76
Acquired stations................................................. 30
Write-offs........................................................ --
---------
Balance at December 31, 1997...................................... $ 106
---------
---------
</TABLE>
STOCK-BASED COMPENSATION
The Company applies Accounting Principles Board (APB) Opinion 25,
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for stock issued to employees as defined by APB No. 25. In addition,
the Company applies Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock Based Compensation", for stock issued to individuals or
groups other than employees.
EARNINGS PER SHARE
Basic and diluted earnings per share has been calculated by dividing net
loss adjusted for preferred stock dividends and accretion of discount by average
shares outstanding.
2. ACQUISITIONS AND DISPOSITION:
The Company completed the following acquisitions of radio stations for cash
during 1997:
<TABLE>
<CAPTION>
ASSET PURCHASE
MARKETS AND STATIONS ACQUISITION DATE PRICE(1)
- ------------------------------------------------------------------ ---------------------- ----------------------
<S> <C> <C>
WILMINGTON, NC
WWQQ-FM, WQSL-FM and WXQR-FM.................................... August 28, 1997 $ 6,186
WAAV-FM and WAAV-AM............................................. September 2, 1997 $ 1,590
AUGUSTA, GEORGIA
WEKL-FM, WRXR-FM, WUUS-FM and WGUS-AM........................... August 31, 1997 $ 15,525
APPLETON/OSHKOSH/GREEN BAY, WISCONSIN
WOSH-AM, WVBO-FM and WOGB-FM.................................... August 31, 1997 $ 7,347
WUSW-FM and WNAM-AM............................................. August 31, 1997 $ 5,515
TOLEDO, OHIO
WKKO-FM, WRQN-FM, WIMX-FM and WTOD-AM........................... November 10, 1997 $ 30,113
WWWM-FM and WLQR-AM............................................. November 12, 1997 $ 10,000
</TABLE>
F-14
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
2. ACQUISITIONS AND DISPOSITION: (CONTINUED)
<TABLE>
<CAPTION>
ASSET PURCHASE
MARKETS AND STATIONS ACQUISITION DATE PRICE(1)
- ------------------------------------------------------------------ ---------------------- ----------------------
<S> <C> <C>
WICHITA FALLS, TEXAS
KLUR-FM, KQXC-FM and KYYI-FM.................................... December 1, 1997 $ 6,341
SALISBURY-OCEAN CITY, MARYLAND
WLVW-FM, WQHQ-FM, WTGM-AM, and WLBW-FM.......................... December 18, 1997 $ 9,283
-------
$ 91,900
-------
-------
</TABLE>
- ------------------------
(1) Includes acquisition related costs
As a part of the above transactions, the Company sold WIMX-FM for a note
receivable in the amount of $1,500 in early 1998.
The aforementioned acquisitions were accounted for by the purchase method of
accounting. As such, the accompanying consolidated balance sheet includes the
acquired assets and liabilities and the statement of operations includes the
results of operations of the acquired entities from their respective dates of
acquisition.
An allocation of the purchase prices to the estimated fair values of the
assets acquired and liabilities assumed is presented below.
<TABLE>
<S> <C>
Current assets, other than cash.................................... $ 629
Property and equipment............................................. 6,733
Intangible assets.................................................. 84,638
Other liabilities.................................................. (100)
---------
$ 91,900
---------
---------
</TABLE>
The unaudited consolidated condensed pro forma results of operations data as
if the acquisitions had occurred on May 22, 1997 follows:
<TABLE>
<CAPTION>
(UNAUDITED)
-----------
Net revenues..................................................... $ 16,051
<S> <C>
-----------
-----------
Operating loss................................................... $ (4,454)
-----------
-----------
Net loss......................................................... $ (6,922)
-----------
-----------
Net loss attributable to common stockholders..................... $ (7,196)
-----------
-----------
Basic loss per common share...................................... $ (7,196)
-----------
-----------
</TABLE>
Escrow funds of approximately $2,000 paid in 1997 by the Company in
connection with transactions completed subsequent to year end and the pending
transactions have been classified as other assets at December 31, 1997 in the
accompanying consolidated balance sheet.
F-15
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
2. ACQUISITIONS AND DISPOSITION: (CONTINUED)
During 1997, the Company operated the following stations under a LMA:
<TABLE>
<S> <C>
August 18, 1997.......... WHBX-FM, WBZE-FM, WWLD-FM
and WHBT-AM
August 25, 1997.......... WLVW-FM, WQHQ-FM,
WTGM-AM, and WLBW-FM
September 3, 1997........ WZNY-FM, WBBQ-FM and WBBQ-AM
October 1, 1997.......... KLUR-FM, KQXC-FM and KYYI-FM
November 1, 1997......... KBCY-FM, KCDD-FM and KHXS-FM
November 3, 1997......... WGLF-FM
</TABLE>
The consolidated statement of operations includes the revenue and broadcast
operating expenses of these entities from the date of the LMA and any related
fees associated with the LMA.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31, 1997:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
LIFE
--------------------
<S> <C> <C>
Broadcasting and other equipment............................. 3-7 years $ 4,377
Furniture and fixtures....................................... 5 years 2,679
Buildings and improvements................................... 20 years 879
Construction in process...................................... 169
---------
8,104
Less accumulated depreciation................................ (391)
Land......................................................... 407
---------
$ 8,120
---------
---------
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1997:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
LIFE
--------------------
<S> <C> <C>
Broadcasting licenses and goodwill........................... 25 years $ 89,472
Other intangibles............................................ 3-5 years 1,649
---------
91,121
Less accumulated amortization................................ (904)
---------
$ 90,217
---------
---------
</TABLE>
F-16
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at December
31, 1997:
<TABLE>
<S> <C>
Accounts payable.................................................... $ 2,124
Accrued expenses.................................................... 551
Accrued interest.................................................... 901
Accrued state income taxes.......................................... 67
---------
$ 3,643
---------
---------
</TABLE>
6. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997:
<TABLE>
<S> <C>
Revolving line of credit of $70,000 at 9%........................ $ 42,535
Promissory note--interest and principal payable monthly at an
interest rate of 11%........................................... 266
---------
42,801
Less: Current portion of long-term debt.......................... (12)
---------
$ 42,789
---------
---------
</TABLE>
The revolving line of credit provides for commitments of $70,000 under a
senior secured reducing revolver and $25,000 under an uncommitted senior secured
acquisition facility. At December 31, 1997, the Company had borrowed $42,535
under the revolver and the acquisition facility had not been activated. At
December 31, 1997, the Company has issued letters of credit related to pending
acquisitions in the amount of $5,574, which is also included under the $70,000
revolver limit. Annual facility fees on unused commitments were .50% for the
revolver and, once activated, for the acquisition facilities. Borrowing rates
were based upon (i) LIBOR plus a margin ranging from 1.5% to 2.75% or, (ii) a
base rate plus a margin ranging from 0.5% to 1.75%. The commitments of the
lenders for the revolver were scheduled to mandatorily reduce in June 1999. The
Company's obligations under the facility were secured by substantially all of
its assets. The facilities contained general covenants related to the operation
of the Company, information covenants to provide periodic reporting of
information and various financial covenants consisting of financial ratios.
A summary of the future maturities of long-term debt follows:
<TABLE>
<S> <C>
1998............................................................... $ 12
1999............................................................... 12
2000............................................................... 12
2001............................................................... 12
2002............................................................... 12
Thereafter......................................................... 42,741
---------
$ 42,801
---------
---------
</TABLE>
F-17
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
6. LONG-TERM DEBT (CONTINUED)
In March 1998, the Company entered into a $190 million senior credit
facility pursuant to which the Company has available a revolving line of credit
of $110 million and a term loan commitment of $80 million. Commitments reduce
beginning in March 2000. The senior credit facility contains certain covenants
that restrict, among other things, the ability of the Company and its
subsidiaries to incur additional indebtedness, pay dividends or make certain
other restricted payments, enter into certain transactions with affiliates,
merge or consolidate with any other person or sell, assign, transfer, lease
convey or otherwise dispose of all or substantially all of the assets of the
Company. In addition, the senior credit facility restricts the ability of the
Company to incur liens or to consummate certain asset sales. The senior credit
facility also requires the Company to maintain specified financial ratios and to
satisfy certain financial condition tests.
7. COMMON STOCK AND MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK
The Company is authorized to issue 10,000 shares of common stock. In 1997,
the Company issued 1,000 shares of common stock to Cumulus Media, LLC in
exchange for $45,245 and the fair value of contributed net assets of $7,204. In
January 1998, the Company received an additional $15,000 as an equity
contribution from Cumulus Media, LLC. The holder of common stock is entitled to
one vote per share. Dividends are payable subject to the rights and preferences
of preferred stock.
During 1997, the Company was authorized to issue 12,000 shares of
Mandatorily Redeemable 12% Class A Cumulative Preferred Stock ("Preferred
Stock"), $.01 par value, stated value $10,000. In November 1997, the Company
issued 1,625 shares for net proceeds of $12,837. In February 1998, the Company
issued an additional 1,625 shares of the Preferred Stock in exchange for
$16,250. Dividends on the outstanding Preferred Stock accrue at an annual rate
of 12% of the stated value per share compounded quarterly, and accrue and are
payable quarterly, subject to the Company's right to pay dividends by issuing
Payment in Kind (PIK) shares, which are shares of Preferred Stock. At December
31, 1997, the Company had accrued the value of preferred stock dividends and
accretion of discount in the amount of $274. The Company declared a PIK dividend
of 52.36 shares in February 1998. On the mandatory redemption date, November 14,
2007, the Company will redeem any outstanding Preferred Stock at the stated
value plus any accrued and unpaid cumulative dividends. Under the agreement with
the holder of Preferred Stock, the Company is subject to various covenants
related to various financial ratios and measures and has restrictions related to
the payment of dividends, asset sales and debt issuances.
F-18
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
8. INCOME TAXES
Income tax expense for 1997 consisted of the following components:
<TABLE>
<S> <C>
Current tax expense:
Federal............................................................. $ --
State............................................................... 67
---
Total current expense........................................... 67
---
Deferred tax expense (benefit):
Federal............................................................. (356)
State............................................................... 21
---
(335)
---
Less: Change in valuation allowance................................... 335
---
Total deferred expense............................................ --
---
Total income tax expense.............................................. $ 67
---
---
</TABLE>
Total income tax expense differed from the amount computed by applying the
federal standard tax rate of 34% for the period ended December 31, 1997 due to
the following:
<TABLE>
<S> <C>
Pretax loss at federal statutory rate.............................. $ (1,194)
State income tax expense, net of federal benefit................... 58
Nondeductible stock compensation................................... 574
Other.............................................................. 394
Change in valuation allowance...................................... 335
---------
Net income tax expense............................................. $ 67
---------
---------
</TABLE>
F-19
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
8. INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997 are
presented below:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.................................... $ 468
Accounts receivable................................................. 41
Property, plant and equipment....................................... 4
---
Total deferred tax assets......................................... 513
Less: Valuation allowance........................................... (335)
---
Net deferred tax assets............................................. 178
---
Deferred tax liabilities:
Intangible assets................................................... 178
---
Total deferred tax liabilities.................................... 178
---
Net deferred tax liability........................................ $ --
---
---
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary differences
and other tax attributes, such as net operating loss carryforwards. The Company
has established a valuation allowance against its net deferred tax asset
following an assessment of the likelihood of realizing such amounts. In arriving
at the determination as to the amount of the valuation allowance required, the
Company considered its operating history as well as significant acquisitions
made in 1997 and pending acquisitions, statutory restrictions on the use of
operating losses, tax planning strategies and its expectation of the level and
timing of future taxable income.
The foreign operations of the Company have incurred operating losses, the
benefit of which remains unlikely. Accordingly, the Company has not recognized a
tax benefit for these loss carryforwards since it is not assured it could
utilize the loss carryforward in the future.
At December 31, 1997, the Company has a federal net operating loss
carryforward available to offset future income of approximately $1,303 which
will expire after 2012.
9. LEASES
The Company has noncancelable operating leases, primarily for office space
and various capital leases primarily for equipment and vehicles. The operating
leases generally contain renewal options for periods ranging from one to ten
years and require the Company to pay all executory costs such as maintenance and
insurance. Rental expense for operating leases (excluding those with lease terms
of one month or less that were not renewed) was approximately $201 for the
period ended December 31, 1997.
F-20
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
9. LEASES (CONTINUED)
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1997
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- -------------------------------------------------------------------------------------
<S> <C>
1998................................................................................. $ 469
1999................................................................................. 407
2000................................................................................. 332
2001................................................................................. 258
2002................................................................................. 186
Thereafter........................................................................... 232
---------
$ 1,884
---------
---------
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
The Company is a defendant from time to time in various lawsuits which are
generally incidental to its business. The Company is vigorously contesting all
such matters and believes that their ultimate resolution will not have a
material adverse effect on its consolidated financial position, results of
operations or cash flows.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of receivables, payables, and accrued expenses
approximate fair value due to the short maturity of these instruments. The
estimated fair value of long term debt and preferred stock subject to mandatory
redemption are estimated based on current market rates and approximate the
carrying value.
12. RELATED PARTY TRANSACTIONS
On November 12, 1997, the Company purchased substantially all of the assets
of The Midwestern Broadcasting Company, including WWWM-FM and WLQR-AM, for
approximately $10,000. The President of Midwestern Broadcasting Company is the
Vice Chairman and a Director of the Company.
Substantially all of the Company's broadcast strategy consulting services
and programming research are contracted with Stratford Research the co-owner of
which is the Vice Chairman and a Director of the Company. Total fees paid to
Stratford Research during fiscal 1997 were approximately $184 and fees owed at
December 31, 1997 were approximately $240.
During 1997, the Company remitted $206 to Cumulus Media, LLC representing
fees for management services. These fees are included in corporate general and
administrative expenses. The Company has also paid Cumulus Media, LLC $300 for
organizational costs, which have been included in other assets.
During 1997, the Company paid $297 to Quaestus Management Corporation for
services rendered in connection with the acquisition of stations and corporate
finance services. The Chairman and Chief Executive of Quaestus Management
Corporation is also the Chairman and a Director of the Company.
F-21
<PAGE>
CUMULUS MEDIA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
13. NON-CASH STOCK COMPENSATION
Cumulus Media, LLC issued 1,630 shares of common stock to two key employees
of the Company. In addition, Cumulus Media, LLC issued 1,564 shares and 2,346
shares of common stock to DBBC of Georgia, LLC, the co-owner of which is the
Vice Chairman and a Director of the Company, and Quaestus Management Corporation
(consulting service organizations), respectively. During the period ended
December 31, 1997, the Company has recognized compensation expense of $1,689 for
the shares issued based on an independent valuation of the fair value of the
shares issued as of the date of grant (the measurement date).
14. DEFINED CONTRIBUTION PLAN
Effective January 1, 1998, the Company adopted a qualified profit sharing
plan under Section 401(k) of the Internal Revenue Code. All employees meeting
eligibility requirements are qualified for participation in the plan.
Participants in the plan may contribute 1% to 15% of their annual compensation
through payroll deductions. Under the plan, the Company will provide a matching
contribution of 25% of the first 6% of each participant's contribution. Matching
contributions are to be remitted to the plan by the Company quarterly.
15. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF ACCOUNTANTS' REPORT
Subsequent to December 31, 1997, the Company completed acquisitions of
twenty two radio stations in seven separate markets for an aggregate purchase
price of approximately $67,200. These transactions will be accounted for by the
purchase method of accounting.
The Company has also entered into various agreements to acquire 119 stations
in 29 markets for an aggregate purchase price of approximately $260,200.
The Company plans to complete a reorganization whereby (i) all of the shares
of Preferred Stock will be exchanged for shares of a new Series A Preferred
Stock and (ii) Cumulus Media, LLC will be liquidated and shares of common stock
of the Company will be distributed by Cumulus Media, LLC to its members in
liquidation.
F-22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations and partners' capital and of cash flows present fairly, in all
material respects, the financial position of Arbor Radio LP at December 31, 1997
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 19, 1998
F-23
<PAGE>
ARBOR RADIO LP
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 117,000 $ 137,000
Accounts receivable, less allowance for doubtful accounts of $22,000 and $14,000,
respectively.................................................................... 640,000 520,000
Prepaid expenses and other current assets......................................... 10,000 18,000
------------- -------------
Total current assets.......................................................... 767,000 675,000
Property and equipment, net......................................................... 997,000 1,259,000
Intangible assets, net.............................................................. 2,140,000 2,334,000
------------- -------------
Total assets.................................................................. $ 3,904,000 $ 4,268,000
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Notes payable, current portion.................................................... $ 517,000 $ 450,000
Accounts payable.................................................................. 45,000 84,000
Accrued payroll and commissions................................................... 112,000 82,000
Accrued and other current liabilities............................................. 32,000 11,000
------------- -------------
Total current liabilities..................................................... 706,000 627,000
------------- -------------
Long-term liabilities:
Notes payable, less current portion............................................... 2,533,000 3,050,000
Related party notes payable....................................................... -- 135,000
------------- -------------
Total long-term liabilities................................................... 2,533,000 3,185,000
------------- -------------
Commitments and contingencies
Partners' capital:
Partners' capital................................................................. 1,800,000 1,800,000
Accumulated deficit............................................................... (1,135,000) (1,344,000)
------------- -------------
Total partners' capital....................................................... 665,000 456,000
------------- -------------
Total liabilities and partners' capital....................................... $ 3,904,000 $ 4,268,000
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
F-24
<PAGE>
ARBOR RADIO LP
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:............................................................... $ 3,723,000 $ 3,304,000 $ 2,993,000
Less: agency commissions.............................................. (289,000) (286,000) (287,000)
------------ ------------ ------------
Net revenues...................................................... 3,434,000 3,018,000 2,706,000
Operating expenses:
Programming........................................................... 623,000 575,000 596,000
Sales and promotions.................................................. 737,000 591,000 621,000
Advertising........................................................... 165,000 231,000 106,000
Technical............................................................. 152,000 164,000 193,000
General and administrative............................................ 717,000 739,000 737,000
Depreciation and amortization......................................... 502,000 666,000 926,000
------------ ------------ ------------
Total operating expenses.......................................... 2,896,000 2,966,000 3,179,000
------------ ------------ ------------
Income (loss) from operations........................................... 538,000 52,000 (473,000)
Other income (expense):
Interest expense, net................................................. (329,000) (358,000) (383,000)
Other................................................................. -- (14,000) 3,000
------------ ------------ ------------
Net income (loss)....................................................... 209,000 (320,000) (853,000)
Partners' capital at the beginning of the year.......................... 456,000 776,000 1,629,000
------------ ------------ ------------
Partners' capital at the end of the year................................ $ 665,000 $ 456,000 $ 776,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
F-25
<PAGE>
ARBOR RADIO LP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................ $ 209,000 ($ 320,000) ($ 853,000)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Loss on sale of fixed asset............................................ 3,000 14,000 --
Depreciation and amortization.......................................... 502,000 666,000 926,000
Provision for doubtful accounts........................................ 8,000 8,000 9,000
Decrease (increase) in accounts receivable............................. (128,000) 36,000 (242,000)
Decrease (increase) in prepaid expenses and other current assets....... 8,000 1,000 (1,000)
(Decrease) increase in accounts payable................................ (39,000) (14,000) (45,000)
Increase (decrease) in accrued and other liabilities................... 51,000 (221,000) 238,000
---------- ----------- -----------
Net cash provided by operating activities.............................. 614,000 170,000 32,000
---------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment...................................... (49,000) (35,000) (121,000)
Proceeds from sale of assets............................................. -- 3,000 --
Acquisition cost......................................................... -- -- (109,000)
---------- ----------- -----------
Net cash used for investing activities................................... (49,000) (32,000) (230,000)
---------- ----------- -----------
Cash flows from financing activities:
Payments on bank borrowings.............................................. (585,000) (300,000) --
Proceeds from borrowings of notes payable................................ -- 135,000 --
---------- ----------- -----------
Net cash used in financing activities.................................... (585,000) (165,000) --
---------- ----------- -----------
Net decrease in cash....................................................... (20,000) (27,000) (198,000)
Cash at beginning of year.................................................. 137,000 164,000 362,000
---------- ----------- -----------
Cash at end of year........................................................ $ 117,000 $ 137,000 $ 164,000
---------- ----------- -----------
---------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest................................... $ 341,000 $ 446,000 $ 298,000
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
F-26
<PAGE>
ARBOR RADIO LP
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Arbor Radio LP, a limited partnership, (the "Partnership") was incorporated
in the State of Delaware on October 6, 1994 and started operations on December
20, 1994. The general partner is American Media Management, Inc. The Partnership
owns and operates radio stations WQKL-FM, WTKA-AM, WIQB-FM and WDEO-AM, Ann
Arbor and Saline, Michigan.
In October 1997, the Partnership entered into an agreement with Cumulus
Broadcasting, Inc. (a wholly-owned subsidiary of Cumulus Media Inc.) ("Cumulus")
to sell the assets of the Partnership, subject to approval of the Federal
Communications Commission ("FCC"), to Cumulus.
The significant accounting principles followed by the Partnership and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Partnership enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Trade revenue and
trade expense are recognized in equal amounts at the fair market value of
products or services received as advertising air time is broadcast or as
services are received. Trade revenues and trade expenses for the years ended
December 31, 1997, 1996 and 1995 was $245,000, $262,000 and $251,000,
respectively. The difference between this method of accounting and the
recognition of trade sales as advertising air time as broadcast, and the
recognition of trade expense as services are received is not material.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Partnership to
concentrations of credit risk consist principally of cash and accounts
receivable. The Partnership holds deposits in money market accounts. The
Partnership performs ongoing credit evaluations of its customers and generally
does not require collateral
F-27
<PAGE>
ARBOR RADIO LP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
for its accounts receivable. The Partnership maintains reserves for potential
credit losses based upon the expected collectibility of all accounts receivable.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed using accelerated methods over the estimated useful
lives of the respective assets, generally five to fifteen years. Leasehold
improvements are amortized on the straight-line basis over their estimated
useful lives of thirty-nine years.
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include FCC licenses and acquisition and organizational
costs. Intangible assets are recorded at cost and amortized over their
respective estimated useful lives. Amortization is calculated using the
straight-line method over a 15-year life for FCC licenses and call letters and a
five-year life for acquisition and organizational costs. The Partnership
evaluates the carrying value of intangibles periodically in relation to the
projected future undiscounted net cash flows of the related businesses.
FEDERAL INCOME TAXES
The Partnership is not a taxpaying entity for Federal income tax purposes,
and thus no income tax expense has been recorded in the financial statements.
Income from the Partnership is taxed to the partners in their individual
returns.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Partnership's financial instruments, including
cash, accounts receivable, accounts payable and long-term debt, approximate fair
value.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Broadcasting towers and equipment................................ $1,932,000 $1,903,000
Buildings........................................................ 194,000 194,000
Office furniture and equipment................................... 226,000 224,000
Leasehold improvements........................................... 95,000 95,000
------------ ------------
2,447,000 2,416,000
Accumulated depreciation......................................... (1,580,000) (1,287,000)
------------ ------------
867,000 1,129,000
Land............................................................. 130,000 130,000
------------ ------------
Property and equipment, net...................................... $ 997,000 $1,259,000
------------ ------------
------------ ------------
</TABLE>
F-28
<PAGE>
ARBOR RADIO LP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. PROPERTY AND EQUIPMENT: (CONTINUED)
Depreciation expense for 1997, 1996 and 1995 was $308,000 and $478,000 and
$726,000, respectively.
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
FCC licenses and call letters.................................... $2,555,000 $2,555,000
Acquisition and organizational costs............................. 168,000 168,000
------------ ------------
2,723,000 2,723,000
Accumulated amortization......................................... (583,000) (389,000)
------------ ------------
Intangible assets, net........................................... $2,140,000 $2,334,000
------------ ------------
------------ ------------
</TABLE>
Amortization expense for 1997, 1996 and 1995 was $194,000, $188,000, and
$200,000, respectively.
4. NOTES PAYABLE:
At December 31, 1997, the Partnership owes $2,250,000 to Michigan National
Bank which is secured by accounts receivable; call letters; property, fixtures,
and equipment; and other assets. Interest payments are due quarterly beginning
January 1, 1995 with the principal portion due in equal quarterly payments
beginning March 31, 1996. The entire amount of unpaid principal and interest is
due December 31, 2002. Interest is calculated at Michigan National Prime
Interest Rate plus 1.25% (9.75% at December 31, 1997).
Maturities of debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
1998............................................................................ $ 450,000
1999............................................................................ 450,000
2000............................................................................ 450,000
2001............................................................................ 450,000
2002............................................................................ 450,000
------------
2,250,000
Less current portion (450,000)
------------
$ 1,800,000
------------
------------
</TABLE>
The loan agreement relating to the note payable to the bank contains various
covenants pertaining to the maintenance of debt service and acquisition of
property, plant and equipment. At December 31, 1997, the debt service coverage
ratio, senior debt to broadcast cash flow ratio, and all other covenants were in
compliance.
Under a Promissory Note with the prior station owners, MW Blue Partnership,
the Partnership owes $800,000. Interest payments are due on the first business
day after each quarter end beginning April 3, 1995. The repayment of the
principal portion begins September 30, 1998 as presented below. Interest is
calculated at Michigan National Prime Interest Rate plus 1.5%. The interest rate
was 10% at December 31, 1997.
F-29
<PAGE>
ARBOR RADIO LP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. NOTES PAYABLE: (CONTINUED)
Maturities of debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
1998.............................................................................. $ 67,000
1999.............................................................................. 133,000
2000.............................................................................. 133,000
2001.............................................................................. 133,000
2002.............................................................................. 133,000
Thereafter........................................................................ 201,000
----------
800,000
Less current portion (67,000)
----------
$ 733,000
----------
----------
</TABLE>
Total interest expense related to notes payable for 1997, 1996 and 1995 was
$322,000, $351,000, and $384,000, respectively.
5. RELATED PARTY NOTES PAYABLE:
During the year ended December 31, 1996, three notes payable from the
partners were established. Each unsecured note bears interest at Michigan
National Prime Interest rate plus 1%. These notes were paid in full in November
1997.
Interest expense for 1997 and 1996 was $12,000 and $6,000, respectively.
6. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Partnership leases its station studios, and certain equipment under
various operating leases. Rent expense under operating leases for 1997, 1996 and
1995 was $107,000, $106,000 and $99,000, respectively. Future minimum annual
payments under these non-cancelable operating leases and agreements as of
December 31, 1997, are as follows:
<TABLE>
<CAPTION>
PAYMENT
----------
<S> <C>
1998.............................................................................. $ 102,000
1999.............................................................................. 97,000
2000.............................................................................. 97,000
2001.............................................................................. 100,000
2002.............................................................................. 83,000
Thereafter........................................................................ 198,000
----------
$ 677,000
----------
----------
</TABLE>
F-30
<PAGE>
ARBOR RADIO LP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. MANAGEMENT FEE:
The Partnership is under agreement with the general partner to pay an annual
management fee over the life of the Partnership. Payments are to commence with
the year 1998 as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- -------------------------------------------------------------------------------------- ----------
<S> <C>
1998.................................................................................. $ 25,000
1999.................................................................................. 50,000
2000.................................................................................. 50,000
2001.................................................................................. 50,000
2002.................................................................................. 50,000
2003.................................................................................. 200,000
2004.................................................................................. 200,000
2005.................................................................................. 250,000
2006.................................................................................. 250,000
Thereafter............................................................................ 100,000
</TABLE>
F-31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholder's equity and of cash flows present fairly,
in all material respects, the financial position of Beaumont Skywave, Inc., (the
"Company") at December 31, 1997, and the results of its operations for the year
then ended in conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 10, 1998
F-32
<PAGE>
BEAUMONT SKYWAVE, INC.
(A WHOLLY-OWNED SUBSIDIARY
OF PACIFIC BROADCASTING OF BEAUMONT, INC.)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash.............................................................................................. $ 14,699
Accounts receivable, net of allowance for doubtful accounts of $11,143............................ 120,734
Employee receivables.............................................................................. 2,891
Other current assets.............................................................................. 3,604
------------
Total current assets.......................................................................... 141,928
Property and equipment, net......................................................................... 168,311
Intangible assets, net.............................................................................. 811,051
------------
Total assets.................................................................................. $1,121,290
------------
------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt.............................................................. $ 41,208
Accrued interest payable.......................................................................... 14,896
Accrued compensation.............................................................................. 20,088
Accrued legal expense............................................................................. 26,147
Other accrued liabilities......................................................................... 3,737
Advances payable to Parent........................................................................ 107,869
Note payable to related party..................................................................... 125,000
------------
Total current liabilities..................................................................... 338,945
Long-term debt...................................................................................... 480,358
------------
Total liabilities............................................................................. 819,303
------------
Commitments and contingencies
Stockholder's equity:
Common stock, no par value, 400 shares
authorized, 1 share issued and outstanding...................................................... 400,000
Accumulated deficit............................................................................... (98,013)
------------
Total stockholder's equity.................................................................... 301,987
------------
Total liabilities and stockholder's equity.................................................... $1,121,290
------------
------------
</TABLE>
See Notes to Financial Statements.
F-33
<PAGE>
BEAUMONT SKYWAVE, INC.
(A WHOLLY-OWNED SUBSIDIARY
OF PACIFIC BROADCASTING OF BEAUMONT, INC.)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1997
------------------
<S> <C>
Revenues...................................................................................... $ 703,524
Less: agency commissions.................................................................... (57,320)
----------
Net revenues........................................................................... 646,204
Operating expenses:
Programming................................................................................. 109,475
Sales and promotions........................................................................ 173,042
General and administrative.................................................................. 240,709
Trade....................................................................................... 49,711
Depreciation and amortization............................................................... 122,826
----------
Total operating expenses................................................................ 695,763
----------
Loss from operations.......................................................................... (49,559)
Interest expense.............................................................................. 71,500
----------
Net loss...................................................................................... $ (121,059)
----------
----------
</TABLE>
See Notes to Financial Statements.
F-34
<PAGE>
BEAUMONT SKYWAVE, INC.
(A WHOLLY-OWNED SUBSIDIARY
OF PACIFIC BROADCASTING OF BEAUMONT, INC.)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON SURPLUS
STOCK (DEFICIT) TOTAL
---------- ------------ -----------
<S> <C> <C> <C>
Balance at January 1, 1997................................................. $ 400,000 $ 25,546 $ 425,546
Net loss................................................................... (121,059) (121,059)
Distribution to stockholder................................................ (2,500) (2,500)
---------- ------------ -----------
Balance at December 31, 1997............................................... $ 400,000 $ (98,013) $ 301,987
---------- ------------ -----------
---------- ------------ -----------
</TABLE>
See Notes to Financial Statements.
F-35
<PAGE>
BEAUMONT SKYWAVE, INC.
(A WHOLLY-OWNED SUBSIDIARY
OF PACIFIC BROADCASTING OF BEAUMONT, INC.)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
------------------
<S> <C>
Cash flows from operating activities:
Net loss.................................................................................... $ (121,059)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization............................................................. 122,826
Provision for doubtful accounts........................................................... 9,068
Increase in accounts receivable........................................................... (103,539)
Increase in employee receivables.......................................................... (870)
Increase in other current assets.......................................................... (2,134)
Increase in intangibles................................................................... (15,823)
Increase in accrued interest payable...................................................... 13,750
Increase in accrued compensation.......................................................... 5,848
Increase in accrued legal expense......................................................... 26,147
Increase in other accrued liabilities..................................................... 332
----------
Net cash used in operating activities................................................... (65,454)
----------
Cash flows used in investing activities:
Purchases of property and equipment......................................................... (11,290)
----------
Cash used in investing activities....................................................... (11,290)
----------
Cash flows provided by financing activities:
Advances from Parent, net................................................................... 88,170
Distribution to shareholder................................................................. (2,500)
Payment of long-term debt................................................................... (3,434)
----------
Cash provided by financing activities................................................... 82,236
----------
Increase in cash.............................................................................. 5,492
Cash at beginning of year..................................................................... 9,207
----------
Cash at end of year........................................................................... $ 14,699
----------
----------
Non-cash operating activities:
Trade revenue............................................................................... $ 52,085
----------
----------
Trade expense............................................................................... $ 49,711
----------
----------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest...................................................... $ 57,750
----------
----------
</TABLE>
See Notes to Financial Statements.
F-36
<PAGE>
BEAUMONT SKYWAVE, INC.
(A WHOLLY-OWNED SUBSIDIARY OF PACIFIC BROADCASTING OF BEAUMONT, INC.)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Beaumont Skywave, Inc. (the "Company") is a wholly-owned subsidiary of
Pacific Broadcasting of Beaumont, Inc. (the "Parent"). The Company owns and
operates the radio station KTCX-FM (the "Station") located in Beaumont, Texas.
The Company is dependent on the Parent to fund certain of its activities,
primarily the Company's debt service requirements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated using an accelerated method over estimated useful lives of 5 and
7 years.
INTANGIBLE ASSETS
Intangible assets include goodwill (see Note 2), Federal Communications
Commission ("FCC") license and other acquisition costs. Intangible assets are
stated at cost and are being amortized using the straight-line method over the
estimated useful life or contract term for periods not exceeding 15 years. The
Company evaluates the carrying value of intangibles periodically in relation to
the projected future undiscounted net cash flows of the related businesses.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
INCOME TAXES
Effective January 1, 1997, the Company has elected to be treated as a
qualified subchapter S subsidiary of the Parent for federal and state income tax
purposes, in accordance with Section 1361b3 of
F-37
<PAGE>
BEAUMONT SKYWAVE, INC.
(A WHOLLY-OWNED SUBSIDIARY OF PACIFIC BROADCASTING OF BEAUMONT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
the Internal Revenue Code. Accordingly, no provision for federal or state income
taxes has been recorded in the financial statements as the earnings of the
Company are included in the personal income tax returns of the Parent's
shareholders.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable and accounts payable
approximates fair value because of the short maturity of these instruments. The
carrying value of outstanding notes payable approximates fair value based on
current market rates.
2. ACQUISITIONS:
In June 1996, the Parent acquired 33% of the issued and outstanding common
and preferred stock of the Company from Alice Ramsey and Skywave Communications
Corporation (collectively referred to as the "Sellers") for $400,000. In July
1996, the Parent entered into a stock purchase option agreement with the Sellers
whereby the Parent was granted an option to purchase the remaining 67% of the
issued and outstanding common and preferred stock of the Company. In November
1996, the Parent exercised its option and acquired the remaining 67% of the
Company's outstanding stock for $650,000, which was financed through the
execution of a $525,000 note payable to the Seller and a $125,000 note payable
to a shareholder of the Parent.
The above transactions were accounted for as a step acquisition using the
purchase method of accounting, and, accordingly, the purchase price of each
acquisition was allocated to the net assets acquired based on the estimated fair
value as of the acquisition date. As a result, the Company recorded goodwill
aggregating $755,000, which represents the excess of the purchase price over the
fair value of the net tangible assets acquired.
3. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Broadcasting towers and equipment................................. $ 186,190
Studio equipment.................................................. 35,173
Furniture, fixtures and leasehold improvements.................... 17,486
---------
238,849
Accumulated depreciation.......................................... (70,538)
---------
Property and equipment, net....................................... $ 168,311
---------
---------
</TABLE>
Depreciation expense for the year ended December 31, 1997 was $62,506.
F-38
<PAGE>
BEAUMONT SKYWAVE, INC.
(A WHOLLY-OWNED SUBSIDIARY OF PACIFIC BROADCASTING OF BEAUMONT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INTANGIBLE ASSETS:
Intangible assets at December 31, 1997 consist of the following:
<TABLE>
<S> <C>
Broadcast license................................................. $ 100,000
Organization costs................................................ 32,423
Goodwill.......................................................... 755,000
---------
887,423
Accumulated amortization.......................................... (76,372)
---------
Intangible assets, net............................................ $ 811,051
---------
---------
</TABLE>
Amortization expense for the year ended December 31, 1997 was $60,320.
5. LONG-TERM DEBT:
In connection with the acquisition of the Company's stock in November 1996,
the Parent issued a $525,000 promissory note payable to the Sellers. This
promissory note has been recorded in the Company's financial statements. The
promissory note accrues interest at 11% and required interest only payments of
$4,813 per month during the first twelve months. Beginning December 1997, the
promissory note requires monthly principal and interest payments of $8,247
through October 2002, and the outstanding balance is due in its entirety at
November 30, 2002. During 1997, the Company recorded interest expense of $57,750
and made principal payments totaling $3,434.
Following represents a summary of the future maturities of the Company's
long-term debt as of December 31, 1997:
<TABLE>
<S> <C>
1998.............................................................. $ 41,208
1999.............................................................. 41,208
2000.............................................................. 41,208
2001.............................................................. 41,208
2002.............................................................. 356,734
---------
$ 521,566
---------
---------
</TABLE>
The note payable to Sellers is secured by a pledge of $525,000 of the
Company's stock, as well as by personal guarantees of the Parent's shareholders.
6. RELATED PARTY TRANSACTIONS:
In connection with the acquisition of the Company's stock in November 1996,
the Parent also executed a $125,000 promissory note payable to a shareholder of
the Parent. This promissory note has been recorded in the Company's financial
statements. Such note is due on demand and accrues interest at 11%. During 1997,
the Company recorded interest expense of $13,750 and made no principal payments.
At December 31, 1997, the Company had net advances due to the Parent
totaling $107,869. Such advances relate to various operating activities of the
Station, as well as interest payments made by the Parent on behalf of the
Company. The advances are due on demand and do not accrue interest.
F-39
<PAGE>
BEAUMONT SKYWAVE, INC.
(A WHOLLY-OWNED SUBSIDIARY OF PACIFIC BROADCASTING OF BEAUMONT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS: (CONTINUED)
At December 31, 1997, the Company had outstanding loan receivable balances
due from the Station's General Manager and a certain employee totaling $2,691
and $200, respectively. Such loans are due on demand and do not accrue interest.
7. OPERATING LEASE COMMITMENTS:
The Company has entered into lease agreements for building and property used
in the operations of the Station. Rent expense under such leases totalled
$30,600 in 1997. Future minimum rentals under these leases at December 31, 1997
are as follows:
<TABLE>
<S> <C>
1998............................................................... $ 20,100
1999............................................................... 5,400
2000............................................................... 5,400
2001............................................................... 6,000
2002............................................................... 6,600
Thereafter......................................................... 23,100
---------
$ 66,600
---------
---------
</TABLE>
8. SUBSEQUENT EVENT:
On January 30, 1998, the Parent and the Company entered into an asset
purchase agreement with Cumulus Broadcasting, Inc. (a wholly-owned subsidiary of
Cumulus Media Inc.) ("Cumulus") to sell substantially all of the assets and
liabilities of the Station to Cumulus. The closing of the sale is subject to
certain events that must occur which include, among other things, obtaining the
approval of the FCC. In conjunction with the sale, the Parent and the Company
entered into a local marketing agreement with Cumulus effective February 15,
1998.
F-40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholder's equity
(deficit) and of cash flows present fairly, in all material respects, the
financial position of Caribbean Communications Company Limited and its
subsidiaries, a wholly-owned subsidiary of Cumulus Media, LLC, at April 30,
1997, and the results of their operations and their cash flows for the four
month period ended April 30, 1997 in conformity with generally accepted
accounting principles. 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 audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 9, 1998
F-41
<PAGE>
CARIBBEAN COMMUNICATIONS COMPANY LIMITED
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
APRIL 30,
1997
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................................ $ 86,674
Accounts receivable, less allowance for doubtful accounts of $30,688............................. 128,115
Prepaid expenses and other receivables........................................................... 24,242
-------------
Total current assets......................................................................... 239,031
Property and equipment, net........................................................................ 1,105,787
Intangible assets, net............................................................................. 217,437
-------------
Total assets................................................................................. $ 1,562,255
-------------
-------------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................................................. $ 138,498
Accrued interest................................................................................. 44,578
Capital lease obligation......................................................................... 16,029
Accrued professional fees........................................................................ 40,137
Due to related parties........................................................................... 2,496,950
Other accrued expenses........................................................................... 7,642
-------------
Total current liabilities.................................................................... 2,743,834
-------------
Non-current liabilities:
Deferred compensation............................................................................ 145,000
-------------
Commitments and contingencies
Stockholder's equity (deficit):
Common stock ($0.37 par value, 50,000 shares authorized, 46,057 shares issued, 46,057
outstanding)................................................................................... 17,058
Capital in excess of par value................................................................... 2,267,699
Accumulated deficit.............................................................................. (3,606,486)
-------------
(1,321,729)
Less treasury stock, at cost (50 shares)......................................................... (4,850)
-------------
Total stockholder's equity (deficit)......................................................... (1,326,579)
-------------
Total liabilities and stockholder's equity (deficit)............................................... $ 1,562,255
-------------
-------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-42
<PAGE>
CARIBBEAN COMMUNICATIONS COMPANY LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
FOUR MONTH
PERIOD ENDED
APRIL 30,
1997
------------
<S> <C>
Revenues............................................................................................ $ 191,112
Less: agency commissions............................................................................ (13,554)
------------
Net revenues................................................................................. 177,558
------------
Operating expenses:
Sales and promotions.............................................................................. 120,733
Technical......................................................................................... 126,319
Programming....................................................................................... 75,985
General and administrative........................................................................ 200,538
Depreciation and amortization..................................................................... 55,628
------------
Total operating expenses...................................................................... 579,203
------------
Loss from operations................................................................................ (401,645)
Other income (expense):
Interest income................................................................................... 210
Interest expense.................................................................................. (62,248)
Other income...................................................................................... 1,227
------------
Net loss............................................................................................ ($ 462,456)
------------
------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-43
<PAGE>
CARIBBEAN COMMUNICATIONS COMPANY LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CAPITAL IN
COMMON TREASURY EXCESS OF ACCUMULATED
STOCK STOCK PAR VALUE DEFICIT TOTAL
--------- --------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997...................... $ 17,058 $ -- $ 2,267,699 $ (3,144,030) $ (859,273)
Purchase of treasury stock...................... (4,850) (4,850)
Net loss........................................ -- -- -- (462,456) (462,456)
--------- --------- ------------ ------------- -------------
Balance at April 30, 1997....................... $ 17,058 $ (4,850) $ 2,267,699 $ (3,606,486) $ (1,326,579)
--------- --------- ------------ ------------- -------------
--------- --------- ------------ ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-44
<PAGE>
CARIBBEAN COMMUNICATIONS COMPANY LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
FOUR MONTH
PERIOD ENDED
APRIL 30,
1997
------------
<S> <C>
Cash flows from operating activities:
Net loss.......................................................................................... $ (462,456)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................................. 55,628
Decrease in receivables....................................................................... 15,917
Increase in prepaid expenses and other assets................................................. (3,657)
Increase in accounts payable.................................................................. 40,346
Decrease in accrued expenses and other current liabilities.................................... (49,760)
------------
Net cash used in operating activities............................................................... (403,982)
------------
Cash flows from investing activities:
Purchases of property and equipment............................................................... (20,345)
------------
Net cash used in investing activities............................................................... (20,345)
------------
Cash flows from financing activities:
Proceeds from borrowings.......................................................................... 983,725
Repayments of borrowings.......................................................................... (396,235)
Payments of capital lease obligation.............................................................. (2,381)
Payments of deferred compensation................................................................. (80,000)
Purchase of treasury stock........................................................................ (4,850)
------------
Net cash provided by financing activities........................................................... 500,259
------------
Increase in cash and cash equivalents............................................................... 75,932
Cash and cash equivalents at beginning of period.................................................... 10,742
------------
Cash and cash equivalents at end of period.......................................................... $ 86,674
------------
------------
Supplemental disclosure of cash flow information:
Cash paid for interest............................................................................ $ 91,773
------------
------------
Non-cash operating activities:
Trade revenue..................................................................................... $ 63,808
------------
------------
Trade expense..................................................................................... $ 45,919
------------
------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-45
<PAGE>
CARIBBEAN COMMUNICATIONS COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Caribbean Communications Company Limited (the "Company"), a wholly-owned
subsidiary of Cumulus Media, LLC, is a corporation incorporated in the Crown
Colony of Montserrat, which operates the GEM Radio Network, a multi-market FM
radio broadcasting network serving the area extending from the British Virgin
Islands south to Trinidad in the Eastern Caribbean.
Before April 24, 1997, the Company was wholly-owned by CML Holdings, LLC. On
April 24, 1997, CML Holdings, LLC transferred the capital stock and assets of
the Company to Cumulus Media, LLC in exchange for shares of preferred stock of
Cumulus Media, LLC.
The Company is dependent on the continued financial support of Cumulus
Media, LLC to meet its obligations as they come due.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, GEM Radio Five Limited. All
intercompany transactions and balances have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable, and other accrued expenses approximates fair value due to
their short term nature.
CASH FLOWS
For purposes of the consolidated statement of cash flows, cash consists of
bank deposits and money market funds.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
advertisers. Revenue is recognized as commercials are broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
F-46
<PAGE>
CARIBBEAN COMMUNICATIONS COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over their
estimated useful lives, or in the case of leasehold improvements, over the terms
of the leases, if shorter. The estimated useful lives used in determining
depreciation range from 3 to 20 years. For financial reporting purposes,
depreciation is computed using the straight-line method.
Depreciation expense includes the amortization of capital lease assets.
INTANGIBLE ASSETS
Intangible assets include goodwill and broadcast licenses. Intangible assets
are stated at cost and are being amortized using the straight-line method over
the estimated useful life not exceeding 15 years. The Company evaluates the
carrying value of intangibles periodically in relation to the projected future
undiscounted net cash flows of the related businesses.
INCOME TAXES
The Company accounts for income tax expense and liabilities under the
liability method. As the Company has not realized taxable profits, no income tax
liability has been recorded as of April 30, 1997.
FOREIGN CURRENCY
Assets, liabilities and all profit and loss items of the Company are stated
in U.S. dollars for reporting purposes. The Company uses a conversion rate of
one U.S. dollar to 2.7 Eastern Caribbean dollars, and one U.S. dollar to 6.0
Trinidad and Tobago dollars for book purposes, which approximate the actual
exchange rates at April 30, 1997. The functional currencies are the Trinidad and
Tobago dollar for the Trinidad location, the Eastern Caribbean dollar for other
island locations, and the U.S. dollar for corporate-related functions.
Transactions for the various locations are recorded locally in the functional
currency. Foreign currency transaction gains and losses are included in the
determination of income.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
APRIL 30,
1997
------------
<S> <C>
Broadcast equipment............................................................. $ 1,003,527
Towers, masts and transmitter buildings......................................... 228,458
Leasehold improvements and site preparation..................................... 67,314
Furniture and fixtures.......................................................... 352,107
Vehicles........................................................................ 63,095
Network infrastructure.......................................................... 218,673
------------
1,933,174
Accumulated depreciation........................................................ (836,290)
Land............................................................................ 8,903
------------
Property and equipment, net..................................................... $ 1,105,787
------------
------------
</TABLE>
Depreciation expense for the four months ended April 30, 1997 was $49,792.
F-47
<PAGE>
CARIBBEAN COMMUNICATIONS COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
1997
----------
<S> <C>
Broadcast licenses................................................................ $ 262,674
Accumulated amortization.......................................................... (45,237)
----------
Intangible assets, net............................................................ $ 217,437
----------
----------
</TABLE>
Amortization expense for the four months ended April 30, 1997 was $5,836.
4. DUE TO RELATED PARTIES:
Amounts due to related parties consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
1997
------------
<S> <C>
Advances--CML Holdings, LLC..................................................... $ 2,286,189
Advances--Cumulus Media, LLC.................................................... 210,761
------------
$ 2,496,950
------------
------------
</TABLE>
ADVANCES--CML HOLDINGS, LLC
The Company has advances from CML Holdings, LLC, a related party, in the
amount of $2,286,189, bearing interest at prime plus 2% (10.5% at April 30,
1997) and payable on demand.
ADVANCES--CUMULUS MEDIA, LLC
The Company has an advance from Cumulus Media, LLC, a related party, in
the amount of $210,761, which does not bear interest and is payable on
demand.
5. LEASES
Certain of the Company's buildings and equipment are leased under
noncancelable operating leases. Total rent expense for the four month period
ended April 30, 1997 was approximately $22,300.
Future minimum lease payments required under operating leases in effect at
April 30, 1997 for the twelve month periods ended April 30 are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 33,884
1999.............................................................. 32,384
2000.............................................................. 21,628
2001.............................................................. 20,000
2002.............................................................. 20,000
Thereafter........................................................ 1,667
---------
$ 129,563
---------
---------
</TABLE>
F-48
<PAGE>
CARIBBEAN COMMUNICATIONS COMPANY LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
The Company has entered into several agreements whereby the Company has been
granted licenses to broadcast under preassigned frequencies in Trinidad and
Tobago, Montserrat, Saint Lucia and the British Virgin Islands. The Company also
has an affiliation agreement with a broadcast licensee in St. Maarten. Under the
terms of the agreements, the Company pays royalties to the government of
Trinidad of 2% of gross annual revenue, and pays fixed annual royalties for all
other licenses. Royalty expense under these agreements was approximately $5,400
for the four month period ended April 30, 1997. Pursuant to the various
licensing agreements, the future minimum guaranteed royalty payments are $17,000
in 1998, and $12,000 per year from 1999 through 2005.
The Company has entered into a broadcast service agreement with a
telecommunications company for unlimited usage of its satellite equipment for
the purpose of uplinking GEM Radio Network broadcasts to its satellite equipment
and downlinking the transmission of these broadcasts to various receiver sites.
The agreement expires January 15, 2001 and requires 84 monthly payments of
$2,820, subject to escalation.
The Company also has a vehicle under a capital lease with a cost of $44,700
and accumulated depreciation of $16,729 as of April 30, 1997.
7. RELATED PARTY TRANSACTIONS
During 1997, the Company reimbursed Quaestus Management Corporation
(Quaestus), a related party, for general and administrative expenses paid by
Quaestus on behalf of the Company. At April 30, 1997, the Company had a payable
to Quaestus of $20,296.
During 1997, the Company paid $80,000 in settlement of notes payable to
shareholders of the Company. At April 30, 1997, the balance of the notes payable
was $0.
8. SUBSEQUENT EVENT
Effective May 22, 1997, the capital stock and assets of the Company were
contributed to Cumulus Media Inc.
F-49
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of operations, of changes in stockholders' deficit and of
cash flows present fairly, in all material respects, the combined financial
position of Carolina Broadcasting, Inc. and Georgetown Radio, Inc. at December
31, 1997, and the combined results of their operations and their cash flows for
the year in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Companies' management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 4, 1998
F-50
<PAGE>
CAROLINA BROADCASTING, INC. AND GEORGETOWN RADIO, INC.
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash.............................................................................................. $ 1,325
Accounts receivable, less allowance for doubtful accounts of $10,000.............................. 33,291
------------
Total current assets.......................................................................... 34,616
Property and equipment, net......................................................................... 397,170
Intangible assets, net of accumulated amortization of $78,897....................................... 1,104,537
------------
Total assets.................................................................................. $1,536,323
------------
------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.................................................................................. $ 59,839
Note payable...................................................................................... 50,800
Accrued interest.................................................................................. 131,573
------------
Total current liabilities..................................................................... 242,212
Notes payable from stockholders..................................................................... 1,154,000
Seller note payable................................................................................. 500,000
Commitments and contingencies
Stockholders' deficit:
Common stock...................................................................................... 4,448
Additional paid-in-capital........................................................................ 255,552
Accumulated deficit............................................................................... (619,889)
------------
Total stockholders' deficit................................................................... (359,889)
------------
Total liabilities and stockholders' deficit................................................... $1,536,323
------------
------------
</TABLE>
See Notes to Financial Statements.
F-51
<PAGE>
CAROLINA BROADCASTING, INC. AND GEORGETOWN RADIO, INC.
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
------------------
<S> <C>
Revenues...................................................................................... $ 267,770
----------
Operating expenses:
Sales and promotions........................................................................ 103,586
Technical and programming................................................................... 223,236
General and administrative.................................................................. 252,234
Depreciation and amortization............................................................... 105,910
----------
Total operating expenses.................................................................. 684,966
----------
Loss from operations.......................................................................... (417,196)
Other income (expense):
Interest income............................................................................. 853
Interest expense............................................................................ (168,240)
----------
Net loss...................................................................................... $ (584,583)
----------
----------
</TABLE>
See Notes to Financial Statements.
F-52
<PAGE>
CAROLINA BROADCASTING, INC. AND GEORGETOWN RADIO, INC.
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN- ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1997...................................... $ 7 $ 154,993 $ (35,306) $ 119,694
Net loss........................................................ -- -- (584,583) (584,583)
Issuance of common stock........................................ 4,441 100,559 -- 105,000
----------- ---------- ------------ -----------
Balance at December 31, 1997.................................... $ 4,448 $ 255,552 $ (619,889) $ (359,889)
----------- ---------- ------------ -----------
----------- ---------- ------------ -----------
</TABLE>
See Notes to Financial Statements.
F-53
<PAGE>
CAROLINA BROADCASTING, INC. AND GEORGETOWN RADIO, INC.
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
------------------
<S> <C>
Cash flows from operating activities:
Net loss.................................................................................... $ (584,583)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation............................................................................ 27,013
Amortization............................................................................ 78,897
Changes in assets and liabilities:
Accounts receivable, net................................................................ 28,984
Other current assets.................................................................... 25,000
Accounts payable........................................................................ 59,839
Accrued interest........................................................................ 131,573
------------------
Net cash used in operating activities................................................. (233,277)
------------------
Cash flows from investing activities:
Capital expenditures........................................................................ (46,777)
Payments for businesses acquired............................................................ (1,060,000)
------------------
Net cash used for investing activities................................................ (1,106,777)
------------------
Cash flows from financing activities:
Issuance of common stock.................................................................... 105,000
Net proceeds from shareholders' loans....................................................... 484,000
Proceeds from borrowings.................................................................... 50,800
------------------
Net cash provided by financing activities............................................. 639,800
------------------
Net decrease in cash and cash equivalents..................................................... (700,254)
Cash and cash equivalents, beginning of period................................................ 701,579
------------------
Cash and cash equivalents, end of period...................................................... $ 1,325
------------------
------------------
Supplemental disclosure:
Interest paid............................................................................... $ 36,667
------------------
------------------
Non-cash operating, investing and financing activities:
Trade revenue............................................................................... $ 40,942
------------------
------------------
Trade expense............................................................................... $ 40,942
------------------
------------------
Acquisition of assets in exchange for note payable.......................................... $ 500,000
------------------
------------------
</TABLE>
See Notes to Financial Statements.
F-54
<PAGE>
CAROLINA BROADCASTING, INC. AND GEORGETOWN RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
On January 6, 1997, Carolina Broadcasting, Inc. (Carolina) acquired two
radio stations located in Conway, South Carolina (WJXY-FM and WJXY-AM) for
$800,000 in cash plus a $500,000 promissory note payable to the seller, Downs
Satellite Broadcasting of South Carolina, Inc. Pursuant to a time brokerage
agreement, Carolina has operated these stations since October 1, 1996. On
February 6, 1997, Georgetown Radio, Inc. (Georgetown) acquired a radio station
located in Georgetown, South Carolina (WXJY-FM) for $260,000. The acquisitions
were accounted for as purchases. Accordingly, the accompanying combined
financial statements include the results of operations of the acquired entities
from the dates of acquisition.
The significant accounting principles followed by Carolina and Georgetown
and the methods of applying those principles which materially affect the
determination of financial position, results of operations, and cash flows are
summarized below.
BASIS OF PRESENTATION
Carolina and Georgetown (collectively, the Companies) share common owners
and common management. Thus, the Companies' financial position and results of
operations have been combined in the attached financial statements. All
significant intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Companies enter into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Companies use
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Companies to
concentrations of credit risk consist principally of cash and accounts
receivable. The Companies perform ongoing credit evaluations of their customers
and generally do not require collateral for their accounts receivable.
F-55
<PAGE>
CAROLINA BROADCASTING, INC. AND GEORGETOWN RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The Companies reserve for potential credit losses based upon the expected
collectibility of all accounts receivable.
CASH AND CASH EQUIVALENTS
The Companies consider all highly liquid investments with original
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Buildings......................................................... 15 years
Broadcasting equipment............................................ 15 years
Office furniture and equipment.................................... 5-7 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets primarily represent the excess of cost over the fair
market value of tangible net assets acquired. Intangible assets are stated at
cost and are being amortized using the straight-line method over fifteen years.
The Companies evaluate the carrying value of intangibles periodically in
relation to the projected future undiscounted cash flows of the related
businesses.
FEDERAL INCOME TAXES
The Companies have elected to be treated as Subchapter S corporations for
federal and state income tax purposes. As a result, the Companies' shareholders
include a pro-rata share of the Companies' taxable income in their respective
personal income tax returns. Accordingly, no federal and state income tax
expense or benefit has been included in the accompanying financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Companies financial instruments, including cash
and cash equivalents, accounts receivable and payable and long-term debt
approximate fair value.
F-56
<PAGE>
CAROLINA BROADCASTING, INC. AND GEORGETOWN RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Buildings......................................................... $ 46,473
Equipment......................................................... 212,529
Furniture and fixtures............................................ 17,041
---------
276,043
Accumulated depreciation.......................................... (27,073)
---------
248,970
Land.............................................................. 148,200
---------
Property and equipment, net....................................... $ 397,170
---------
---------
</TABLE>
3. DEBT:
Debt at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Seller note payable at 8%, payable in 24 monthly installments
beginning January 2000 and $450,000 due January 2002.......... $ 500,000
Bank note payable at 9.5%, due April 1998....................... 50,800
Stockholder notes payable at 12%, due January 2007.............. 1,040,000
Stockholder notes payable at 12%, due June 1999................. 114,000
---------
$1,704,800
---------
---------
</TABLE>
In connection with the acquisition of radio stations in January 1997,
Carolina entered into a $500,000 promissory note payable to the seller. In
October 1997, Carolina borrowed $50,800 from a bank to fund operations. In
addition, throughout 1997 certain shareholders made advances to Carolina to fund
operations. Such advances were evidenced by promissory notes payable.
The maturities of long-term debt outstanding at December 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998............................................................. $ 50,800
1999............................................................. 114,000
2000............................................................. 25,000
2001............................................................. 25,000
2002............................................................. 450,000
Thereafter....................................................... 1,040,000
</TABLE>
4. COMMON STOCK:
Carolina has authorized 5,000 shares of common stock, $1 par value, of which
2,226 shares were outstanding at December 31, 1997. Georgetown has authorized
5,000 shares of common stock, $1 par value, of which 2,222 shares were
outstanding at December 31, 1997.
F-57
<PAGE>
CAROLINA BROADCASTING, INC. AND GEORGETOWN RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of approximately $47,726 for the year ended
December 31, 1997 under operating leases for radio broadcasting facilities.
Future minimum annual payments under these non-cancelable operating leases and
agreements as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................... $ 41,572
1999............................................................... 37,176
2000............................................................... 37,176
2001............................................................... 600
Thereafter......................................................... --
</TABLE>
6. SALE OF ASSETS:
In October 1997, the Companies entered into an asset purchase agreement to
sell the Companies' assets to Cumulus Broadcasting, Inc., a wholly owned
subsidiary of Cumulus Media Inc., for approximately $2.3 million.
F-58
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in partners' deficit, and of cash flows present
fairly, in all material respects, the financial position of Castle Broadcasting
Limited Partnership at December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 18, 1998
F-59
<PAGE>
CASTLE BROADCASTING LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
ASSETS
Current assets:
Cash.............................................................................. $ 22,925 $ 106,242
Accounts receivable, less allowance for
doubtful accounts of $10,500 for both years..................................... 209,118 184,482
Prepaid expenses and other current assets......................................... 16,539 19,219
------------- -------------
Total current assets.......................................................... 248,582 309,943
Other assets........................................................................ 45,593 --
Property and equipment, net......................................................... 242,680 104,051
Intangible assets, net.............................................................. 495,731 47,762
------------- -------------
Total assets.................................................................. $ 1,032,586 $ 461,756
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Note payable to bank.............................................................. $ 70,000 $ --
Accounts payable.................................................................. 55,318 22,161
Accrued and other current liabilities............................................. 39,146 39,319
Note payable on demand to a limited partner....................................... 1,990,190 1,445,190
Accrued interest to a limited partner............................................. 439,367 515,919
------------- -------------
Total current liabilities..................................................... 2,594,021 2,022,589
------------- -------------
Commitments and contingencies
Partners' deficit................................................................... (1,561,435) (1,560,833)
------------- -------------
Total liabilities and partners' deficit....................................... $ 1,032,586 $ 461,756
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
F-60
<PAGE>
CASTLE BROADCASTING LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
Revenues:........................................................................... $ 1,778,115 $ 1,689,508
Less: agency commissions......................................................... (142,134) (122,773)
------------- -------------
Net revenues................................................................ 1,635,981 1,566,735
------------- -------------
Operating expenses:
Programming and technical......................................................... 370,072 257,933
Sales............................................................................. 443,533 373,409
Engineering....................................................................... 9,778 9,907
News.............................................................................. 109,446 103,087
General and administrative........................................................ 330,666 337,769
Promotions........................................................................ 106,055 127,692
Trade............................................................................. 28,365 26,510
Depreciation and amortization..................................................... 47,908 31,275
National sales.................................................................... 40,900 67,171
------------- -------------
Total operating expenses...................................................... 1,486,723 1,334,753
------------- -------------
Income from operations.............................................................. 149,258 231,982
------------- -------------
Other income (expense):
Gain on sale of equipment......................................................... -- 75
Interest income................................................................... 1,340 1,100
Interest expense.................................................................. (151,200) (133,680)
------------- -------------
Other income (expense) net.................................................... (149,860) (132,505)
------------- -------------
Net income (loss)................................................................... $ (602) $ 99,477
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
F-61
<PAGE>
CASTLE BROADCASTING LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
<TABLE>
<S> <C>
Balance at January 1, 1996...................................................... $(1,660,310)
Net income...................................................................... 99,477
----------
Balance at December 31, 1996.................................................... (1,560,833)
Net loss........................................................................ (602)
----------
Balance at December 31, 1997.................................................... $(1,561,435)
----------
----------
</TABLE>
See Notes to Financial Statements.
F-62
<PAGE>
CASTLE BROADCASTING LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------
<S> <C> <C>
1997 1996
----------- -----------
Cash flows from operating activities:
Net income (loss)..................................................................... $ (602) $ 99,477
Adjustments to reconcile net income(loss) to net cash provided by operating
activities:
Depreciation and amortization..................................................... 47,908 31,275
Loss on sale of equipment......................................................... -- (75)
(Increase) in accounts receivable................................................. (24,636) (5,249)
Decrease in prepaid expenses and other current assets............................. 2,680 11,238
Increase (decrease) in accounts payable........................................... 33,157 (132)
Decrease in accrued and other current liabilities................................. (173) (417)
Decrease in accrued interest to a limited partner................................. (76,552) (125,320)
----------- -----------
Net cash (used in) provided by operating activities..................................... (18,218) 10,797
----------- -----------
Cash flows from investing activities:
Proceeds from sale of equipment....................................................... -- 75
Purchases of property and equipment................................................... (66,991) (13,056)
Acquisition of WBZN--FM............................................................... (567,515) --
Deferred costs incurred with sale of the Partnership.................................. (45,593) --
----------- -----------
Net cash used for investing activities.................................................. (680,099) (12,981)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of debt........................................................ 615,000 --
----------- -----------
Net cash provided by financing activities............................................... 615,000 --
----------- -----------
Net decrease in cash.................................................................... (83,317) (2,184)
Cash at beginning of year............................................................... 106,242 108,426
----------- -----------
Cash at end of year..................................................................... $ 22,925 $ 106,242
----------- -----------
----------- -----------
Supplemental cash flow information:
Cash payments for interest............................................................ $ 238,257 $ 259,000
----------- -----------
----------- -----------
Non-cash operating activities:
Trade revenue......................................................................... $ 28,200 $ 23,938
----------- -----------
----------- -----------
Trade expense......................................................................... $ 28,365 $ 26,510
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements.
F-63
<PAGE>
CASTLE BROADCASTING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Castle Broadcasting Limited Partnership (the "Partnership") owns and
operates radio stations WQCB-FM and WBZN-FM (the "Stations") located in Brewer,
Maine. The general partner of the Partnership is 200 Danforth Street, a company
controlled by a limited partner of the Partnership. During 1997, this limited
partner acquired the ownership interests of the three other limited partners of
the Partnership.
The significant accounting principles followed by the Partnership and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated using accelerated methods over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Transmitter....................................................... 25 years
Broadcasting towers and equipment................................. 15 years
Office furniture and equipment.................................... 5 years
Leasehold improvement............................................. 5 years
Vehicles.......................................................... 5 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets represent the excess of cost over the fair market value of
tangible net assets acquired and consist primarily of Federal Communications
Commission ("FCC") licenses and goodwill. Intangible assets are stated at cost
and are being amortized using the straight-line method over 15 years. The
Partnership evaluates the carrying value of intangibles periodically in relation
to the projected future undiscounted net cash flows of the related businesses.
INCOME TAXES
The Partnership operates as a Limited Partnership under the provisions of
the Internal Revenue Code. Accordingly, no provision for income taxes has been
made since income or losses of the Partnership are allocated to the partners.
F-64
<PAGE>
CASTLE BROADCASTING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Partnership enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Partnership uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. ACQUISITIONS
On October 1, 1997, the Partnership acquired WBZN-FM in Brewer, Maine for
$500,000 in cash plus various other direct acquisition costs totaling $67,515.
The purchase price was allocated to property and equipment ($99,810) and
intangibles ($467,705). Results of operations of WBZN-FM for the 1997 period
prior to acquisition are not available. The net loss of WBZN-FM for the 1996
year, based on unaudited financial information, approximated $110,000.
The acquisition was accounted for as a purchase. Accordingly, the
accompanying financial statements include the results of operations of the
acquired entity from the date of acquisition.
3. OTHER ASSETS
Other assets represents deferred costs incurred in connection with the sale
of the Partnership.
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1997 1996
---------- ----------
Transmitter........................................................... $ 115,883 $ 108,583
Broadcasting towers and equipment..................................... 723,141 593,169
Office furniture and equipment........................................ 108,510 89,038
Leasehold improvements................................................ 23,816 16,518
Vehicles.............................................................. 11,630 8,870
---------- ----------
Total property and equipment.......................................... 982,980 816,178
Accumulated depreciation.............................................. (757,220) (729,047)
---------- ----------
225,760 87,131
Land.................................................................. 16,920 16,920
---------- ----------
Property and equipment, net........................................... $ 242,680 $ 104,051
---------- ----------
---------- ----------
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1996 was
$28,173 and $19,335 respectively.
F-65
<PAGE>
CASTLE BROADCASTING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1997 1996
---------- ----------
Goodwill, FCC license and other....................................... $ 646,810 $ 179,105
Accumulated amortization.............................................. (151,079) (131,343)
---------- ----------
Intangible assets, net................................................ $ 495,731 $ 47,762
---------- ----------
---------- ----------
</TABLE>
Amortization expense for the years ended December 31, 1997 and 1996 was
$19,735 and $11,940, respectively.
6. DEBT:
The Partnership has significant transactions with a limited partner and is
dependent upon the limited partner for continued support. The Partnership has
debt of $1,990,190 and $1,445,190 at December 31, 1997 and 1996, respectively,
payable to the limited partner on demand. The note is collaterialized by a
mortgage on real property in Garland, Maine and a security agreement on all
equipment, accounts receivable and contract rights of the Partnership. Interest
is due quarterly at 1% above Bank of Boston Base Rate. At December 31, 1997 and
1996, the Partnership owed accrued interest of $439,367 and $515,919,
respectively, to the limited partner.
The Partnership obtained a $100,000 secured demand line of credit during
1997. At December 31, 1997, $70,000 is outstanding. The borrowing rate is based
on the Bank of Boston's prime rate of interest. The Partnership's obligations
under the facility are secured by various marketable securities held by the
limited partner.
7. COMMITMENTS AND CONTINGENCIES:
The Partnership incurred expenses of approximately $52,632 and $46,498 for
the period ended December 31, 1997 and 1996, respectively, under operating
leases for radio broadcasting facilities. Future minimum annual payments at
December 31, 1997 are:
<TABLE>
<S> <C>
1998................................................................... $ 9,525
1999................................................................... 6,000
2000................................................................... 6,000
2001................................................................... 6,000
2002................................................................... 6,000
</TABLE>
Also, at December 31, 1997, the Partnership has vehicles under capital lease
with a cost of $11,630 ($8,870 at December 31, 1996) with accumulated
depreciation of $9,008 ($8,870 at December 31, 1996).
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable, and accounts payable
approximates fair value because of the short maturity of these instruments.
F-66
<PAGE>
CASTLE BROADCASTING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. SUBSEQUENT EVENT:
In February 1998, the Partnership entered into an agreement to sell, subject
to approval of the FCC, certain assets of the Partnership to Cumulus
Broadcasting, Inc., a wholly owned subsidiary of Cumulus Media Inc., for
$6,400,000.
F-67
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of owner's equity in stations and of cash
flows present fairly, in all material respects, the financial position of
Clearly Superior Radio Properties (the "Company") at December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the two
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These combined financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these combined financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall combined financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 24, 1998
F-68
<PAGE>
CLEARLY SUPERIOR RADIO PROPERTIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 10,604 $ 637,035
Accounts receivable, less allowance for doubtful accounts of $44,427 and $25,039,
respectively..................................................................... 438,020 253,204
Prepaid and other current assets................................................... 23,654 --
------------ ------------
Total current assets............................................................. 472,278 890,239
Property and equipment, net.......................................................... 556,394 115,849
Intangible assets, net............................................................... 2,759,096 220,816
------------ ------------
Total assets..................................................................... $3,787,768 $1,226,904
------------ ------------
------------ ------------
LIABILITIES AND OWNER'S EQUITY IN STATIONS
Current liabilities:
Accounts payable and accrued liabilities........................................... $ 6,231 $ 12,593
Current portion of long-term debt.................................................. 27,072 47,038
------------ ------------
Total current liabilities........................................................ 33,303 59,631
Long term debt....................................................................... 3,170,307 73,962
------------ ------------
Total liabilities................................................................ 3,203,610 133,593
------------ ------------
Commitment and contingencies
Owner's equity in stations........................................................... 584,158 1,093,311
------------ ------------
Total liabilities and owner's equity in stations................................. $3,787,768 $1,226,904
------------ ------------
------------ ------------
</TABLE>
See Notes to Combined Financial Statements.
F-69
<PAGE>
CLEARLY SUPERIOR RADIO PROPERTIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
Revenues.............................................................................. $ 2,661,954 $ 1,568,752
Less: agency commissions............................................................ (104,140) (56,402)
------------ ------------
Net revenues...................................................................... 2,557,814 1,512,350
------------ ------------
Operating expenses:
Programming......................................................................... 530,285 301,997
Sales and promotions................................................................ 636,030 360,239
Technical........................................................................... 90,536 33,221
General and administrative.......................................................... 470,661 333,076
Depreciation and amortization....................................................... 211,192 81,105
------------ ------------
Total operating expenses.......................................................... 1,938,704 1,109,638
------------ ------------
Income from operations................................................................ 619,110 402,712
Other income (expense), net........................................................... (75,235) 36,965
Interest income (expense), net........................................................ (261,602) 15,707
------------ ------------
Net income............................................................................ $ 282,273 $ 455,384
------------ ------------
------------ ------------
</TABLE>
See Notes to Combined Financial Statements.
F-70
<PAGE>
CLEARLY SUPERIOR RADIO PROPERTIES
COMBINED STATEMENT OF OWNER'S EQUITY IN STATIONS
<TABLE>
<S> <C>
Balance at January 1, 1996...................................................... $ 972,927
Owner contributions............................................................. 50,000
Owner distributions............................................................. (385,000)
Net income...................................................................... 455,384
---------
Balance at December 31, 1996.................................................... 1,093,311
Owner distributions............................................................. (791,426)
Net income...................................................................... 282,273
---------
Balance at December 31, 1997.................................................... $ 584,158
---------
---------
</TABLE>
See Notes to Combined Financial Statements.
F-71
<PAGE>
CLEARLY SUPERIOR RADIO PROPERTIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------
<S> <C> <C>
1997 1996
----------- ----------
Cash flows from operating activities:
Net income............................................................................ $ 282,273 $ 455,384
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization....................................................... 211,192 81,105
Provision for doubtful accounts..................................................... 19,388 10,192
Gain on sale of equipment........................................................... -- 1,000
Increase in accounts receivable..................................................... (204,204) (54,649)
Increase in prepaid and other current assets........................................ (23,654) (14,835)
(Decrease) increase in accounts payable & accrued liabilities....................... (6,362) 4,639
----------- ----------
Net cash provided by operating activities........................................... 278,633 482,836
----------- ----------
Cash flows from investing activities:
Purchases of property and equipment................................................... (32,171) (110,696)
Purchase of radio station assets...................................................... (3,157,844) --
----------- ----------
Cash used for investing activities.................................................... (3,190,015) (110,696)
----------- ----------
Cash flows from financing activities:
Repayment of debt..................................................................... (1,221,000) --
Distributions to owner................................................................ (791,426) (385,000)
Contributions from owner.............................................................. -- 50,000
Proceeds from debt.................................................................... 4,297,377 --
----------- ----------
Cash provided by (used in) financing activities....................................... 2,284,951 (335,000)
----------- ----------
(Decrease) increase in cash and cash equivalents........................................ (626,431) 37,140
Cash and cash equivalents at beginning of year.......................................... 637,035 599,895
----------- ----------
Cash and cash equivalents at end of year................................................ $ 10,604 $ 637,035
----------- ----------
----------- ----------
Supplemental disclosures of cash flow information:
Cash paid for interest................................................................ $ 270,907 $ --
----------- ----------
----------- ----------
Non-cash operating activities:
Trade revenue......................................................................... $ 195,801 $ 43,665
----------- ----------
----------- ----------
Trade expense......................................................................... $ 194,954 $ 34,537
----------- ----------
----------- ----------
</TABLE>
See Notes to Combined Financial Statements.
F-72
<PAGE>
CLEARLY SUPERIOR RADIO PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Clearly Superior Radio Properties ("the Company") represents six radio
stations under the common control of the sole owner. The stations are held in
pass-through entities which are controlled by the owner. The Company has
stations licensed in Marion, Illinois (WDDD-FM), Johnston City, Illinois (WDDD-
AM), Herrin, Illinois (WVZA-FM), West Frankfort, Illinois (WQUL-FM) & (WFRX-AM),
and Carbondale, IL (WTAO-FM).
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
INCOME TAXES
The stations are held in pass-through entities which are controlled by the
owner. Income or loss of the Company is included in the tax return of the sole
owner. Accordingly, federal income taxes are not recognized by the Company.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repair and maintenance, that significantly add to
productivity or extend the economic lives of the assets are capitalized at cost
and depreciated on an accelerated method as follows.
<TABLE>
<S> <C>
Building.................................................... 15 years
Broadcasting towers and equipment........................... 6 years
Office furniture and equipment.............................. 6 years
Leasehold improvements...................................... Term of lease
Automobiles................................................. 6 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets represent FCC licenses and organizational costs. Fee
licenses and organizational costs are stated at cost and are being amortized
using the straight-line method over the estimated useful
F-73
<PAGE>
CLEARLY SUPERIOR RADIO PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
life of 15 and 5 years, respectively. The Company evaluates the carrying value
of intangibles periodically in relation to the projected future undiscounted net
cash flows of the related businesses.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
recharged products or services before advertising air time is provided, a trade
liability is recognized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value due to the short maturity of these
instruments. The fair value of notes payable are estimated based on current
market rates and approximates the carrying value.
2. ACQUISITION
In March 1997, the Company acquired WTAO-FM in Carbondale, IL for
approximately $3 million. The acquisition was accounted for as a purchase.
Accordingly, the accompanying combined financial statements include the results
of operations of the acquired entity from the date of acquisition.
The following pro forma financial information represents the unaudited pro
forma results of operations as if the aforementioned acquisition had been
completed on January 1, 1996, after giving effect to certain adjustments
including increased depreciation and amortization of property and equipment and
intangible assets. These unaudited pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of the results of
operations which would have been achieved had this acquisition been completed as
of January 1, 1996, nor are the results indicative of future results of
operations.
<TABLE>
<CAPTION>
PRO FORMA FOR THE YEARS
ENDED DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
(UNAUDITED)
Revenues.......................................................... $ 2,690,889 $ 2,541,006
------------ ------------
------------ ------------
Income from operations............................................ $ 657,271 $ 670,135
------------ ------------
------------ ------------
Net income........................................................ $ 317,619 $ 733,136
------------ ------------
------------ ------------
</TABLE>
F-74
<PAGE>
CLEARLY SUPERIOR RADIO PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Building......................................................... $ 303,542 $ --
Broadcasting towers and equipment................................ 368,118 208,270
Office furniture and equipment................................... 71,485 62,674
Leasehold improvements........................................... 12,750 12,750
Automobile....................................................... 43,390 35,477
------------ ------------
799,285 319,171
Accumulated depreciation......................................... (313,882) (203,322)
Land............................................................. 70,991 --
------------ ------------
Property and equipment, net...................................... $ 556,394 $ 115,849
------------ ------------
------------ ------------
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1996 was
$110,560 and $50,829, respectively.
4. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
FCC license...................................................... $3,147,990 $ 518,330
Organizational costs............................................. 55,214 45,962
------------ ------------
3,203,204 564,292
Accumulated amortization......................................... (444,108) (343,476)
------------ ------------
Intangible assets, net........................................... $2,759,096 $ 220,816
------------ ------------
------------ ------------
</TABLE>
Amortization expense for the years ended December 31, 1997 and 1996 was
$100,632 and $30,276, respectively.
5. RELATED PARTY TRANSACTIONS:
The Company rents property from its owner for use in the broadcasting
operations. Payments of $4,000 per month are made on a building lease with an
initial term of ten years, with two five-year extensions available at the option
of the lessee. Payments of $1,100 per month are made on a tower lease with an
initial term of fifteen years, with two five-year extensions available at the
option of the lessee. Additional payments of $500 per month were made during
1996 on an additional tower lease which expired December 31, 1996. The total
rental payments included in the Company's expense for 1996 under these leases
total $67,200.
During 1997, payments of $4,000 per month continued to be made on the
building lease. Payment of $2,380 per month are made to the sole stockholder on
various tower leases. In September 1997, the Company sold the WTAO transmitter
tower to the sole stockholder which then leased to the Company for
F-75
<PAGE>
CLEARLY SUPERIOR RADIO PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. RELATED PARTY TRANSACTIONS: (CONTINUED)
$500 per month. Total rental payments included in the Company's expense for 1997
under these leases total $78,560. All lease agreements are subject to annual
escalations based on inflation.
Future minimum annual payments in current year dollars, under these
non-cancelable operating leases & agreement as of December 31, 1997, are as
follows:
<TABLE>
<S> <C>
1998............................................................ $ 82,560
1999............................................................ 82,560
2000............................................................ 82,560
2001............................................................ 82,560
2002............................................................ 82,560
Thereafter...................................................... 825,000
---------
$1,237,800
---------
---------
</TABLE>
6. LONG-TERM DEBT:
Following is a summary of long-term debt at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
------------ ----------
<S> <C> <C>
Note payable to financial institution, due May 31, 1998, including interest at 12%,
interest payable monthly.............................................................. $ -- $ 47,000
Note payable to financial institution, due in annual installments payable
May 31, 1997 and 1998, including interest at 12%, interest payable monthly............ -- 74,000
Note payable to bank, variable interest rate (8.75% on December 31, 1997), interest
payable monthly....................................................................... 3,030,000 --
Note payable to bank payable in monthly installments of $2,256, including interest at
7.75%, interest payable monthly....................................................... 167,379 --
------------ ----------
3,197,379 121,000
Less: Current maturities of long-term debt.............................................. (27,072) (47,038)
------------ ----------
$ 3,170,307 $ 73,962
------------ ----------
------------ ----------
</TABLE>
F-76
<PAGE>
CLEARLY SUPERIOR RADIO PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
Payment obligation as of December 31, 1997 by year are as follows:
<TABLE>
<CAPTION>
AMOUNT
------------
<S> <C>
1998............................................................................ $ 27,072
1999............................................................................ 27,072
2000............................................................................ 27,072
2001............................................................................ 27,072
2002............................................................................ 27,072
Thereafter...................................................................... 3,062,019
------------
$ 3,197,379
------------
------------
</TABLE>
7. OTHER TRANSACTIONS:
As of December 18, 1997, the Company entered into an asset purchase
agreement to sell all of the assets of the Company to Cumulus Broadcasting, Inc.
(a wholly-owned subsidiary Cumulus Media Inc.) for $12.5 million.
F-77
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in stockholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of
Communications Properties, Inc. at August 31, 1997 and 1996, and the results of
its operations and its cash flows for each of the years then ended, in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
January 10, 1998
F-78
<PAGE>
COMMUNICATIONS PROPERTIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31,
---------------------------
<S> <C> <C>
1997 1996
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 47,812 $ 16,994
Accounts receivable, less allowance for doubtful accounts of $9,060 and $16,340,
respectively..................................................................... 314,164 282,551
Prepaid expenses and other current assets.......................................... 12,910 18,326
Deferred income taxes.............................................................. 24,000 --
------------ -------------
Total current assets........................................................... 398,886 317,871
Property and equipment, net.......................................................... 1,873,040 174,966
Cash surrender value of life insurance............................................... 120,560 108,339
Long-term receivables from affiliates................................................ 15,352 33,112
Intangible assets, net............................................................... 731,000 198,314
------------ -------------
Total assets................................................................... $ 3,138,838 $ 832,602
------------ -------------
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt............................................... $ 36,373 $ --
Notes payable...................................................................... 2,718,202 1,577,084
Accounts payable................................................................... 88,189 47,055
Accrued and other current liabilities.............................................. 219,669 153,157
------------ -------------
Total current liabilities...................................................... 3,062,433 1,777,296
Long-term debt, less current maturities.............................................. 126,280 --
Deferred income taxes................................................................ 190,000 --
Stockholders' equity (deficit):
Common stock, $0.01 par value:
Class A Voting, authorized 1,250,000 shares; issued 62,150 and 70,988 shares..... 622 710
Class B Nonvoting, authorized 1,250,000 shares; issued 37,850 and 46,688
shares......................................................................... 379 467
Additional paid-in capital......................................................... 837,944 1,137,591
Accumulated deficit................................................................ (469,622) (1,542,102)
Less--Cost of treasury shares:
Class A--41,017.5 shares......................................................... (508,605) (508,605)
Class B--18,738.5 and 17,738.5 shares............................................ (100,593) (32,755)
------------ -------------
Total stockholders' equity (deficit)........................................... (239,875) (944,694)
------------ -------------
Total liabilities and stockholders' equity (deficit)........................... $ 3,138,838 $ 832,602
------------ -------------
------------ -------------
</TABLE>
See Notes to Financial Statements.
F-79
<PAGE>
COMMUNICATIONS PROPERTIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST
31,
---------------------------
<S> <C> <C>
1997 1996
------------ -------------
Revenues............................................................................ $ 2,527,771 $ 1,849,712
Less: agency commissions.......................................................... (150,876) (104,880)
------------ -------------
Net revenues.................................................................. 2,376,895 1,744,832
Operating expenses:
Programming....................................................................... 767,710 595,159
Sales and promotions.............................................................. 516,833 434,666
Technical......................................................................... 104,923 96,649
General and administrative........................................................ 900,768 577,270
Depreciation and amortization..................................................... 67,190 55,271
------------ -------------
Total operating expenses...................................................... 2,357,424 1,759,015
------------ -------------
Income (loss) from operations....................................................... 19,471 (14,183)
Other income (expense):
Gain on sale of stations.......................................................... 1,462,261 --
Interest expense.................................................................. (172,802) (139,260)
Other............................................................................. 37,200 30,898
------------ -------------
1,326,659 (108,362)
------------ -------------
Income (loss) before income taxes................................................... 1,346,130 (122,545)
Provision for income taxes.......................................................... 167,598 --
------------ -------------
Net income (loss)................................................................... $ 1,178,532 $ (122,545)
------------ -------------
------------ -------------
</TABLE>
See Notes to Financial Statements.
F-80
<PAGE>
COMMUNICATIONS PROPERTIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------------ PAID-IN ACCUMULATED ------------------------
CLASS A CLASS B CAPITAL DEFICIT CLASS A CLASS B TOTAL
----------- ----------- ------------ ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at August 31, 1995........ $ 710 $ 467 $ 1,137,591 $ (1,419,557) $ (508,605) $ (32,755) $ (822,149)
Net loss.......................... (122,545) (122,545)
----- ----- ------------ ------------- ----------- ----------- -------------
Balance at August 31, 1996........ 710 467 1,137,591 (1,542,102) (508,605) (32,755) (944,694)
Redemption of 8,838 Class A shares
and 8,838 Class B shares........ (88) (88) (299,647) (106,052) (405,875)
Purchase of 1,000 Class B shares
for the treasury................ (67,838) (67,838)
Net income........................ 1,178,532 1,178,532
----- ----- ------------ ------------- ----------- ----------- -------------
Balance at August 31, 1997........ $ 622 $ 379 $ 837,944 $ (469,622) $ (508,605) $ (100,593) $ (239,875)
----- ----- ------------ ------------- ----------- ----------- -------------
----- ----- ------------ ------------- ----------- ----------- -------------
</TABLE>
See Notes to Financial Statements.
F-81
<PAGE>
COMMUNICATIONS PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST
31,
-------------------------
<S> <C> <C>
1997 1996
------------ -----------
Cash flows from operating activities:
Net income (loss)................................................................. $ 1,178,532 ($ 122,545)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
(Gain) loss on sale of stations/equipment..................................... (1,462,261) 37
Provision for deferred income taxes........................................... 166,000 --
Depreciation and amortization................................................. 67,190 55,271
Provision for doubtful accounts............................................... (7,280) --
Increase in accounts receivable............................................... (167,442) (10,616)
Decrease (increase) in prepaid expenses and other current
assets...................................................................... 5,416 (164)
Increase in accounts payable.................................................. 41,134 22,910
Increase in accrued and other liabilities..................................... 66,512 25,612
------------ -----------
Net cash used in operating activities..................................... (112,199) (29,495)
------------ -----------
Cash flows from investing activities:
Purchases of property and equipment............................................... (18,189) (21,580)
Purchase of stations.............................................................. (2,290,855) --
Proceeds from sale of stations.................................................... 1,825,609 --
Other............................................................................. 5,539 (6,974)
------------ -----------
Net cash used for investing activities.................................... (477,896) (28,554)
------------ -----------
Cash flows from financing activities:
Proceeds from long-term borrowings................................................ -- 53,350
Increase (decrease) in notes payable.............................................. 1,026,788 (80,720)
Redemption of common stock........................................................ (405,875) --
------------ -----------
Net cash provided by (used in) financing activities....................... 620,913 (27,370)
------------ -----------
Increase (decrease) in cash and cash equivalents.................................... 30,818 (85,419)
Cash and cash equivalents at beginning of year...................................... 16,994 102,413
------------ -----------
Cash and cash equivalents at end of year............................................ $ 47,812 $ 16,994
------------ -----------
------------ -----------
Cash paid for interest.............................................................. $ 122,639 $ 119,836
------------ -----------
------------ -----------
Non-cash activities:
Trade revenue..................................................................... $ 180,617 $ 90,028
------------ -----------
------------ -----------
Trade expense..................................................................... $ 174,639 $ 90,028
------------ -----------
------------ -----------
Acquisition of treasury shares by issuance of a note payable...................... $ 67,838 $ --
------------ -----------
------------ -----------
Assumption of bank borrowings in connection with purchase of stations............. $ 209,145 $ --
------------ -----------
------------ -----------
</TABLE>
See Notes to Financial Statements.
F-82
<PAGE>
COMMUNICATIONS PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
At August 31, 1997, the Company owns and operates radio stations WDBQ-AM,
KXGE-FM and KLYV-FM located in Dubuque, Iowa and WJOD-FM located in Galena,
Illinois (the "Stations").
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expense
during the reporting period. Actual results could differ from these estimates
and assumptions.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Building and building improvements.............................. 15-25
years
Broadcasting equipment.......................................... 5-20 years
Office and other equipment...................................... 10 years
Vehicles........................................................ 3-5 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets represent the excess of cost over the fair market value of
tangible net assets acquired. Intangible assets are stated at cost and are being
amortized using the straight-line method over estimated useful lives of 15 to 40
years. The Company evaluates the carrying value of intangibles periodically in
relation to the projected future undiscounted net cash flows of the related
businesses.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
Fees paid pursuant to a local marketing agreement ("LMA") are amortized to
expense over the term of the agreement using the straight-line method.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products
F-83
<PAGE>
COMMUNICATIONS PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
or services received as advertising air time is broadcast. Products and services
received are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. ACQUISITIONS AND DISPOSITIONS
On August 1, 1997, the Company acquired WJOD-FM (Galena, Illinois) and
KGGY-FM (now KXGE-FM) (Dubuque, Iowa) for $2,500,000. The acquisition also
included a wireless paging business operated in Galena. The purchase price
comprised cash of $2,290,855 and assumption of liabilities for bank borrowings
aggregating $209,145. The stations that were acquired were operated under an LMA
from February 1, 1997 through date of acquisition.
The acquisition discussed above was accounted for as a purchase.
Accordingly, the accompanying financial statements include the results of
operations of the acquired entities from the date of acquisition. The purchase
price was allocated $1,860,000 to property and equipment and $640,000 to
intangible assets.
On July 31, 1997, the Company sold KATE-AM and KCPI-FM located in Albert
Lea, Minnesota, for $1,825,609.
Because of the comparability of the stations purchased and sold, no pro
forma results of operations have been presented.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AUGUST 31,
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
Building and improvements....................................... $ 74,892 $ 153,324
Broadcasting equipment.......................................... 2,623,574 1,805,348
Office and other equipment...................................... 245,535 335,339
Vehicles........................................................ 20,060 23,971
------------- -------------
2,964,061 2,317,982
Accumulated depreciation........................................ (1,126,021) (2,180,396)
------------- -------------
1,838,040 137,586
Land............................................................ 35,000 37,380
------------- -------------
Property and equipment, net..................................... $ 1,873,040 $ 174,966
------------- -------------
------------- -------------
</TABLE>
Depreciation expense for the years ended August 31, 1997 and 1996 was
$54,646 and $46,283, respectively.
F-84
<PAGE>
COMMUNICATIONS PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
-----------------------
<S> <C> <C>
1997 1996
---------- -----------
Goodwill............................................................. $ 821,163 $ 359,523
Accumulated amortization............................................. (90,163) (161,209)
---------- -----------
Intangible assets, net............................................... $ 731,000 $ 198,314
---------- -----------
---------- -----------
</TABLE>
Amortization expense for the year ended August 31, 1997 and 1996 was $12,544
and $8,988, respectively.
5. NOTES PAYABLE:
Notes payable consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
Note payable, bank, due in monthly installments of $17,652, including
interest at a variable rate of .5% above The First National Bank of
Chicago Prime Rate (8.75% at August 31, 1997), due January 1, 1997. The
note was collateralized by substantially all Company assets and the assets
of a related party. The note was also guaranteed by the cash surrender
value of an officer-stockholder life insurance policy and by personal
guarantees of an officer-stockholder...................................... $ -- $ 1,319,070
Note payable, under a line of credit agreement with a bank which allows the
Company to borrow up to $100,000. The line of credit bears interest at 1%
over The First National Bank of Chicago Prime Rate. Unpaid principal and
interest are due June 4, 1998............................................. 43,647 --
Note payable, bank, interest only payments, due at a variable rate of 1.5%
over The First National Bank of Chicago Prime Rate (9.75% at August 31,
1997). Unpaid principal and interest is due January 8, 1998 but has been
extended to February 28, 1998. The note is collateralized by substantially
all assets of the Company................................................. 1,249,939 --
Notes payable, stockholder. These notes bear interest at 7% and, in
accordance with the loan agreement, are subordinate to existing bank debt.
The notes are due on demand............................................... 1,171,026 258,014
Note payable, individual, bearing interest at 7%, due on demand............. 253,590 --
------------ ------------
$ 2,718,202 $ 1,577,084
------------ ------------
------------ ------------
</TABLE>
F-85
<PAGE>
COMMUNICATIONS PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
AUGUST 31,
----------------------
<S> <C> <C>
1997 1996
---------- ----------
Note payable, bank, due in monthly installments of $4,189, including
interest at 9.5%. The note matures June 4, 2001, and is
collateralized by a Security Agreement dated June 4, 1996, and a
real estate mortgage................................................ $ 162,653 $ --
Less: current maturities.............................................. 36,373 --
---------- ----------
Total long-term debt.................................................. $ 126,280 $ --
---------- ----------
---------- ----------
</TABLE>
Aggregate maturities required on long-term debt for years following August
31, 1997 are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 36,373
1999.............................................................. 39,983
2000.............................................................. 43,951
2001.............................................................. 42,346
---------
$ 162,653
---------
---------
</TABLE>
7. INCOME TAXES
The provision for income taxes consists of the following for years ended
August 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Current income taxes:
Federal....................................................................... $ -- $ --
State......................................................................... 1,598 --
Deferred income taxes........................................................... 166,000 --
---------- ----------
$ 167,598 $ --
---------- ----------
---------- ----------
</TABLE>
Income tax expense (benefit) differs from the amount of income tax
determined by applying the U.S. federal income tax rate to pretax income for the
years ended August 31, 1997 and 1996, due to the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Computed "expected" tax expense (benefit) at 34%............ $ 457,700 ($ 41,600)
Increase (decrease) in income taxes resulting from:
Effect of graduated rates lower than 34%.................. (167,802) 10,600
State income taxes........................................ 1,600 --
Increase (reduction) in valuation allowance............... (133,000) 15,000
Expiration of general business tax credits................ 3,000 8,400
Reduction in contribution carryforward.................... 2,000 --
Permanently nondeductible expenses........................ 4,100 7,600
---------- ----------
Total income tax expense................................ $ 167,598 $ --
---------- ----------
---------- ----------
</TABLE>
F-86
<PAGE>
COMMUNICATIONS PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
Deferred tax assets and liabilities consisted of the following at August 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
General business tax credits...................................... $ 43,000 $ 46,000
Net operating loss carryforwards.................................. 49,000 66,000
Contribution carryforward......................................... 3,000 5,000
Allowance for doubtful accounts................................... 2,000 3,000
Accrued expenses.................................................. 22,000 16,000
----------- -----------
119,000 136,000
Less deferred tax valuation allowance............................. -- (133,000)
----------- -----------
119,000 3,000
Deferred tax liability relating to property and equipment........... (285,000) (3,000)
----------- -----------
Net deferred tax liabilities...................................... ($ 166,000) $ --
----------- -----------
----------- -----------
</TABLE>
8. RELATED PARTY TRANSACTIONS:
The long-term receivables from affiliates of $15,352 and $33,112 at August
31, 1997 and 1996, respectively, are due from radio stations owned by the
principal stockholder of the Company and are personally guaranteed by him.
The Company also leases land and buildings from the principal stockholder.
The lease is on a yearly basis and provides that the lessee pay general
maintenance plus a monthly rental. Rent expense related to this lease was
$77,230 and $80,040 for the years ended August 31, 1997 and 1996, respectively.
Unpaid rentals under the lease included in accounts payable were $42,020 and
$20,813 at August 31, 1997 and 1996, respectively.
9. COMMITMENTS AND CONTINGENCIES:
Commencing in 1997, the Company leases building space from an unrelated
party. This operating lease expires March 31, 2001, and requires monthly
payments of $2,430. Total rent expense recognized on this lease for the year
ended August 31, 1997 was $19,440.
Total minimum future lease commitments under this lease for the years ending
August 31 are as follows:
<TABLE>
<S> <C>
1998.............................................................. $29,160
1999.............................................................. 29,160
2000.............................................................. 29,160
2001.............................................................. 17,010
---------
$104,490
---------
---------
</TABLE>
F-87
<PAGE>
COMMUNICATIONS PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value because of the short maturity of these
instruments. The carrying amount of long-term debt approximates its fair value.
11. SUBSEQUENT EVENTS:
In October 1997, the Company entered into an agreement with Cumulus
Broadcasting, Inc. (a wholly owned subsidiary of Cumulus Media, Inc.)
("Cumulus") to sell the outstanding capital stock of the Company, subject to
approval of the Federal Communications Commission, for $4,881,263.
Subsequent to August 31, 1997, but prior to the sale to Cumulus, the
insurance policy on the life of the sole shareholder (carried at a cash
surrender value of $120,560 in the balance sheet at August 31, 1997) was
transferred to a related company and notes payable owing to the stockholder were
reduced by the same amount.
F-88
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in stockholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of Crystal
Radio Group, Inc. at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 13, 1998
F-89
<PAGE>
CRYSTAL RADIO GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
<S> <C> <C>
1997 1996
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 320,622 $ 93,459
Accounts receivable, less allowance for
doubtful accounts of $9,000 and $9,000, respectively............................. 784,716 667,819
Receivable from shareholder........................................................ -- 41,289
Prepaid expenses and other current assets.......................................... 8,538 7,116
------------- ------------
Total current assets........................................................... 1,113,876 809,683
Property and equipment, net.......................................................... 637,162 693,866
Intangible assets, net of accumulated amortization
of $463,255 and $406,025, respectively............................................. 417,488 474,718
Deposits and other................................................................... 2,438 3,888
------------- ------------
Total assets................................................................... $ 2,170,964 $ 1,982,155
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short-term borrowings.............................................................. $ 326,530 --
Current portion of long-term debt.................................................. 1,326,250 $ 457,747
Accounts payable................................................................... 21,391 60,717
Notes payable--stockholders........................................................ 250,000 250,000
Current portion of payable to former stockholder................................... 579,978 --
Dividends payable.................................................................. -- 131,537
Accrued wages and commissions...................................................... 69,735 65,761
Accrued and other current liabilities.............................................. 25,853 28,589
------------- ------------
Total current liabilities...................................................... 2,599,737 994,351
------------- ------------
Long-term debt....................................................................... -- 1,363,360
Long term payable to former stockholder.............................................. 1,106,374 --
------------- ------------
Total liabilities.............................................................. 3,706,111 2,357,711
Commitments and contingent liabilities............................................... -- --
Stockholders' equity (deficit):
Common stock, $1 par value, 100,000 shares authorized,
93,094 issued and outstanding.................................................... 93,094 93,094
Additional paid-in capital......................................................... 303,036 290,664
Accumulated deficit................................................................ (612,256) (759,314)
Less--treasury stock at cost, 26,264 shares........................................ (1,319,021) --
------------- ------------
Total stockholders' equity (deficit)........................................... (1,535,147) (375,556)
------------- ------------
Total liabilities and stockholders' equity (deficit)........................... $ 2,170,964 $ 1,982,155
------------- ------------
------------- ------------
</TABLE>
See Notes to Financial Statements.
F-90
<PAGE>
CRYSTAL RADIO GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
<S> <C> <C> <C>
1997 1996 1995
------------ ------------ ------------
Revenues:............................................................... $ 4,579,576 $ 4,125,962 $ 3,774,516
Less: agency commissions.............................................. (601,172) (530,197) (472,154)
------------ ------------ ------------
Net revenues...................................................... 3,978,404 3,595,765 3,302,362
Operating expenses:
Programming........................................................... 1,037,483 973,259 900,929
Sales and promotions.................................................. 733,875 682,557 673,289
Technical............................................................. 116,504 60,741 56,750
General and administrative............................................ 802,006 866,620 804,973
Non-compete provision................................................. 700,000 -- --
Depreciation and amortization......................................... 139,886 141,769 122,189
------------ ------------ ------------
Total operating expenses.......................................... 3,529,754 2,724,946 2,558,130
------------ ------------ ------------
Income from operations.................................................. 448,650 870,819 744,232
Interest expense........................................................ 221,735 217,674 269,374
Interest income......................................................... (9,430) (4,752) (6,899)
------------ ------------ ------------
Net income.............................................................. $ 236,345 $ 657,897 $ 481,757
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
F-91
<PAGE>
CRYSTAL RADIO GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED TREASURY
STOCK CAPITAL DEFICIT STOCK TOTAL
--------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995................... $ 93,094 $ 290,664 $ (1,490,815) $ 1,107,057
Net income................................... 481,757 481,757
Dividends.................................... (149,145) (149,145)
--------- ---------- ------------- ------------- -------------
Balance at December 31, 1995................. 93,094 290,664 (1,158,203) (774,445)
Net income................................... 657,897 657,897
Dividends.................................... (259,008) (259,008)
--------- ---------- ------------- ------------- -------------
Balance at December 31, 1996................. 93,094 290,664 (759,314) (375,556)
Net income................................... 236,345 236,345
Dividends.................................... (89,287) (89,287)
Purchase of treasury stock................... $ (1,506,649) (1,506,649)
Sale of treasury stock....................... 12,372 187,628 200,000
--------- ---------- ------------- ------------- -------------
Balance at December 31, 1997................. $ 93,094 $ 303,036 $ (612,256) $ (1,319,021) $ (1,535,147)
--------- ---------- ------------- ------------- -------------
--------- ---------- ------------- ------------- -------------
</TABLE>
See Notes to Financial Statements.
F-92
<PAGE>
CRYSTAL RADIO GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------
<S> <C> <C> <C>
1997 1996 1995
------------ ----------- -----------
Cash flows from operating activities:
Net income.............................................................. $ 236,345 $ 657,897 $ 481,757
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization......................................... 139,886 141,769 122,189
Increase in accounts receivable....................................... (116,897) (18,495) (114,574)
Increase in shareholder receivable.................................... -- -- (11,961)
Non-compete provision................................................. 700,000 -- --
Non-compete payment................................................... (175,000) -- --
Decrease (increase) in prepaid expenses and other assets.............. 28 (295) (5,757)
(Decrease) increase in accounts payable............................... (39,326) (58,888) 100,394
Increase (decrease) in accrued and other liabilities.................. 28,030 (37,358) 16,014
------------ ----------- -----------
Net cash provided by operating activities............................... 773,066 684,630 588,062
------------ ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment..................................... (25,952) (139,478) (279,629)
Proceeds from life insurance policy..................................... -- -- 10,000
Cash payments for other assets.......................................... -- -- (56,032)
Proceeds from other assets.............................................. -- 75,854 --
------------ ----------- -----------
Cash used for investing activities...................................... (25,952) (63,624) (325,661)
------------ ----------- -----------
Cash flows from financing activities:
Proceeds from short-term borrowings..................................... 326,530 -- 250,000
Repayment of long-term obligations...................................... (494,857) (456,238) (471,596)
Dividends paid.......................................................... (220,824) (175,533) (101,083)
Purchase of treasury stock.............................................. (330,800) -- --
Sale of treasury stock.................................................. 200,000 -- --
------------ ----------- -----------
Cash used for financing activities...................................... (519,951) (631,771) (322,679)
------------ ----------- -----------
Increase (decrease) in cash and cash equivalents.......................... 227,163 (10,765) (60,278)
Cash and cash equivalents at beginning of year............................ 93,459 104,224 164,502
------------ ----------- -----------
Cash and cash equivalents at end of year.................................. $ 320,622 $ 93,459 $ 104,224
------------ ----------- -----------
------------ ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for interest.................................................. $ 194,943 $ 217,674 $ 269,374
------------ ----------- -----------
------------ ----------- -----------
Non-cash operating and financing activities:
Trade revenue........................................................... $ 179,578 $ 138,410 $ 96,813
------------ ----------- -----------
------------ ----------- -----------
Trade expense........................................................... $ 101,539 $ 131,719 $ 106,567
------------ ----------- -----------
------------ ----------- -----------
Purchase of treasury stock.............................................. $ 1,175,849 $ -- $ --
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See Notes to Financial Statements.
F-93
<PAGE>
CRYSTAL RADIO GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Crystal Radio Group, Inc. (the "Company") owns and operates radio stations
WKFR-FM, WKMI-AM and WRKR-FM located in Kalamazoo, Michigan.
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and accounts
receivable. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral for its accounts receivable.
The Company reserves for potential credit losses based upon the expected
collectibility of all accounts receivable.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Broadcasting towers and equipment................. 5-15 years
Buildings......................................... 19-31.5 years
Office furniture and equipment.................... 5-7 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
F-94
<PAGE>
CRYSTAL RADIO GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INTANGIBLE ASSETS
Intangible assets primarily include goodwill and Federal Communications
Commission ("FCC") license. Intangible assets are stated at cost and are being
amortized using the straight-line method over estimated useful lives of 5 to 40
years. Amortization expense was $57,230 in each of 1997, 1996 and 1995. The
Company evaluates the carrying value of intangibles periodically in relation to
the projected future undiscounted net cash flows of the related businesses.
INCOME TAXES
The Company's shareholders elected S Corporation status in 1986. In lieu of
corporate income taxes, the Company's taxable income or loss is reported by its
shareholders.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Broadcasting towers and equipment............................ $1,865,697 $1,849,793
Buildings.................................................... 562,412 562,412
Office furniture and equipment............................... 275,119 265,073
------------ ------------
2,703,228 2,677,278
Accumulated depreciation..................................... (2,142,322) (2,059,668)
------------ ------------
560,906 617,610
Land......................................................... 76,256 76,256
------------ ------------
Property and equipment, net.................................. $ 637,162 $ 693,866
------------ ------------
------------ ------------
</TABLE>
Depreciation expense for 1997, 1996 and 1995 was $82,656, $84,539 and
$64,959, respectively.
3. RELATED PARTY TRANSACTIONS:
Notes payable--stockholders in the amount of $250,000 at December 31, 1997
consist of promissory notes, which require monthly payments of interest at 8%
per annum. The notes are unsecured and are due December 31, 1998.
In August 1997, the Company entered into a Settlement and Purchase Agreement
with a stockholder (the "Former Stockholder"). Under this agreement, the Company
purchased the 30,000 shares of the Company owned by the Former Stockholder and
settled various matters in dispute with the Former Stockholder. The Former
Stockholder also entered into a three year non-compete agreement. As
consideration for the shares, the Former Stockholder received $330,800 in cash
and a note for $1,134,560. The note bears interest at 6.07% and is due in three
installments on each of August 7, 1998, 1999 and 2000. The shares purchased have
been classified as treasury stock. Under the non-compete agreement the Former
Stockholder received $175,000 in cash and will receive three additional payments
of $175,000 each on August 8, 1998, 1999 and 2000.
As part of the agreement, the Company paid the Former Stockholder $144,000
which represented his portion of dividends which had been held in arrears and
forgave a receivable of $41,289 due to the
F-95
<PAGE>
CRYSTAL RADIO GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS: (CONTINUED)
Company from the Former Stockholder. The forgiveness of this receivable has been
recorded as additional cost of the shares purchased from the Former Stockholder.
In addition, a pending lawsuit brought by the Former Stockholder against the
Company was set aside and dismissed.
Subsequently, during 1997, certain stockholders of the Company purchased an
aggregate 3,736 shares of the treasury stock for $200,000.
4. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Michigan National Bank........................................ $ 1,326,250 $ 1,821,107
Less: current maturities...................................... 1,326,250 457,747
------------ ------------
$ -- $ 1,363,360
------------ ------------
------------ ------------
</TABLE>
The note with Michigan National Bank calls for monthly payments of $50,256
(includes both principal and interest) with a balloon payment of $1,074,250 due
September 1, 1998. Interest is calculated at prime plus .75%. The prime rate at
December 31, 1997 and 1996 was 8.0% and 8.25%, respectively. The note is secured
by mortgages on all real estate, a security agreement and a life insurance
policy on a shareholder.
The Company also has a line of credit for $750,000 with Michigan National
Bank available for its use as of December 31, 1997. The line bears interest at
.75% over the bank's prime rate and is due July 1, 1998. There was $326,530 due
on the line at December 31, 1997.
5. BENEFITS PLAN:
The Company has a 401(k) plan that covers eligible employees. Employees may
contribute up to the maximum amount allowed by the Internal Revenue Code. The
Company does not match employee contributions.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value because of the short maturity of these
instruments. The carrying amount of notes payable approximates fair value based
on current market rates.
7. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF ACCOUNTANTS' REPORT:
In March 1998, the Company entered into an agreement with Cumulus
Broadcasting, Inc. (a wholly owned subsidiary of Cumulus Media Inc.) to sell the
assets of the Company, subject to approval of the Federal Communications
Commission, for approximately $14,000,000.
F-96
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in shareholder's equity and of cash flows present fairly,
in all material respects, the financial position of Forjay Broadcasting
Corporation (the "Company") at December 31, 1997, and the results of its
operations and its cash flows for the year ended December 31, 1997 in conformity
with generally accepted accounting principles. 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 audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
January 23, 1998
F-97
<PAGE>
FORJAY BROADCASTING CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash.............................................................................................. $ 217,000
Accounts receivable, less allowance for doubtful accounts of $13,000.............................. 228,000
------------
Total current assets............................................................................ 445,000
Property and equipment, net......................................................................... 203,000
Intangible assets, net.............................................................................. 145,000
Other assets, net................................................................................... 32,000
------------
Total assets.................................................................................... $ 825,000
------------
------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current maturities of note payable to related party............................................... $ 17,000
Accounts payable.................................................................................. 35,000
Accrued and other current liabilities............................................................. 137,000
Deferred compensation............................................................................. 191,000
------------
Total current liabilities....................................................................... 380,000
------------
Note payable to related party....................................................................... 42,000
Long-term debt...................................................................................... 384,000
------------
Total long-term liabilities..................................................................... 426,000
------------
Total liabilities............................................................................... 806,000
------------
Commitments and contingencies
Shareholder's equity:
Common stock, $100 par value, 200 shares authorized,
40 shares issued and outstanding................................................................ 20,000
Retained earnings................................................................................. 390,000
Less: treasury stock at cost, 160 shares.......................................................... (391,000)
------------
Total shareholder's equity...................................................................... 19,000
------------
Total liabilities and shareholder's equity...................................................... $ 825,000
------------
------------
</TABLE>
See Notes to Financial Statements.
F-98
<PAGE>
FORJAY BROADCASTING CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1997
------------------
<S> <C>
Revenues.................................................................. $ 1,667,000
Less: agency commissions................................................ (178,000)
------------------
Net revenues.......................................................... 1,489,000
------------------
Operating expenses:
Programming............................................................. 305,000
Sales and promotions.................................................... 465,000
Technical............................................................... 23,000
General and administrative.............................................. 485,000
Depreciation and amortization........................................... 29,000
------------------
Total operating expenses.............................................. 1,307,000
------------------
Income from operations.................................................... 182,000
Interest expense.......................................................... (48,000)
------------------
Income before income tax.................................................. 134,000
Income tax expense........................................................ (44,000)
------------------
Net income................................................................ $ 90,000
------------------
------------------
</TABLE>
See Notes to Financial Statements.
F-99
<PAGE>
FORJAY BROADCASTING CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
RETAINED TREASURY
COMMON STOCK EARNINGS STOCK TOTAL
-------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balance at January 1, 1997.................................. $ 20,000 $ 300,000 ($ 391,000) ($ 71,000)
Net income.................................................. -- 90,000 -- 90,000
------- ---------- ----------- ----------
Balance at December 31, 1997................................ $ 20,000 $ 390,000 ($ 391,000) $ 19,000
------- ---------- ----------- ----------
------- ---------- ----------- ----------
</TABLE>
See Notes to Financial Statements.
F-100
<PAGE>
FORJAY BROADCASTING CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Cash flows from operating activities:
Net income........................................................................................ $ 90,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................................... 29,000
Increase in accounts receivable................................................................. (37,000)
Decrease in other assets........................................................................ 40,000
Increase in accounts payable.................................................................... 11,000
Increase in accrued and other liabilities....................................................... 64,000
Increase in deferred compensation............................................................... 77,000
------------
Net cash provided by operating activities....................................................... 274,000
------------
Cash flows from investing activities:
Purchases of property and equipment............................................................... (5,000)
------------
Cash used for investing activities.............................................................. (5,000)
------------
Cash flows from financing activities:
Payments on bank notes payable.................................................................... (135,000)
Payments on borrowings from related party......................................................... (16,000)
------------
Cash used for financing activities.............................................................. (151,000)
------------
Increase in cash.................................................................................... 118,000
Cash at beginning of year........................................................................... 99,000
------------
Cash at end of year................................................................................. $ 217,000
------------
------------
Supplemental disclosures of cash flow information:
Cash paid for interest.......................................................................... $ 48,000
------------
------------
Cash paid for income taxes...................................................................... $ 22,000
------------
------------
Non-cash operating and financing activities:
Trade revenue..................................................................................... $ 104,000
------------
------------
Trade expense..................................................................................... $ 91,000
------------
------------
</TABLE>
See Notes to Financial Statements.
F-101
<PAGE>
FORJAY BROADCASTING CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Forjay Broadcasting Corporation ("the Company") owns and operates the radio
stations WYNN-FM and WYNN-AM (the "Stations") located in Florence, South
Carolina.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH
Cash includes deposits in demand deposit accounts.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a declining balance method for equipment and furniture, and
by the straight-line method for buildings over the estimated useful lives of the
related assets as follows:
<TABLE>
<S> <C>
Buildings....................................................... 25 years
Tower and ground system......................................... 20 years
Technical and studio equipment.................................. 5-10 years
Office furniture, fixtures, and equipment....................... 6-10 years
</TABLE>
INTANGIBLE ASSETS
Intangible assets are comprised of an FCC license and are stated at cost and
amortized using the straight-line method over the estimated useful life of 40
years. The Company evaluates the carrying value of intangibles periodically in
relation to the projected future undiscounted net cash flows for the related
businesses.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company provides
advertising air time before products and services are exchanged, a trade asset
is recognized.
F-102
<PAGE>
FORJAY BROADCASTING CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts cash, accounts receivable and accounts payable
approximates fair value due to their short-term maturities. The fair value of
notes payable and long-term debt are estimated based on currents market rates
and approximate the carrying value.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Office furniture and equipment.................................................. $ 229,000
Buildings....................................................................... 69,000
Broadcasting towers and equipment............................................... 194,000
------------
492,000
Accumulated depreciation........................................................ (379,000)
Land............................................................................ 90,000
------------
Property and equipment, net..................................................... $ 203,000
------------
------------
</TABLE>
Depreciation expense for the year ended December 31, 1997 was $23,000.
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
FCC license..................................................................... $ 182,000
Accumulated amortization........................................................ (37,000)
------------
Intangible assets, net.......................................................... $ 145,000
------------
------------
</TABLE>
Amortization expense for the year ended December 31, 1997 was $6,000.
4. RELATED PARTY TRANSACTIONS:
As of December 31, 1996, the Company had a payable to the sole shareholder
of $114,000 related to deferred compensation. During 1997, the deferred
compensation was paid with cash of $97,000 and the forgiveness of a $17,000
receivable due from this shareholder.
During 1997, the sole shareholder earned a bonus of $300,000. The bonus was
unpaid as of December 31, 1997 and $191,000, representing the liability for the
bonus less applicable taxes, is recorded as deferred compensation.
The Station has a note payable to the sole shareholder's mother, relating to
the Company's buyout of Forjay Broadcasting Corporation stock held by her. This
note bears interest at 6% per annum and is payable in equal monthly installments
of $2,000, including principal and interest, until repaid in March 2001. The
balance of this note at December 31, 1997 is $59,000. As of December 31, 1997,
future maturities on this note are as follows: 1998--$17,000; 1999--$18,000;
2000--$20,000; 2001--$4,000.
F-103
<PAGE>
FORJAY BROADCASTING CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT:
In March 1995 the Company entered into a loan agreement with a bank which
provided for a term note payable of $750,000. The term note is payable in
fifty-nine monthly payments of principal and interest of $13,000, continuing
through February, 2000, with a final payment of $292,000 due March, 2000.
Payments remaining under the agreement for 1998 reflect advance payments made by
the Company. The term note bears interest at the prime rate plus 1% (9.5%) at
December 31, 1997, is secured by substantially all of the Company's assets, and
is guaranteed by the sole shareholder of the Company.
The agreement contains certain restrictive covenants, which, among other
things, require the maintenance of a debt service ratio and limitations on debt
and compensation. The Company did not calculate compliance with these covenants
as of December 31, 1997, and was in violation of the covenant related to
compensation. However, the bank has waived all financial covenants related to
the debt as of December 31, 1997.
As of December 31, 1997, future maturities of long-term debt are as follows:
1998--$0; 1999-- $72,000; 2000--$312,000.
6. INCOME TAXES:
The components of the provision for income taxes consists of the following
for the year ended December 31, 1997 are as follows:
<TABLE>
<S> <C>
Current income taxes:
Federal.......................................................... $ 38,000
State & Local.................................................... 7,000
---------
Total.......................................................... 45,000
Deferred income taxes:
Federal.......................................................... (1,000)
---------
Total.......................................................... $ 44,000
---------
---------
</TABLE>
During 1997, the effective tax rate differs from the federal statutory tax
rate of 34% as a result of the following:
<TABLE>
<S> <C>
Federal income tax expense at U.S. statutory rate.................. $ 45,000
State income tax expense, net of U.S. benefit...................... 5,000
Impact of U.S. surtax exemption.................................... (9,000)
Nondeductible items................................................ 3,000
---------
$ 44,000
---------
---------
</TABLE>
Temporary differences giving rise to deferred tax assets relate to the FCC
license.
7. TREASURY STOCK:
Treasury stock relates to the buyout of the Company stock from family
members.
8. SUBSEQUENT EVENTS:
In 1997, the Company entered into an agreement with Cumulus Broadcasting,
Inc. ("Cumulus") (a wholly owned subsidiary of Cumulus Media Inc.) to sell the
stock of the Company to Cumulus, subject to approval of the Federal
Communications Commission ("FCC"), to Cumulus for approximately $4,100,000.
F-104
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders
Fritz Broadcasting, Inc. Toledo Division
We have audited the accompanying divisional balance sheet of Fritz
Broadcasting, Inc. Toledo Division as of December 29, 1996 and December 31, 1995
and the related statements of divisional income, changes in divisional equity
and divisional cash flows for the years then ended. These financial statements
are the responsibility of the Division'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 audits 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 incudes
assessing the accounting principles used and significant estimates made by
management, we 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 Fritz Broadcasting, Inc.
Toledo Division as of December 29, 1996 and December 31, 1995 and the results of
its operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ Plante & Moran, LLP
Troy, Michigan
February 11, 1997
F-105
<PAGE>
FRITZ BROADCASTING, INC. TOLEDO DIVISION
DIVISIONAL BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................................................... $ 61,813 $ 110,732
Accounts receivable--Less allowance for doubtful accounts of $30,957
for 1996 and $35,400 for 1995.................................................... 1,430,977 1,002,035
Prepaid expenses and deposits...................................................... 18,223 18,446
------------ ------------
Total current assets........................................................... 1,511,013 1,131,213
PROPERTY, PLANT AND EQUIPMENT (Note 2)............................................... 868,736 861,566
INTANGIBLE ASSETS (Note 1)........................................................... 5,935,825 5,007,725
------------ ------------
Total assets................................................................... $8,315,574 $7,000,504
------------ ------------
------------ ------------
LIABILITIES AND DIVISIONAL EQUITY
CURRENT LIABILITIES
Current portion of long-term obligations:
Notes payable (Note 3)........................................................... $ 479,000 $ 12,000
Capital lease obligations (Note 4)............................................... 15,885 --
Accounts payable................................................................... 69,025 99,493
Accrued corporate charges.......................................................... 1,353,123 786,561
Accrued expenses................................................................... 650,172 470,773
------------ ------------
Total current liabilities...................................................... 2,567,205 1,368,837
LONG-TERM LIABILITIES
Notes payable--Long-term portion (Note 3).......................................... 2,836,000 2,238,000
Capital lease obligations (Note 4)................................................. 9,964 --
------------ ------------
Total liabilities.............................................................. 5,413,169 3,606,827
DIVISIONAL EQUITY.................................................................... 2,902,405 3,393,677
------------ ------------
Total liabilities and divisional equity........................................ $8,315,574 $7,000,504
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements.
F-106
<PAGE>
FRITZ BROADCASTING, INC. TOLEDO DIVISION
STATEMENT OF DIVISIONAL INCOME
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
<S> <C> <C>
DECEMBER 29, DECEMBER 31,
1996 1995
------------ ------------
BROADCASTING REVENUE--Net
Local.............................................................................. $4,488,610 $3,878,911
National........................................................................... 535,614 610,446
Network............................................................................ 6,724 50,740
Other.............................................................................. 115,098 118,861
------------ ------------
Total broadcasting revenue--Net................................................ 5,146,046 4,658,958
BROADCASTING EXPENSES
Programming........................................................................ 1,206,076 1,327,977
Technical.......................................................................... 124,413 115,967
News............................................................................... 49,761 44,172
Sales.............................................................................. 791,369 711,510
Promotions......................................................................... 182,723 303,354
General and administrative......................................................... 836,209 695,031
Depreciation....................................................................... 161,175 199,282
------------ ------------
Total broadcasting expenses.................................................... 3,351,726 3,397,293
------------ ------------
OPERATING INCOME..................................................................... 1,794,320 1,261,665
OTHER EXPENSES
Interest expense................................................................... 260,459 224,188
Amortization of intangible assets.................................................. 193,648 129,746
Corporate charges.................................................................. 566,562 544,914
Loss on sale of assets............................................................. 2,868 --
------------ ------------
Total other expense............................................................ 1,023,537 898,848
------------ ------------
INCOME--Before income taxes.......................................................... 770,783 362,817
STATE AND LOCAL INCOME TAXES......................................................... 66,485 52,277
------------ ------------
NET INCOME........................................................................... $ 704,298 $ 310,540
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements.
F-107
<PAGE>
FRITZ BROADCASTING, INC. TOLEDO DIVISION
STATEMENT OF CHANGES IN DIVISIONAL EQUITY
<TABLE>
<S> <C>
DIVISIONAL EQUITY--January 1, 1995.............................................. $4,289,689
Net income...................................................................... 310,540
Distribution of corporate division.............................................. (1,206,552)
---------
DIVISIONAL EQUITY--December 31, 1995............................................ 3,393,677
Net income...................................................................... 704,298
Distribution of corporate division.............................................. (1,195,570)
---------
DIVISIONAL EQUITY--December 29, 1996............................................ $2,902,405
---------
---------
</TABLE>
See Notes to Financial Statements.
F-108
<PAGE>
FRITZ BROADCASTING, INC. TOLEDO DIVISION
STATEMENT OF DIVISIONAL CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
<S> <C> <C>
DECEMBER 29, DECEMBER 31,
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................................................................... $ 704,298 $ 310,540
Adjustments to reconcile net income to net cash from operating activities:
Depreciation..................................................................... 161,175 199,282
Loss on sale of assets........................................................... 2,868 --
Bad debt expense................................................................. -- 20,400
Amortization of intangible assets................................................ 193,648 129,746
Changes in assets and liabilities:
Accounts receivable............................................................ (428,942) 3,040
Prepaid expenses and deposits.................................................. 223 (6,432)
Accounts payable............................................................... (30,468) (24,077)
Accrued expenses............................................................... 745,961 766,069
------------ ------------
Net cash provided by operating activities.................................... 1,348,763 1,398,568
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangible assets...................................................... (1,121,748) (2,572)
Purchase of fixed assets........................................................... (171,213) (166,921)
------------ ------------
Net cash used in investing activities........................................ (1,292,961) (169,493)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term obligations................................................ 3,355,667 --
Payments of stockholder notes payable.............................................. (2,250,000) --
Principal payments under long-term obligations..................................... (14,818) --
Distributions to corporate division, net of advances............................... (1,195,570) (1,206,552)
------------ ------------
Net cash used in financing activities........................................ (104,721) (1,206,552)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................. (48,919) 22,523
CASH AND CASH EQUIVALENTS--Beginning of year......................................... 110,732 88,209
------------ ------------
CASH AND CASH EQUIVALENTS--End of year............................................... $ 61,813 $ 110,732
------------ ------------
------------ ------------
</TABLE>
The Division paid approximately $280,000 in 1996 and $224,000 in 1995 for
interest expense.
See Notes to Financial Statements.
F-109
<PAGE>
FRITZ BROADCASTING, INC. TOLEDO DIVISION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 1996 AND DECEMBER 31, 1995
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fritz Broadcasting, Inc. (the "Company") owns and operates radio stations
within the Saginaw, Michigan and Toledo, Ohio markets. The station's advertisers
consist of a broad spectrum of services and industries, located primarily within
those markets. These financial statements present the operations of the Fritz
Broadcasting, Inc. Toledo Division (the "Division") only.
During 1996, the Division acquired a new station, WIMX. The 1995 financial
statements include the operations of the stations WTOD-AM, WKKO-FM and WRQN-FM.
The 1996 financial statements include the operations of the original stations
plus the newly acquired station. The new station was accounted for under the
purchase method.
Significant accounting policies are as follows:
BROADCAST REPORTING--The Division reports operations on a broadcast year as
opposed to a calendar year. The broadcast year ends on the last Sunday in
December.
CASH AND CASH EQUIVALENTS--For purposes of reporting cash flows, cash and
cash equivalents include checking and savings account balances and money market
funds.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are recorded at
cost. The Division uses predominantly accelerated methods of depreciation. Costs
of maintenance and repairs are charged to expense when incurred.
NOTES PAYABLE--The divisional balance sheet reflects long-term debt that has
been allocated to the Toledo division by the corporate division.
RECOGNITION OF BROADCASTING REVENUE--The Division recognizes broadcasting
revenue as the air time is produced. The fair value of barter and trade-out
transactions is included in broadcasting revenue and broadcasting expenses.
These transactions represent advertising time exchanged for program material,
merchandise or services.
DIVISIONAL EQUITY--Divisional equity represents the cumulative results of
operations of the Toledo division stations since their acquisition by Fritz
Broadcasting, Inc., the initial capitalization of the Division, cumulative
contributions of cash to the Division from Fritz Broadcasting, Inc., less
distributions paid back to the corporate division.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
INTANGIBLE ASSETS--Broadcasting licenses and goodwill represent the excess
of consideration paid for the purchase of radio stations over the amounts
assigned to the net identifiable assets acquired. They are being amortized by
the straight-line method over 40 years. Noncompete agreements are amortized
straight-line over the lives of the agreements.
F-110
<PAGE>
FRITZ BROADCASTING, INC. TOLEDO DIVISION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996 AND DECEMBER 31, 1995
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Organization costs are recorded at cost and are amortized over 69 months.
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Organization costs................................................ $ 67,336 $ --
Broadcasting licenses, goodwill and noncompete agreements......... 6,244,256 5,189,844
------------ ------------
Total cost.................................................. 6,311,592 5,189,844
Less accumulated amortization..................................... 375,767 182,119
------------ ------------
Net carrying amount......................................... $ 5,935,825 $ 5,007,725
------------ ------------
------------ ------------
</TABLE>
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES
1996 1995 (YEARS)
---------- ---------- -------------
<S> <C> <C> <C>
Land..................................................... $ 217,369 $ 198,229 --
Buildings................................................ 217,614 183,914 40
Vehicles................................................. 62,082 1,000 5
Furniture, fixtures and equipment........................ 666,389 625,701 5-20
Leasehold improvements................................... 162,041 19,514 20
Construction............................................. -- 126,878 --
---------- ----------
Total cost......................................... 1,325,495 1,155,236
Less accumulated depreciation............................ 456,759 293,670
---------- ----------
Net carrying amount................................ $ 868,736 $ 861,566
---------- ----------
---------- ----------
</TABLE>
F-111
<PAGE>
FRITZ BROADCASTING, INC. TOLEDO DIVISION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996 AND DECEMBER 31, 1995
NOTE 3--NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Bank note payable with one-half of the principal outstanding bearing interest at prime
(8.25 percent at December 29, 1996), and the remaining half bearing interest at the
swap rate as determined by the bank (9.20 percent at December 29, 1996). This note is
payable in quarterly principal installments of $103,500 to $212,750, plus interest,
from March 31, 1997 through December 31, 2001. The note is collateralized by all
Company assets and is guaranteed by the Company's stockholders and subject to
restrictive covenants relating to the Company's cash flow and liquidity............... $ 3,250,000 $ --
Notes payable issued for covenant not to compete with former owner of an acquired
station. The note bears no interest and is due on January 14, 1997.................... 65,000 --
Notes payable--stockholders bearing interest at 1 percent over prime (9.5 percent at
December 31, 1995). The notes were paid during 1996 with the proceeds of the bank note
described above....................................................................... -- 2,250,000
------------ ------------
Total........................................................................... 3,315,000 2,250,000
Less current portion............................................................ 479,000 12,000
------------ ------------
Long-term portion............................................................... $ 2,836,000 $ 2,238,000
------------ ------------
------------ ------------
</TABLE>
The following is a schedule by year of approximate future maturities on the
above notes:
<TABLE>
<CAPTION>
YEARS ENDING AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
1997............................................................................ $ 479,000
1998............................................................................ 552,000
1999............................................................................ 690,000
2000............................................................................ 690,000
2001............................................................................ 904,000
------------
Total $ 3,315,000
------------
------------
</TABLE>
The notes payable were repaid in full in 1997 in connection with the sale of
the Division (see Note 8).
The Division has recorded $79,629 and $224,188 of interest expense on the
stockholder notes for 1996 and 1995, respectively.
NOTE 4--LEASE COMMITMENTS
The Division owns vehicles under capital leases with a cost of $61,082 and
accumulated depreciation of $43,490.
F-112
<PAGE>
FRITZ BROADCASTING, INC. TOLEDO DIVISION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996 AND DECEMBER 31, 1995
NOTE 4--LEASE COMMITMENTS (CONTINUED)
Future minimum capital lease payments are as follows:
<TABLE>
<S> <C>
1997............................................................... $ 18,143
1998............................................................... 12,892
---------
Total minimum lease payments................................. 31,035
Less interest................................................ 5,186
---------
Net minimum lease payments................................... $ 25,849
---------
---------
</TABLE>
NOTE 5--INCOME TAXES
Fritz Broadcasting, Inc. operates as an S Corporation under the provisions
of the Internal Revenue Code. Accordingly, no provision for income taxes has
been made since income or losses of the Company are allocated to the
stockholders. Additionally, the Company uses the modified cash basis method of
accounting for income tax reporting purposes.
NOTE 6--EMPLOYEE BENEFIT PLAN
Effective October 1995, Fritz Broadcasting, Inc. sponsors a defined
contribution 401(k) plan that covers all employees meeting a one-year
eligibility period. Contributions to the plan include employee contributions and
an employer amount determined on a yearly basis by management.
The Division's employer contributions to the plan for 1996 and 1995 amounted
to approximately $25,000 and $8,000, respectively.
NOTE 7--RELATED PARTY TRANSACTIONS
The corporate division of Fritz Broadcasting, Inc. incurs expenses for
executive management, compensation, professional services and other
administrative costs. These expenses have been allocated to the Company's
operating divisions as a corporate charge. The corporate charge for 1996 and
1995 was $566,562 and $544,914, respectively.
NOTE 8--SUBSEQUENT EVENT
In June 1997, Fritz Broadcasting, Inc. sold the assets of its Toledo
division to an unrelated company. The stations were resold to a third owner in
1997. All assets were sold for amounts in excess of their carrying amounts at
December 29, 1996.
F-113
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in partners' equity and of cash flows present fairly,
in all material respects, the financial position of HVS Partners at December 31,
1997 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 25, 1998
F-114
<PAGE>
HVS PARTNERS
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 149,465 $ 56,980
Accounts receivable, less allowance for doubtful accounts of $60,000 and $60,000,
respectively...................................................................... 242,176 1,461,429
Receivable from related party....................................................... 429,827 211,823
Prepaid expenses and other current assets........................................... 289,570 88,845
------------ ------------
Total current assets............................................................ 1,111,038 1,819,077
Property and equipment, net........................................................... 1,686,276 2,257,829
Intangible assets, net................................................................ 2,357,006 4,947,887
------------ ------------
Total assets.................................................................... $ 5,154,320 $ 9,024,793
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 517,461 $ 844,833
Accrued and other current liabilities............................................... 235,889 314,229
Notes payable due within one year................................................... 63,726 43,405
Capital lease obligations due within one year....................................... 4,575 51,072
------------ ------------
Total current liabilities....................................................... 821,651 1,253,539
Long-term liabilities:
Note payable........................................................................ 676,177 374,809
Capital lease obligations........................................................... 12,312 76,804
Commitments and contingencies
Partners' equity:..................................................................... 3,644,180 7,319,641
------------ ------------
Total liabilities and partners' equity.......................................... $ 5,154,320 $ 9,024,793
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements
F-115
<PAGE>
HVS PARTNERS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues............................................................... $ 5,714,682 $ 7,733,057 $ 6,520,289
Less: agency commissions............................................. (383,862) (655,900) (363,666)
------------- ------------ ------------
Net revenues....................................................... 5,330,820 7,077,157 6,156,623
------------- ------------ ------------
Operating expenses:
Programming.......................................................... 1,178,362 1,625,755 1,432,463
Sales and promotions................................................. 1,548,549 1,777,075 1,646,461
Technical............................................................ 246,142 335,545 300,296
General and administrative........................................... 1,364,685 1,532,663 1,492,444
News................................................................. 82,208 117,098 87,687
Trade................................................................ 527,803 762,912 594,699
Depreciation and amortization........................................ 638,098 661,683 631,379
------------- ------------ ------------
Total operating expenses......................................... 5,585,847 6,812,731 6,185,429
------------- ------------ ------------
Income (loss) from operations.......................................... (255,027) 264,426 (28,806)
------------- ------------ ------------
Other income (expense):
Gain on sales of assets.............................................. 12,261,305 -- --
Interest income...................................................... 451 768 679
Interest expense..................................................... (68,740) (26,297) (14,061)
------------- ------------ ------------
Total other income............................................... 12,193,016 (25,529) (13,382)
------------- ------------ ------------
Net income (loss)...................................................... $ 11,937,989 $ 238,897 $ (42,188)
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
See Notes to Financial Statements.
F-116
<PAGE>
HVS PARTNERS
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
-------------
<S> <C>
Balance at January 1, 1995......................................................................... $ 8,346,275
Net loss........................................................................................... (42,188)
Partner distributions.............................................................................. (735,603)
-------------
Balance at December 31, 1995....................................................................... 7,568,484
Net income......................................................................................... 238,897
Partner distributions.............................................................................. (487,740)
-------------
Balance at December 31, 1996....................................................................... 7,319,641
Net income......................................................................................... 11,937,989
Partner distributions.............................................................................. (15,613,450)
-------------
Balance at December 31, 1997....................................................................... $ 3,644,180
-------------
-------------
</TABLE>
See Notes to Financial Statements.
F-117
<PAGE>
HVS PARTNERS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
<S> <C> <C> <C>
1997 1996 1995
------------- ---------- ----------
Cash flows from operating activities:
Net income (loss)....................................................... $ 11,937,989 $ 238,897 $ (42,188)
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of assets................................................ (12,261,305) -- --
Depreciation and amortization......................................... 638,098 661,683 631,379
Changes in current assets and liabilities:
Decrease (increase) in accounts receivable.......................... 1,219,253 (463,094) 621,514
Increase in receivable from related party........................... (218,004)
Decrease (increase) in prepaid expenses and other current assets.... (200,725) 949 14,632
(Decrease) increase in accounts payable............................. (327,372) 85,180 148,593
Increase (decrease) in accrued and other liabilities................ (78,340) 104,554 (124,522)
Other............................................................... (67,422) (4,038) (8,963)
------------- ---------- ----------
Net cash provided by operating activities........................... 642,172 624,131 1,240,445
------------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of assets............................................ 15,200,000 -- --
Purchases of property and equipment..................................... (88,490) (562,879) (329,009)
------------- ---------- ----------
Net cash provide by (used in) investing activities.................. 15,111,510 (562,879) (329,009)
------------- ---------- ----------
Cash flows from financing activities:
Distributions to partners............................................... (15,613,450) (487,740) (735,603)
Proceeds from issuance of notes payable................................. 37,773 436,066 115,572
Principal payments on notes payable and capital lease obligations....... (85,520) (74,273) (215,667)
------------- ---------- ----------
Net cash used in financing activities............................... (15,661,197) (125,947) (835,698)
------------- ---------- ----------
Increase (decrease) in cash and cash equivalents.......................... 92,485 (64,695) 75,738
Cash and cash equivalents at beginning of year............................ 56,980 121,675 45,937
------------- ---------- ----------
Cash and cash equivalents at end of year.................................. $ 149,465 $ 56,980 $ 121,675
------------- ---------- ----------
------------- ---------- ----------
Supplemental disclosures of cash flow information
Cash paid for interest.................................................. $ 68,000 $ 26,000 $ 14,000
------------- ---------- ----------
------------- ---------- ----------
Non-cash operating activities:
Trade revenue........................................................... $ 516,083 $ 696,540 $ 633,398
------------- ---------- ----------
------------- ---------- ----------
Trade expense........................................................... $ 527,803 $ 762,912 $ 594,699
------------- ---------- ----------
------------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
F-118
<PAGE>
HVS PARTNERS
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
HVS Partners (Partnership) was organized under the laws of the State of
Florida on June 1, 1985 as a general partnership for the purpose of acquiring
and operating the following radio stations:
<TABLE>
<S> <C>
WQHQ-FM.......................................... Salisbury, Maryland
WLVW-FM.......................................... Salisbury, Maryland
WRXS-FM.......................................... Salisbury, Maryland
WLBW-FM.......................................... Fenwick Island, Delaware
WTGM-AM.......................................... Salisbury, Maryland
WBZE-FM.......................................... Tallahassee, Florida
WHBT-AM.......................................... Tallahassee, Florida
WHBX-FM.......................................... Tallahassee, Florida
Wilmington, North
WWQQ-FM.......................................... Carolina
Jacksonville, North
WQSL-FM.......................................... Carolina
Jacksonville, North
WXQR-FM.......................................... Carolina
</TABLE>
In January 1997, the Partnership entered into a Local Management Agreement
(LMA) to operate WRXS-FM, Salisbury, Maryland. The Partnership acquired this
station in April 1997. In August 1997, the Partnership completed the sale of
substantially all of the property and equipment and Federal Communications
Commission ("FCC") licenses related to WWQQ-FM, WQSL-FM and WSQR-FM to Cumulus
Broadcasting, Inc. (a wholly-owned subsidiary of Cumulus Media Inc.) ("Cumulus")
for $6,000,000 in cash. In August 1997, the Partnership entered into a LMA
granting Cumulus the right to operate all remaining stations. In December 1997,
the Partnership completed the sale of substantially all of the property and
equipment and FCC licenses related to WQHQ-FM, WLVW-FM, WTGM-AM to Cumulus for
$9,200,000 in cash. The remaining stations were sold to Cumulus in January 1998.
The significant accounting principles followed by the Partnership and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
RECEIVABLE FROM RELATED PARTY
Receivable from related party represents transactions in the ordinary course
of business with other radio stations owned by certain partners of the
Partnership.
F-119
<PAGE>
HVS PARTNERS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions, improvements and
expenditures for repairs and maintenance that significantly add to productivity
or extend the economic lives of the assets, are capitalized at cost and
depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Building..................................................... 39 years
Broadcasting towers and equipment............................ 15 years
Office and studio furniture and equipment.................... 5-6 years
Leasehold improvement........................................ Term of
lease
Station vehicles............................................. 5 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include goodwill and FCC licenses. Intangible assets are
stated at cost and are being amortized using the straight-line method over the
estimated useful life term for periods not exceeding 25 years. The Company
evaluates the carrying value of intangibles periodically in relation to the
projected future undiscounted net cash flows of the related businesses.
INCOME TAXES
The Partnership operated as a general partnership under the provisions of
the Internal Revenue Code during its ownership by HVS Partners. Accordingly, no
provision for income taxes has been made since income or losses of the
Partnership are allocated to the partners.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Partnership enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Partnership uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. ACQUISITIONS:
On April 4, 1997, the Partnership acquired WXRS-FM in Salisbury, Maryland
for $360,000 in the form of a note payable to the former owner, plus various
other direct acquisition costs.
The acquisition was accounted for as a purchase. Accordingly, the
accompanying financial statements include the results of operations of the
acquired stations from the date of acquisition. Pro forma results assuming the
acquisition had occurred on January 1, 1997 are not significantly different from
reported results.
F-120
<PAGE>
HVS PARTNERS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
<S> <C> <C>
1997 1996
---------- ---------
Prepaid assets......................................................... $ 103,894 $ 5,581
Deposits refundable.................................................... 70,398 27,398
Prepaid insurance...................................................... 58,025 51,412
Prepaid property taxes................................................. 17,887 --
Other assets........................................................... 39,366 4,454
---------- ---------
Total.................................................................. $ 289,570 $ 88,845
---------- ---------
---------- ---------
</TABLE>
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
Office and studio furniture and equipment......................... $ 862,056 $ 1,736,690
Broadcasting towers and equipment................................. 786,185 1,690,130
Building.......................................................... 460,425 429,618
Station vehicles.................................................. 28,212 154,110
Leasehold improvements............................................ 5,225 99,015
------------ ------------
Total property and equipment...................................... 2,142,103 4,109,563
Accumulated depreciation.......................................... (996,850) (2,392,757)
------------ ------------
1,145,253 1,716,806
Land and land improvements........................................ 541,023 541,023
------------ ------------
Property and equipment, net....................................... $ 1,686,276 $ 2,257,829
------------ ------------
------------ ------------
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1996 and 1995
was $359,244, $392,486 and $362,323, respectively.
5. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
Goodwill and FCC licenses......................................... $ 2,987,203 $ 6,314,593
Other............................................................. 9,082 44,001
------------ ------------
Total intangible assets........................................... 2,996,285 6,358,594
Accumulated amortization.......................................... (639,279) (1,410,707)
------------ ------------
Intangible assets, net............................................ $ 2,357,006 $ 4,947,887
------------ ------------
------------ ------------
</TABLE>
F-121
<PAGE>
HVS PARTNERS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INTANGIBLE ASSETS: (CONTINUED)
Amortization expense for the year ended December 31, 1997, 1996 and 1995 was
$278,854, $269,197 and $269,056, respectively.
6. NOTES PAYABLE:
Notes payable consists of the following at December 31, 1997:
<TABLE>
<S> <C>
Promissory note--interest and principal
payable monthly at an interest rate of 8%....................... $ 343,885
Promissory Note--interest and principal
payable monthly at an interest rate of 8.5%..................... 332,673
Promissory Note--interest and principal
payable monthly at an interest rate of 9%....................... 63,345
---------
$ 739,903
---------
---------
</TABLE>
A summary of the future maturities of long-term debt follows:
<TABLE>
<S> <C>
1998.............................................................. $ 63,726
1999.............................................................. 47,764
2000.............................................................. 51,381
2001.............................................................. 55,310
2002.............................................................. 42,985
Thereafter........................................................ 478,737
---------
Total............................................................. 739,903
Less current portion.............................................. (63,726)
---------
Total long term debt.............................................. $ 676,177
---------
---------
</TABLE>
7. ACCRUED AND OTHER CURRENT LIABILITIES:
Accrued and other current liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1997 1996
---------- ----------
Federal withholding tax payable....................................... $ 55,019 $ 18,391
FICA tax payable...................................................... 63,254 22,008
State withholding tax liabilities..................................... 8,719 12,176
Vacation and commission accrual....................................... 44,971 170,856
Bonus accrual......................................................... 33,100 59,400
Other................................................................. 30,826 31,398
---------- ----------
$ 235,889 $ 314,229
---------- ----------
---------- ----------
</TABLE>
F-122
<PAGE>
HVS PARTNERS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES:
The Partnership incurred expenses of approximately $29,000, $25,000 and
$13,000 for the years ended December 31, 1997, 1996 and 1995, respectively,
under capital leases for radio broadcasting facilities and vehicles.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value due to their short-term nature. The
carrying amount of notes payable approximates fair value.
F-123
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Boards of Directors
JKJ Broadcasting, Inc.
Missouri River Broadcasting, Inc.
Ingstad Mankato, Inc.
James Ingstad Broadcasting, Inc.
Hometown Wireless, Inc.
Fargo, North Dakota
We have audited the accompanying combined balance sheets of JKJ
Broadcasting, Inc., Missouri River Broadcasting, Inc., Ingstad Mankato, Inc.,
James Ingstad Broadcasting, Inc. and Hometown Wireless, Inc. (the Companies) as
of December 31, 1997 and 1996 and the related combined statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the representation of
the Companies' 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Companies as of
December 31, 1997 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
Pierre, South Dakota
February 11, 1998, except for Note 12 as
to which the date is February 19, 1998
F-124
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
ASSETS (NOTE 4)
Current Assets
Cash............................................................................. $ 143,691 $ 300,883
Accounts receivable, less allowance for doubtful accounts of $111,200 and
$116,046 as of December 31, 1997 and 1996, respectively........................ 1,783,164 1,374,013
Prepaid expenses................................................................. 140,369 98,500
Salary advances.................................................................. 57,441 21,354
------------- -------------
Total current assets......................................................... 2,124,665 1,794,750
------------- -------------
Notes receivable, related parties (Note 7)......................................... 2,063,806 1,519,309
Property and Equipment, at cost
Land............................................................................. 481,123 180,502
Buildings........................................................................ 1,024,175 920,127
Equipment........................................................................ 5,921,283 5,660,785
------------- -------------
7,426,581 6,761,414
Less accumulated depreciation.................................................... 3,322,623 2,815,231
------------- -------------
4,103,958 3,946,183
------------- -------------
Other Assets (Note 3)
Cost in excess of net assets of businesses acquired, net of amortization......... 378,553 433,673
Organization costs, net of amortization.......................................... 220,062 240,699
Loan fees, net of amortization................................................... 57,520 61,834
Noncompete agreement, net of amortization........................................ 217,375 264,693
Broadcast licenses, net of amortization.......................................... 1,670,455 1,841,348
------------- -------------
2,543,965 2,842,247
------------- -------------
$ 10,836,394 $ 10,102,489
------------- -------------
------------- -------------
</TABLE>
F-125
<PAGE>
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Current maturities of long-term debt (Note 4).................................... $ 500,642 $ 605,238
Accounts payable................................................................. 277,202 198,568
Accrued compensation............................................................. 159,535 144,435
Accrued interest................................................................. 54,544 64,217
Other accrued expenses........................................................... 82,676 59,824
------------- -------------
Total current liabilities.................................................... 1,074,599 1,072,282
Notes Payable, related parties (Note 7)............................................ 396,284 358,302
Long-Term Debt, less current maturities (Note 4)................................... 8,463,493 8,055,824
Commitments (Note 5)
Stockholder's Equity (Note 6)
Common stock..................................................................... 121,000 121,000
Additional paid-in capital....................................................... 109,917 109,917
Retained earnings................................................................ 671,101 385,164
------------- -------------
902,018 616,081
------------- -------------
$ 10,836,394 $ 10,102,489
------------- -------------
------------- -------------
</TABLE>
See Notes to Combined Financial Statements.
F-126
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
COMBINED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues.............................................................. $ 10,362,585 $ 9,679,658 $ 8,017,046
Less--agency commissions.............................................. 448,417 396,165 285,161
------------- ------------ ------------
9,914,168 9,283,493 7,731,885
------------- ------------ ------------
Operating expenses:
Direct programming.................................................. 1,778,786 1,723,535 1,510,232
Studio.............................................................. 124,206 127,816 89,338
Sales............................................................... 3,240,346 2,810,494 2,270,613
Administrative...................................................... 3,293,360 3,131,579 2,570,160
------------- ------------ ------------
Total expenses.................................................... 8,436,698 7,793,424 6,440,343
------------- ------------ ------------
Operating income.................................................. 1,477,470 1,490,069 1,291,542
Interest income, including related party interest of $88,141, $51,323
and $18,679, respectively........................................... 88,141 52,557 22,138
Interest expense, including related party interest of $22,748, $7,630
and $7,326, respectively............................................ (937,244) (853,907) (630,267)
Gain from antenna agreement (Note 10)................................. -- 100,000 50,000
------------- ------------ ------------
Net income........................................................ $ 628,367 $ 788,719 $ 733,413
------------- ------------ ------------
------------- ------------ ------------
Pro forma data (unaudited):
Net income before income taxes, as reported......................... $ 628,367 $ 788,719 $ 733,413
Pro forma provision for income taxes................................ 244,500 306,600 286,700
------------- ------------ ------------
Pro forma net income.............................................. $ 383,867 $ 482,119 $ 446,713
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
See Notes to Combined Financial Statements.
F-127
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1994..................................... $ 61,000 $ 94,602 $ (266,775) $ (111,173)
Net income..................................................... -- -- 733,413 733,413
Shareholder distributions...................................... -- -- (281,399) (281,399)
Issuance of 10,000 shares of Ingstad Mankato common stock...... 10,000 -- -- 10,000
---------- ---------- ----------- -----------
Balance, December 31, 1995..................................... 71,000 94,602 185,239 350,841
Net income..................................................... -- -- 788,719 788,719
Shareholder distributions...................................... -- -- (588,794) (588,794)
Issuance of 50,000 shares of Hometown Wireless, Inc. common
stock........................................................ 50,000 15,315 -- 65,315
---------- ---------- ----------- -----------
Balance, December 31, 1996..................................... 121,000 109,917 385,164 616,081
Net income..................................................... -- -- 628,367 628,367
Shareholder distributions...................................... -- -- (342,430) (342,430)
---------- ---------- ----------- -----------
Balance, December 31, 1997..................................... $ 121,000 $ 109,917 $ 671,101 $ 902,018
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
See Notes to Combined Financial Statements.
F-128
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income........................................................... $ 628,367 $ 788,719 $ 733,413
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation........................................................... 506,980 472,930 441,859
Amortization........................................................... 298,282 310,302 230,639
Provision for doubtful accounts........................................ 231,777 227,481 104,194
Imputed interest accrued and added to notes receivable, related
parties.............................................................. (88,141) (51,323) (18,679)
Imputed interest accrued and added to notes payable, related parties... 22,748 -- --
Change in assets and liabilities:
(Increase) in accounts receivable...................................... (640,928) (399,199) (304,587)
(Increase) in prepaid expenses and salary advances..................... (77,956) (32,198) (57,370)
Decrease in accrued interest receivable................................ -- 2,234 --
Increase (decrease) in accounts payable and accrued expenses........... 106,913 (41,197) 178,254
(Decrease) in excess of outstanding checks over bank balances.......... -- -- (37,902)
------------- ----------- -----------
Net cash provided by operating activities.............................. 988,042 1,277,749 1,269,821
------------- ----------- -----------
Cash Flows From Investing Activities
Change in related party notes receivable, net.......................... (456,356) (2,320,601) (69,850)
Payment of organizational costs........................................ -- (233,271) --
Purchase of property and equipment..................................... (664,755) (515,309) (580,157)
Purchase of radio stations............................................. -- (1,111,630) (413,370)
Purchase of license for station construction........................... -- (56,885) (10,000)
------------- ----------- -----------
Net cash (used in) investing activities................................ (1,121,111) (4,237,696) (1,073,377)
------------- ----------- -----------
Cash Flows From Financing Activities
Principal payments made on notes payable, stockholder.................. $ -- $ -- $ (106,001)
Proceeds from related party notes payable.............................. 15,234 -- --
Payment of loan fees................................................... -- (64,709) (22,114)
Proceeds from long-term borrowings..................................... 987,080 6,610,735 896,666
Principal payments on long-term borrowings............................. (684,007) (3,103,068) (604,739)
Proceeds from issuance of common stock................................. -- 65,315 10,000
Distributions to stockholder........................................... (342,430) (588,794) (281,399)
------------- ----------- -----------
Net cash provided by (used in) financing activities.................... (24,123) 2,919,479 (107,587)
------------- ----------- -----------
Increase (decrease) in cash............................................ (157,192) (40,468) 88,857
Beginning cash......................................................... 300,883 341,351 252,494
------------- ----------- -----------
Ending cash............................................................ $ 143,691 $ 300,883 $ 341,351
------------- ----------- -----------
------------- ----------- -----------
Supplemental Disclosures of Cash Flow Information
Cash payments for interest............................................. $ 924,169 $ 839,539 $ 583,027
</TABLE>
See Notes to Combined Financial Statements.
F-129
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: The Companies' operations are in the radio broadcasting
industry. The Companies own and operate radio stations in Mankato, New Ulm,
Owatonna, Sleepy Eye, Springfield and Waseca, Minnesota and Mason City, Charles
City, New Hampton, Osage, Iowa and Bismarck, North Dakota. The Companies grant
credit to customers primarily in the immediate vicinity of each station.
A summary of the Companies' significant accounting policies is as follows:
PRINCIPLES OF COMBINATION: The combined financial statements include the
accounts of JKJ Broadcasting, Inc., Missouri River Broadcasting, Inc., Ingstad
Mankato, Inc. (IMI), James Ingstad Broadcasting, Inc. (JIB) and Hometown
Wireless, Inc. (HW), which are under common ownership, control and financing.
All material related party balances and transactions have been eliminated in the
combination. Combined financial statements for 1995 include the accounts of
James Ingstad Broadcasting of Iowa, Inc. This entity was merged with James
Ingstad Broadcasting, Inc. during 1996 and operates under this corporate name.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could vary from those estimates.
REVENUE RECOGNITION: Revenues are earned primarily by selling advertising
air time on the radio. The Companies recognize revenue when the customer is
billed which typically occurs when the time sold is aired.
CONCENTRATIONS OF CREDIT RISK: Financial instruments, which potentially
subject the Companies to concentration of credit risk, consist principally of
uncollateralized trade receivables. The Companies perform ongoing credit
evaluations of their customers' financial conditions but do not require
collateral to support customer receivables. The Company establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends and other information.
TRADE-OUTS: The Companies permit the stations to trade advertising air time
for certain goods or services which is commonly known as "trade-outs". The
amount of trade-outs included in revenue and expense was approximately $773,000,
$705,000 and $487,000 as of December 31, 1997, 1996 and 1995, respectively.
DEPRECIATION: It is the policy of the Companies to provide depreciation
using either the straight-line method or accelerated methods based on the
estimated useful life of individual units. The estimated useful lives are as
follows:
<TABLE>
<CAPTION>
YEARS
---------
<S> <C>
Buildings................................................................................................. 19-20
Equipment................................................................................................. 5-10
</TABLE>
F-130
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
AMORTIZATION: The cost in excess of net assets of businesses acquired is
being amortized by the straight-line method over fifteen to twenty years.
Broadcast licenses and noncompete agreement are being amortized by the
straight-line method over ten to fifteen years. The Companies assess long-lived
assets for impairment under FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
Intangible assets are therefore included in impairment evaluations when events
or circumstances exist that indicate the carrying amount of the assets may not
be recoverable. Organization costs are being amortized by the straight-line
method over ten years. Loan fees are being amortized by the straight line method
over the term of the loan. Amortization of assets acquired under capital leases
is included in depreciation expense.
PRO FORMA INCOME TAXES (UNAUDITED): The unaudited pro forma adjustment to
reflect income taxes in the accompanying statement of income is for
informational purposes only and has been calculated based on the estimated
effective tax rate in each year, assuming the Companies had been subject to
corporate federal and state income taxes in each year presented.
INCOME TAX STATUS: Each of the Companies, with the consent of their
stockholder, have elected to be taxed under sections of the federal and state
income tax laws, which provide that in lieu of corporation income taxes, the
stockholder separately accounts for the Companies' items of income, deductions,
losses and credits. Therefore, these statements do not include any provision for
corporation income taxes (refunds). As of December 31, 1997, the Company's
reported net assets exceed their tax basis by approximately $1,270,000.
Accordingly, if the elections were terminated on that date, net deferred tax
liabilities totaling approximately $432,000 would be recognized by charges to
income tax expense. Also, no provision has been made for any amounts which may
be advanced or paid as dividends to the stockholder to assist the stockholder in
paying personal income taxes on the income of the Companies.
NOTE 2. STATION PURCHASES
The Companies have acquired several operating radio stations during 1996 and
1995 as described in the following paragraphs. All acquisitions were accounted
for as purchases and the results of operations from the dates of purchase are
included in the accompanying combined financial statements.
Hometown Wireless, Inc. was formed in 1995 and purchased two Minnesota radio
stations in June 1996. Both are operated in connection with a third nearby
Minnesota radio station. The purchase price of $1,000,000 was allocated to the
assets acquired and consisted of a $250,000 cash down payment with the remaining
$750,000 financed by the seller.
Ingstad Northern Iowa Broadcasting, Inc. (INIBI), a related entity, entered
into an agreement to purchase four Iowa radio stations. INIBI assigned all
rights under this agreement to JIB in 1996. The purchase in the amount of
$875,000, less a cash down payment of $13,370 paid in 1995, occurred in April
1996 and was financed from the loan with a commercial finance corporation
described in Note 4.
Ingstad Mankato, Inc. purchased a Minnesota radio station in January 1995.
The station had previously been and continues to be operated under a Local
Marketing Agreement (LMA) by James Ingstad Broadcasting, Inc. Under the LMA, JIB
operates the radio station which is licensed to the owner,
F-131
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. STATION PURCHASES (CONTINUED)
now IMI, and pays a monthly fee to the owner. All revenues and expenses relating
to the station while operated under a LMA are recognized by JIB. The purchase
price of $1,741,169, $1,341,169 of which was financed by the seller, was
allocated to the assets acquired.
The purchase price of business acquisitions was allocated as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
<S> <C> <C>
1996 1995
------------ -------------
Accounts receivable.................................................................. $ 25,000 $ --
Property and equipment............................................................... 1,040,000 550,000
Costs in excess of fair value of net assets acquired................................. -- 366,169
Other intangibles.................................................................... 810,000 825,000
Issuance of notes payable............................................................ (750,000) (1,341,169)
------------ -------------
Total cash purchase price............................................................ 1,125,000 400,000
Change in acquisition deposits....................................................... (13,370) 13,370
------------ -------------
$ 1,111,630 $ 413,370
------------ -------------
------------ -------------
</TABLE>
NOTE 3. OTHER ASSETS
Accumulated amortization for other assets as of December 31, 1997 and 1996
is as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Cost in excess of net assets of businesses acquired..................................... $ 284,804 $ 229,684
Organization costs...................................................................... 38,004 17,367
Loan fees............................................................................... 7,190 2,876
Noncompete agreement.................................................................... 278,506 231,188
Broadcast licenses...................................................................... 448,706 277,813
------------ ----------
$ 1,057,210 $ 758,928
------------ ----------
------------ ----------
</TABLE>
F-132
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. LONG-TERM DEBT
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Term note payable to a commercial finance corporation, interest rate at 4.5 percent
above the 30 day Commercial Paper rate, paid monthly. Principal payments monthly in
amounts ranging from $30,500 in 1996 to $47,000 in 2001. (1) (2) (3)................ $ 6,037,000 $ 6,006,000
9% Seller financed term note payable, due in monthly payments of $12,021, including
interest to January 2000, followed by payments of $19,468, including interest to
January 2007, at which time all remaining principal and accrued interest will be
payable in full, secured by the assets and stock of Ingstad Mankato, Inc. and the
personal guarantee of stockholder................................................... 1,262,973 1,292,718
8% Seller financed term note payable, due in monthly payments of $7,167, including
interest to June 2011, at which time all remaining principal and accrued interest
will be payable in full, secured by blanket security interest on all assets
purchased, a first mortgage on real estate, and the personal guarantee of the
stockholder (Note 6)................................................................ 708,696 736,777
Term note payable to a bank, variable interest rate of 1% below prior months prime
rate, due in monthly payments of $8,172, including interest, through April 2004, at
which time all remaining principal and accrued interest will be payable in full,
secured by the assets and stock of Missouri River Broadcasting, Inc. and the
personal guarantee of the stockholder............................................... 475,005 262,920
9% Seller financed term note payable, due in monthly payments of $4,424, including
interest, beginning June 1998 through May 2005, secured by personal guarantee of
stockholder......................................................................... 275,000 --
Other bank loans at 10% to 10.5% interest rate, payable in monthly payments ending at
various dates through July 1999, secured by technical equipment..................... 120,203 208,179
Other debt obligations................................................................ 85,258 154,468
------------ ------------
8,964,135 8,661,062
Less current maturities............................................................... 500,642 605,238
------------ ------------
$ 8,463,493 $ 8,055,824
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) The term note payable to a commercial finance corporation is secured by all
James Ingstad Broadcasting, Inc. equipment, accounts receivable, the stock
of JIB, the personal guarantee of the stockholder, and is also secured by a
collateral assignment of life insurance on the life of the stockholder in an
amount not less than $1,500,000. The loan agreement also provides for a
penalty for early payment of the note and restrictive debt covenants.
The amounts loaned to affiliates exceeded the amount permitted in the loan
covenants during 1996; however, the Companies received a waiver of the
covenant from the lender.
F-133
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. LONG-TERM DEBT (CONTINUED)
Subsequent to December 31, 1997, the terms of this note were renegotiated.
The interest rate will be reduced to 4.25% above the 30 day commercial paper
rate and monthly payments will be reduced to $14,500 beginning in February
1998 increasing to $21,350 in February 2002 with final payment in January
2003.
(2) Subsequent to December 31, 1997, James Ingstad Broadcasting, Inc. negotiated
additional financing with the commercial finance corporation in the amount
of $2,672,000 with interest at 4.25% above the 30 day commercial paper rate
for high-grade unsecured notes sold through dealers by major corporations.
This agreement provides for JIB to make loans to certain affiliates and to
enable such affiliates to acquire certain radio broadcast properties as well
as fund working capital needs of JIB and its affiliates. This loan is
payable in monthly principal payments ranging from $6,950 in 1998 to $10,250
in 2002, plus interest. The security for this loan is the same as (1) above.
(3) Also subsequent to December 31, 1997, James Ingstad Broadcasting, Inc.
negotiated a line of credit with the commercial finance corporation in the
amount of $1,450,000 with interest at 4.25% above the 30 day commercial
paper rate for high-grade unsecured notes sold through dealers by major
corporations. Each advance shall be payable in monthly installments based on
a percentage of the outstanding principal balance from the date of the
advance continuing until January 2003 when all remaining outstanding
principal and accrued interest will be due and payable in full. The security
for this loan is the same as (1) above.
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1998............................................................................ $ 500,642
1999............................................................................ 519,898
2000............................................................................ 583,736
2001............................................................................ 630,233
2002............................................................................ 693,546
Thereafter...................................................................... 6,036,080
---------
$8,964,135
---------
---------
</TABLE>
F-134
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. COMMITMENTS
The following is a schedule by year of the minimum future rentals under
noncancelable operating leases and minimum future payments under noncompetition
and consulting agreements as of December 31, 1997:
<TABLE>
<CAPTION>
YEAR LEASES AGREEMENTS TOTAL
- ------------------------------------------------------------------------------- --------- ----------- ---------
<S> <C> <C> <C>
1998........................................................................... $ 22,032 $ 21,292 $ 43,324
1999........................................................................... 15,364 21,296 36,660
2000........................................................................... 700 -- 700
2001........................................................................... 700 -- 700
2002........................................................................... 700 -- 700
Thereafter..................................................................... 10,500 -- 10,500
--------- ----------- ---------
$ 49,996 $ 42,588 $ 92,584
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
Total rental expense under all operating leases was $73,756, $83,356 and
$80,374 for the years ended December 31, 1997, 1996 and 1995, respectively.
NOTE 6. STOCKHOLDER'S EQUITY
Common stock, all of which is owned by the same individual, consists of the
following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING
PAR SHARES SHARES ----------------------
VALUE AUTHORIZED ISSUED 1997 1996
--------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
JKJ Broadcasting, Inc. .................................. $ 1 100,000 1,000 $ 1,000 $ 1,000
Missouri River Broadcasting, Inc. ....................... $ 1 200,000 25,000 25,000 25,000
Ingstad Mankato, Inc. ................................... $ 1 250,000 10,000 10,000 10,000
James Ingstad Broadcasting, Inc. ........................ $ 1 100,000 35,000 35,000 35,000
Hometown Wireless, Inc. ................................. $ 1 100,000 50,000 50,000 50,000
----------- ---------- ---------- ----------
750,000 121,000 $ 121,000 $ 121,000
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
</TABLE>
F-135
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. STOCKHOLDER'S EQUITY (CONTINUED)
Additional paid-in capital and retained earnings by Company follows:
<TABLE>
<CAPTION>
ADDITIONAL PAID-IN RETAINED EARNINGS
CAPITAL (DEFICIT)
---------------------- -----------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------- ---------- ----------- ----------
JKJ Broadcasting, Inc. ......................................... $ -- $ -- $ 38,618 $ 11,272
Missouri River Broadcasting, Inc. .............................. -- -- 278,215 231,429
Ingstad Mankato, Inc. .......................................... -- -- 80,605 50,210
James Ingstad Broadcasting, Inc. ............................... 94,602 94,602 381,678 90,704
Hometown Wireless, Inc. ........................................ 15,315 15,315 (108,015) 1,549
---------- ---------- ----------- ----------
$ 109,917 $ 109,917 $ 671,101 $ 385,164
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
NOTE 7. RELATED PARTY TRANSACTIONS NOT DISCLOSED ELSEWHERE
Notes receivable from parties related through common ownership as of
December 31, 1997 and 1996 consist of the following unsecured loans which bear
interest at the annual applicable federal rate. None of the loans include
structured repayment terms.
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Radio Ingstad of Iowa, Inc. .......................................................... $ 258,509 $ 298,785
Ingstad Broadcasting, Inc. ........................................................... 993,075 1,008,501
Radio Iowa Broadcasting, Inc. ........................................................ 618,413 109,184
Stockholder........................................................................... 193,809 102,839
------------ ------------
$ 2,063,806 $ 1,519,309
------------ ------------
------------ ------------
</TABLE>
Notes payable to parties related through common ownership at December 31,
1997 and 1996 consist of the following unsecured loans which bear interest at
the annual applicable federal rate. None of the loans include structured
repayment terms.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Stockholder............................................................................... $ 383,089 $ 319,707
Ingstad Broadcasting, Inc. ............................................................... 13,195 38,595
---------- ----------
$ 396,284 $ 358,302
---------- ----------
---------- ----------
</TABLE>
The Companies use the management services of their stockholder. The amount
of charges by the stockholder included in corporate office expense for travel,
postage, rent, staff salaries and other business expenses was $85,253, $98,572
and $89,616 for the years ended December 31, 1997, 1996 and 1995, respectively.
F-136
<PAGE>
JKJ BROADCASTING, INC.
MISSOURI RIVER BROADCASTING, INC.
INGSTAD MANKATO, INC.
JAMES INGSTAD BROADCASTING, INC.
HOMETOWN WIRELESS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. DEFINED CONTRIBUTION RETIREMENT PLAN
The Companies have a 401(k) plan covering substantially all their employees,
which allows eligible employees to contribute a portion of their compensation to
the plan. The employer companies may make an additional contribution subject to
the terms of the plan. The Companies did not make any contribution to the plan
in 1997, 1996 and 1995.
NOTE 9. SELF INSURED HEALTH COVERAGE
The Company is self insured for health care up to predetermined amounts
above which third party insurance applies.
NOTE 10. GAIN FROM ANTENNA AGREEMENT
James Ingstad Broadcasting, Inc. entered into an antenna agreement in
December 1995 with another independent radio station owner whereby JIB agreed to
elect to have one of its Minnesota FM towers modified from directional to
nondirectional pending FCC approval. The agreement provided for JIB to receive a
nonrefundable $50,000 initial deposit and $100,000 upon final approval from the
FCC. The initial $50,000 was reported as gain from antenna agreement for the
year ended December 31, 1995. The remaining $100,000 was reported in 1996 when
the FCC approved the agreement terms.
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, "Disclosures of Fair Value of Financial
Instruments", requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. Statement No. 107 provides exclusions for certain trade receivables,
trade payables and accruals and all nonfinancial assets and liabilities from its
disclosure requirements.
Cash approximates fair value because of its highly liquid and short term
nature. The aggregate fair values of the notes receivable from and notes payable
to related parties approximates their carrying amounts as there are no
structured repayment terms and interest is adjusted annually. The carrying
amounts reported for the variable rate note payable to a commercial finance
corporation and notes payable to banks and sellers approximates their fair
values.
NOTE 12. SUBSEQUENT SALE OF BUSINESS
On February 19, 1998, the Companies and their shareholder and Radio Iowa
Broadcasting, Inc. agreed to sell all radio station assets and liabilities, as
defined in the agreements, to an outside party for approximately $49,500,000, of
which $39,200,000 is allocated to these Companies. Approval of the sale must be
received from the Federal Communications Commission ("FCC"). Closing on the sale
will occur on the last day of the month in which the FCC approves the assignment
application.
F-137
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of
Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in shareholders' equity and of cash flows present
fairly, in all material respects, the financial position of Jan-Di Broadcasting,
Inc. (the "Company") at June 30, 1997 and 1996, and the results of its
operations and its cash flows for each of the two years in the period ended June
30, 1997 in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 24, 1998
F-138
<PAGE>
JAN-DI BROADCASTING, INC.
BALANCE SHEETS
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
JUNE 30,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents.................................................................... $ 181 $ 195
Accounts receivable, less allowance for doubtful accounts of $20............................. 292 346
Note receivable from KMXY-FM................................................................. -- 213
Prepaid and other current assets............................................................. 11 9
--------- ---------
Total current assets....................................................................... 484 763
Property and equipment, net.................................................................... 496 277
Intangible assets, net......................................................................... 215 166
--------- ---------
Total assets............................................................................... $ 1,195 $ 1,206
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................................. $ 14 $ 12
Current portion of notes payable............................................................. 60 34
Commissions payable.......................................................................... 63 20
Accrued and other current liabilities........................................................ 36 19
--------- ---------
Total current liabilities.................................................................. 173 85
Long-term liabilities:
Notes payable................................................................................ 505 515
--------- ---------
Total liabilities.......................................................................... 678 600
--------- ---------
Commitments and contingencies
Shareholders' equity:
Common stock, $2.60 par value, 50,000 shares authorized, 20,000 issued and outstanding....... 52 52
Retained earnings............................................................................ 465 554
--------- ---------
Total shareholders' equity................................................................. 517 606
--------- ---------
Total liabilities and shareholders' equity................................................. $ 1,195 $ 1,206
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements.
F-139
<PAGE>
JAN-DI BROADCASTING, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JUNE 30,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Revenues.................................................................................. $ 2,087 $ 1,939
Less: agency commissions.................................................................. (116) (111)
--------- ---------
Net revenues.......................................................................... 1,971 1,828
Operating expenses:
Programming............................................................................. 391 304
Sales and promotions.................................................................... 570 419
Technical............................................................................... 145 105
General and administrative.............................................................. 627 524
Trade................................................................................... 13 20
Depreciation and amortization........................................................... 112 53
--------- ---------
Total operating expenses.............................................................. 1,858 1,425
--------- ---------
Income from operations.................................................................... 113 403
Interest expense.......................................................................... (50) (43)
Other income, net......................................................................... 27 13
--------- ---------
Net income................................................................................ $ 90 $ 373
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements.
F-140
<PAGE>
JAN-DI BROADCASTING, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------------- ------------- ---------
<S> <C> <C> <C>
Balance at June 30, 1995........................................................... $ 52 $ 426 $ 478
Net income......................................................................... -- 373 373
Dividends.......................................................................... -- (245) (245)
--- ----- ---------
Balance at June 30, 1996........................................................... 52 554 606
Net income......................................................................... -- 90 90
Dividends.......................................................................... -- (179) (179)
--- ----- ---------
Balance at June 30, 1997........................................................... $ 52 $ 465 $ 517
--- ----- ---------
--- ----- ---------
</TABLE>
See Notes to Financial Statements.
F-141
<PAGE>
JAN-DI BROADCASTING, INC.
STATEMENTS OF CASH FLOWS
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JUNE 30,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Cash flows from operating activities:
Net income.................................................................................. $ 90 $ 373
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization............................................................. 112 53
Decrease (increase) in accounts receivable................................................ 54 (111)
Decrease (increase) in prepaid expenses and other current assets.......................... (2) 54
Increase in accounts payable.............................................................. 2 3
Increase (decrease) in accrued and other liabilities...................................... 60 (18)
--- ---------
Net cash provided by operating activities................................................... 316 354
--- ---------
Cash flows from investing activities:
Purchases of property and equipment......................................................... (92) (434)
Acquisition of KMXY-FM...................................................................... (52) --
--- ---------
Cash used in investing activities........................................................... (144) (434)
--- ---------
Cash flows from financing activities:
Proceeds from notes payable................................................................. 27 305
Repayments of notes payable................................................................. (34) (29)
Dividends paid to shareholders.............................................................. (179) (245)
--- ---------
Net cash (used in) provided by financing activities......................................... (186) 31
--- ---------
Decrease in cash and cash equivalents......................................................... (14) (49)
Cash and cash equivalents at beginning of year................................................ 195 244
--- ---------
Cash and cash equivalents at end of year...................................................... $ 181 $ 195
--- ---------
--- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest........................................................................ $ 54 $ 43
--- ---------
--- ---------
Non-cash operating activities:
Trade revenue............................................................................. $ 20 $ 16
--- ---------
--- ---------
Trade expense............................................................................. $ 13 $ 20
--- ---------
--- ---------
</TABLE>
See Notes to Financial Statements.
F-142
<PAGE>
JAN-DI BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (DOLLARS IN 000'S)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Jan-Di Broadcasting, Inc. (the "Company") is a broadcasting company formed
in 1980 to own and operate radio stations in Western Colorado. As of June 30,
1997, the Company owned and operated three FM stations, KEKB-FM, KBKL-FM and
KMXY-FM.
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flow are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Broadcasting towers and equipment............................ 7 years
Office furniture and equipment............................... 6 years
Leasehold improvement........................................ Term of
lease
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include FCC licenses and non-compete agreements.
Intangible assets are stated at cost and are being amortized using the
straight-line method over the estimated useful life or contract term for periods
not exceeding 15 years. The Company evaluates the carrying value of intangibles
periodically in relation to the projected future undiscounted net cash flows of
the related businesses.
INCOME TAXES
The Company has elected to be treated as an S-Corporation for federal income
tax purposes. Under this election the income or loss of the S-Corporation is
included in the tax returns of the individual shareholders. Accordingly, federal
income taxes are not included in the accompanying financial statements.
F-143
<PAGE>
JAN-DI BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (DOLLARS IN 000'S) (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
REVENUE RECOGNITION
Revenue is recognized as advertising air time is broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. ACQUISITION
On July 23, 1996, the Company acquired the intangible assets of Station
KMXY-FM in Grand Junction, Colorado for total consideration of $77 including a
non-compete agreement for $25. The acquisition was accounted for using the
purchase method of accounting.
The Company's results of operations for the year ended June 30, 1997 and
1996 include the results of operations of the KMXY-FM from the date of
acquisition. The following unaudited pro forma statement of operations data give
effect to the acquisition as if it had occurred on July 1, 1995. In addition,
depreciation and amortization has been increased for each period to reflect
initial purchase price allocations as if the acquisition had occurred as of July
1, 1995.
<TABLE>
<CAPTION>
PRO FORMA FOR THE YEARS
ENDED JUNE 30,
------------------------
<S> <C> <C>
1997 1996
----------- -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Net revenues........................................................ $ 1,987 $ 2,084
----------- -----------
----------- -----------
Income from operations.............................................. $ 116 $ 449
----------- -----------
----------- -----------
Net income.......................................................... $ 103 $ 419
----------- -----------
----------- -----------
</TABLE>
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Broadcasting towers and equipment............................................. $ 857 $ 593
Office furniture and equipment................................................ 57 35
Leasehold improvements........................................................ 67 50
--------- ---------
981 678
Less accumulated depreciation................................................. (485) (401)
--------- ---------
Property and equipment, net................................................... $ 496 $ 277
--------- ---------
--------- ---------
</TABLE>
Depreciation expense for the years ended June 30, 1997 and 1996 was $84 and
$43, respectively.
F-144
<PAGE>
JAN-DI BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (DOLLARS IN 000'S) (CONTINUED)
4. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
FCC licenses.................................................................. $ 260 $ 208
Non-compete agreement......................................................... 25 --
--------- ---------
285 208
Less accumulated amortization................................................. (70) (42)
--------- ---------
Intangible assets, net........................................................ $ 215 $ 166
--------- ---------
--------- ---------
</TABLE>
Amortization expense for the years ended June 30, 1997 and 1996 was $28 and
$10, respectively.
5. RELATED PARTY TRANSACTIONS:
The Company leases business offices and studio space from the shareholders.
Monthly rental paid by the Company is $2.5 under a month to month agreement,
whereby the Company is responsible for all insurance, maintenance and utilities.
6. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of approximately $42 and $40, respectively,
for the years ended June 30, 1997 and 1996, under operating leases for equipment
and broadcasting facilities. Future minimum annual payments under the
non-cancelable operating equipment leases and agreements as of June 30, 1997,
are as follows:
<TABLE>
<CAPTION>
JUNE 30, PAYMENT
- ------------------------------------------------------------------------------------ -----------
<S> <C>
1998................................................................................ $ 8
1999................................................................................ 4
-----
$ 12
-----
-----
</TABLE>
F-145
<PAGE>
JAN-DI BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (DOLLARS IN 000'S) (CONTINUED)
7. NOTES PAYABLE:
Outstanding amounts under the Company's long-term debt arrangements consist
of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Note payable to Norwest Bank of Colorado, $538 principal, interest at prime
rate plus 1.5% (9.5% and 9.25% at June 30, 1997 and 1996, respectively) due
June 14, 2006, secured by accounts receivable, inventory, and equipment..... $ 505 $ 493
Note payable to Norwest Bank of Colorado with interest at 8.5%, due January
14, 2001, secured by Jeep Cherokee.......................................... 13 --
Note payable with interest at 8.0%, due March 1, 1998, secured by
equipment................................................................... 22 56
Note payable with interest imputed at average funds rate, due December,
1998........................................................................ 25 --
--------- ---------
565 549
Less current maturities....................................................... (60) (34)
--------- ---------
Long-term debt................................................................ $ 505 $ 515
--------- ---------
--------- ---------
</TABLE>
A summary of the future maturities of long-term debt follows:
<TABLE>
<CAPTION>
JUNE 30,
- --------------------------------------------------------------------------------------
<S> <C>
1998.................................................................................. $ 60
1999.................................................................................. 48
2000.................................................................................. 51
2001.................................................................................. 54
2002.................................................................................. 56
Thereafter............................................................................ 296
---------
$ 565
---------
---------
</TABLE>
The Company also has a revolving line of credit with Norwest Bank of
Colorado which provides short-term borrowings up to $100. Interest on advances
is payable monthly at one percent above the prime rate. The line of credit is
reviewed annually by the bank, contains no fee for the unused balance and
expires November 1, 1998. There were no outstanding balances on this line of
credit as of June 30, 1997 and 1996.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value due to their short-term nature. The
fair value of note payable are estimated based on current market rates and
approximates the carrying value.
9. SUBSEQUENT EVENTS
On January 5, 1998, the Company entered into an asset purchase agreement to
sell substantially all of the assets of the Company to Cumulus Media Inc. (a
wholly-owned subsidiary of Cumulus Holdings, Inc.) for $5 million.
F-146
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying combined balance sheet and the related combined
statements of income and retained earnings and of cash flows present fairly, in
all material respects, the financial position of K-- Country, Inc. at June 30,
1997, and the results of its operations and its cash flows for the year in
conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 27, 1998
F-147
<PAGE>
K-COUNTRY, INC.
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................................... $ 76,153
Accounts receivable, less allowance for doubtful accounts of $11,880.............................. 271,236
Prepaid expenses.................................................................................. 4,973
------------
Total current assets.......................................................................... 352,362
Property and equipment, net......................................................................... 706,711
Intangible assets, net of accumulated amortization of $94,215....................................... 562,774
------------
Total asset................................................................................... $ 1,621,847
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable on demand to stockholder............................................................. $ 1,296,156
Accounts payable.................................................................................. 41,862
Accrued salaries and commissions payable.......................................................... 22,342
Other accrued expenses............................................................................ 14,204
------------
Total current liabilities..................................................................... 1,374,564
------------
Commitment and contingencies
Stockholders' equity:
Common stock, $1 par value, 5,000 shares authorized, 500 issued and outstanding................... 500
Retained earnings................................................................................. 246,783
------------
Total stockholders' equity.................................................................... 247,283
------------
Total liabilities and stockholders' equity.................................................... $ 1,621,847
------------
------------
</TABLE>
See Notes to Combined Financial Statements.
F-148
<PAGE>
K-COUNTRY, INC.
COMBINED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
-------------
<S> <C>
Revenues:.......................................................................................... $ 2,205,817
Less: agency commissions......................................................................... 383,739
-------------
Net revenues................................................................................. 1,822,078
Operating expenses:
Programming...................................................................................... 423,610
Magazine expenses................................................................................ 261,650
Selling expenses................................................................................. 587,768
General and administrative....................................................................... 308,426
Depreciation and amortization.................................................................... 159,649
-------------
Total operating expenses..................................................................... 1,741,103
-------------
Income before income taxes......................................................................... 80,975
Income taxes....................................................................................... 24,777
-------------
Net income......................................................................................... 56,198
Beginning retained earnings........................................................................ 190,585
-------------
Ending retained earnings........................................................................... $ 246,783
-------------
-------------
</TABLE>
See Notes to Combined Financial Statements.
F-149
<PAGE>
K-COUNTRY, INC.
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
-------------
<S> <C>
Cash flows from operating activities:
Net income....................................................................................... $ 56,198
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization................................................................ 159,649
Increase in accounts receivable.............................................................. (5,435)
Decrease in prepaid insurance................................................................ 5,311
Decrease in accounts payable................................................................. (80,790)
Decrease in accrued liabilities.............................................................. (10,677)
Increase in income taxes payable............................................................. 1,095
-------------
Net cash provided by operating activities.................................................. 125,351
-------------
Cash flows from investing activities:
Acquisition of radio station..................................................................... (804,000)
Purchases of property and equipment.............................................................. (65,757)
-------------
Cash used for investing activities............................................................... (869,757)
-------------
Cash flows from financing activities:
Repayment of note payable to stockholder......................................................... (165,000)
Proceeds from borrowings from stockholder........................................................ 895,538
-------------
Cash provided by financing activities............................................................ 730,538
-------------
Decrease in cash and cash equivalents.............................................................. (13,868)
Cash and cash equivalents at beginning of year..................................................... 90,021
-------------
Cash and cash equivalents at end of year........................................................... $ 76,153
-------------
-------------
Supplemental disclosures of cash flow information:
Cash paid for interest........................................................................... $ --
-------------
-------------
Cash paid for income taxes....................................................................... $ 24,777
-------------
-------------
Non-cash operating activities:
Trade revenue.................................................................................... $ 125,080
-------------
-------------
Trade expense.................................................................................... $ 159,890
-------------
-------------
</TABLE>
See Notes to Combined Financial Statements.
F-150
<PAGE>
K--COUNTRY, INC.
COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
The combined financial statements of K--Country, Inc. include the operations
of radio stations WEGC-FM, WJAD-FM, WKAK-FM and WALG-FM located in Albany, GA
and the operations of Albany Magazine. K--Country, Inc. owns radio stations
WKAK-FM and WALG-AM. WEGC-FM, WJAD-FM and the Albany Magazine are wholly owned
by the 89% owner of K--Country, Inc. All significant intercompany transactions
are eliminated. The combined operations are hereinafter referred to as the
"Company".
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Building......................................................... 27 years
Vehicles......................................................... 5 years
7-15
Studio and broadcasting equipment................................ years
Office furniture and fixtures.................................... 10 years
Program library.................................................. 7 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets primarily represent the excess of cost over the fair
market value of tangible net assets acquired. Intangible assets are stated at
cost and are being amortized using the straight-line method over the estimated
useful life of 15 years. The Company evaluates the carrying value of intangibles
periodically in relation to the projected future undiscounted net cash flows of
the related businesses.
F-151
<PAGE>
K--COUNTRY, INC.
COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amount at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized. Income tax expense is the total of tax payable for the period and the
change during the period in deferred tax assets and liabilities.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
ORGANIZATION COSTS
Organization costs are amortized using the straight-line method over a
useful life of 5 years.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. ACQUISITIONS
On July 23, 1996, the Company acquired the assets of WEGC-FM and WJAD-FM for
$804,000 of cash. The acquisition was accounted for as a purchase. Accordingly,
the accompanying combined financial statements include the results of operations
of the acquired stations from the date of acquisition. The purchase price was
allocated $267,850 to property and equipment and $536,150 to intangible assets.
The Company operated the WEGC-FM and WJAD-FM under a local marketing agreement
from May 1, 1996 to July 23, 1996.
F-152
<PAGE>
K--COUNTRY, INC.
COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT:
Property and equipment at June 30, 1997 consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
1997
-----------
<S> <C>
Building......................................................................... $ 96,209
Vehicles......................................................................... 93,783
Studio and broadcasting equipment................................................ 665,965
Office furniture and fixtures.................................................... 31,103
Program library.................................................................. 47,387
-----------
934,447
Accumulated depreciation......................................................... (257,736)
-----------
676,711
Land............................................................................. 30,000
-----------
Property and equipment, net...................................................... $ 706,711
-----------
-----------
</TABLE>
Depreciation expense for the year ended June 30, 1997 was $114,873.
4. NOTE PAYABLE TO STOCKHOLDER
The Company is dependent on the controlling stockholder for financing. Note
payable to stockholder is payable on demand and is non-interest bearing.
5. EMPLOYEE 401-K PLAN
The Company has an elective contribution program for employees, where
contributions are withheld from employee salaries and remitted to the plan
administrator each month. The Company makes no contributions and only gives to
employees the service of withholding and remitting for their convenience.
6. INCOME TAXES
The Company's effective income tax rate differs from the statutory federal
income tax rate of 34% for the year ended June 30, 1997 as follows:
<TABLE>
<S> <C>
Income tax benefit at federal statutory rate....................... $ 27,531
State income taxes (net of federal benefit)........................ 3,616
Other.............................................................. (6,370)
---------
$ 24,777
---------
---------
</TABLE>
Temporary differences are insignificant.
F-153
<PAGE>
K--COUNTRY, INC.
COMBINED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of approximately $7,500 for the year ended
June 30, 1997 under operating leases for radio broadcasting facilities. Future
minimum annual payments under these non-cancelable operating leases and
agreements as of June 30, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................... $ 7,500
1999............................................................... 7,625
2000............................................................... 7,650
2001............................................................... 7,650
Thereafter......................................................... 45,663
---------
$ 76,088
---------
---------
</TABLE>
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable and note payable to stockholder approximates fair value due to
their short-term nature.
9. SUBSEQUENT EVENT:
In February 1998, the Company entered into a letter of intent with Cumulus
Broadcasting, Inc. (a wholly owned subsidiary of Cumulus Media Inc.) to sell the
assets of the Company, subject to approval of the Federal Communications
Commission, for $3,300,000. The Company expects to enter into an asset purchase
agreement with Cumulus Broadcasting, Inc. in March 1998.
F-154
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in stockholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of Lesnick
Communications, Inc. at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 20, 1998
F-155
<PAGE>
LESNICK COMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1997 1996
---------- ----------
ASSETS
Current assets:
Cash.................................................................................... $ 7,678 $ 8,524
Accounts receivable, less allowance for doubtful accounts of $8,000 in both 1997 and
1996.................................................................................. 77,560 63,332
Income tax receivable................................................................... 2,025 25,000
Prepaid expenses and other current assets............................................... 3,300 3,099
---------- ----------
Total current assets................................................................ 90,563 99,955
Property and equipment, net............................................................... 16,595 17,844
Intangible assets, net.................................................................... 182,000 204,750
---------- ----------
Total assets........................................................................ $ 289,158 $ 322,549
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................ $ 54,219 $ 50,710
Accrued expenses and other current liabilities.......................................... 22,748 12,304
Current portion of settlements payable.................................................. 14,400 38,400
Loan from shareholder................................................................... 170,530 27,000
---------- ----------
Total current liabilities........................................................... 261,897 128,414
Long-term settlements payable............................................................. 17,200 31,600
---------- ----------
Total liabilities................................................................... 279,097 160,014
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value, 75,000 shares authorized, issued and outstanding............ 75,000 75,000
Retained earnings (deficit)............................................................. (64,939) 87,535
---------- ----------
Total stockholders' equity.......................................................... 10,061 162,535
---------- ----------
Total liabilities and stockholders' equity.......................................... $ 289,158 $ 322,549
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements.
F-156
<PAGE>
LESNICK COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------
<S> <C> <C>
1997 1996
----------- -----------
Revenues.......................................................................... $ 438,062 $ 482,946
Less: agency commissions.......................................................... (12,947) (22,129)
----------- -----------
Net revenues................................................................ 425,115 460,817
----------- -----------
Operating expenses:
Programming..................................................................... 126,953 135,012
Sales and promotions............................................................ 147,619 155,647
Technical....................................................................... 23,082 21,474
General and administrative...................................................... 242,874 267,561
Depreciation and amortization................................................... 29,882 22,383
----------- -----------
Total operating expenses.................................................... 570,410 602,077
----------- -----------
Loss from operations.............................................................. (145,295) (141,260)
Interest income................................................................... 91 1,194
Interest expense.................................................................. (5,645) (3,056)
Other expense..................................................................... -- (70,000)
----------- -----------
Loss before income taxes.......................................................... (150,849) (213,122)
Income tax expense (benefit)...................................................... (1,625) 24,613
----------- -----------
Net loss.......................................................................... $ (152,474) $ (188,509)
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements.
F-157
<PAGE>
LESNICK COMMUNICATIONS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
RETAINED
COMMON EARNINGS
STOCK (DEFICIT) TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1, 1996................................................... $ 75,000 $ 276,044 $ 351,044
Net loss..................................................................... (188,509) (188,509)
---------- ---------- ----------
Balance at December 31, 1996................................................. 75,000 87,535 162,535
Net loss..................................................................... (152,474) (152,474)
---------- ---------- ----------
Balance at December 31, 1997................................................. $ 75,000 $ (64,939) $ 10,061
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
F-158
<PAGE>
LESNICK COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------
<S> <C> <C>
1997 1996
----------- -----------
Cash flows from operating activities:
Net loss........................................................................ $ (152,474) $ (188,509)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization................................................. 29,882 22,383
Decrease (increase) in accounts receivable.................................... (14,228) 12,671
Decrease in income tax receivable............................................. 22,975 --
Decrease (increase) in prepaid expenses and other current assets.............. (201) 19,601
Increase in accounts payable.................................................. 3,509 7,509
Increase (decrease) in accrued settlement payments............................ (38,400) 70,000
Increase in accrued expenses and other liabilities............................ 10,444 6,446
----------- -----------
Net cash used in operating activities....................................... (138,493) (49,899)
Cash flows from investing activities:
Purchases of property and equipment............................................. (5,883) (2,153)
----------- -----------
Cash used for investing activities.......................................... (5,883) (2,153)
----------- -----------
Cash flows from financing activities:
Repayment of borrowings......................................................... -- (4,324)
Proceeds from borrowings........................................................ 143,530 27,000
----------- -----------
Cash provided by financing activities....................................... 143,530 22,676
----------- -----------
Decrease in cash.................................................................. (846) (29,376)
Cash at beginning of year......................................................... 8,524 37,900
----------- -----------
Cash at end of year............................................................... $ 7,678 $ 8,524
----------- -----------
----------- -----------
Non-cash operating activities:
Trade revenue................................................................... $ 97,096 $ 80,795
----------- -----------
----------- -----------
Trade expense................................................................... $ 90,405 $ 74,481
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements.
F-159
<PAGE>
LESNICK COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Lesnick Communications, Inc. owns and operates radio station WTWR-FM (the
"Station" or the "Company") located in Monroe, Michigan.
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Vehicles........................................................ 5 years
10-12
Broadcasting towers and equipment............................... years
Office furniture and equipment.................................. 7-12 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include goodwill, Federal Communications Commission
("FCC") license and favorable lease contracts. Intangible assets are stated at
cost and are being amortized using the straight-line method over the estimated
useful life or contract term for periods not exceeding 40 years. The Company
evaluates the carrying value of intangibles periodically in relation to the
projected future undiscounted net cash flows of the related businesses.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
Fees paid pursuant to various time brokerage agreements are amortized to
expense, respectively, over the term of the agreement using the straight-line
method.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products
F-160
<PAGE>
LESNICK COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
or services received as advertising air time is broadcast. Products and services
received are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Vehicles......................................................... $ 31,047 $ 31,047
Broadcasting towers and equipment................................ 141,962 141,962
Office furniture and equipment................................... 97,357 91,474
------------ ------------
270,366 264,483
Accumulated depreciation......................................... 253,771 246,639
------------ ------------
Property and equipment, net...................................... $ 16,595 $ 17,844
------------ ------------
------------ ------------
</TABLE>
Depreciation expense for the year ended December 31, 1997 and 1996 was
$7,132 and $4,183, respectively.
3. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Goodwill, FCC license and others................................. $ 455,000 $ 455,000
Accumulated amortization......................................... (273,000) (250,250)
------------ ------------
Intangible assets, net........................................... $ 182,000 $ 204,750
------------ ------------
------------ ------------
</TABLE>
Amortization expense for the year ended December 31, 1997 and 1996 was
$22,750 and $18,200, respectively.
4. RELATED PARTY TRANSACTIONS
A stockholder of the Company provides cash for operations to the Station as
needed. At December 31, 1997 and 1996, the Company had a balance payable to the
stockholder of $170,530 and $27,000, respectively. The balance is payable on
demand of the stockholder. The interest rate applicable to the payable balance
was 8.5% for the two years ended December 31, 1997.
The Company leases the land on which the tower transmitter is located from a
stockholder of the Company. The Company was not required to pay monthly rent
payments during 1997 and 1996; however, rent expense was accrued for that
period. Rent expense for the tower site was $6,000 for each of the years ended
December 31, 1997 and 1996. Future rent expense will be $6,000 for each of the
next five years.
F-161
<PAGE>
LESNICK COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
In 1996, the Company recorded an income tax benefit for alternative minimum
taxes paid in prior years due to the carryforward of a portion of the 1996
income tax loss. The Company has established a valuation allowance against all
of its operating loss carryforwards following an assessment of the likelihood of
realizing such amounts. In arriving at the determination as to the amount of the
valuation allowance required, the Company considered its past operating history,
tax planning strategies and its expectation of the level and timing of future
taxable income. At December 31, 1997, the Company had net operating loss
carryforwards for income tax purposes of approximately $350,000.
6. COMMITMENTS AND CONTINGENCIES
During 1997, the Company settled two lawsuits which were filed during 1996.
The first lawsuit was settled in January 1997 for $20,000. The second lawsuit
was settled in May 1997 for $50,000. The Company paid $38,400 in relation to
these settlements in 1997. Future payments will be $14,400 in 1998 and 1999 and
$2,800 in 2000.
The Company incurred expenses of approximately $12,675 for the year ended
December 31, 1997 and $12,375 for the year ended December 31, 1996, under
operating leases for radio broadcasting facilities. Future minimum annual
payments under these non-cancelable operating leases and agreements as of
December 31, 1997 include payments of $9,675 in 1998.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash accounts receivables and accounts payable, and
long term settlements payable approximates fair value because of the short
maturity of these instruments.
8. SUBSEQUENT EVENT
In January 1998, the Company entered into an agreement with Cumulus
Broadcasting, Inc. (a wholly owned subsidiary of Cumulus Media Inc.) ("Cumulus")
to sell substantially all the assets of the Company to Cumulus, subject to
approval of the FCC.
F-162
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial position of
Louisiana Media Interests, Inc. and subsidiaries at December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 9, 1998
F-163
<PAGE>
LOUSISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 98,568 $ 15,528
Accounts receivable, less allowance for doubtful accounts of $15,000 and $15,000,
respectively...................................................................... 631,741 472,755
Prepaid expenses and other current assets........................................... 23,997 12,212
------------ ------------
Total current assets............................................................ 754,306 500,495
Property and equipment, net........................................................... 1,056,060 370,276
Intangible assets, net................................................................ 6,076,587 4,364,569
Other assets.......................................................................... 7,093 7,093
------------ ------------
Total assets.................................................................... $ 7,894,046 $ 5,242,433
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................................................... $ 72,980 $ 403
Accrued expenses and other current liabilities...................................... 329,782 272,621
Current portion of long-term debt................................................... 1,266,429 245,174
------------ ------------
Total current liabilities....................................................... 1,669,191 518,198
------------ ------------
Long-term debt, less current portion.................................................. 6,195,594 4,482,717
Preferred stock of subsidiary......................................................... 748,000 694,000
Commitments and contingencies
Stockholders' equity:
8% Convertible preferred stock, no par value, 100,000 shares authorized, 10,000
issued and 10,000 outstanding (liquidation value of $15.91 per share)............. -- 175,000
Common stock, no par value, 100,000 shares authorized, 91,000 issued and outstanding
at December 31, 1997; 75,500 issued and outstanding at December 31, 1996.......... 598,040 125,000
Treasury stock at cost.............................................................. (79,063) (79,063)
Accumulated deficit................................................................. (1,237,716) (673,419)
------------ ------------
Total stockholders' equity (deficit)............................................ (718,739) (452,482)
------------ ------------
Total liabilities and stockholders' equity (deficit)............................ $ 7,894,046 $ 5,242,433
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements
F-164
<PAGE>
LOUISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
<S> <C> <C> <C>
1997 1996 1995
------------ ------------ ------------
Revenues................................................................ $ 3,362,885 $ 2,738,549 $ 1,937,337
Less: agency commissions................................................ (298,763) (216,756) (147,038)
------------ ------------ ------------
Net revenues...................................................... 3,064,122 2,521,793 1,790,299
Operating expenses:
Programming........................................................... 613,462 470,544 262,524
Sales and promotions.................................................. 696,540 532,788 360,018
Technical............................................................. 141,063 135,832 73,839
News.................................................................. 93,736 109,446 96,436
General and administrative............................................ 1,008,404 727,272 441,223
Depreciation and amortization......................................... 393,817 368,640 436,066
------------ ------------ ------------
Total operating expenses.......................................... 2,947,022 2,344,522 1,670,106
------------ ------------ ------------
Income from operations.................................................. 117,100 177,271 120,193
Interest expense........................................................ (543,717) (390,350) (363,944)
------------ ------------ ------------
Loss before income taxes and minority interest.......................... (426,617) (213,079) (243,751)
Income taxes............................................................ -- -- --
Minority interest....................................................... (121,680) (54,431) --
------------ ------------ ------------
Net loss................................................................ (548,297) (267,510) (243,751)
Preferred dividends..................................................... 16,000 16,000 16,000
------------ ------------ ------------
Net loss attributable to common shares.................................. $ (564,297) $ (283,510) $ (259,751)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
F-165
<PAGE>
LOUISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED COMMON TREASURY ACCUMULATED
STOCK STOCK STOCK DEFICIT TOTAL
----------- ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995...................... $ 175,000 $ 125,000 -- $ (130,158) $ 169,842
Repurchased 5,000 shares of common stock........ -- -- $ (39,062) -- (39,062)
Net loss........................................ -- -- -- (243,751) (243,751)
Preferred stock dividends....................... -- -- -- (16,000) (16,000)
----------- ---------- ---------- ------------- -----------
Balance at December 31, 1995.................... 175,000 125,000 (39,062) (389,909) (128,971)
Repurchased 5,000 shares of common stock........ -- -- (40,001) -- (40,001)
Net loss........................................ -- -- -- (267,510) (267,510)
Preferred stock dividends....................... -- -- -- (16,000) (16,000)
----------- ---------- ---------- ------------- -----------
Balance at December 31, 1996.................... 175,000 125,000 (79,063) (673,419) (452,482)
Conversion of preferred stock to common stock... (175,000) 175,000 -- -- --
Issuance of 4,500 shares of common stock........ -- 298,040 -- -- 298,040
Net loss........................................ -- -- -- (548,297) (548,297)
Preferred stock dividends....................... -- -- -- (16,000) (16,000)
----------- ---------- ---------- ------------- -----------
Balance at December 31, 1997.................... $ -- $ 598,040 $ (79,063) $ (1,237,716) $ (718,739)
----------- ---------- ---------- ------------- -----------
----------- ---------- ---------- ------------- -----------
</TABLE>
See Notes to Financial Statements.
F-166
<PAGE>
LOUISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
<S> <C> <C> <C>
1997 1996 1995
------------- ----------- -----------
Cash flows from operating activities:
Net loss............................................................... $ (548,297) $ (267,510) $ (243,751)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization.......................................... 393,817 368,640 436,066
Minority interest...................................................... 121,680 54,431 --
Stock-based compensation expense....................................... 278,040 20,000 --
Increase in accounts receivable........................................ (158,986) (152,432) (41,783)
Increase in other long-term assets..................................... -- (8,000) (7,082)
Increase in other current assets....................................... (11,785) (4,969) (7,243)
Increase (decrease) in accounts payable................................ 72,577 403 (58,250)
Increase (decrease) in other accrued liabilities....................... 65,831 82,794 119,964
------------- ----------- -----------
Net cash provided by operating activities.......................... 212,877 93,357 197,921
------------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment.................................... (616,619) (127,625) (14,337)
Acquisition of radio stations.......................................... (550,000) (500,000) --
------------- ----------- -----------
Net cash used in investing activities.............................. (1,166,619) (627,625) (14,337)
------------- ----------- -----------
Cash flows from financing activities:
Proceeds from borrowings of notes payable, net......................... 1,109,132 (194,439) (26,480)
Issuance of preferred stock of subsidiary.............................. -- 676,000 --
Repurchase of treasury stock........................................... -- (40,001) (39,062)
Dividends paid on preferred stock of subsidiary........................ (56,350) (36,431) --
Cash dividends paid.................................................... (16,000) (16,000) (16,000)
------------- ----------- -----------
Net cash (used in) provided by financing activities................ 1,036,782 389,129 (81,542)
------------- ----------- -----------
Net increase (decrease) in cash.......................................... 83,040 (145,139) 102,042
Cash at beginning of year................................................ 15,528 160,667 58,625
------------- ----------- -----------
Cash at end of year...................................................... $ 98,568 $ 15,528 $ 160,667
------------- ----------- -----------
------------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for interest................................................. $ 496,035 $ 363,077 $ 251,599
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
F-167
<PAGE>
LOUISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Louisiana Media Interests, Inc. and subsidiaries (the "Company") owns and
operates radio stations KKGB-FM, KBIU-FM, KYKZ-FM and KXZZ-AM in Lake Charles,
Louisiana.
The consolidated financial statements include the accounts of Louisiana
Media Interests, Inc. and all wholly owned subsidiaries. All significant
intercompany transactions are eliminated. The significant accounting principles
followed by the Company and the methods of applying those principles which
materially affect the determination of financial position, results of
operations, and cash flows are summarized below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized. Revenues and expenses under these agreements were
insignificant during 1997; such revenues and expenses totaled $35,877 and
$36,945, respectively during 1996 and $29,807 and $32,926, respectively during
1995.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and accounts
receivable. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral for its accounts receivable. The Company
maintains reserves for potential credit losses based upon the expected
collectibility of all accounts receivable.
F-168
<PAGE>
LOUISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed using an accelerated method over the estimated useful
lives of the property and equipment, ranging from 3 to 39 years.
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include FCC licenses, non-compete agreements,
organizational costs and goodwill. Intangible assets are recorded at cost and
amortized over their respective estimated useful lives. Amortization is
calculated using the straight-line method over a 15-year life. The Company
evaluates the carrying value of intangibles periodically in relation to the
projected future undiscounted net cash flows of the related businesses.
INCOME TAXES
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amount at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized. Income tax expense is the total of taxes payable for the period and
the change during the period in deferred tax assets and liabilities.
The Company files separate federal and state income tax returns.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, including cash,
accounts receivable, accounts payable and long-term debt, approximate fair
value.
2. ACQUISITIONS:
On July 15, 1997, the Company acquired KKGB-FM for $2,175,000 consisting of
cash of $550,000 and the issuance of a note payable of $1,625,000. The purchase
price was allocated to property and equipment ($115,798), intangibles
($1,959,202) and a covenant not to compete ($100,000).
The unaudited 1997 and 1996 pro forma results of operations are shown below.
The pro forma information was prepared as if the acquisition occurred at the
beginning of each year. The pro forma results may not be indicative of the
results that would have been reported if the transaction had actually occurred
at the beginning of each year presented, or of results that may be attained in
the future.
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Net revenues...................................................... $ 3,311,427 $ 3,039,657
Income from operations............................................ 106,778 139,551
Net loss.......................................................... (692,283) (531,341)
</TABLE>
F-169
<PAGE>
LOUISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS: (CONTINUED)
On August 21, 1996, the Company acquired KBIU-FM and KXZZ-AM for $1,500,000
consisting of cash of $500,000 and the issuance of a note payable of $1,000,000.
The purchase price was allocated to property and equipment ($59,411) and
intangibles ($1,440,589). The Company operated these stations under a local
marketing agreement from February 1, 1996 to the acquisition date.
The acquisitions discussed above were accounted for as purchases.
Accordingly, the accompanying consolidated financial statements include the
results of operations of the acquired entities from the dates of acquisition.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Broadcasting towers and equipment................................ $ 356,802 $ 221,290
Buildings........................................................ 678,118 106,000
Office furniture and equipment................................... 42,525 33,524
------------ ------------
1,077,445 360,814
Accumulated depreciation......................................... (153,669) (107,036)
------------ ------------
923,776 253,778
Land............................................................. 132,284 116,498
------------ ------------
Property and equipment, net...................................... $1,056,060 $ 370,276
------------ ------------
------------ ------------
</TABLE>
Depreciation expense for 1997, 1996 and 1995 was $46,633, $57,307 and
$36,713, respectively.
4. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
FCC licenses and goodwill........................................ $6,982,791 $5,023,589
Noncompete and organizational costs.............................. 179,193 79,193
------------ ------------
7,161,984 5,102,782
Accumulated amortization......................................... (1,085,397) (738,213)
------------ ------------
Intangible assets, net........................................... $6,076,587 $4,364,569
------------ ------------
------------ ------------
</TABLE>
Amortization expense for 1997, 1996 and 1995 was $347,184, $311,333 and
$399,353, respectively.
F-170
<PAGE>
LOUISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
The Company's effective income tax rate differs from the statutory federal
income tax rate as a follows:
<TABLE>
<CAPTION>
% OF % OF % OF
1997 PRE-TAX 1996 PRE-TAX 1995 PRE-TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Income tax benefit at federal statutory
rate................................. $ (186,421) (34.0) $ (90,953) (34.0) $ (82,875) (34.0)
State income taxes (net of federal
benefit)............................. (14,475) (2.6) (6,955) (2.6) (6,435) (2.6)
Other nondeductible items.............. 1,428 0.3 1,400 0.5 1,962 0.8
Minority interest expense.............. 41,371 7.5 18,507 6.9 -- --
Change in valuation allowance.......... 158,097 28.8 78,001 29.2 87,348 35.8
----------- ----- ---------- ----- ---------- -----
$ -- -- $ -- -- $ -- --
----------- ----- ---------- ----- ---------- -----
----------- ----- ---------- ----- ---------- -----
</TABLE>
Significant components of the deferred tax asset (liabilities) are as
follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets (liabilities):
Net operating loss carryforwards.................................... $ 329,316 $ 185,694
Allowance for doubtful accounts..................................... 5,100 5,100
Other items......................................................... 27,865 13,390
---------- ----------
Net deferred tax asset.............................................. 362,281 204,184
---------- ----------
Less valuation allowance............................................ (362,281) (204,184)
---------- ----------
Total net deferred tax asset........................................ $ -- $ --
---------- ----------
---------- ----------
</TABLE>
The net deferred tax asset at December 31, 1997 and 1996 is fully offset by
a valuation allowance. The amount of the valuation allowance is reviewed
periodically by management and is determined based on management's assessment of
the Company's ability to generate future taxable income and realize the tax
benefits associated with the deferred tax assets.
Net operating losses expire as follows:
<TABLE>
<S> <C>
2009.............................................................. $ 114,158
2010.............................................................. 238,040
2011.............................................................. 193,962
2012.............................................................. 422,417
---------
$ 968,577
---------
---------
</TABLE>
F-171
<PAGE>
LOUISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT:
Debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Note payable to former owner of KYKZ at 9.4%, payable in monthly
installments through February 2011.............................. $ 3,616,798 $ 3,748,468
Note payable to former owner under non-compete agreement; payable
in monthly installments of $1,110 through 2010.................. 100,000 --
Note payable at 9.55%, due December 1998.......................... 71,144 27,847
Note payable at 8.625%, secured by certain assets of the Company,
due December 2001............................................... 546,617 50,263
Note payable to former owner of KBIU and KXZZ at 8%, due August
2001............................................................ 787,656 848,313
Note payable to former owner of KKGB at 8.5%, due September
2009............................................................ 1,598,609 --
Notes payable upon demand to stockholders at rates ranging from
12% to 18%...................................................... 725,000 53,000
Capital lease obligation, due in monthly installments of $476
through November 2000........................................... 16,199 --
------------ ------------
7,462,023 4,727,891
Less: Current portion of long-term debt........................... (1,266,429) (245,174)
------------ ------------
$ 6,195,594 $ 4,482,717
------------ ------------
------------ ------------
</TABLE>
Maturities of debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
1998............................................................................ $ 1,266,429
1999............................................................................ 490,071
2000............................................................................ 510,765
2001............................................................................ 1,020,178
2002............................................................................ 465,281
Thereafter...................................................................... 3,709,299
------------
$ 7,462,023
------------
------------
</TABLE>
7. RELATED PARTY TRANSACTIONS:
The Company paid management fees to a related party of $120,711 and $127,290
during 1997 and 1996, respectively.
8. CONVERTIBLE PREFERRED STOCK:
On December 3, 1997, the 10,000 issued and outstanding voting shares of
convertible preferred stock were converted to 11,000 shares of the Company's
common stock at a conversion price $15.91 per share.
F-172
<PAGE>
LOUISIANA MEDIA INTERESTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. PREFERRED STOCK OF SUBSIDIARY:
In July 1996, KBIU Acquisition, Inc., a subsidiary of the Company, issued
96,572 shares of preferred stock for $676,000 in cash in connection with the
acquisition of KBIU-FM. Dividends on the preferred stock are payable by the
Company at an annual rate of 10% on a quarterly basis plus 8% cumulative at
redemption and are reported as minority interest in the statements of
operations. The preferred stock has a stated redemption value equal to the
original par value of the stock plus accrued but unpaid dividends. Unpaid
dividends payable upon redemption of the stock were $72,000 and $18,000 at
December 31, 1997 and 1996, respectively. The Company has the right to
repurchase the stock at any time after July 18, 1999 but prior to July 18, 2001
at which time the stated redemption value plus accrued dividends must be paid.
10. LEASES:
The Company leases certain equipment under various operating leases. Rent
expense under operating leases for 1997, 1996 and 1995 was $78,058, $34,447 and
$29,832, respectively. Future minimum annual payments under these non-cancelable
operating leases and agreements as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
PAYMENT
---------
<S> <C>
1998............................................................................... $ 77,660
1999............................................................................... 77,660
2000............................................................................... 77,660
2001............................................................................... 61,570
2002............................................................................... 32,863
</TABLE>
11. STOCK COMPENSATION:
During 1997 and 1996, the Company awarded common stock to a stockholder and
an employee for services rendered. Participants are fully vested in the shares
issued at date of grant which totaled 4,500 during 1997, 1,000 of which were
issued in both January and December 1997 and 2,500 shares were issued in October
1997. The Company recognized compensation expense of $278,040 and $20,000, for
the years ended December 31, 1997 and 1996, respectively, representing the
estimated fair value of the shares awarded at the date of grant.
12. SALE OF STOCK:
In February 1998, the Company and its stockholders entered into an agreement
with Cumulus Media Inc. ("Cumulus") to sell all of the issued and outstanding
stock of the Company, subject to approval of the Federal Communications
Commission, to Cumulus for $14,848,000.
F-173
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in partners' capital and of cash flows present fairly,
in all material respects, the financial position of M&M Partners (the
"Partnership") at November 30, 1997 and December 31, 1996, and the results of
its operations and its cash flows for the eleven months ended November 30, 1997,
and for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 24, 1998
F-174
<PAGE>
M&M PARTNERS
BALANCE SHEETS
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 171 $ 144
Accounts receivable, less allowance
for doubtful accounts of $25..................................................... 689 386
Deposit on broadcast property...................................................... 100 --
Prepaid and other current assets................................................... 11 3
------ ------
Total current assets........................................................... 971 533
------ ------
Property and equipment, net.......................................................... 573 589
Intangible assets, net............................................................... 2,336 2,641
------ ------
Total assets................................................................... $ 3,880 $ 3,763
------ ------
------ ------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued liabilities........................................... $ 111 $ 45
Related party notes payable........................................................ -- 1,245
Current portion of notes payable................................................... 100 1,432
------ ------
Total current liabilities...................................................... 211 2,722
Commitments and contingencies
Notes payable........................................................................ -- 100
------ ------
Total liabilities.............................................................. 211 2,822
------ ------
Partners' capital.................................................................... 3,669 941
------ ------
Total liabilities and partners' capital........................................ $ 3,880 $ 3,763
------ ------
------ ------
</TABLE>
See Notes to Financial Statements.
F-175
<PAGE>
M&M PARTNERS
STATEMENTS OF OPERATIONS
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE ELEVEN FOR THE YEAR FOR THE YEAR
MONTHS ENDED ENDED ENDED
NOVEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
--------------- ------------- -------------
<S> <C> <C> <C>
Revenues........................................................... $ 3,295 $ 2,332 $ 1,531
Less: agency commissions........................................... (354) (264) (177)
------ ------ ------
Net revenues................................................. 2,941 2,068 1,354
Operating expenses:
Programming...................................................... 554 401 238
Sales and promotions............................................. 375 247 152
Technical........................................................ 21 21 16
General and administrative....................................... 789 702 429
Trade............................................................ 526 238 108
Time brokerage fees.............................................. 70 48 --
Depreciation and amortization.................................... 485 335 222
------ ------ ------
Total operating expenses..................................... 2,820 1,992 1,165
------ ------ ------
Income from operations............................................. 121 76 189
Interest expense, net.............................................. (114) (118) (152)
Other income....................................................... 2 2 8
------ ------ ------
Net income (loss)............................................ $ 9 $ (40) $ 45
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Financial Statements.
F-176
<PAGE>
M&M PARTNERS
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(DOLLARS IN 000'S)
<TABLE>
<S> <C>
Balance at December 31, 1994........................................................ $ 71
Partner contribution................................................................ 478
Net income.......................................................................... 45
---------
Balance at December 31, 1995........................................................ 594
Partner contribution................................................................ 672
Partner withdrawal.................................................................. (285)
Net loss............................................................................ (40)
---------
Balance at December 31, 1996........................................................ 941
Partner contribution................................................................ 2,898
Partner withdrawal.................................................................. (179)
Net income.......................................................................... 9
---------
Balance at November 30, 1997........................................................ $ 3,669
---------
---------
</TABLE>
See Notes to Financial Statements.
F-177
<PAGE>
M&M PARTNERS
STATEMENTS OF CASH FLOWS
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE ELEVEN FOR THE YEAR FOR THE YEAR
MONTHS ENDED ENDED ENDED
NOVEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
--------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................ $ 9 $ (40) $ 45
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization................................ 485 335 222
Increase in accounts receivable.............................. (303) (93) (58)
Increase in prepaid and other current assets................. (8) -- --
Increase in accounts payable and accrued liabilities......... 66 8 26
------ ------ ------
Net cash provided by operating activities.................. 249 210 235
------ ------ ------
Cash flows from investing activities:
Acquisitions of broadcast properties............................. (35) (2,000) --
Deposit on broadcast property.................................... (100) -- --
Purchases of property and equipment.............................. (129) (3) (73)
------ ------ ------
Net cash used in investing activities...................... (264) (2,003) (73)
------ ------ ------
Cash flows from financing activities:
Proceeds from related party note payable......................... -- 1,245 68
Payments of related party note payable........................... (1,245) (56) --
Proceeds from notes payable...................................... -- 254 --
Payments of notes payable........................................ (1,432) -- (603)
Partner contributions............................................ 2,898 672 478
Partner withdrawal............................................... (179) (285) --
------ ------ ------
Net cash provided by (used in) investing activities........ 42 1,830 (57)
------ ------ ------
Net increase in cash and cash equivalents.......................... 27 37 105
Cash and cash equivalents at beginning of year..................... 144 107 2
------ ------ ------
Cash and cash equivalents at end of year........................... $ 171 $ 144 $ 107
------ ------ ------
------ ------ ------
Supplemental disclosures of cash flow information:
Cash paid for interest........................................... $ 114 $ 118 $ 152
------ ------ ------
------ ------ ------
Non-cash operating activities:
Trade revenue.................................................... $ 523 $ 238 $ 108
------ ------ ------
Trade expense.................................................... $ 526 $ 238 $ 108
------ ------ ------
------ ------ ------
</TABLE>
See Notes to Financial Statements.
F-178
<PAGE>
M&M PARTNERS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN 000'S)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
M&M Partners (The "Partnership") was organized for the purpose of owning and
operating radio broadcasting stations in and around Columbus, Georgia. The
Partnership consists of two general partner interests whose ownership interests
are allocated 99% and 1%, respectively.
Until January 6, 1998, the Partnership owned and operated four stations
WVRK-FM, WPNX-AM, WMLF-AM and WGSY-FM (the "Stations") and operated one station,
WAGH-FM, under a time brokerage agreement ("TBA"). The Partnership has placed
$100 on deposit with the licensor of WAGH-FM pending completion of a stock
purchase agreement between the parties.
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated using accelerated methods over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Buildings.................................................... 31.5 years
Broadcasting towers and equipment............................ 5-6 years
Office furniture and equipment............................... 5-10 years
Leasehold improvement........................................ Term of
lease
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets consist of FCC licenses which are stated at cost and
amortized using the straight-line method over 15 years. The Partnership
evaluates the carrying value of intangibles periodically in relation to the
projected future undiscounted net cash flows of the related businesses.
F-179
<PAGE>
M&M PARTNERS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES
Income or loss of the Partnership is included in the tax returns of the
individual partners. Accordingly, federal income taxes are not recognized by the
Partnership.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TIME BROKERAGE
The Partnership operates station WAGH-FM under a TBA whereby the stations'
operating revenues and expenses are controlled by the Partnership and,
accordingly, are reflected in the Partnership's financial statements over the
term of the TBA. A TBA fee is paid to the licensee of the station on a monthly
basis.
TRADE AGREEMENTS
The Partnership enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Partnership uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. ACQUISITIONS:
In March 1997, the Partnership acquired station WMLF-AM licensed to
Columbus, Georgia for approximately $35 in total consideration. In July 1996,
the Partnership acquired station WGSY-FM licensed to Phoenix City, Alabama for
$1,950 in total consideration. The acquisitions were accounted for using the
purchase method of accounting.
The Partnership's results of operations for the eleven months ended November
30, 1997 and for the year ended December 31, 1996 include the results of
operations of WGSY-FM and WMLF-AM from their respective dates of acquisition.
The following unaudited pro forma statement of operations data give effect to
the acquisitions as if they had occurred on January 1, 1996. In addition,
depreciation and amortization
F-180
<PAGE>
M&M PARTNERS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
2. ACQUISITIONS: (CONTINUED)
has been increased each period to reflect initial purchase price allocations as
if the acquisitions had occurred on January 1, 1996.
<TABLE>
<CAPTION>
PRO FORMA
------------------------------
<S> <C> <C>
FOR THE
ELEVEN MONTHS FOR THE
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1997 1996
--------------- -------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Net revenues.................................................... $ 2,946 $ 2,486
------ ------
------ ------
Income from operations.......................................... $ 121 $ 181
------ ------
------ ------
Net income...................................................... $ 9 $ 32
------ ------
------ ------
</TABLE>
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Buildings........................................................ $ 241 $ 241
Broadcasting towers and equipment................................ 659 616
Office furniture and equipment................................... 307 189
Leasehold improvements........................................... 70 70
----- -----
1,277 1,116
Accumulated depreciation......................................... (731) (554)
Land............................................................. 27 27
----- -----
Property and equipment, net...................................... $ 573 $ 589
----- -----
----- -----
</TABLE>
Depreciation expense for the periods ended November 30, 1997 and December
31, 1996 and 1995 was $177, $91 and $25, respectively.
4. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
FCC licenses..................................................... $ 4,623 $ 4,620
Accumulated amortization......................................... (2,287) (1,979)
------ ------
Intangible assets, net........................................... $ 2,336 $ 2,641
------ ------
------ ------
</TABLE>
Amortization expense for the periods ended November 30, 1997 and December
31, 1996 and 1995 was $308, $244 and $197, respectively.
F-181
<PAGE>
M&M PARTNERS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
5. RELATED PARTY TRANSACTIONS:
JTM, Inc., which is under common ownership, provides accounting and payroll
services to the Partnership in exchange for advertising time for other
businesses operated by JTM, Inc. The value of these transactions, which are
recorded as trade revenue and trade expense, were approximately $16.5 for the
eleven months ended November 30, 1997 and $18 for the years ended December 31,
1996 and 1995.
The majority partner provides space for radio broadcasting facilities for
which rent expense is allocated based on the estimated fair value of rental
expense for similar facilities. Rent allocations included in expense were $73,
$51 and $46 for the eleven months ended November 30, 1997 and the two years
ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Related party note payable, interest accrues at the applicable
short-term federal rate prescribed by the Internal Revenue
Service with the balance of principal and interest due upon
demand......................................................... $ -- $ 1,245
------ ------
------ ------
</TABLE>
6. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Line of credit loan, interest at prime
(8.5% at November 30, 1997), principal
and interest payments due monthly.............................. $ 50 $ 804
Line of credit loan, interest at prime
(8.5% at November 30, 1997), principal
and interest payments due monthly.............................. 50 728
------ ------
Less current maturities.......................................... 100 1,532
(100) (1,432)
------ ------
$ - $ 100
------ ------
------ ------
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
The Partnership is involved from time to time in various other claims and
lawsuits which arise in the ordinary course of business. The Partnership is
vigorously contesting all such matters and believes that their ultimate
resolution will not have a material adverse effect on its financial position,
results of operations or cash flows.
The Partnership incurred expenses of approximately $28, $20 and $15,
respectively for the eleven months ended November 30, 1997 and the two years
ended December 31, 1996 and 1995 under operating leases for equipment and
broadcast towers and a time brokerage arrangement. Future minimum annual
F-182
<PAGE>
M&M PARTNERS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
payments under these non-cancelable operating leases and agreements as of
November 30, 1997, are as follows:
<TABLE>
<S> <C>
1998.................................................................. $ 30
1999.................................................................. 5
---
$ 35
---
---
</TABLE>
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value due to their short term nature. The
fair value of notes payable are estimated based on current market rates and
approximate the carrying value.
9. SUBSEQUENT EVENTS
On January 6, 1998, the assets of the Partnership were sold to Cumulus
Broadcasting, Inc. (a wholly-owned subsidiary of Cumulus Media Inc.) for $12.75
million.
F-183
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of income and retained earnings and of cash flows present
fairly, in all material respects, the combined financial position of The
Midwestern Broadcasting Company's radio stations, WWWM-FM and WLQR-AM at October
31, 1997 and December 31, 1996, and the results of their operations and their
cash flows for the period January 1, 1997 to October 31, 1997 and for each of
the two years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Toledo, Ohio
February 11, 1998
F-184
<PAGE>
THE MIDWESTERN BROADCASTING COMPANY
RADIO STATIONS WWWM-FM AND WLQR-AM
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 310,134 $ 95,279
Marketable securities, at fair value............................................... 303,546 544,510
Trade accounts receivable, less allowance of $10,000 in 1997 and $10,000 in 1996... 593,249 397,661
Amounts due from related parties................................................... 63,431 170,722
Amount due from shareholders....................................................... 79,500 37,620
Prepaid expenses................................................................... 10,431 25,615
Income tax receivable.............................................................. 7,177 7,750
Interest receivable................................................................ 5,018
------------ ------------
Total current assets........................................................... 1,367,468 1,284,175
Property and equipment:
Land and land improvements......................................................... 85,040 85,040
Buildings and leasehold improvements............................................... 168,510 153,028
Transmitter, towers, antenna system, and other equipment........................... 307,821 313,751
Furniture and fixtures............................................................. 160,409 159,418
Automobiles and other vehicles..................................................... 54,858 54,858
------------ ------------
776,638 766,095
Less accumulated depreciation...................................................... 550,705 522,117
------------ ------------
225,933 243,978
------------ ------------
$ 1,593,401 $1,528,153
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-185
<PAGE>
THE MIDWESTERN BROADCASTING COMPANY
RADIO STATIONS WWWM-FM AND WLQR-AM
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
LIABILITIES AND STATIONS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.............................................. $ 15,860 $ 71,084
Amounts due to affiliates.......................................................... 470,951 426,566
Employees' compensation, payroll taxes, and commissions............................ 83,761 83,292
Income taxes....................................................................... 9,800 418
Current maturities of long-term liabilities........................................ 4,539 4,389
Deferred barter revenue............................................................ 89,055 86,882
------------ ------------
Total current liabilities...................................................... 673,966 672,631
Long-term liabilities:
Notes payable to bank.............................................................. 36,863 38,003
Capital lease obligations.......................................................... 12,355 15,349
------------ ------------
49,218 53,352
Less current maturities............................................................ 4,539 4,389
------------ ------------
44,679 48,963
Stations' equity:
Contributed equity................................................................. 105,702 105,702
Retained earnings.................................................................. 769,054 700,857
------------ ------------
874,756 806,559
------------ ------------
$ 1,593,401 $1,528,153
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-186
<PAGE>
THE MIDWESTERN BROADCASTING COMPANY
RADIO STATIONS WWWM-FM AND WLQR-AM
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE PERIOD YEAR ENDED
JANUARY 1, TO DECEMBER 31,
OCTOBER 31, --------------------------
1997 1996 1995
--------------- ------------ ------------
<S> <C> <C> <C>
Operating revenues:
Local announcements............................................... $ 1,234,931 $ 1,561,720 $ 1,893,321
Regional announcements............................................ 618,134 545,996 797,467
Barter revenue.................................................... 172,656 239,395 333,300
National announcements............................................ 454,405 342,953 403,487
Remotes........................................................... 37,111 39,779 105,195
Political announcements........................................... 4,206
Other............................................................. 446 6,957
--------------- ------------ ------------
2,517,237 2,734,495 3,539,727
Less: agency and national representative commissions.............. 279,227 317,038 408,451
--------------- ------------ ------------
2,238,010 2,417,457 3,131,276
--------------- ------------ ------------
Operating costs and expenses:
Engineering....................................................... 110,848 117,195 91,620
Production........................................................ 443,054 647,557 717,461
Selling........................................................... 560,613 619,285 781,565
General and administrative........................................ 626,268 825,500 825,606
--------------- ------------ ------------
1,740,783 2,209,537 2,416,252
--------------- ------------ ------------
Other income (expense):
Investment income................................................. 13,070 31,556 27,938
Interest expense.................................................. (4,573) (5,992) (4,180)
Miscellaneous..................................................... (18,788) (7,941) (877)
--------------- ------------ ------------
(10,291) 17,623 22,881
--------------- ------------ ------------
Income before local income taxes.................................... 486,936 225,543 737,905
Provision for local income taxes.................................... 9,800 6,000 16,000
--------------- ------------ ------------
Net income.......................................................... 477,136 219,543 721,905
Retained earnings at beginning of year.............................. 700,857 716,705 347,768
Dividends and distributions......................................... (408,939) (235,391) (352,968)
--------------- ------------ ------------
Retained earnings at end of year.................................... $ 769,054 $ 700,857 $ 716,705
--------------- ------------ ------------
--------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-187
<PAGE>
THE MIDWESTERN BROADCASTING COMPANY
RADIO STATIONS WWWM-FM AND WLQR-AM
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD YEAR ENDED
JANUARY 1, TO DECEMBER 31,
OCTOBER 31, ----------------------
1997 1996 1995
--------------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income.............................................................. $ 477,136 $ 219,543 $ 721,905
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization......................................... 49,678 53,510 37,326
Provision for losses on accounts receivable........................... 20,084
Interest income from marketable securities............................ (906)
Loss on disposal of property, plant and equipment..................... 995
Barter revenue........................................................ (172,656) (239,395) (333,300)
Barter expense........................................................ 174,829 187,317 277,828
Changes in operating assets and liabilities:
Trade accounts and other receivables.................................. (189,997) 233,534 (74,890)
Amounts due related parties and shareholders.......................... (36,917) (121,408) (26,683)
Intercompany payable/receivable....................................... 146,713 (71,876) 5,287
Prepaid expenses...................................................... 15,184 (6,304) (5,259)
Other assets.......................................................... 3,250 873
Accounts payable and accrued expenses................................. (45,373) (28,516) (12,556)
--------------- ---------- ----------
Net cash provided by operating activities............................... 418,686 229,655 610,615
--------------- ---------- ----------
Cash flows from investing activities
Purchases of property and equipment................................... (32,628) (51,176) (111,503)
Sales (purchases) of marketable securities, net....................... 241,870 (544,510)
--------------- ---------- ----------
Net cash provided by (used in) investing activities..................... 209,242 (595,686) (111,503)
--------------- ---------- ----------
Cash flows from financing activities
Principal payments on note payable to bank and capital lease
obligations........................................................... (4,134) (1,366) (631)
Proceeds from issuance of debt.......................................... 40,000
Dividends and distributions............................................. (408,939) (235,391) (352,968)
--------------- ---------- ----------
Net cash used in financing activities................................... (413,073) (236,757) (313,599)
--------------- ---------- ----------
Increase (decrease) in cash and cash equivalents........................ 214,855 (602,788) 185,513
Cash and cash equivalents at beginning of year.......................... 95,279 698,067 512,554
--------------- ---------- ----------
Cash and cash equivalents at end of year................................ $ 310,134 $ 95,279 $ 698,067
--------------- ---------- ----------
--------------- ---------- ----------
Supplemental schedule of non-cash activities
Equipment acquired under capital leases................................. $ -- $ 15,349 $ --
--------------- ---------- ----------
--------------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-188
<PAGE>
THE MIDWESTERN BROADCASTING COMPANY
RADIO STATIONS WWWM-FM AND WLQR-AM
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Midwestern Broadcasting Company (the "Company") owns and operates radio
stations WWWM-FM and WLQR-AM (the "Stations") located in Toledo, Ohio. At the
close of business on November 12, 1997, the stations were sold to Cumulus
Broadcasting, Inc., a wholly owned subsidiary of Cumulus Media Inc. For
accounting purposes, the acquisition date has been designated as of the close of
business on October 31, 1997. The combined financial statements present the
operations of the Stations on a "carved out" basis.
The significant accounting principles followed by the Stations and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
BASIS OF PRESENTATION
The combined financial statements include the assets and liabilities of the
Stations and the results of their operations.
CASH EQUIVALENTS
The Stations consider all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
MARKETABLE SECURITIES
Marketable securities consist of U.S. Government debt securities and have
original maturities of six months. Management considers all marketable
securities to be "available for sale" as defined by Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Such securities are carried at market value.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for additions and
improvements that add materially to productive capacity or extend the useful
life of an asset are capitalized, and expenditures for maintenance and repairs
are charged to operations. When property is retired or otherwise disposed of,
the related accounts for cost and depreciation are relieved, and any gain or
loss resulting from the disposal is included in results of operations.
Depreciation is computed by accelerated and straight-line methods. Useful lives
ranged from 5 to 20 years for land improvements; 5 to 45 years for buildings and
leasehold improvements; 5 to 10 years for transmitting equipment, towers,
antennas, and furniture; and 5 to 12 years for automobiles and other vehicles.
BARTER TRANSACTIONS
Goods and services received in exchange for commercial broadcasts are
recorded at fair value when received, and the related revenue is recorded when
the advertisement is broadcast. The Stations recorded $10,000, $1,700 and $7,000
of fixed assets obtained through various barter transactions during 1997, 1996
and 1995, respectively.
F-189
<PAGE>
THE MIDWESTERN BROADCASTING COMPANY
RADIO STATIONS WWWM-FM AND WLQR-AM
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Midwestern Broadcasting is a Subchapter S corporation for federal and state
income tax purposes. As a result, the shareholders of Midwestern include their
pro-rata share of Midwestern's taxable income in their respective personal
income tax returns. Therefore, federal and state income tax provisions have not
been recorded for the Stations. See Note 3 for pro forma federal and state
income tax provisions.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during that period.
Actual results could differ from those estimates.
2. LONG-TERM LIABILITIES
During 1995, the Stations borrowed $40,000 from a bank under a term note.
The note bears interest at a fixed interest rate of 10.75% per annum and is
payable in equal monthly installments of principal and interest of $448 over
fifteen years. At October 31, 1996 the balance is $36,863.
The Stations entered into a capital lease for certain equipment during 1996.
The liability under the lease was $12,355 and $15,349 at October 31, 1997 and
December 31, 1996, respectively. The equipment is included in furniture and
fixtures and has a net book value of $11,831 and $15,028 at October 31, 1997 and
December 31, 1996, respectively. Amortization of the capital lease asset is
included in depreciation expense.
Future minimum payments for all long-term obligations as of October 31, 1997
are as follows:
<TABLE>
<CAPTION>
NOTES CAPITALIZED
PAYABLE LEASES
--------- -----------
<S> <C> <C>
1998................................................................... $ 1,239 $ 4,680
1999................................................................... 1,524 4,680
2000................................................................... 1,696 4,680
2001................................................................... 1,888 390
2002................................................................... 2,101
Future Years........................................................... 28,415
--------- -----------
$ 36,863 14,430
--------- -----------
Amount representing interest........................................... 2,075
-----------
Present value of minimum lease payments................................ $ 12,355
-----------
-----------
</TABLE>
Total interest payments were $4,573, $5,992 and $4,180 in 1997, 1996 and
1995, respectively.
F-190
<PAGE>
THE MIDWESTERN BROADCASTING COMPANY
RADIO STATIONS WWWM-FM AND WLQR-AM
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTIES
Stratford Research, a company affiliated through common ownership and
management, provides market research and consulting services to the Stations.
Consulting fees charged during 1997, 1996 and 1995 to the Stations totaled
$43,000, $71,000 and $98,000, respectively, and are included in general and
administrative expenses. Certain expenditures are incurred by the Stations and
charged to Stratford. At October 31, 1997 and December 31, 1996 and 1995, the
Stations had a receivable from Stratford totaling $6,611, $3,438 and $10,388,
respectively, which is included in amounts due from related parties.
During 1997 and 1996, the shareholders of the Company incurred travel and
other personal expenses in excess of dividends paid, resulting in a net $31,864
and $38,000 receivable due from shareholders as of October 31, 1997 and December
31, 1996, respectively.
F-191
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholder's equity and of cash flows present fairly,
in all material respects, the financial position of Mustang Broadcasting Company
at December 31, 1997, and the results of its operations and its cash flows for
the year in conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 5, 1998
F-192
<PAGE>
MUSTANG BROADCASTING COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................................... $ 51,353
Accounts receivable, less allowance for doubtful accounts of $5,000............................... 160,167
Prepaid expenses.................................................................................. 227
------------
Total current assets.......................................................................... 211,747
------------
Property and equipment, net......................................................................... 295,303
Intangible assets, net.............................................................................. 362,606
------------
Total asset................................................................................... $ 869,656
------------
------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.................................................................................. $ 4,067
Accrued expenses.................................................................................. 40,793
Current portion of debt........................................................................... 21,540
Current portion of stockholder advances........................................................... 429,483
------------
Total current liabilities..................................................................... 495,883
------------
Long-term debt...................................................................................... 31,134
Stockholder advances................................................................................ 299,280
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value, 100,000 shares authorized, 68,500 issued and outstanding............ 685
Additional paid-in-capital........................................................................ 684,315
Accumulated deficit............................................................................... (641,641)
------------
Total stockholder's equity.................................................................... 43,359
------------
Total liabilities and stockholder's equity.................................................... $ 869,656
------------
------------
</TABLE>
See Notes to Financial Statements.
F-193
<PAGE>
MUSTANG BROADCASTING COMPANY
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
------------------
<S> <C>
Revenues...................................................................................... $ 1,139,924
Less: agency commissions.................................................................... (46,753)
------------------
Net revenues............................................................................ 1,093,171
Operating expenses:
Programming................................................................................. 334,345
Sales and promotions........................................................................ 436,741
Technical................................................................................... 68,058
General and administrative.................................................................. 238,628
Depreciation and amortization............................................................... 96,673
------------------
Total operating expenses................................................................ 1,174,445
------------------
Loss from operations.......................................................................... (81,274)
Interest expense.............................................................................. (36,096)
------------------
Net loss...................................................................................... $ (117,370)
------------------
------------------
</TABLE>
See Notes to Financial Statements.
F-194
<PAGE>
MUSTANG BROADCASTING COMPANY
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1997...................................... $ 520 $ 519,480 $ (524,271) $ (4,271)
Issuance of common stock........................................ 165 164,835 -- 165,000
Net loss........................................................ -- -- (117,370) (117,370)
----- ---------- ------------ -----------
Balance at December 31, 1997.................................... $ 685 $ 684,315 $ (641,641) $ 43,359
----- ---------- ------------ -----------
----- ---------- ------------ -----------
</TABLE>
See Notes to Financial Statements.
F-195
<PAGE>
MUSTANG BROADCASTING COMPANY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
------------------
<S> <C>
Cash flows from operating activities:
Net loss.................................................................................... $ (117,370)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization............................................................. 96,673
Loss on disposal of assets................................................................ 21,616
Changes in assets and liabilities:
Accounts receivable....................................................................... 19,984
Prepaid expenses and other current assets................................................. 13,203
Accounts payable.......................................................................... (8,837)
Accrued and other liabilities............................................................. (11,252)
----------
Net cash provided by operating activities................................................... 131,387
----------
Cash flows from investing activities:
Capital expenditures........................................................................ (23,769)
----------
Net cash used for investing activities...................................................... (23,769)
----------
Cash flows from financing activities:
Net repayment of borrowings................................................................. (4,625)
Proceeds from issuance of stock............................................................. 165,000
Net repayment of advances from stockholder.................................................. (182,888)
----------
Net cash used for financing activities...................................................... (22,513)
----------
Net decrease in cash and cash equivalents..................................................... (32,265)
Cash and cash equivalents at beginning of year................................................ 83,618
----------
Cash and cash equivalents at end of year...................................................... $ 51,353
----------
----------
Supplemental disclosure of cash flow information:
Interest paid................................................................................. $ 36,096
----------
----------
Non-cash operating activities:
Trade revenue............................................................................... $ 93,878
----------
----------
Trade expense............................................................................... $ 93,878
----------
----------
</TABLE>
See Notes to Financial Statements.
F-196
<PAGE>
MUSTANG BROADCASTING COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Mustang Broadcasting Company (the "Company") owns and operates radio
stations KEXO-AM, KKNN-FM, KQIX-FM, KQIL AM/FM located in Grand Junction, CO.
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
5-15
Office furniture and equipment................................... years
Leasehold improvement............................................ 39 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include organizational costs, goodwill and Federal
Communications Commission ("FCC") licenses. Intangible assets are stated at cost
and are being amortized using the straight-line method over the estimated useful
life or contract term for periods not exceeding 15 years. The Company evaluates
the carrying value of intangibles periodically in relation to the projected
future undiscounted cash flows of the related businesses.
INCOME TAXES
The Company has elected to be treated as a Subchapter S Corporation for
federal and state income tax purposes. Under this election, the income or loss
of the Company is included in the tax return of the stockholder. Accordingly,
federal and state income taxes are not included in the accompanying financial
statements.
F-197
<PAGE>
MUSTANG BROADCASTING COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Pro forma results reflecting the treatment of the Company as a tax paying
entity are not included since the Company incurred a net loss for the year ended
December 31, 1997.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
FAIR VALUE OF FINANCIAL STATEMENTS
The carrying amounts of the Company's financial instruments, including cash,
accounts receivable accounts payable, short-term and long-term debt, approximate
fair value.
2. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Equipment......................................................... $ 272,476
Office Furniture and Leasehold improvements....................... 30,340
---------
302,816
Accumulated depreciation.......................................... (132,789)
---------
170,027
Land.............................................................. 125,276
---------
Property and equipment, net....................................... $ 295,303
---------
---------
</TABLE>
Depreciation expense for the year ended December 31, 1997 was $46,412.
3. INTANGIBLE ASSETS:
Intangible assets at December 31, 1997 consist of the following:
<TABLE>
<S> <C>
Organization costs................................................ $ 105,263
Goodwill and FCC license.......................................... 438,124
---------
543,387
Accumulated amortization.......................................... (180,781)
---------
Intangible assets, net............................................ $ 362,606
---------
---------
</TABLE>
Amortization expense for the year ended December 31, 1997 was $50,261.
F-198
<PAGE>
MUSTANG BROADCASTING COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT:
At December 31, 1997, the Company had a note payable for $52,674 with Alpine
Bank related to equipment purchases. The note bears interest at 9.25% and the
final payment is due on October 2, 2000.
The Company also receives advances from its sole stockholder to be used in
business operations. At December 31, 1997, net advances were $728,763. Of this
amount, $343,763 is due on demand and has been classified as a current
liability. The remaining $385,000 is outstanding pursuant to a promissory note
payable and is due in quarterly installments with the balance due April 15,
1999. No interest is paid or accrued related to the stockholder advances.
A summary of the future maturities of long-term debt follows:
<TABLE>
<S> <C>
1998.............................................................. $ 451,023
1999.............................................................. 320,820
2000.............................................................. 9,594
</TABLE>
5. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of approximately $32,836 for the year ended
December 31, 1997 under operating leases for radio broadcasting facilities.
Future minimum annual payments under these non-cancelable operating leases and
agreements as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................... $ 26,309
1999............................................................... 3,278
2000............................................................... 3,278
2001............................................................... 3,278
Thereafter......................................................... 42,616
</TABLE>
6. SUBSEQUENT EVENT:
In February 1998, the Company entered into an agreement to sell certain
assets, subject to approval of the Federal Communications Commission, to Cumulus
Media Inc. for approximately $2,800,000.
F-199
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
New Frontier Communications, Inc.
We have audited the balance sheets of New Frontier Communications, Inc. as
of December 31, 1997 and 1996, and the related statements of operations,
stockholders' deficit, and cash flows for the years ended December 31, 1997,
1996 and 1995. 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 New Frontier Communications,
Inc. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for the years ended December 31, 1997, 1996 and 1995, in conformity
with generally accepted accounting principles.
/s/ JOHNSON, MILLER & CO.
Odessa, Texas
February 24, 1998
F-200
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
BALANCE SHEET
DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash................................................................................ $ 388,925 118,189
Receivables
Trade (note B).................................................................... 686,003 689,987
Current maturities of notes receivable (note C)................................... 5,108 4,023
Affiliates........................................................................ 67,693 --
Prepaid expenses.................................................................... 113,107 52,728
------------ ------------
Total current assets............................................................ 1,260,836 864,927
PROPERTY AND EQUIPMENT (notes A3 and D)............................................... 1,505,691 1,281,154
GOODWILL, LICENSES AND OPERATING RIGHTS
(net of accumulated amortization of $507,041 in 1997 and $295,942 in 1996) (notes A4
and E).............................................................................. 2,244,784 1,826,981
NOTES RECEIVABLE--less current maturities (note C).................................... 28,475 14,077
------------ ------------
$ 5,039,786 3,987,139
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt (note G)....................................... $ 369,995 246,504
Accounts payable (note F)........................................................... 183,735 206,641
Accrued liabilities
Interest.......................................................................... 123,376 --
Wages............................................................................. 87,170 67,625
Other............................................................................. 19,321 29,612
Advance from affiliates............................................................. 116,675 --
------------ ------------
Total current liabilities....................................................... 900,272 550,382
LONG-TERM DEBT, less current maturities (note G)...................................... 4,646,346 3,922,241
DEFERRED INCOME TAX LIABILITY (note J)................................................ 71,919 26,651
------------ ------------
5,618,537 4,499,274
------------ ------------
STOCKHOLDERS' DEFICIT
Common stock, no par value;
1,000,000 shares authorized,
560,000 shares issued and outstanding............................................. 315,000 315,000
Accumulated deficit................................................................. (893,751) (827,135)
------------ ------------
(578,751) (512,135)
------------ ------------
$ 5,039,786 3,987,139
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-201
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Broadcast revenue....................................................... $ 4,642,280 3,539,479 2,245,326
Costs and expenses
Direct expenses....................................................... 410,290 351,210 211,335
Engineering........................................................... 192,044 111,213 75,959
Programming (note H).................................................. 801,943 496,046 326,620
Marketing............................................................. 1,315,784 951,446 752,828
Administrative........................................................ 968,263 802,281 544,409
Depreciation and amortization......................................... 485,883 298,303 108,211
------------ ------------ ------------
Total operating expenses.......................................... 4,174,207 3,010.499 2,019,362
------------ ------------ ------------
Operating profit.................................................. 468,073 528,980 225,964
------------ ------------ ------------
Other (income) expenses
Loss on disposal of assets............................................ 33,850 -- 13,076
Interest and financing................................................ 497,234 363,733 167,363
Other................................................................. (1,926) (1,724) 10,209
------------ ------------ ------------
529,158 362,009 190,648
------------ ------------ ------------
(Loss) earnings before income tax....................................... (61,085) 166,971 35,316
Income tax benefit (expense)
Current............................................................... 39,737 (32,824) (7,207)
Deferred.............................................................. (45,268) (26,651) --
------------ ------------ ------------
(5,531) (59,475) (7,207)
------------ ------------ ------------
NET (LOSS) EARNINGS............................................... $ (66,616) 107,496 28,109
------------ ------------ ------------
------------ ------------ ------------
(Loss) earnings per share............................................... $ (.12) .19 .05
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-202
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES COMMON ACCUMULATED
ISSUED STOCK DEFICIT TOTAL
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Balances at December 31, 1994.................................... 560,000 $ 315,000 (962,740) (647,740)
Net earnings..................................................... -- -- 28,109 28,109
----------- ---------- ------------ ----------
Balances at December 31, 1995.................................... 560,000 315,000 (934,631) (619,631)
Net earnings..................................................... -- -- 107,496 107,496
----------- ---------- ------------ ----------
Balances at December 31, 1996.................................... 560,000 315,000 (827,135) (512,135)
Net loss......................................................... -- -- (66,616) (66,616)
----------- ---------- ------------ ----------
Balances at December 31, 1997.................................... 560,000 $ 315,000 (893,751) (578,751)
----------- ---------- ------------ ----------
----------- ---------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-203
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996 1995
--------- ---------- ---------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net (loss) earnings........................................................... $ (66,616) 107,496 28,109
Adjustments to reconcile net (loss) earnings to net cash provided by operating
activities:
Depreciation and amortization............................................. 485,883 298,303 108,211
Decrease (increase) in accounts receivable................................ 3,984 (307,645) (55,008)
Increase in prepaid expense............................................... (60,379) (28,337) (1,719)
(Decrease) increase in accounts payable................................... (22,906) (41,974) 55,616
Increase in accrued interest payable...................................... 123,376 -- --
Increase in wages payable................................................. 19,545 42,736 2,926
Loss on disposal of assets................................................ 33,850 -- 13,076
(Decrease) increase in other accrued liabilities.......................... (10,291) 22,405 7,207
Increase in deferred income tax liability................................. 45,268 26,651 --
Donation of fixed assets to charity....................................... 22,041 -- --
--------- ---------- ---------
Net cash provided by operating activities............................... 573,755 119,635 158,418
--------- ---------- ---------
Cash flows from investing activities:
Acquisition of property and equipment......................................... (31,972) (24,452) (55,562)
Acquisition of radio stations................................................. (28,013) -- --
Loan made to employees........................................................ (33,583) -- (21,752)
Principal payments received on employee loan.................................. 18,100 3,652 --
--------- ---------- ---------
Net cash used in investing activities................................... (75,468) (20,800) (77,314)
--------- ---------- ---------
Cash flows from financing activities:
Loan proceeds................................................................. 94,438 1,607,301 125,505
Principal payments under note obligations..................................... (280,588) (1,526,499) (195,949)
Payment of loan fees.......................................................... (90,383) (107,341) --
Advance from affiliates, net.................................................. 48,982 -- --
--------- ---------- ---------
Net cash provided by financing activities............................... (227,551) (26,539) (70,444)
--------- ---------- ---------
Net increase in cash and cash equivalents....................................... 270,736 72,296 10,660
Cash and cash equivalents at beginning of year.................................. 118,189 45,893 35,233
--------- ---------- ---------
Cash and cash equivalents at end of year........................................ $ 388,925 118,189 45,893
--------- ---------- ---------
--------- ---------- ---------
Cash paid during the year for:
Interest...................................................................... $ 373,858 363,733 167,363
Noncash investing and financing activities:
Detail of radio station purchases
Assets acquired
Property, plant and equipment............................................. $ 517,676 1,084,500 --
Goodwill, licenses and operating rights................................... 588,527 1,557,035 --
--------- ---------- ---------
Total consideration..................................................... 1,106,203 2,641,535 --
Less: Issuance of long-term debt.............................................. 1,033,746 2,641,535 --
Cancellation of noncompete agreement...................................... 44,444 -- --
--------- ---------- ---------
Cash paid................................................................. $ 28,013 -- --
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-204
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. GENERAL
New Frontier Communications, Inc. (the Company) is an Arizona Corporation
organized in 1989. Its principal business is the operation of five radio
stations, KGEE, KODM, KMND, KNFM and KBAT, in Midland/Odessa, Texas.
2. CASH AND CASH EQUIVALENTS
For the purposes of the statement of cash flows, the Company considers cash
on hand and cash on deposit in banks to be cash and cash equivalents.
3. ACCOUNTS RECEIVABLE
The Company has set up an allowance for specific accounts deemed
uncollectible at year end.
4. PROPERTY AND EQUIPMENT
Property and equipment are carried at cost and depreciated principally on
the straight-line method over the estimated useful lives of the assets. Major
additions and betterments are capitalized while replacements, maintenance and
repairs that do not improve or extend the life of the respective assets are
expensed. When the assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is charged or credited to operations.
5. GOODWILL, LICENSES AND OPERATING RIGHTS
The Company's intangible assets result from station acquisitions and are
being amortized on the straight-line basis over estimated useful lives of 2 to
40 years.
6. BARTER TRANSACTIONS
Revenue from such transactions is recorded at the time the commercials are
broadcast, and barter expense is recorded at the time the services are used. If
the services or products have not been received at the date the commercial is
aired, a receivable is reported. On the other hand, if services or products are
received before the date the commercial is aired, a liability is reported.
Revenue from barter transactions totaled approximately $669,000 in 1997,
$481,000 in 1996, and $380,000 in 1995. Expenses from barter transactions
totaled approximately $635,000 in 1997, $490,000 in 1996, and $420,000 in 1995.
7. INCOME TAXES
The Company has elected C Corporation status under the Internal Revenue
Code. Provisions for income taxes are based on amounts reported in the
statements of earnings and include deferred taxes on temporary differences in
the recognition of income and expense for tax and financial statement purposes.
F-205
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred taxes are computed using the asset and liability approach as prescribed
in Financial Accounting Standards Board Statement No. 109, ACCOUNTING FOR INCOME
TAXES.
8. USE OF ESTIMATES
In preparing the Company's financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
9. EARNINGS PER SHARE
Net loss/earnings per share is determined by dividing net loss/earnings by
the weighted average number of common shares outstanding for the period. The
computation of fully diluted net loss/earnings per share was antidilutive in
each of the periods presented; therefore, the amounts reported as primary and
fully diluted are the same.
10. RECLASSIFICATIONS, NOT MATERIAL
Certain reclassifications have been made to conform to the 1997
presentation.
NOTE B--ACCOUNTS RECEIVABLE
Receivables consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Regular trade.......................................................... $ 686,003 689,987
Barter trade........................................................... -- --
---------- ---------
Net receivables...................................................... $ 686,003 689,987
---------- ---------
---------- ---------
</TABLE>
NOTE C--NOTE RECEIVABLE
In November 1995, the Company purchased two vehicles through a finance
company for the personal use of two employees. The payments, including interest,
are being made by the two employees. The amounts of the notes receivable are for
the same amounts as the notes payable. The balance on the notes receivable is
$23,998 and $9,585 respectively at December 31, 1997.
Schedule of long-term notes receivable for the years following December 31,
1997:
<TABLE>
<S> <C>
1998............................................................... $ 5,108
1999............................................................... 5,981
2000............................................................... 20,157
2001............................................................... 2,337
---------
$ 33,583
---------
---------
</TABLE>
F-206
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE D--PROPERTY AND EQUIPMENT
The classification of the Company's property and equipment, and their
estimated useful lives, are as follows:
<TABLE>
<CAPTION>
ESTIMATED
1997 1996 USEFUL LIFE
------------ ---------- -----------
<S> <C> <C> <C>
Land................................................. $ 10,000 10,000
Buildings............................................ 30,000 65,010 31.5 years
Transmitter equipment................................ 946,301 752,558 5-20 years
Studio equipment..................................... 760,247 511,880 5-20 years
Office furniture and equipment....................... 430,535 387,537 3-10 years
Antenna.............................................. 110,913 110,913 6-15 years
Vehicles............................................. 60,566 28,066 3-5 years
------------ ----------
2,348,562 1,865,964
Less accumulated depreciation.................... 842,871 584,810
------------ ----------
$ 1,505,691 1,281,154
------------ ----------
------------ ----------
</TABLE>
Depreciation expense was $269,220 in 1997, $181,938 in 1996 and $75,360 in
1995.
NOTE E--GOODWILL, LICENSES AND OPERATING RIGHTS
Intangible assets consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
License agreements, less accumulated amortization of $278,369 and $201,200............ $ 988,678 777,847
Goodwill, less accumulated amortization of $135,771 and $78,214....................... 926,291 908,321
Non-compete agreements and deferred charges, less accumulated amortization of $92,901
and $16,528......................................................................... 329,815 140,813
------------ ------------
$ 2,244,784 1,826,981
------------ ------------
------------ ------------
</TABLE>
Amortization expense charged to operations in 1997 was $216,663, in 1996 was
$116,365, and in 1995 was $32,851.
NOTE F--ACCOUNTS PAYABLE
Payables consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Regular trade.......................................................... $ 121,751 101,581
Barter trade........................................................... 40,048 70,979
Agencies and royalties................................................. 21,936 34,081
---------- ---------
$ 183,735 206,641
---------- ---------
---------- ---------
</TABLE>
F-207
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE G--LONG-TERM OBLIGATIONS
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Note payable to FINOVA Capital Corporation at Citibank Prime plus 2.5%,
payable in quarterly installments with final payment of $2,692,650 due on
5/1/01. Interest is payable monthly. Payment schedule is as follows:
1/1/98 - 4/1/98 $75,000
7/1/98 81,250
10/1/98 - 7/1/99 100,000
10/1/99 - 7/1/00 112,500
10/1/00 - 4/1/01 166,700
5/1/01 Remaining balance 2,629,650
All existing and after-acquired property of Borrower, including accountings,
equipment, inventory, and all proceeds of the foregoing have been pledged as
collateral for all three FINOVA notes. $ 4,211,000 --
Note payable to FINOVA Capital Corporation at Citibank Prime plus 2.5%,
payable in seventeen consecutive quarterly installments on the first
business day of each quarter commencing with the first business day of the
fourth quarter following the closing with final payment of $1,902,895 due on
5/1/01. Monthly interest payment commences 5/1/96. Payment schedule is as
follows:
4/1/97 $50,000
7/1/97 - 4/1/98 75,000
7/1/98 - 4/1/99 81,250
7/1/99 - 4/1/00 93,750
7/1/00 - 4/1/01 112,500
5/1/01 Remaining balance 1,902,895
All existing and after-acquired property of Borrower, including accountings,
equipment, inventory, and all proceeds of the foregoing have been pledged as
collateral for all three FINOVA notes. -- 3,386,000
Note payable to FINOVA Capital Corporation at Citibank Prime plus 2.5%,
payable in full on May 1, 2001. Interest is payable monthly. Collateral as
stated in above note. 614,000 614,000
Revolving note payable to FINOVA Capital Corporation at Citibank Prime plus
2.5%, payable in full on May 1, 2001 with interest payable monthly.
Collateral as stated in above note. ........................................ 124,121 100,000
</TABLE>
F-208
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE G--LONG-TERM OBLIGATIONS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
------------ ------------
Note payable to finance company at 12.00%, due in monthly principal and
interest installment of $514. The note is unsecured. ....................... $ 2,981 --
Note payable to finance company at 11%, due in monthly principal and
interest installments of $4,000. The note is unsecured. .................... 19,469 --
Note payable to bank at 11.50%, due in monthly principal and interest
installments of $1,157. The note is secured by accounts receivable,
equipment and fixtures. .................................................... 2,631 15,443
Note payable to finance company at 8.75%, due in monthly principal and
interest installments of $439. The note is secured by a vehicle. (See Note
C).......................................................................... 23,998 --
Note payable to finance company at 14% due in monthly principal and interest
installments of $275. The note is secured by a vehicle. (See Note C). ...... 9,585 --
Note payable to finance company at 13.75%, due in monthly principal and
interest installments of $526. The note is unsecured........................ 3,032 --
Note payable to a finance company at 12.6%, due in monthly principal and
interest installments of $943. The note is secured by equipment............. 5,524 15,384
Other....................................................................... -- 37,914
------------ ------------
5,016,341 4,168,745
Less current maturities................................................. 369,995 246,504
------------ ------------
$ 4,646,346 3,922,241
------------ ------------
------------ ------------
</TABLE>
Aggregate maturities of long-term debt for the five years following December
31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................ $ 369,995
1999............................................................ 418,482
2000............................................................ 524,357
2001............................................................ 3,703,507
---------
$5,016,341
---------
---------
</TABLE>
As part of the FINOVA debt agreements, the Company must comply with certain
restrictive covenants, including restrictions on capital expenditures, operating
leases, involvement in mergers or acquisitions and must comply with certain
financial ratios. At December 31, 1997, the Company was in compliance with these
various covenants.
F-209
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
------------ ------------
</TABLE>
NOTE H--RELATED PARTY TRANSACTIONS
The Company's majority stockholder also operates a radio station in Arizona.
This station provides programming research and consulting to the Company at
cost. Such consulting charges totalled approximately $32,000 in 1997 and $15,000
in 1996, and have been included in the Company's operating expenses.
Another employee of this related party, also a stockholder of the Company,
provides programming consulting to the Company at no charge. The consulting
services provided have an estimated market value between approximately $4,800
and $3,600 for the years ended December 31, 1997 and 1996.
The Company's current trade payables include balances owed the Arizona
station of approximately $19,210 at December 31, 1996.
NOTE I--OPERATING LEASES AND COMMITMENTS
The Company conducts its operations utilizing leased facilities and
equipment consisting of a sales and production office, antenna space, computer
and software. The operating lease covering the office space provides that the
Company pay taxes and a portion of the annual increments to operating expenses
applicable to the leased premises. The leases provide for renewals for various
periods at stipulated rates. Total rental expenses were approximately $124,000,
$99,000, and $46,000 for the years ended December 31, 1997, 1996 and 1995,
respectively, of which a substantial portion was provided by advertising
services rendered in both years.
The minimum rental commitments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------
1998.............................................................................. $ 82,459
1999.............................................................................. 65,228
2000.............................................................................. 24,795
2001.............................................................................. 9,500
----------
$ 181,982
----------
----------
</TABLE>
The Company renewed a license agreement to use a rating service's market
share information for advertising sales through March, 1999. The noncancelable
agreement requires the following minimum annual payments:
<TABLE>
<S> <C>
1998............................................................... $ 22,314
1999............................................................... 5,672
---------
$ 27,986
---------
---------
</TABLE>
F-210
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
------------ ------------
</TABLE>
NOTE J--TAXES
The income tax provision reconciled to the tax computed at the Company's
effective statutory rate was as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Tax at statutory rate (34%)............................................. $ (20,769) 56,770
Non-deductible portion of meals--entertainment.......................... 3,035 3,583
Other................................................................... (6,056) (878)
Limitation of net operating loss carryback.............................. 29,321 --
---------- ---------
$ 5,531 59,475
---------- ---------
---------- ---------
</TABLE>
Deferred tax liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax assets
Excess tax basis over book basis of intangibles....................... $ 10,982 36,905
Net operating loss carryforward....................................... 21,560 --
---------- ---------
32,542 36,905
Less allowance.................................................... 21,560 --
---------- ---------
10,982 36,905
Deferred tax liability
Excess book basis over tax basis of property and equipment............ (82,901) (63,556)
---------- ---------
Net deferred tax liability............................................ $ (71,919) (26,651)
---------- ---------
---------- ---------
</TABLE>
NOTE K--ACQUISITIONS
On May 1, 1997, the Company entered into negotiations to purchase KBAT, a
privately owned radio station. Between May 1, 1997 and the date of closing, the
Company operated the radio station under a local marketing agreement. On August
1, 1997, the Company purchased substantially all the assets of KBAT. The
aggregate purchase price was approximately $1,106,000, including related
acquisition costs. The aggregate purchase price, which was financed by
substantially long-term debt, has been allocated to the assets of the company
based on their respective market values. The excess of the purchase price over
the underlying assets acquired, approximately $75,000, was allocated to goodwill
and is being amortized over 15 years.
For financial statement purposes, the acquisition was accounted for as a
purchase. Accordingly, the assets of the acquired business are included in the
financial statement since the date of acquisition. The
F-211
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE K--ACQUISITIONS (CONTINUED)
unaudited proforma results below assume the acquisition occurred at the
beginning of the fiscal years ending December 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Net sales.......................................................... $ 4,762,507 3,900,159
Operating income................................................... 473,319 544,717
Net earnings....................................................... (75,191) 81,768
Net (loss) earnings per share
Primary.......................................................... (.13) .18
</TABLE>
Pro forma data does not purport to be indicative of the results that would
have been obtained had these events actually occurred at the beginning of the
periods presented and is not intended to be a projection of future results under
the ownership and management of the Company.
NOTE L--STOCK SALE AGREEMENT
Effective December 17, 1997, the Company's stockholders entered into a Stock
Sale Agreement (the Agreement) with Cumulus Holdings, Inc., an Illinois
corporation. The Agreement provides for the sale of 100% of the outstanding
capital stock of the Company to Cumulus. In consideration for 100% of the
Company's stock, Cumulus will pay the stockholders a purchase price as follows:
-- on December 17, 1997, Cumulus deposited with an earnest money escrow
agent, the amount of $750,000 in the form of an irrevocable letter of
credit,
-- on the closing date, Cumulus will deposit with a retainage agent, in
cash, the amount of $500,000. The retainage deposit shall be placed in
an interest-bearing account and will be released to the Company's
stockholders on the first anniversary of the closing date if Cumulus has
not submitted an indemnification claim,
-- on the closing date, Cumulus will pay to the Company's stockholders the
amount of $13,000,000 less an amount equal to the total of the Company's
long-term debt and other liabilities (except certain lease obligations),
-- on the closing date, Cumulus will pay to the Company's stockholders an
amount equal to the Company's cash at closing plus adjusted accounts
receivable and prepaid expenses and deposits.
The closing date will occur no later than the tenth business day after the
FCC approval. If closing does not occur because of a breach by Cumulus, the
earnest money deposit will be paid to the Company's stockholders; and, if the
closing does not occur because of a breach by the Company's stockholders, the
earnest money deposit will be returned to Cumulus.
Concurrent with the execution of the Agreement, the Company's stockholders
and Cumulus entered into a Local Marketing Agreement (the LMA) in which Cumulus
will purchase airtime on the Company's stations effective January 1, 1998. The
agreement will expire on the earliest of December 31, 1998 or the closing of the
sale. In consideration for the airtime, Cumulus will pay monthly amounts ranging
from $73,000 to $81,334. In addition, Cumulus will reimburse the Company certain
station expenses, estimated to be $43,675 monthly. At December 31, 1997, the
Company had received advances on these payments from Cumulus of $116,675.
F-212
<PAGE>
NEW FRONTIER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE L--STOCK SALE AGREEMENT (CONTINUED)
Concurrent with the closing date, the Company's President (and one of it's
stockholders), will execute a noncompete agreement whereby he will agree not to
compete with Cumulus in the markets served by the stations. In consideration for
the noncompete agreement, in addition to his portion of the purchase price, he
will receive $500,000.
F-213
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of the Radio Stations
In our opinion, the accompanying combined balance sheet and the related
combined statements of operations, of changes in net investment of parent and of
cash flows present fairly, in all material respects, the financial position of
Ninety Four Point One, Inc. (a subsidiary of Petracom Broadcasting, Inc.) and
KAYD AM/FM (a division of Petracom Broadcasting of Rockford, Inc.) (the "Radio
Stations") at December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Radio Stations' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Atlanta, Georgia
February 20, 1998, except as
to Note 7, which is as of
March 6, 1998
F-214
<PAGE>
NINETY FOUR POINT ONE, INC.
(A SUBSIDIARY OF PETRACOM BROADCASTING, INC.)
AND KAYD AM/FM
(A DIVISION OF PETRACOM BROADCASTING OF ROCKFORD, INC.)
COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
ASSETS
Current assets: $ 91 $ 81
Cash.........................................................................................
Accounts receivable, less allowance for doubtful accounts of $101 and $108, respectively..... 641 634
Trade receivables............................................................................ 40 23
Prepaid expenses and other current assets.................................................... 13 18
--------- ---------
Total current assets..................................................................... 785 756
Property and equipment, net.................................................................... 733 685
Intangible assets, net......................................................................... 136 189
--------- ---------
Total assets............................................................................. $ 1,654 $ 1,630
--------- ---------
--------- ---------
LIABILITIES AND NET INVESTMENT OF PARENT
Current liabilities:
Accounts payable............................................................................. $ 76 $ 90
Trade payables............................................................................... 74 71
Accrued expenses and other current liabilities............................................... 25 7
--------- ---------
Total current liabilities................................................................ 175 168
Net investment of parent....................................................................... 1,479 1,462
Commitments and contingencies (Note 6)......................................................... -- --
--------- ---------
Total liabilities and net investment of parent........................................... $ 1,654 $ 1,630
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements.
F-215
<PAGE>
NINETY FOUR POINT ONE, INC.
(A SUBSIDIARY OF PETRACOM BROADCASTING, INC.)
AND KAYD AM/FM
(A DIVISION OF PETRACOM BROADCASTING OF ROCKFORD, INC.)
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- ----------- ---------
<S> <C> <C> <C>
Revenues......................................................................... $ 3,821 $ 3,840 $ 2,934
Less: commissions.............................................................. 396 506 309
--------- ----------- ---------
3,425 3,334 2,625
Barter and trade revenues........................................................ 351 345 404
--------- ----------- ---------
Total net revenues......................................................... 3,776 3,679 3,029
--------- ----------- ---------
Operating expenses:
Operating...................................................................... 98 57 96
Selling, general and administrative............................................ 2,439 2,391 2,145
Programming.................................................................... 763 650 602
Depreciation and amortization.................................................. 185 186 264
--------- ----------- ---------
Total operating expenses................................................... 3,485 3,284 3,107
--------- ----------- ---------
Income (loss) from operations.................................................... 291 395 (78)
Other (expense) income:
Interest expense............................................................... (380) (336) (239)
Other.......................................................................... (22) (12) 24
--------- ----------- ---------
Net (loss) income.......................................................... $ (111) $ 47 $ (293)
--------- ----------- ---------
--------- ----------- ---------
Pro forma adjustments:
Net loss before pro forma provision for income taxes (Note 2).................. $ (111)
Pro forma provision for income taxes........................................... (49)
---------
Pro forma net loss......................................................... $ (160)
---------
---------
</TABLE>
See Notes to Financial Statements.
F-216
<PAGE>
NINETY FOUR POINT ONE, INC.
(A SUBSIDIARY OF PETRACOM BROADCASTING, INC.)
AND KAYD AM/FM
(A DIVISION OF PETRACOM BROADCASTING OF ROCKFORD, INC.)
COMBINED STATEMENT OF CHANGES IN NET INVESTMENT OF PARENT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance at January 1, 1995.......................................................... $ 836
Net loss............................................................................ (293)
Net transfers from Parent........................................................... 1,109
---------
Balance at December 31, 1995........................................................ 1,652
Net income.......................................................................... 47
Net transfers to Parent............................................................. (237)
---------
Balance at December 31, 1996........................................................ 1,462
Net loss............................................................................ (111)
Net transfers from Parent........................................................... 128
---------
Balance at December 31, 1997........................................................ $ 1,479
---------
---------
</TABLE>
See Notes to Financial Statements.
F-217
<PAGE>
NINETY FOUR POINT ONE, INC.
(A SUBSIDIARY OF PETRACOM BROADCASTING, INC.)
AND KAYD AM/FM
(A DIVISION OF PETRACOM BROADCASTING OF ROCKFORD, INC.)
COMBINED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income...................................................................... $ (111) $ 47 $ (293)
Adjustments to reconcile net (loss) income to net cash provided by (used for)
operating activities:
Depreciation..................................................................... 132 141 168
Amortization..................................................................... 53 45 96
Net trade (revenue) expense...................................................... (14) 91 41
Gain on sale of fixed assets..................................................... (2) -- --
Minority interest share of net loss.............................................. -- -- 22
Forgiveness of debt.............................................................. -- -- (44)
Changes in assets and liabilities:
Decrease (increase) in net investment of parent................................ 128 (237) 1,109
Increase in accounts receivable................................................ (7) (110) (79)
Decrease (increase) in prepaid expenses and other current assets............... 5 9 (7)
Decrease in accounts payable................................................... (14) (16) (101)
Increase (decrease) in accrued expenses and other current liabilities.......... 18 (38) 45
--------- --------- ---------
Net cash provided by (used for) operating activities......................... 188 (68) 957
--------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment.................................................. (187) (65) (253)
Proceeds from sale of fixed assets................................................... 9 -- --
--------- --------- ---------
Net cash used for investing activities....................................... (178) (65) (253)
--------- --------- ---------
Cash flows from financing activities:
Payments on long-term debt........................................................... -- (9) (516)
--------- --------- ---------
Cash used for financing activities........................................... -- (9) (516)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents....................................... 10 (142) 188
Cash at beginning of year.............................................................. 81 223 35
--------- --------- ---------
Cash at end of year.................................................................... $ 91 $ 81 $ 223
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Financial Statements.
F-218
<PAGE>
NINETY FOUR POINT ONE, INC.
(A SUBSIDIARY OF PETRACOM BROADCASTING, INC.)
AND KAYD AM/FM
(A DIVISION OF PETRACOM BROADCSTING OF ROCKFORD, INC.)
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying combined financial statements present the financial
position, results of operations, changes of net investment of parent and cash
flows of Ninety Four One, Inc. and KAYD AM/FM. Ninety Four Point One, Inc. owns
and operates the KQXY and KQHN radio stations in Beaumont, Texas. Petracom
Broadcasting of Rockford, Inc. owns and operates the KAYD AM/FM radio stations
in Beaumont, Texas (collectively the "Radio Stations").
Throughout the periods presented, the Radio Stations' operations were
conducted and accounted for as subsidiaries or divisions of Petracom Holdings,
Inc. ("Holdings"). These financial statements have been derived from the
historical accounting records of the Radio Stations and include all revenues and
expenses directly attributable to the Radio Station, including allocations for
the costs of general and administrative expenses performed on behalf of the
Radio Stations by Holdings. As more fully described in Note 2, a pro forma
provision for income taxes for the year ended December 31, 1997 was made to
reflect the provision for income taxes of the Radio Stations if they were a
separate taxpayer. See Note 5 for a description of the allocation methodology.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Advertising revenue is recognized in the period during which the spots are
aired. Revenues from other sources are recognized in the period when the
services are provided.
PROPERTY AND EQUIPMENT
Property and equipment, is recorded at cost. Depreciation is computed over
the estimated useful lives of the assets which range from 5 to 20 years on a
straight line basis.
INTANGIBLE ASSETS
Intangible assets are stated at cost and are being amortized using the
straight-line method over the estimated useful life. The Radio Stations evaluate
the recoverability of goodwill annually to determine if the expected
undiscounted future cash flows from goodwill is inadequate to exceed the
carrying value. In those instances, the carrying value would be reduced and an
impairment loss would be recognized. The Radio Stations did not recognize any
impairment loss during the years ended December 31, 1997, 1996 and 1995.
F-219
<PAGE>
NINETY FOUR POINT ONE, INC.
(A SUBSIDIARY OF PETRACOM BROADCASTING, INC.)
AND KAYD AM/FM
(A DIVISION OF PETRACOM BROADCSTING OF ROCKFORD, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Radio Stations' operating results have been included in the consolidated
tax returns filed by Holdings and no effect for income taxes has been recorded
in the historical results of operations. A pro forma adjustment for income taxes
has been made for the year ended December 31, 1997 as if the Radio Stations were
a separate taxpayer.
TRADE TRANSACTIONS
The Radio Stations trade certain advertising time in exchange for various
goods and services. These transactions are recorded at the estimated fair value
of the goods or services received. The related revenue is recognized when the
advertisements are broadcast while expenses are recognized when the goods or
services are received or used.
FINANCIAL INSTRUMENTS
Management estimates that the fair value of all financial instruments
approximates their carrying value at December 31, 1997.
EARNINGS PER SHARE
Due to the historical organization and capital structure of the Radio
Stations, earning per share information is not considered relevant.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIFE --------------------
(YEARS) 1997 1996
--------------- --------- ---------
<S> <C> <C> <C>
Land........................................................ 20 $ 194 $ 153
Building and improvements................................... 20 155 150
Broadcasting towers and equipment........................... 10 541 499
Office furniture and equipment.............................. 5 725 632
Motor vehicles.............................................. 5 74 70
Construction in progress.................................... -- 7 21
--------- ---------
1,696 1,525
Accumulated depreciation and amortization................... (963) (840)
--------- ---------
$ 733 $ 685
--------- ---------
--------- ---------
</TABLE>
F-220
<PAGE>
NINETY FOUR POINT ONE, INC.
(A SUBSIDIARY OF PETRACOM BROADCASTING, INC.)
AND KAYD AM/FM
(A DIVISION OF PETRACOM BROADCSTING OF ROCKFORD, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
AMORTIZATION DECEMBER 31,
PERIOD --------------------
(YEARS) 1997 1996
----------------- --------- ---------
<S> <C> <C> <C>
Deferred financing costs.................................... 7-8 $ 143 $ 143
Customer list............................................... 5 125 125
Goodwill.................................................... 5 25 25
Organizational costs........................................ 5 12 12
--------- ---------
305 305
Accumulated amortization.................................... (169) (116)
--------- ---------
$ 136 $ 189
--------- ---------
--------- ---------
</TABLE>
The amortization of deferred financing costs is recorded as interest expense
in the statement of operations.
5. RELATED PARTY TRANSACTIONS
The financial statements include significant transactions with Holdings
involving functions and services that were provided to or for the Radio
Stations. The costs of these functions and services have been directly charged
or allocated to the Radio Stations using methods that management believes are
reasonable. Such charges and allocations are not necessarily indicative of costs
which may have been incurred if the Radio Stations had been a separate entity.
Allocated costs for the years ended December 31, 1997, 1996 and 1995 were $137,
$117 and $128, respectively.
6. COMMITMENTS AND CONTINGENCIES
The Radio Stations have operating lease agreements for broadcasting
facilities and equipment. Rental expense for the years ended December 31, 1997,
1996 and 1995 was $93, $59 and $26, respectively. Future minimum annual payments
under these noncancelable operating leases as of December 31, 1997, are as
follows:
<TABLE>
<S> <C>
1998............................................................... $ 23
1999............................................................... 3
---
$ 26
---
---
</TABLE>
7. SUBSEQUENT EVENT
On March 6, 1998, Holdings entered into an asset purchase agreement (the
"Agreement") to sell substantially all of the assets of the Radio Stations. The
sale is expected to close in the second quarter 1998.
F-221
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations and of cash flows present fairly, in all material respects, the
financial position of Pamplico Broadcasting, L.P. (the "Partnership") at
December 31, 1997, and the results of its operations and its cash flows for the
year ended December 31, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 13, 1998
F-222
<PAGE>
PAMPLICO BROADCASTING, L.P.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------------
<S> <C>
ASSETS
Current assets:
Cash........................................................................................ $ --
Accounts receivable, less allowance for doubtful accounts of $53,127........................ 91,915
Other current assets........................................................................ 1,000
----------
Total current assets.................................................................... 92,915
Property and equipment, net................................................................... 413,197
Intangible assets, net........................................................................ 473,888
----------
Total assets............................................................................ $ 980,000
----------
----------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
Accounts payable............................................................................ $ 89,051
Accrued and other current liabilities....................................................... 73,653
Deferred liabilities........................................................................ 50,000
Demand notes................................................................................ 3,476,993
Due to affiliate............................................................................ 63,700
----------
Total current liabilities............................................................... 3,753,397
----------
Commitments and contingencies
Partners' capital (deficit):
Beginning capital (deficit)................................................................. (2,229,399)
Partner contributions....................................................................... 31,974
Current year loss........................................................................... (575,972)
----------
Total partners' capital (deficit)....................................................... (2,773,397)
----------
Total liabilities and partners' capital................................................. $ 980,000
----------
----------
</TABLE>
See Notes to Financial Statements.
F-223
<PAGE>
PAMPLICO BROADCASTING, L.P.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1997
------------------
<S> <C>
Revenues...................................................................................... $ 1,046,516
Less: agency commissions.................................................................... (51,325)
------------------
Net revenues............................................................................ 995,191
Operating expenses:
Sales and promotions........................................................................ 132,143
Technical................................................................................... 293,412
General and administrative.................................................................. 416,506
Trade....................................................................................... 440,082
------------------
Total operating expenses................................................................ 1,282,143
------------------
Loss from operations.......................................................................... (286,952)
Other income (expense):
Interest expense............................................................................ (270,944)
Other....................................................................................... (18,076)
------------------
Net loss...................................................................................... $ (575,972)
------------------
------------------
</TABLE>
See Notes to Financial Statements.
F-224
<PAGE>
PAMPLICO BROADCASTING, L.P.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1997
------------------
<S> <C>
Cash flows used in operating activities:
Net loss.................................................................................... $ (575,972)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization........................................................... 68,419
Decrease in accounts receivable......................................................... 16,092
Increase in other current assets........................................................ (1,000)
Decrease in accounts payable............................................................ (33,165)
Increase in accrued liabilities......................................................... 73,653
Decrease in payable to affiliate........................................................ (36,158)
----------
Net cash used in operating activities................................................. (488,131)
----------
Cash flows used in investing activities--
Purchases of property and equipment......................................................... (291,554)
----------
Cash flows from financing activities:
Proceeds of borrowings of notes payable, net................................................ 747,711
Proceeds from partner contributions......................................................... 31,974
----------
Net cash provided by financing activities............................................. 779,685
----------
Increase (decrease) in cash................................................................... --
Cash at beginning of year..................................................................... --
----------
Cash at end of year........................................................................... $ --
----------
----------
Supplemental disclosures of cash flow information:
Interest paid............................................................................... $ 197,291
----------
----------
Non-cash operating activities:
Trade revenue............................................................................... $ 440,082
----------
----------
Trade expense............................................................................... $ 440,082
----------
----------
</TABLE>
See Notes to Financial Statements.
F-225
<PAGE>
PAMPLICO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Pamplico Broadcasting, L.P. (the "Partnership") is a limited partnership
whose partners include a general partner and two limited partners. The
Partnership owns and operates radio stations WMXT-FM, WBZF-FM, WYNA-FM and
maintains a management operating lease for WWFN (the "Stations") located in
Florence, SC.
The significant accounting principles followed by the Partnership and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
The Partnership is entirely dependent on the continued financial support of
its partners to meet its obligations as they come due.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Partnership enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Partnership uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Broadcasting towers and equipment............................ 7 years
Office furniture and equipment............................... 5 years
Term of
Leasehold improvement........................................ lease
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
F-226
<PAGE>
PAMPLICO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INTANGIBLE ASSETS
Intangible assets include Federal Communications Commission ("FCC")
licenses. Intangible assets are stated at cost and are being amortized using the
straight-line method over a fifteen year period. The Partnership evaluates the
carrying value of intangibles periodically in relation to the projected future
undiscounted net cash flows of the related businesses.
FEDERAL INCOME TAXES
The Partnership is not a taxpaying entity for Federal income tax purposes,
and thus no income tax expense or benefit have been recorded.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable, accounts payable, and
demand notes approximates fair value due to their short-term nature.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Broadcasting towers and equipment............................................... $ 631,341
Office furniture and equipment.................................................. 26,016
Leasehold improvements.......................................................... 12,317
------------
669,674
Accumulated depreciation........................................................ (256,477)
------------
Property and equipment, net..................................................... $ 413,197
------------
------------
</TABLE>
Depreciation expense for the year ended December 31, 1997 was $36,753.
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
FCC licenses.................................................................... $ 550,000
Accumulated amortization........................................................ (76,112)
------------
Intangible assets, net.......................................................... $ 473,888
------------
------------
</TABLE>
Amortization expense for the year ended December 31, 1997 was $31,666.
F-227
<PAGE>
PAMPLICO BROADCASTING, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. DEMAND NOTES:
Demand notes consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
Note payable at prime rate minus 1%, due February 1998, and secured by
substantially all assets of the Partnership and the personal stock of a
certain partner.......................................................... $ 1,900,000
Note payable at 9.25%, total payment due January, 1998..................... 190,143
Note payable on demand to partners at prime rate plus 1%................... 1,386,850
-----------------
$ 3,476,993
-----------------
-----------------
</TABLE>
5. RELATED PARTIES:
The Partnership entered into several transactions with an affiliate owned by
two of the same partners as the Partnership. At December 31, 1997, $63,700 was
owed to the affiliate.
Of the $1,386,850 note payable to partners, $715,000 was loaned to the
Partnership during 1997 to be used in the daily operations of the Partnership.
The loans are payable on demand at prime plus 1%.
6. COMMITMENTS AND CONTINGENCIES:
The Partnership incurred expenses of approximately $57,042 for the year
ended December 31, 1997 under operating leases for radio broadcasting
facilities. Future minimum annual payments under these non-cancelable operating
leases and agreements as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
PAYMENTS
----------
<S> <C>
1998.............................................................................. $ 57,000
1999.............................................................................. 55,800
2000.............................................................................. 55,800
2001.............................................................................. --
Thereafter........................................................................ --
----------
$ 168,600
----------
----------
</TABLE>
7. SUBSEQUENT EVENT:
In February 1998, the Partnership entered into an agreement with Cumulus
Broadcasting, Inc. (a wholly-owned subsidiary of Cumulus Media Inc.) ("Cumulus")
to sell all of the assets of the Partnership to Cumulus, subject to approval of
the FCC.
F-228
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations and accumulated deficit and of cash flows present fairly, in all
material respects, the financial position of Phoenix Broadcast Partners, Inc. at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 16, 1998
F-229
<PAGE>
PHOENIX BROADCAST PARTNERS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 543 $ --
Accounts receivable, less allowance for
doubtful accounts of $35,300 and $25,413........................................... 100,704 75,057
----------- -----------
Total current assets............................................................. 101,247 75,057
Property and equipment, net............................................................ 163,410 181,643
Intangible assets, net................................................................. 586,054 637,271
Due from related party................................................................. 14,950 14,250
Other assets........................................................................... 3,274 3,274
----------- -----------
Total assets..................................................................... $ 868,935 $ 911,495
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable......................................................................... $ 661,000 $ 661,000
Due to related party................................................................. 604,728 423,917
Accounts payable..................................................................... 59,475 48,757
Accrued interest..................................................................... 313,547 243,267
Other current liabilities............................................................ 134,293 155,564
----------- -----------
Total current liabilities........................................................ 1,773,043 1,532,505
Long-term liabilities.................................................................. 96,625 104,239
----------- -----------
Total liabilities................................................................ 1,869,668 1,636,744
----------- -----------
Commitments and contingencies
Stockholders' deficit:
Common stock, $1 par value; 7,500 shares
authorized; 7,500 issued and outstanding; 1,000 fully paid......................... 1,000 1,000
Paid-in capital...................................................................... 320,668 320,668
Accumulated deficit.................................................................. (1,322,401) (1,046,917)
----------- -----------
Total stockholders' deficit...................................................... (1,000,733) (725,249)
----------- -----------
Total liabilities and stockholders' deficit...................................... $ 868,935 $ 911,495
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements
F-230
<PAGE>
PHOENIX BROADCAST PARTNERS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Revenues............................................................................ $ 777,905 $ 636,638
Less: agency commissions............................................................ (46,633) (27,060)
------------- -------------
Net revenues................................................................ 731,272 609,578
------------- -------------
Operating expenses:
Programming....................................................................... 267,448 205,132
Sales and promotions.............................................................. 222,603 141,430
Technical and engineering......................................................... 81,492 81,182
General and administrative........................................................ 171,130 175,805
Bad debt expense.................................................................. 47,059 41,727
Depreciation and amortization..................................................... 94,069 90,697
------------- -------------
Total operating expenses.................................................... 883,801 735,973
------------- -------------
Loss from operations................................................................ (152,529) (126,395)
Other income........................................................................ 7,645 --
Interest expense.................................................................. (130,600) (102,580)
------------- -------------
Loss before income taxes.......................................................... (275,484) (228,975)
Income taxes...................................................................... -- --
------------- -------------
Net loss............................................................................ (275,484) (228,975)
Accumulated deficit at beginning of year............................................ (1,046,917) (817,942)
------------- -------------
Accumulated deficit at end of year.................................................. ($ 1,322,401) ($ 1,046,917)
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
F-231
<PAGE>
PHOENIX BROADCAST PARTNERS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.............................................................................. $ (275,484) $ (228,975)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization..................................................... 94,069 90,697
Increase in accounts receivable................................................... (25,647) (18,905)
Increase in accounts payable...................................................... 10,718 21,412
Increase in accrued interest...................................................... 70,280 59,095
Decrease in long term liabilities................................................. (7,614) (7,614)
Increase in due to related parties, net........................................... 180,111 53,624
Increase (decrease) in accrued expenses and other................................. (21,271) 44,298
----------- -----------
Net cash provided by operating activities............................................... 25,162 13,632
----------- -----------
Cash flows from investing activities:
Purchase of intangible assets......................................................... -- (1,500)
Purchases of property and equipment................................................... (24,619) (12,904)
----------- -----------
Net cash used for investing activities.................................................. (24,619) (14,404)
----------- -----------
Net increase (decrease) in cash......................................................... 543 (772)
Cash at beginning of year............................................................... -- 772
----------- -----------
Cash at end of year..................................................................... $ 543 $ --
----------- -----------
----------- -----------
Supplemental disclosures of cash flow information:
Cash paid for taxes................................................................... $ -- $ --
----------- -----------
----------- -----------
Cash paid for interest................................................................ $ 30,496 $ 14,070
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements.
F-232
<PAGE>
PHOENIX BROADCAST PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Phoenix Broadcast Partners, Inc. (the "Company"), a C corporation, owns and
operates radio stations WZAT-FM and WSGA-AM in Savannah, Georgia.
The Company shares common owners and officers with WGUL-FM, Inc. (WGUL), a
radio station operating in Palm Harbor, Florida, which provides certain services
to the Company. As more fully described in Note 2, the Company has significant
transactions with WGUL, its owners and other related parties and is dependent
upon its owners and the related parties for continued financial support.
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized. Trade activities were not significant during 1997 and
1996.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral for its accounts receivable. The Company maintains
reserves for potential credit losses based upon the expected collectibility of
all accounts receivable.
F-233
<PAGE>
PHOENIX BROADCAST PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed using accelerated methods over the estimated useful
lives of the respective assets, generally 5 to 7 years. Leasehold improvements
are amortized on the straight-line basis over the shorter of their estimated
useful life or the lease term.
Maintenance, repairs and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets are amortized on a straight line basis over their
respective estimated useful lives of 15 years. The Company evaluates the
carrying value of intangibles periodically in relation to the projected future
undiscounted net cash flows of the related businesses.
INCOME TAXES
The Company files separate federal and state income tax returns on the cash
basis of accounting.
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amount at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, including cash,
accounts receivable, accounts payable and notes payable, approximate fair value
due to their short term nature.
2. RELATED PARTY TRANSACTIONS:
The due to/(from) related parties at December 31, 1997 and 1996 consist of
the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Advances due from shareholder....................................... $ (14,950) $ (14,250)
----------- -----------
----------- -----------
Advances due to shareholders........................................ $ 40,710 $ 40,710
Note payable to shareholders........................................ 293,700 293,700
Accrued interest on note payable.................................... 64,205 39,417
Balance due to WGUL................................................. 206,113 50,090
----------- -----------
$ 604,728 $ 423,917
----------- -----------
----------- -----------
</TABLE>
The Company shares its owners and officers with WGUL which has from time to
time paid for certain expenses on behalf of the Company. During 1997, WGUL
advanced $156,023 of working capital to the Company. During 1996, WGUL advanced
$29,335 of working capital to the Company.
F-234
<PAGE>
PHOENIX BROADCAST PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. RELATED PARTY TRANSACTIONS: (CONTINUED)
Advances due from shareholder present an amount advanced to an
employee/shareholder of the Company for investment in an unrelated business
entity. The advance is unsecured and does not accrue interest.
Advances due to shareholders represent amounts received from certain
shareholders in 1996 and 1995. The amounts received were used primarily to fund
the operating activities of the Company and its capital expenditures. The
advances are due on demand and do not accrue interest.
Note payable to shareholders represents a promissory note entered into on
June 20, 1995 between the Company and its principal shareholders. The note is
secured on all equipment, accounts receivable and intangible assets of the
Company, subordinate to Lewis Broadcasting Corporation's security interest. The
note is payable on demand and accrues simple interest at Prime. The weighted
average interest rate on this note for the year ended December 31, 1997 and 1996
was 8.27% and 8.44% respectively.
Interest expense on the note payable was $24,788 and $24,289 in 1997 and
1996 respectively.
3. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1997 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Leasehold improvements............................................... $ 36,113 $ 24,113
Broadcasting equipment............................................... 227,993 215,374
Office furniture and equipment....................................... 36,500 36,500
----------- ----------
300,606 275,987
Accumulated depreciation............................................. (137,196) (94,344)
----------- ----------
Property and equipment, net.......................................... $ 163,410 $ 181,643
----------- ----------
----------- ----------
</TABLE>
Depreciation expense for 1997 and 1996 was $42,852 and $39,305,
respectively.
4. INTANGIBLE ASSETS:
Intangible assets at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
FCC licenses........................................................ $ 635,000 $ 635,000
Other............................................................... 134,757 134,757
----------- -----------
769,757 769,757
Accumulated amortization............................................ (183,703) (132,486)
----------- -----------
Intangible assets, net.............................................. $ 586,054 $ 637,271
----------- -----------
----------- -----------
</TABLE>
Amortization expense for 1997 and 1996 was $51,217 and $51,392,
respectively.
F-235
<PAGE>
PHOENIX BROADCAST PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. NOTE PAYABLE:
The Note Payable balance at December 31. 1997 and 1996 is represented by the
following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Lewis Broadcasting Corporation Note, matured on
June 10, 1995; fixed interest rate of 10%;
secured by accounts receivable, tangible assets
and intangible assets of the Company................................ $ 661,000 $ 661,000
---------- ----------
---------- ----------
</TABLE>
The Lewis Broadcasting Corporation (Lewis) note matured on June 10, 1995,
however the Company defaulted on the loan repayment. Consequently, Lewis
notified the Company and its shareholders on July 15, 1995 of the default and
tendered the requisite notice to pursue remedy under the terms of the note. In
connection with the default, Lewis filed a suit against the Company and its
shareholders seeking specific performance of the default remedies under the
note. (See Note 9 Commitments and Contingencies)
As a consequence of the default, interest at a rate of 10% per annum is
still accruing on the outstanding note and interest with a late charge of 5% of
the outstanding principal at the date of default and attorneys' fees at the rate
of 15% on the foregoing outstanding principal and interest. Interest, late
charges and attorneys' fees amounted to $70,889 and $76,015 in 1997 and 1996,
respectively.
6. LONG TERM LIABILITIES:
Long term liabilities consist of obligations due, under an employment
contract, to a former employee and consist of the following:
- $93,757 under the employment contract payable in semi-annual installments
of $3,825 for principal and 6% simple interest commencing January 1994 and
maturing January 2014, and
- $50,000 bonus payable in ten equal annual installments of $5,000
commencing May 1994.
The Company has not been making payments in accordance with the terms set
out in the contract and consequently has recorded a liability of $127,932 and
$129,432 at December 31, 1997 and 1996 respectively, of which $31,307 and
$25,193, representing the portion currently payable, has been recorded in
accrued liabilities as of December 31, 1997 and 1996, respectively.
Interest expense on the employment contract obligation amounted to $5,036
and $5,126 for the years ended December 31, 1997 and 1996, respectively.
F-236
<PAGE>
PHOENIX BROADCAST PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES:
The Company's effective income tax rate differs from the statutory federal
income tax rate as follows:
<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C> <C> <C>
Income tax benefit at federal statutory rate................. $ (93,665) (34.0%) $ (77,852) (34.0%)
State income taxes (net of federal benefit).................. (10,902) (4.0%) (9,060) (4.0%)
Non-deductible items......................................... 60 -- 60 --
Change in valuation allowance................................ 104,507 -- 86,852 --
----------- --------- ---------- ---------
$ -- --% $ -- --%
----------- --------- ---------- ---------
----------- --------- ---------- ---------
</TABLE>
Significant items giving rise to deferred taxes as of December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets (liabilities):
Net operating loss carryforwards.................................... $ 176,340 $ 112,204
Accounts receivable................................................. (38,227) (27,526)
Depreciation and amortization....................................... 26,643 27,252
Accounts payable and accrued liabilities............................ 216,949 170,370
Other............................................................... -- (5,102)
----------- -----------
Net deferred tax asset.............................................. 381,705 277,198
Less valuation allowance............................................ (381,705) (277,198)
----------- -----------
Total net deferred tax asset........................................ $ -- $ --
----------- -----------
----------- -----------
</TABLE>
The net deferred tax asset at December 31, 1997 and 1996 is fully offset by
the valuation allowance. The amount of the valuation allowance is reviewed
periodically by management and is determined based on management's assessment of
the Company's ability to generate future taxable income and realize the tax
benefits associated with the deferred tax assets.
Net operating losses expire as follows:
<TABLE>
<S> <C>
2009..... $ 69,955
2010..... 97,291
2011..... 129,536
2012..... 168,639
---------
$ 465,421
---------
---------
</TABLE>
If certain substantial changes in the Company's ownership should occur,
there would be an annual limitation on the amount of the operating loss
carryforwards which can be utilized.
8. DEFINED CONTRIBUTION PLAN:
Effective August 1997, the Company in conjunction with WGUL adopted a
qualified profit sharing plan under Section 401(k) of the Internal Revenue Code.
All employees meeting eligibility requirements are qualified for participation
in the plan. Participants of the plan may contribute 1% to 15% of their annual
compensation, up to $10,000 for the year, through payroll deductions. The
Company has the option
F-237
<PAGE>
PHOENIX BROADCAST PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. DEFINED CONTRIBUTION PLAN: (CONTINUED)
to provide a matching and discretionary contribution each year. For fiscal 1997,
the total matching contribution was $2,214. No discretionary contributions were
made in 1997.
9. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES AND LICENSING AGREEMENTS
The Company leases its station studios and certain equipment under various
operating leases and enters into licensing agreements to obtain the rights to
broadcast shows. Rent expense under operating leases and payments under the
licensing agreements for the years ended December 31, 1997 and 1996 amounted to
$48,250 and $34,009 respectively. Future minimum annual payments under these
non-cancelable operating leases and agreements as of December 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998............................................................... $ 51,300
1999............................................................... 36,000
2000............................................................... 12,000
Thereafter......................................................... --
---------
$ 99,300
---------
---------
</TABLE>
CONTINGENCIES
The Company is party to a lawsuit relating to the default on the note
payable to Lewis. The Lewis note was originally executed by Gulf Atlantic, the
previous owners of the radio stations, and as security for the note, Gulf
Atlantic executed a security agreement conveying to Lewis a first priority
interest in all of the operating assets of WZAT-FM and WSGA-AM. In conjunction
with the execution of the promissory note and the security agreement, Gulf
Atlantic and the Company's shareholders executed an option agreement granting
Lewis an irrevocable right to purchase both radio stations for $650,000, less
any amounts remaining to be paid on the note plus a $100,000 non-compete fee as
well as the right of first refusal on the sale of the stations' operational
assets and business. Upon the Company's default on the note, Lewis notified the
Company and its shareholders of the default and tendered requisite notice of its
intention to exercise its rights under the option agreement. Lewis also filed a
suit against the Company and its shareholders to seek specific performance of
exercising the option under the option agreement and collection of all amounts
due under the note. Through a counterclaim for declaratory judgment, the Company
obtained a court ruling concluding that the option agreement is void as a matter
of law. The court ruling, however, upheld Lewis' claim that the Company and its
shareholders are indebted to Lewis for the principal and interest due under the
promissory note together with reasonable attorneys' fees of 15% of all
outstanding principal and interest amounts owed. Lewis has appealed the court's
decision with respect to the option agreement being void and is awaiting a
decision from the appellate court. Management expects to prevail in the
appellate court decision.
10. SUBSEQUENT EVENTS
On March 16, 1998, the Company entered into a 1 year Local Marketing
Agreement (LMA) with Cumulus Broadcasting, Inc., a wholly owned subsidiary of
Cumulus Media Inc., in return for a monthly license fee.
F-238
<PAGE>
PHOENIX BROADCAST PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. SUBSEQUENT EVENTS (CONTINUED)
The Company has also commenced negotiations with Cumulus Broadcasting, Inc.,
to sell certain assets of WZAT-FM and WSGA-AM, subject to approval of the
Federal Communications Commission, in return for consideration of approximately
$3.5 million.
The Company has also commenced negotiation with Lewis regarding a proposed
settlement agreement for $1,700,000. The proposed settlement agreement will
satisfy the Company's obligations with respect to the following: (1) all
principal, interest, late fees, origination fees and attorneys' fees related to
the Lewis note referred to in Note 9 above; (2) rent and late fees related to
the lease of the Company's antenna and tower from Lewis for the period up
through the date of the proposed settlement agreement and through May, 1998; (3)
all obligations of the Company and its shareholders to pay Lewis some proceeds
from the proposed sale of the Company to Cumulus Broadcasting, Inc. under the
option agreement as discussed in Note 9 above; and (4) any and all remaining
obligations of the Company with respect to the note and option agreement with
Lewis.
F-239
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Republic Corporation
Montgomery, Alabama
We have audited the consolidated balance sheets of Republic Corporation and
subsidiary (radio broadcasting operations only) as of December 31, 1997 and
1996, and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 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 audits 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Republic Corporation and subsidiary (radio broadcasting operations only) as of
December 31, 1997 and 1996, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Montgomery, Alabama
March 2, 1998
F-240
<PAGE>
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................................. $ 247 $ 257
Accounts receivable, net of allowance for doubtful accounts of $521 in 1997 and $479 in
1996.................................................................................... 1,515 1,449
Other current assets...................................................................... 246 172
State income taxes receivable............................................................. 44 47
--------- ---------
Total current assets.................................................................. 2,052 1,925
Other assets:
Land, building and equipment, net......................................................... 2,397 2,167
Investment in equity investee............................................................. 628 633
Intangible assets and other............................................................... 12,152 13,103
--------- ---------
Total assets.......................................................................... $ 17,229 $ 17,828
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................................................... $ 131 $ 263
Accrued expenses.......................................................................... 693 484
--------- ---------
Total current liabilities............................................................. 824 747
Deferred tax liability...................................................................... 272 4,123
--------- ---------
Total liabilities..................................................................... 1,096 4,870
--------- ---------
Stockholder's Equity:
Common stock, $0.01 par; 500,000 shares authorized,
50,000 shares issued and outstanding.................................................... 1 1
Contributed capital....................................................................... 8,003 8,003
Retained earnings......................................................................... 8,129 4,954
--------- ---------
Total stockholder's equity............................................................ 16,133 12,958
--------- ---------
Total liabilities and stockholder's equity.................................................. $ 17,229 $ 17,828
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-241
<PAGE>
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Advertising.................................................................... $ 11,677 $ 10,959 $ 11,047
Other.......................................................................... 14 161 36
--------- --------- ---------
Total revenue.............................................................. 11,691 11,120 11,083
Less commissions............................................................... 2,360 2,114 2,090
--------- --------- ---------
Net revenues............................................................... 9,331 9,006 8,993
--------- --------- ---------
Expenses:
Selling, general, and administrative........................................... 6,323 5,990 5,981
Amortization................................................................... 954 954 844
Depreciation................................................................... 252 251 267
--------- --------- ---------
Total expenses............................................................. 7,529 7,195 7,092
--------- --------- ---------
Operating income........................................................... 1,802 1,811 1,901
--------- --------- ---------
Other income (expense):
Interest income................................................................ 11 14 13
Equity in loss of equity investee.............................................. (32) (41) (62)
Reorganization expenses........................................................ (438)
--------- --------- ---------
Total other income (expense)............................................... (21) (27) (487)
--------- --------- ---------
Income before provision for (benefit from) income taxes.................... 1,781 1,784 1,414
Provision for (benefit from) income taxes........................................ (3,724) 561 464
--------- --------- ---------
Net income................................................................. $ 5,505 $ 1,223 $ 950
--------- --------- ---------
--------- --------- ---------
Earnings per share (basic and diluted):
Net income................................................................. $ 110.10 $ 24.46 $ 19.00
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-242
<PAGE>
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
COMMON CONTRIBUTED RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
----------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994....................................... $ 1 $ 236 $ 8,655 $ 8,892
Change in ownership step-up, net of taxes........................ 7,767 7,767
Dividends to former parent....................................... (3,231) (3,231)
Net distributions to stockholder................................. (1,284) (1,284)
Net income....................................................... 950 950
----------- ----------- --------- ------------
Balance, December 31, 1995....................................... 1 8,003 5,090 13,094
Net distributions to stockholder................................. (1,359) (1,359)
Net income....................................................... 1,223 1,223
----------- ----------- --------- ------------
Balance, December 31, 1996....................................... 1 8,003 4,954 12,958
Net distributions to stockholder................................. (2,330) (2,330)
Net income....................................................... 5,505 5,505
----------- ----------- --------- ------------
Balance, December 31, 1997....................................... $ 1 $ 8,003 $ 8,129 $ 16,133
----------- ----------- --------- ------------
----------- ----------- --------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-243
<PAGE>
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................................................... $ 5,505 $ 1,223 $ 950
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.................................................. 1,206 1,205 1,111
Equity in loss of investee..................................................... 32 41 62
Deferred income taxes.......................................................... (3,851) (311) (261)
(Gain) loss on sale of land, buildings, and equipment.......................... (2) 6 (4)
Changes in:
Accounts receivable, net..................................................... (66) 34 (311)
Other current assets......................................................... 79 (72) (47)
Accounts payable and accrued expenses........................................ 77 126 265
State income taxes receivable................................................ 3 (35) (24)
--------- --------- ---------
Net cash provided by operating activities............................................ 2,983 2,217 1,741
--------- --------- ---------
Cash flows from investing activities:
Purchases of land, buildings, and equipment........................................ (662) (913) (271)
Proceeds from sale of land, buildings, and equipment............................... 26 4
Contribution to equity investee.................................................... (27) (25) (35)
--------- --------- ---------
Net cash used in investing activities................................................ (663) (938) (302)
--------- --------- ---------
Cash flows from financing activities:
Net distributions to stockholder................................................... (2,330) (1,359) (1,284)
--------- --------- ---------
Net cash used in financing activities................................................ (2,330) (1,359) (1,284)
--------- --------- ---------
(Decrease) increase in cash and cash equivalents................................... (10) (80) 155
Cash and cash equivalents, beginning of year......................................... 257 337 182
--------- --------- ---------
Cash and cash equivalents, end of year............................................... $ 247 $ 257 $ 337
--------- --------- ---------
--------- --------- ---------
Supplemental disclosure of cash flow Information:
Income taxes paid.................................................................. $ 42 $ 144 $ 137
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-244
<PAGE>
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
Republic Corporation (the Company) was formed on February 17, 1995, at which
time The Colonial Company (TCC) effected a divisive reorganization and
transferred ownership of Colonial Broadcasting Company, Inc. (CBC) to the
Company's stockholder which is one of the three previous owners of TCC. The
Company's stockholder then contributed CBC to the Company.
The Company is engaged in radio broadcasting, operating four radio stations:
WLWI-FM, WMSP-AM, WMXS-FM, and WNZZ-AM in Montgomery, Alabama; and operating one
radio station, WUSY-FM, in Chattanooga, Tennessee.
On January 10, 1998, the stockholder of the Company entered into a Stock
Purchase Agreement (the Stock Purchase Agreement) with Cumulus Holdings, Inc.
(Cumulus) pursuant to which Cumulus will acquire all of the outstanding shares
of the Company. Prior to or concurrent with the acquisition by Cumulus, the
Company will repay all long term debt and spin-off all non-broadcasting assets
and liabilities to the stockholder of the Company.
These consolidated financial statements have been prepared to reflect the
broadcasting assets and liabilities of the Company to be acquired by Cumulus
pursuant to the Stock Purchase Agreement. The Company's only asset, for all
periods presented, is the investment in its wholly owned broadcasting
subsidiary, CBC. These financial statements exclude the non-broadcasting assets
to be spun-off to the stockholder of the Company (which include CBC's two
subsidiaries, CBC Realty, Inc. and Radio Management Services, Inc., as well as
certain related party receivables and cash surrender value of life insurance)
and all long term debt.
Historically, the CBC broadcasting operations have been managed, financed,
and accounted for on an independent stand alone basis, requiring no allocation
of overhead costs by the Company. The broadcasting operations will continue to
be managed and operated autonomously after the spin-off, with no material
financial commitments, guarantees, or contingent liabilities with the spun-off,
non-broadcasting operations. These financial statements exclude all unrelated,
non-broadcasting expenses incurred by the Company at the holding company level.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements and notes
to the consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, CBC. All significant intercompany balances and
transactions have been eliminated.
BASIS IN NET ASSETS CONTRIBUTED--The February 17, 1995 divisive
reorganization of TCC and the resulting contribution of CBC to the Company was a
change in control which resulted in the removal of CBC's due from TCC of $3,231
through a noncash dividend and a new basis of accounting for CBC, the primary
effect of which was a step-up in basis for Federal Communications Commission
(FCC) rights of $12,481, or $7,767 net of deferred taxes.
INCOME RECOGNITION--Advertising income is recognized as services are
provided. Barter transactions are reported at the estimated fair market value of
the product or services received. Barter revenue is reported when commercials
are broadcast, and merchandise or services received as consideration are
reported when used or received.
F-245
<PAGE>
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS--For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid investments purchased with
an original maturity of three months or less to be cash equivalents.
LAND, BUILDINGS, AND EQUIPMENT--Land, buildings, and equipment are stated at
cost less accumulated depreciation. Depreciation is computed using the
straight-line method for financial statement purposes and straight-line and
accelerated methods for income tax purposes. Costs for maintenance and repairs
are expensed when incurred; betterments and improvements which materially
prolong the lives of assets are capitalized. The cost of assets sold or
otherwise disposed of and the related accumulated depreciation are removed from
the accounts and the gain or loss on such disposition is included in income.
INVESTMENT IN EQUITY INVESTEE--The investment in equity investee, in which
CBC does not exercise control and has a 50% or less ownership interest, is
carried at cost and adjusted for equity in undistributed earnings or losses
since the date of acquisition or investment.
INTANGIBLE ASSETS--Intangible assets are recorded at a stepped-up basis in
connection with the change in ownership described in Note 2. These assets are
being amortized using the straight-line method predominately over a period of 15
years.
ACCOUNTING FOR INCOME TAXES--Effective January 1, 1997, the Company elected
to be taxed as an S Corporation for federal and state income tax purposes. Under
the provisions of the Internal Revenue Code, an S Corporation generally is not
subject to federal income tax because its taxable income or loss accrues to the
individual stockholder. Accordingly, no current federal income tax expense is
recognized by the Company for 1997. The Company files tax returns in the State
of Tennessee, which does not recognize S Corporations for income tax purposes.
Prior to its S Corporation election, the Company utilized an asset and
liability approach for financial accounting and reporting for income taxes.
Deferred tax assets are recognized only to the extent of their anticipated
realization. Deferred income taxes reflect the future tax consequences of
differences between the tax basis of assets and liabilities and the amounts
reported for the financial statements. The radio broadcasting operations have
historically been included in the consolidated income tax returns filed with the
Company. Income tax expense for 1996 and 1995 has been calculated on a separate
tax return basis.
EARNINGS PER SHARE--Earnings per share of common stock is computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the period. The weighted average number of shares used in the
computation for 1997, 1996, and 1995 was 50,000 each year.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
3. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE. SFAS No.
128 establishes standards for computing and presenting earnings per share (EPS).
This Statement simplifies the standards for computing earnings per share
previously found in Accounting Principles Bulletin Opinion No. 15, EARNINGS PER
SHARE, and replaces
F-246
<PAGE>
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
3. RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
the presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997.
The Company does not anticipate that any other recently issued accounting
standards will have a material impact on its financial position, results of
operations, or cash flows.
4. LAND, BUILDINGS, AND EQUIPMENT
Land, buildings, and equipment consists of the following at December 31,
1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Land....................................................................... $ 128 $ 128
Development in process..................................................... 1,081 789
Buildings and improvements................................................. 69 69
Furniture and fixtures..................................................... 227 219
Equipment.................................................................. 3,302 3,148
Land improvements.......................................................... 67 67
Leasehold improvements..................................................... 320 313
--------- ---------
5,194 4,733
Accumulated depreciation................................................... (2,797) (2,566)
--------- ---------
$ 2,397 $ 2,167
--------- ---------
--------- ---------
</TABLE>
5. INVESTMENT IN EQUITY INVESTEE
The following sets forth the condensed unaudited financial information of
investment in equity investee at December 31, 1997 and 1996. A comparison of the
Company's investment (through CBC) in Montgomery Tower Partners along with the
Company's portion of Montgomery Tower Partners' capital is as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
BALANCE SEPARATE BALANCE SEPARATE
PERCENT SHEET ENTITY SHEET ENTITY
INTEREST INVESTMENT EQUITY INVESTMENT EQUITY
----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Montgomery Tower Partners................................. 50% $ 628 $ 628 $ 633 $ 633
--- ----- ----- ----- -----
--- ----- ----- ----- -----
</TABLE>
F-247
<PAGE>
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
5. INVESTMENT IN EQUITY INVESTEE (CONTINUED)
Shown below is condensed financial information relating to the Company's
investment in equity investee based on the entity's separate financial
reporting.
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Assets............................................................................... $ 1,299
Liabilities.......................................................................... 24
---------
Partners' capital.................................................................... $ 1,275
---------
---------
Revenue.............................................................................. $ 91
---------
---------
Net loss............................................................................. $ (64)
---------
---------
Republic Corporation's share of:
Partners' capital.................................................................. $ 628
---------
---------
Equity in loss of investee......................................................... $ (32)
---------
---------
</TABLE>
6. INTANGIBLE ASSETS AND OTHER
Unamortized intangible assets and other consist of the following at December
31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Federal Communications Commission rights................................ $ 12,083 $ 13,031
Brokers' fees and other................................................. 69 72
--------- ---------
$ 12,152 $ 13,103
--------- ---------
--------- ---------
</TABLE>
7. OPERATING LEASES
The Company leases office facilities and equipment under operating leases.
Future minimum lease payments as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
FOR THE YEAR ENDING DECEMBER 31:
- ------------------------------------------------------------------------------------
1998.............................................................................. $ 159
1999.............................................................................. 148
2000.............................................................................. 148
2001.............................................................................. 148
2002.............................................................................. 147
Thereafter........................................................................ 609
-----------
$ 1,359
-----------
-----------
</TABLE>
Rent expense amounted to $254, $240 and $233 for the years ended December
31, 1997, 1996, and 1995, respectively.
F-248
<PAGE>
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
8. INCOME TAXES
As discussed in Note 2, effective January 1, 1997, the Company elected to be
taxed as an S Corporation for federal and state income tax purposes. Prior to
that election, the Company used an asset and liability approach for financial
accounting and reporting for income taxes.
The provision for (benefit from) income taxes is composed of the following
at December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal......................................................... $ 760 $ 610
State........................................................... $ 127 112 115
--------- --------- ---------
Total......................................................... 127 872 725
--------- --------- ---------
Deferred:
Federal......................................................... (3,756) (278) (219)
State........................................................... (95) (33) (42)
--------- --------- ---------
Total......................................................... (3,851) (311) (261)
--------- --------- ---------
$ (3,724) $ 561 $ 464
--------- --------- ---------
--------- --------- ---------
</TABLE>
The components of the Company's net deferred tax liability as of December
31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax assets;
Allowance for bad debts.................................................... $ 14 $ 175
Pension accrual in excess of contributions................................. 2 36
Other...................................................................... 26
--------- ---------
Total deferred tax asset................................................. 16 237
--------- ---------
Deferred tax liabilities:
Accelerated tax depreciation............................................... 8 109
Intangible assets--FCC rights.............................................. 274 4,143
Equity investment.......................................................... 6 108
--------- ---------
Total deferred tax liability............................................. 288 4,360
--------- ---------
Net deferred tax liability............................................... $ 272 $ 4,123
--------- ---------
--------- ---------
</TABLE>
At the time of the S Corporation election, it was determined by management
that any built-in gains as a result of the tax basis of the Company's net assets
would not be realized during the prescribed holding period. Therefore, the net
deferred tax liability, excluding the portion related to the State of Tennessee,
was written off, through the recognition of a deferred benefit in the 1997
statement of income.
F-249
<PAGE>
REPUBLIC CORPORATION (RADIO BROADCASTING OPERATIONS ONLY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
9. EMPLOYEE BENEFIT PLAN
The Company and its subsidiary are participants in a pension plan with
related companies. This plan covers most employees who have met certain age and
length of service requirements. The Company's policy is to contribute annually
an amount that can be deducted for federal income tax purposes using the frozen
entry age actuarial method. Actuarial computations for financial reporting
purposes are based on the projected unit credit method.
Employee pension benefit plan status at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation............................................. $ 801 $ 577
--------- ---------
--------- ---------
Vested benefit obligation.................................................. $ 737 $ 549
--------- ---------
--------- ---------
Projected benefit obligation for service rendered to date.................. $ 1,278 $ 965
Plan assets at fair value.................................................. 1,240 888
--------- ---------
Projected benefit obligation in excess of plan assets.................... (38) (77)
Unrecognized transition asset.............................................. (18) (20)
Unrecognized prior service cost............................................ (40) (43)
Unrecognized gain.......................................................... (13) 53
--------- ---------
Accrued pension cost..................................................... $ (109) $ (87)
--------- ---------
--------- ---------
</TABLE>
Net pension cost includes the following components for the years ended
December 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ----- -----
<S> <C> <C> <C>
Service cost............................................................. $ 75 $ 73 $ 56
Interest cost............................................................ 88 70 61
Return on plan assets.................................................... (286) (90) (48)
Net amortization and deferral............................................ 196 18 (7)
--- --- ---
Net pension cost....................................................... $ 73 $ 71 $ 62
--- --- ---
--- --- ---
</TABLE>
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.25%, 7.75%, and 7.75% for 1997,
1996, and 1995, respectively. The rate of increase in future compensation levels
used was 4.25%, 4.75%, and 5.00% for 1997, 1996, and 1995, respectively, and the
expected long-term rate of return was 9% for all years.
10. RELATED PARTY TRANSACTIONS
The Company entered into lease agreements with an affiliate for its office
facilities in Montgomery. Rent expense under these agreements was $167, $141,
and $137 for the years ended December 31, 1997, 1996, and 1995, respectively,
and future rent obligations were $1,340 and $1,477, respectively, at December
31, 1997 and 1996.
The Company received $101, $117, and $69 in advertising revenue from related
parties during the years ended December 31, 1997, 1996, and 1995, respectively.
The Company maintains cash and cash equivalent amounts in an affiliated
financial institution. The book value of the accounts totaled $219 and $224 at
December 31, 1997 and 1996, respectively.
F-250
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Savannah Communications, L.P.
We have audited the accompanying balance sheets of Savannah Communications,
L.P. (the "Partnership") as of December 31, 1997 and 1996, and the related
statements of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
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 Savannah Communications,
L.P. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership has experienced
losses since its inception in 1995 and is in default on certain of its long-term
debt, raising substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Coopers & Lybrand L.L.P.
Atlanta, Georgia
February 27, 1998
F-251
<PAGE>
SAVANNAH COMMUNICATIONS, L.P.
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................................ $ 3,812 $ 9,265
Accounts receivable, net of allowance for doubtful accounts of $14,815 and $10,556,
respectively...................................................................... 177,899 267,995
Accounts receivable, partners....................................................... 110,000
Prepaid expenses.................................................................... 2,805 8,804
------------ ------------
Total current assets............................................................ 184,516 396,064
Property and equipment, net of accumulated depreciation............................... 1,427,694 1,592,468
Intangible assets, net of accumulated amortization.................................... 3,464,139 3,073,085
------------ ------------
Total assets.................................................................... $ 5,076,349 $ 5,061,617
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities and long-term debt in default.................................... $ 2,800,000 $ 2,800,000
Accounts payable.................................................................... 81,797 118,236
Cash advances from affiliate........................................................ 52,876 32,876
Accrued expenses.................................................................... 51,220 39,783
------------ ------------
Total current liabilities....................................................... 2,985,893 2,990,895
Long-term debt, less current maturities and debt in default........................... 600,000 150,000
Partners' capital..................................................................... 1,490,456 1,920,722
------------ ------------
Total liabilities and partners' capital......................................... $ 5,076,349 $ 5,061,617
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-252
<PAGE>
SAVANNAH COMMUNICATIONS, L.P.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- ------------
<S> <C> <C>
Broadcasting revenue:
Advertising........................................................................ $ 1,405,307 $ 1,785,059
Less commissions................................................................... (147,772) (216,604)
------------- ------------
Net broadcasting revenue....................................................... 1,257,535 1,568,455
Operating expenses:
Promotion.......................................................................... 32,511 66,349
Programming........................................................................ 553,475 439,130
Selling, general and administrative................................................ 898,676 744,145
Depreciation and amortization...................................................... 507,168 149,480
Local management agreement fees.................................................... 12,000 365,813
------------- ------------
2,003,830 1,764,917
------------- ------------
Operating loss................................................................. (746,295) (196,462)
------------- ------------
Other income (expense):
Interest expense................................................................... (366,450) (67,642)
Other, net......................................................................... 14,621 (47,411)
------------- ------------
(351,829) (115,053)
------------- ------------
Net loss....................................................................... $ (1,098,124) $ (311,515)
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-253
<PAGE>
SAVANNAH COMMUNICATIONS, L.P.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<S> <C>
Partners' capital, December 31, 1995............................................ $1,313,349
Capital contributions......................................................... 918,888
Net loss...................................................................... (311,515)
----------
Partners' capital, December 31, 1996............................................ 1,920,722
Capital contributions......................................................... 667,858
Net loss...................................................................... (1,098,124)
----------
Partners' capital, December 31, 1997............................................ $1,490,456
----------
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-254
<PAGE>
SAVANNAH COMMUNICATIONS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................................................... $ (1,098,124) $ (311,515)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation.................................................................... 255,048 77,585
Amortization of intangibles..................................................... 252,128 71,895
Changes in operating assets and liabilities:
Accounts receivable........................................................... 90,096 (10,611)
Prepaid expenses.............................................................. 5,999 (8,804)
Accounts payable and accrued expenses......................................... (25,002) 134,754
------------- -------------
Net cash used by operating activities....................................... (519,855) (46,696)
------------- -------------
Cash flows from investing activities:
Acquisition of business, including related costs.................................. (729,410) (4,450,000)
Organization costs................................................................ (4,046) (61,579)
Purchases of property and equipment............................................... (104,883)
------------- -------------
Net cash used in investing activities....................................... (733,456) (4,616,462)
------------- -------------
Cash flows from financing activities:
Proceeds from long-term debt, net of loan fees.................................... 450,000 2,775,134
Cash advances from affiliate...................................................... 20,000 32,876
Proceeds from capital contributions............................................... 777,858 808,888
------------- -------------
Net cash provided by financing activities................................... 1,247,858 3,616,898
------------- -------------
Net decrease in cash........................................................ (5,453) (1,046,260)
Cash, beginning of year............................................................. 9,265 1,055,525
Cash, end of year................................................................... $ 3,812 $ 9,265
------------- -------------
------------- -------------
Supplemental disclosure of cash flow information:
Cash paid for interest............................................................ $ 329,372 $ 51,966
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-255
<PAGE>
SAVANNAH COMMUNICATIONS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION:
Savannah Communications, L.P. (the "Partnership") was formed to acquire, own
and operate radio stations servicing the Savannah, Georgia area. The Partnership
commenced operations effective October 1995, at which time it entered into a
local marketing agreement (LMA) permitting the Partnership to program and market
two stations, WBMQ-AM and WIXV-FM, prior to acquiring them on July 31, 1996. The
Partnership entered into an LMA commencing August 1996 with respect to another
station, WSFG-FM, prior to acquiring it on February 28, 1997.
The Partnership's financial statements have been prepared in accordance with
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses for the period presented. They also affect
the disclosures of contingencies. Actual results could differ from those
estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the respective assets. Expenditures for repairs are expensed
while major additions are capitalized.
INTANGIBLE ASSETS
Intangible assets are stated at cost and amortized on a straight-line basis
over their estimated useful lives, as follows:
FCC broadcast licenses over 15 years.
Goodwill over 15 years.
Organization costs over five years.
On an ongoing basis, management evaluates the recoverability of the net
carrying value of intangible assets by reference to the Partnership's
undiscounted anticipated future cash flows.
REVENUE RECOGNITION
Revenue from the sale of air-time is recognized at the time the related
program or advertisement is broadcast. Barter transactions are reported at the
estimated fair market value of the product or services received. Barter revenue
is reported when commercials are broadcast, and merchandise or services received
as consideration are reported as expense when used or received.
ALLOCATIONS AND DISTRIBUTIONS
The profits and losses of the Partnership are allocated and cash flow from
operations or cash from capital transactions, if any, will be distributed to the
partners in accordance with the terms of the partnership agreement.
F-256
<PAGE>
SAVANNAH COMMUNICATIONS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES
No provision for federal or state income taxes has been provided as the
partners report their pro rata share of the partnership profits or losses on
their tax returns.
2. ACQUISITIONS:
On July 31, 1996, the Partnership acquired substantially all of the assets
of two radio stations for $4,450,000, including related costs. The Partnership
operated the two stations under an LMA from October 1995 until the acquisition.
On February 28, 1997, the Partnership acquired substantially all of the assets
of a third radio station for $729,410, including related costs. The Partnership
operated this station under an LMA from August 1996 until the acquisition.
The 1997 and 1996 acquisitions were accounted for as purchase transactions
and, accordingly, the purchase price was allocated to assets based on their
estimated fair value with the excess of the purchase price over the fair value
of the identifiable tangible and intangible assets acquired reflected as
goodwill, as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ------------
<S> <C> <C>
Property and equipment.............................................. $ 90,274 $ 1,571,407
FCC broadcast licenses.............................................. 100,000 1,999,000
Goodwill............................................................ 539,136 879,593
---------- ------------
Purchase price, including related costs............................. $ 729,410 $ 4,450,000
---------- ------------
---------- ------------
</TABLE>
3. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Land and improvements............................................. $ 279,685 $ 279,685
Buildings......................................................... 260,690 260,690
Tower and antenna................................................. 790,297 712,397
Furniture and equipment........................................... 420,539 408,165
Other............................................................. 9,116 9,116
------------ ------------
1,760,327 1,670,053
Less accumulated depreciation..................................... (332,633) (77,585)
------------ ------------
$ 1,427,694 $ 1,592,468
------------ ------------
------------ ------------
</TABLE>
F-257
<PAGE>
SAVANNAH COMMUNICATIONS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INTANGIBLE ASSETS:
Intangible assets consisted of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
FCC broadcast licenses............................................ $ 2,099,000 $ 1,999,000
Goodwill.......................................................... 1,418,729 879,593
Deferred financing costs.......................................... 176,970 176,970
Organization costs................................................ 93,463 89,417
------------ ------------
3,788,162 3,144,980
Less accumulated amortization..................................... (324,023) (71,895)
------------ ------------
$ 3,464,139 $ 3,073,085
------------ ------------
------------ ------------
</TABLE>
5. LONG-TERM DEBT:
Long-term debt consisted of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Bank note payable, quarterly payments ranging from $50,000 to $125,000 commencing
January 1, 1998 with a balloon payment of remaining balance due October 1, 2000,
bearing interest at the bank's reference rate plus 2.5% (reference rate was 8.5% at
December 31, 1997), collateralized by substantially all assets of the Partnership... $ 2,800,000 $ 2,800,000
Note payable, due September 2001, interest payable quarterly at 10%................... 150,000 150,000
Note payable, due February 2002, interest payable monthly at 9%....................... 450,000
------------ ------------
3,400,000 2,950,000
Less current maturities and long-term debt in default................................. (2,800,000) (2,800,000)
------------ ------------
$ 600,000 $ 150,000
------------ ------------
------------ ------------
</TABLE>
The bank note is subject to certain restrictive financial covenants,
including the maintenance of minimum broadcast operating cash flow amounts, and
limitations on additional indebtedness, capital expenditures, lease agreements,
investments and distributions to partners. The Partnership was in violation of
certain of these financial covenants at December 31, 1997 and 1996.
Additionally, the Partnership did not make the first required principal payment
of $50,000 due January 1, 1998. As a result of these matters, the noteholder has
the right to demand payment. Therefore, the entire principal balance has been
classified as current at December 31, 1997 and 1996. Interest payments on this
note are current.
The carrying amount reported for long-term debt approximates fair value.
F-258
<PAGE>
SAVANNAH COMMUNICATIONS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. OPERATING LEASES:
The Partnership leases a vehicle and a tower site under operating leases
with future minimum rental payments as follows:
<TABLE>
<CAPTION>
<S> <C>
1998............................................................... $ 57,700
1999............................................................... 56,600
2000............................................................... 58,700
2001............................................................... 60,900
Thereafter......................................................... 13,200
</TABLE>
Rental expense charged to operations was $56,800 and $50,500 for the years
ended December 31, 1997 and 1996.
7. RELATED PARTY TRANSACTIONS:
Included in other expenses are fees paid to the general partner in the
amounts of $19,400 and $43,800 in 1997 and 1996, respectively.
Cash advances from an affiliate are non-interest bearing and have no fixed
due dates. It is anticipated that these advances will be repaid upon completion
of the events described in Note 8.
Accounts receivable, partners at December 31, 1996 were collected in January
1997.
8. SUBSEQUENT EVENTS:
On January 14, 1998, the Partnership entered into an agreement to sell
substantially all of the assets associated with its three radio stations for
$5,250,000 in cash. The party agreeing to purchase the stations began
programming and marketing all three stations on that date under an LMA. Subject
to FCC approval, the Partnership expects to consummate this sale in the second
quarter of 1998.
F-259
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of changes in owner's equity (deficit) in
stations and of cash flows present fairly, in all material respects, the
financial position of Savannah Valley Broadcasting Radio Properties at December
31, 1997 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 27, 1998
F-260
<PAGE>
SAVANNAH VALLEY BROADCASTING RADIO PROPERTIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
<CAPTION>
ASSETS
<S> <C> <C>
Current assets:
Cash................................................................................ $ -- $ --
Short term investments.............................................................. -- 199,000
Accounts receivable, less allowance for
doubtful accounts of $58,000 and $25,000, respectively............................ 11,000 560,000
Receivable from Cumulus............................................................. 85,000 --
Prepaid expenses and other current assets........................................... 3,000 34,000
------------ ------------
Total current assets............................................................ 99,000 793,000
Property and equipment, net........................................................... 649,000 787,000
Intangible assets, net................................................................ 2,435,000 2,640,000
------------ ------------
Total assets.................................................................... $ 3,183,000 $ 4,220,000
------------ ------------
------------ ------------
LIABILITIES AND OWNER'S EQUITY (DEFICIT) IN STATIONS
Current liabilities:
Line of credit...................................................................... $ 866,000 $ 1,142,000
Current portion of notes payable.................................................... 2,280,000 20,000
Related party note payable.......................................................... 50,000 50,000
Due to related party................................................................ -- 174,000
Accounts payable.................................................................... 30,000 77,000
Accrued legal fees.................................................................. 81,000 --
Accrued and other current liabilities............................................... 54,000 23,000
------------ ------------
Total current liabilities....................................................... 3,361,000 1,486,000
------------ ------------
Long-term liabilities:
Notes payable, less current portion................................................. -- 2,280,000
------------ ------------
Total liabilities............................................................... 3,361,000 3,766,000
------------ ------------
Commitments and contingencies
Owner's equity (deficit) in stations.................................................. (178,000) 454,000
------------ ------------
Total liabilities and owner's equity (deficit) in stations...................... $ 3,183,000 $ 4,220,000
------------ ------------
------------ ------------
</TABLE>
See Notes to Combined Financial Statements.
F-261
<PAGE>
SAVANNAH VALLEY BROADCASTING RADIO PROPERTIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
<S> <C> <C> <C>
1997 1996 1995
------------ ------------ ------------
Revenues................................................................ $ 2,283,000 $ 3,351,000 $ 3,380,000
Less: agency commissions.............................................. (258,000) (309,000) (427,000)
Income from time brokerage agreement.................................. 118,000 -- --
------------ ------------ ------------
Net revenues...................................................... 2,143,000 3,042,000 2,953,000
Operating expenses:
Programming........................................................... 829,000 1,368,000 1,339,000
Sales and promotions.................................................. 590,000 607,000 665,000
Technical............................................................. 188,000 216,000 224,000
General and administrative............................................ 604,000 705,000 729,000
Depreciation and amortization......................................... 352,000 362,000 354,000
------------ ------------ ------------
Total operating expenses.......................................... 2,563,000 3,258,000 3,311,000
------------ ------------ ------------
Loss from operations.................................................... (420,000) (216,000) (358,000)
Interest expense, net................................................. (246,000) (287,000) (253,000)
------------ ------------ ------------
Net loss................................................................ $ (666,000) $ (503,000) $ (611,000)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Combined Financial Statements.
F-262
<PAGE>
SAVANNAH VALLEY BROADCASTING RADIO PROPERTIES
COMBINED STATEMENTS OF CHANGES IN OWNER'S EQUITY (DEFICIT) IN STATIONS
<TABLE>
<S> <C>
Balance at January 1, 1995...................................................... $1,540,000
Distribution to owner........................................................... (12,000)
Net loss........................................................................ (611,000)
---------
Balance at December 31, 1995.................................................... 917,000
Distribution from partnership................................................... 40,000
Net loss........................................................................ (503,000)
---------
Balance at December 31, 1996.................................................... 454,000
Contribution of related party obligation........................................ 174,000
Distribution to owner........................................................... (140,000)
Net loss........................................................................ (666,000)
---------
Balance at December 31, 1997.................................................... $(178,000)
---------
---------
</TABLE>
See Notes to Combined Financial Statements.
F-263
<PAGE>
SAVANNAH VALLEY BROADCASTING RADIO PROPERTIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
<S> <C> <C> <C>
1997 1996 1995
----------- ----------- -----------
Cash flows from operating activities:
Net loss................................................................. $ (666,000) $ (503,000) $ (611,000)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization............................................ 352,000 362,000 354,000
Decrease (increase) in accounts receivable, net.......................... 549,000 44,000 (34,000)
Increase in receivable from Cumulus...................................... (85,000) -- --
Decrease (increase) in prepaid expenses and other current assets......... 31,000 (4,000)
Increase in due to related party......................................... -- 70,000 10,000
(Decrease) increase in accounts payable.................................. (47,000) 20,000 57,000
Increase (decrease) in accrued and other liabilities..................... 112,000 (19,000) 88,000
----------- ----------- -----------
Net cash (used in) provided by operating activities.................. 246,000 (26,000) (140,000)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment...................................... (9,000) (8,000) (362,000)
Purchase (sale) of short-term investment, net............................ 199,000 148,000 (35,000)
----------- ----------- -----------
Cash (used for) provided by investing activities..................... 190,000 140,000 (397,000)
----------- ----------- -----------
Cash flows from financing activities:
(Decrease) increase in notes payable..................................... (20,000) (89,000) 390,000
Distribution from partnership............................................ -- 40,000 --
Dividends and distributions.............................................. (140,000) -- (12,000)
Payments on line of credit............................................... (276,000) (98,000) --
Payments on borrowings from related party................................ -- -- 50,000
----------- ----------- -----------
Cash (used for) provided by financing activities..................... (436,000) (147,000) 428,000
----------- ----------- -----------
Net change in cash....................................................... -- (33,000) (109,000)
----------- ----------- -----------
Cash at beginning of year................................................ -- 33,000 142,000
----------- ----------- -----------
Cash at end of year...................................................... $ -- $ -- $ 33,000
----------- ----------- -----------
----------- ----------- -----------
Non-cash operating activities:
Trade revenue............................................................ $ 121,000 $ 276,000 $ 315,000
----------- ----------- -----------
----------- ----------- -----------
Trade expense............................................................ $ 108,000 $ 239,000 $ 315,000
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for interest................................................... $ 200,000 $ 293,000 $ 310,000
----------- ----------- -----------
----------- ----------- -----------
Contribution of related party obligation................................. $ 174,000 $ -- --
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Combined Financial Statements.
F-264
<PAGE>
SAVANNAH VALLEY BROADCASTING RADIO PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Savannah Valley Broadcasting Radio Properties (the "Company") consists of
radio stations WBBQ-AM/FM and WZNY-FM ("the Stations") located in Augusta,
Georgia which are owned and operated by common related ownership. The
combination of the financial statements includes the accounts of WBBQ-AM/FM and
WZNY-FM due to common ownership of the Stations.
In September, 1997, Savannah Valley Broadcasting Radio Properties entered
into an agreement with Cumulus Broadcasting, Inc. (a wholly owned subsidiary of
Cumulus Media Inc.) ("Cumulus"), to sell the assets of Savannah Valley
Broadcasting Radio Properties, subject to approval of the Federal Communication
Commission, to Cumulus. Effective September 4, 1997, the Stations have been
operating under time brokerage agreements ("TBAs") with Cumulus. Under these
TBAs, the Stations have agreed to sell certain broadcast time on the Stations
and Cumulus has agreed to provide programming to and sell advertising on the
Stations during the purchased time. Accordingly, during the TBA period, revenue
derived from the advertising sold during the purchased time and certain expenses
of the Stations are recorded by Cumulus in exchange for a TBA fee. This TBA fee
has been reflected in the combined statement of operations. The Stations retain
responsibility for ultimate control of the Stations in accordance with FCC
policies.
As of December 31, 1997, Savannah Valley Broadcasting Radio Properties has a
term note payable and a line of credit of $2,000,000 and $866,000, respectively.
The original maturity dates of these instruments were extended by the bank to
April 15, 1998 in anticipation of the closing of the sale to Cumulus. These
financial statements have been prepared assuming the sale will close by April
15, 1998, or that Savannah Valley Broadcasting Radio Properties will have the
ability to extend or refinance these debt instruments.
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
SHORT-TERM INVESTMENTS
The Company accounts for short term investments in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" ("SFAS 115") which requires investment securities
to be classified as either held to maturity, trading or available for sale.
Short term investments are comprised of mutual funds with no stated maturity
date and are therefore classified as current.
F-265
<PAGE>
SAVANNAH VALLEY BROADCASTING RADIO PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
At December 31, 1996, the Company held available for sale mutual funds of
$199,000. The difference between the fair value and the cost basis of these
investments is not significant at December 31, 1996. These investments were sold
during 1997. As the carrying value approximated the respective fair value, no
gain or loss was recognized on the sale.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed primarily using accelerated methods of depreciation
over the estimated useful lives of the respective assets, generally five to
thirty-nine years.
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include Federal Communications Commission ("FCC") license.
Intangible assets are stated at cost and are being amortized using the
straight-line method over 15 years. The Company evaluates the carrying value of
intangibles periodically in relation to the projected future undiscounted net
cash flows of the related businesses.
INCOME TAXES
The Company is operated as pass-through entities for Federal tax purposes.
Under this election the income or loss of the entities is included in the tax
returns of the individual shareholders. Accordingly, federal income taxes are
not included in the accompanying financial statements.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, and accounts payable
approximate fair value due to their short-term nature. The fair value of notes
payable is based on current market rates and approximates the carrying value.
F-266
<PAGE>
SAVANNAH VALLEY BROADCASTING RADIO PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Building and improvements....................................... $ 601,000 $ 596,000
Broadcasting towers and equipment............................... 1,324,000 1,324,000
Office furniture and equipment.................................. 456,000 458,000
------------- -------------
2,381,000 2,378,000
Accumulated depreciation........................................ (1,864,000) (1,723,000)
Land............................................................ 132,000 132,000
------------- -------------
Property and equipment, net..................................... $ 649,000 $ 787,000
------------- -------------
------------- -------------
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1996 and 1995
was $145,000, $155,000 and $147,000, respectively.
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
FCC licenses...................................................... $ 3,106,000 $ 3,106,000
Accumulated amortization.......................................... (671,000) (466,000)
------------ ------------
Intangible assets, net............................................ $ 2,435,000 $ 2,640,000
------------ ------------
------------ ------------
</TABLE>
Amortization expense for the years ended December 31, 1997, 1996 and 1995
was $207,000 for each of these years, respectively.
4. RELATED PARTY TRANSACTIONS:
As of December 31, 1997 and 1996, the Company has a note payable to a former
owner in the amount of $50,000 related to the re-purchase of stock from him.
This note is due upon demand and bears interest at 6% per annum, payable on June
30 and December 31 of each year.
As of December 31, 1996, the Company had a payable to a related entity.
During 1997, this entity was donated to charity. The payable balance remaining
at the time of donation of $174,000 was forgiven and has therefore been
accounted for as a contribution to the owner of the stations.
5. NOTES PAYABLE
In October 1994, and as amended October 1996, the Company entered into a
Master Note Agreement (the "Agreement") with a bank which provided for a
$2,000,000 term note and a $1,240,000 line of credit. Both the term note and the
line of credit bear interest at the adjusted prime rate (8.5% at December 31,
1997) and are secured by substantially all of the Station's assets. Accrued
interest is payable monthly. The original maturities of these notes of October
27, 1997 have been extended through April 15, 1998, at which
F-267
<PAGE>
SAVANNAH VALLEY BROADCASTING RADIO PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. NOTES PAYABLE (CONTINUED)
time all principal and accrued interest is due and payable. The balance of the
term note and line of credit as of December 31, 1997 are $2,000,000 and
$866,000, respectively.
In March 1995, the Company entered into a note agreement with a bank which
provided for a note payable in the amount of $425,000. The note is payable in
120 monthly installments of principal and interest through April 2001. The
interest rate on this note was 7.8% at December 31, 1997. The note is secured by
substantially all of the Station's assets. Subsequent to December 31, 1997, the
principal balance of the note and all remaining accrued interest was paid in
full; therefore, the balance of this note of $280,000 as of December 31, 1997
has been classified as current.
In September 1997, the assets of WZNY were transferred from the Company to
the Company's sole shareholder causing an event of default under the note
agreements with the bank. In October 1997, the Company and the Company's sole
shareholder entered into an agreement with the bank, whereby, the bank waived
this default and permitted the transfer of the assets of WZNY as well as the
assumption of the obligation of payments on the notes by the Company's sole
shareholder. This agreement does not release the Company from its obligations
under the original note agreements, nor does it affect the original collateral
securing the notes.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Notes payable consist of:
Term loan payable to a bank............................................... $ 2,000,000 $ 2,000,000
Note payable to a bank.................................................... 280,000 300,000
------------ ------------
Less: current portion..................................................... (2,280,000) (20,000)
------------ ------------
Long term portion......................................................... $ -- $ 2,280,000
------------ ------------
------------ ------------
</TABLE>
6. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of approximately $33,000, $48,000 and $103,000
for the years ended December 31, 1997, 1996 and 1995, respectively, under
operating leases for radio broadcasting facilities. Future minimum annual
payments under these non-cancelable operating leases and agreements as of
December 31, 1997, are $55,000 for 1998 and $54,000 for 1999.
F-268
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in members' equity and of cash flows present fairly,
in all material respects, the financial position of Seacoast Radio Company, LLC
(the "Company") at December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
1997 in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 24, 1998
F-269
<PAGE>
SEACOAST RADIO COMPANY, LLC
BALANCE SHEETS (DOLLARS IN 000'S)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents....................................................................... $ 15 $ 44
Accounts receivable, less allowance for doubtful accounts of $8................................. 104 82
Prepaid and other current assets................................................................ 4 4
--------- ---------
Total current assets.......................................................................... 123 130
--------- ---------
Property and equipment, net....................................................................... 137 176
Intangible assets, net............................................................................ 205 223
--------- ---------
Total assets.................................................................................. $ 465 $ 529
--------- ---------
--------- ---------
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........................................................... $ 13 $ 15
Related party payable........................................................................... 112 90
Current portion of long-term debt............................................................... 284 50
--------- ---------
Total current liabilities..................................................................... 409 155
Long-term debt.................................................................................... 44 330
--------- ---------
Total liabilities............................................................................. 453 485
--------- ---------
Commitments and contingencies
Members' equity................................................................................... 12 44
--------- ---------
Total liabilities and members' equity......................................................... $ 465 $ 529
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements.
F-270
<PAGE>
SEACOAST RADIO COMPANY, LLC
STATEMENTS OF OPERATIONS (DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Revenues.......................................................................................... $ 820 $ 752
Less: agency commissions.......................................................................... (80) (66)
--------- ---------
Net revenues.................................................................................. 740 686
--------- ---------
Operating expenses:
Programming..................................................................................... 131 89
Sales and promotions............................................................................ 101 92
Technical....................................................................................... 15 18
General and administrative...................................................................... 168 165
Trade........................................................................................... 65 71
Depreciation and amortization................................................................... 58 56
--------- ---------
Total operating expenses...................................................................... 538 491
--------- ---------
Income from operations............................................................................ 202 195
Interest expense, net............................................................................. (34) (37)
--------- ---------
Net income........................................................................................ $ 168 $ 158
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements.
F-271
<PAGE>
SEACOAST RADIO COMPANY, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DOLLARS IN 000'S)
<TABLE>
<S> <C>
Balance at January 1, 1996........................................... $ (72)
Dividend to members.................................................. (42)
Net income........................................................... 158
---------
Balance at December 31, 1996......................................... 44
Dividend to members.................................................. (200)
Net income........................................................... 168
---------
Balance at December 31, 1997......................................... $ 12
---------
---------
</TABLE>
See Notes to Financial Statements.
F-272
<PAGE>
SEACOAST RADIO COMPANY, LLC
STATEMENTS OF CASH FLOWS (DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Cash flows from operating activities:
Net income...................................................................................... $ 168 $ 158
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................................... 58 56
Increase in accounts receivable................................................................. (23) (41)
Decrease in prepaid expenses and other current assets........................................... -- 2
Increase (decrease) in accounts payable......................................................... 20 (31)
--------- ---------
Net cash provided by operating activities..................................................... 223 144
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment............................................................. (1) (17)
Net cash used for investing activities........................................................ (1) (17)
Cash flows from financing activities:
Proceeds from borrowing......................................................................... -- 18
Repayments of borrowing......................................................................... (51) (59)
Dividends to members............................................................................ (200) (42)
--------- ---------
Net cash used in financing activities......................................................... (251) (83)
--------- ---------
(Decrease) increase in cash and cash equivalents.................................................. (29) 44
Cash and cash equivalents at beginning of year.................................................... 44 --
--------- ---------
Cash and cash equivalents at end of year.......................................................... $ 15 $ 44
--------- ---------
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest.......................................................................... $ 34 $ 38
--------- ---------
--------- ---------
Non-cash operating activities:
Trade revenue................................................................................... $ 65 $ 71
--------- ---------
--------- ---------
Trade expense................................................................................... $ 65 $ 71
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements.
F-273
<PAGE>
SEACOAST RADIO COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN 000'S)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Seacoast Radio Company, LLC ("the Company") is engaged in the operation of
WDAI-FM, a radio broadcasting station in Surfside Beach, South Carolina.
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Broadcasting tower and equipment.................................. 5-7 years
Office furniture and equipment.................................... 5-7 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include FCC licenses. Intangible assets are stated at cost
and are being amortized using the straight-line method over the estimated useful
life of up to 15 years. The Company evaluates the carrying value of intangibles
periodically in relation to the projected future undiscounted net cash flows of
the related station.
INCOME TAXES
The Company has organized in the state of South Carolina as a Limited
Liability Company and is treated as a partnership for federal and state income
tax purposes. Consequently, income taxes are not payable by, or provided for,
the Company. Members are taxed individually on their share of the Company's
earnings. The Company's net income or loss is allocated equally among the
members.
F-274
<PAGE>
SEACOAST RADIO COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as advertising air time is
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Broadcasting tower and equipment................................. $ 200 $ 199
Office furniture and equipment................................... 6 6
----- -----
206 205
Accumulated depreciation......................................... (107) (67)
Land............................................................. 38 38
----- -----
Property and equipment, net...................................... $ 137 $ 176
----- -----
----- -----
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1996 was $40
and $38, respectively.
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
FCC license...................................................... $ 260 $ 260
Accumulated amortization......................................... (55) (37)
----- -----
Intangible assets, net........................................... $ 205 $ 223
----- -----
----- -----
</TABLE>
Amortization expense for the years ended December 31, 1997 and 1996 was $18
and $18, respectively.
4. RELATED PARTY TRANSACTIONS:
The Company has a related party payable to the Sunny Broadcasters, Inc.,
("Sunny"), a company under common control, totaling $112 and $90 at December 31,
1997 and 1996, respectively.
F-275
<PAGE>
SEACOAST RADIO COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
4. RELATED PARTY TRANSACTIONS: (CONTINUED)
Sunny performs certain corporate and accounting functions for the Company
and allocates corporate overhead expenses to the Company based on estimated
hours expended on the operations of the station. Corporate overhead allocations
were approximately $84 and $86 for the years ended December 31, 1997 and 1996,
respectively, including rent expense of $7 for each of the periods ended
December 31, 1997 and 1996.
5. LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Long-term debt consists of the following:
Note payable, interest at prime plus 1% (9.5% at December 31, 1997) $4
principal plus interest due monthly, balance due July 2, 1998. $ 274 $ 318
Installment loan, payable in 60 monthly installments of $1 including
interest at 9.25%, final payment due September 2001, collateralized by
equipment. 42 47
Installment loan, payable in 60 monthly installments of $.4 including
interest at 8.95%, final payment due August 2000, collateralized by
automobile. 12 15
----- -----
328 380
Less current portion (284) (50)
----- -----
$ 44 $ 330
----- -----
----- -----
</TABLE>
The note payable is payable in 42 monthly installments with interest only
due the first six months; principal payments of $3 plus interest at prime plus
one percent the next twelve months; $3.5 principal plus interest the next twelve
months; $4 principal plus interest the next twelve months with the final
installment on July 2, 1998 to include all unpaid principal and interest due on
the loan. The debt is collateralized by substantially all assets of the Company.
The Company's long-term debt agreement contains certain restrictions and
covenants. Under these restrictions, the Company must obtain the consent of the
lender to borrow from others, make any loan or advance to any individual,
partnership, corporation or other entity, sell, assign, dispose of, or transfer
any assets of the Company or make capital expenditures in excess of $50 per
year. In addition, the Company must maintain a specified cash flow debt coverage
ratio.
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1998......................................................... $ 284
1999......................................................... 11
2000......................................................... 10
2001......................................................... 23
---------
$ 328
---------
---------
</TABLE>
F-276
<PAGE>
SEACOAST RADIO COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
6. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of approximately $7 for the year ended
December 31, 1997 and 1996, under operating leases for radio broadcasting
facilities. There are no future minimum annual payments under this cancelable
operating lease.
The Company is involved in various other claims and lawsuits which are
generally incidental to its business. The Company is vigorously contesting all
such matters and believes that their ultimate resolution will not have a
material adverse effect on its consolidated financial position, results of
operations or cash flows.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable and accrued expenses approximates fair value due to their
short-term nature. The fair value of long-term debt is estimated based on
current market rates and approximates the carrying value.
8. OTHER TRANSACTIONS:
On October 11, 1997, the Company entered into an asset purchase agreement to
sell all of the Company's assets to Cumulus Broadcasting, Inc. (a wholly-owned
subsidiary of Cumulus Media Inc.) for $4 million.
F-277
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Sunny Broadcasters,
Inc. the ("Company") at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 24, 1998
F-278
<PAGE>
SUNNY BROADCASTERS, INC.
BALANCE SHEETS (DOLLARS IN 000'S)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................................... $ 38 $ 58
Accounts receivable, less allowance for doubtful accounts of $8............................... 168 151
Related party receivable...................................................................... 112 90
Prepaid and other current assets.............................................................. 19 19
--------- ---------
Total current assets........................................................................ 337 318
Property and equipment, net..................................................................... 501 599
Intangible assets, net.......................................................................... 114 124
--------- ---------
Total assets................................................................................ $ 952 $ 1,041
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities...................................................... $ 48 $ 47
Trade payable................................................................................. 8 --
Current portion of notes payable.............................................................. 13 12
Current portion notes payable--stockholders................................................... 678 97
--------- ---------
Total current liabilities................................................................... 747 156
Commitments and contingencies
Long-term liabilities:
Notes payable................................................................................. 129 142
Note payable--stockholders.................................................................... 192 869
--------- ---------
Total liabilities........................................................................... 1,068 1,167
--------- ---------
Stockholders' equity:
Common stock, $10 par value, 100,000 shares authorized, 100 shares issued and outstanding..... 10 10
Additional paid-in-capital.................................................................... 400 400
Accumulated deficit........................................................................... (362) (372)
Less treasury stock, at cost.................................................................. (164) (164)
--------- ---------
Total stockholders' equity.................................................................. (116) (126)
--------- ---------
Total liabilities and stockholders' equity.................................................. $ 952 $ 1,041
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements.
F-279
<PAGE>
SUNNY BROADCASTERS, INC.
STATEMENTS OF OPERATIONS (DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Revenues....................................................................................... $ 1,359 $ 1,268
Less: agency commissions....................................................................... (111) (101)
--------- ---------
Net revenues............................................................................... 1,248 1,167
Operating expenses:
Programming.................................................................................. 253 227
Sales and promotions......................................................................... 182 174
Technical.................................................................................... 27 29
General and administrative................................................................... 271 256
Trade........................................................................................ 117 131
Depreciation and amortization................................................................ 117 113
--------- ---------
Total operating expenses................................................................... 967 930
--------- ---------
Income from operations......................................................................... 281 237
Other income and expense:
Interest expense............................................................................. (99) (107)
--------- ---------
Net income..................................................................................... $ 182 $ 130
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements.
F-280
<PAGE>
SUNNY BROADCASTERS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DOLLARS IN 000'S)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN- ACCUMULATED TREASURY
STOCK CAPITAL DEFICIT STOCK TOTAL
------------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996................................ $ 10 $ 400 $ (500) $ (164) $ (254)
Dividends................................................. -- -- (2) -- (2)
Net income................................................ -- -- 130 -- 130
--- ----- ----- ----- ---------
Balance at December 31, 1996.............................. 10 400 (372) (164) (126)
Dividends................................................. -- -- (172) -- (172)
Net income................................................ -- -- 182 -- 182
--- ----- ----- ----- ---------
Balance at December 31, 1997.............................. $ 10 $ 400 $ (362) $ (164) $ (116)
--- ----- ----- ----- ---------
--- ----- ----- ----- ---------
</TABLE>
See Notes to Financial Statements.
F-281
<PAGE>
SUNNY BROADCASTERS, INC.
STATEMENT OF CASH FLOWS
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Cash flows from operating activities:
Net income.................................................................................. $ 182 $ 130
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization............................................................. 117 113
Increase in accounts receivable........................................................... (17) (60)
(Increase) decrease in receivable from related party...................................... (22) 21
Increase (decrease) in accounts payable................................................... 1 (39)
Increase in accounts payable--trades...................................................... 8 --
--------- ---------
Net cash provided by operating activities............................................... 269 165
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment......................................................... (9) (27)
--------- ---------
Net cash used for investing activities.................................................. (9) (27)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowing..................................................................... -- 39
Repayments of borrowing..................................................................... (108) (118)
Dividends paid to stockholders.............................................................. (172) (2)
--------- ---------
Net cash used for financing activities.................................................. (280) (81)
--------- ---------
(Decrease) increase in cash and cash equivalents.............................................. (20) 57
Cash and cash equivalents at beginning of year................................................ 58 1
--------- ---------
Cash and cash equivalents at end of year...................................................... $ 38 $ 58
--------- ---------
--------- ---------
Supplemental disclosure of cash flow information
Cash paid for interest...................................................................... $ 93 $ 100
--------- ---------
--------- ---------
Non-cash operating activities:
Trade revenue............................................................................... $ 109 $ 131
--------- ---------
--------- ---------
Trade expense............................................................................... $ 117 $ 131
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements.
F-282
<PAGE>
SUNNY BROADCASTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996 (DOLLARS IN 000'S)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Sunny Broadcasters, Inc. (the "Company") owns and operates the radio station
WSYN-FM in Surfside Beach, South Carolina.
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Buildings and improvements........................................ 31 years
Broadcasting tower and equipment.................................. 5-7 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include Federal Communications Commission ("FCC") license
and organization costs. Intangible assets are stated at cost and are being
amortized using the straight-line method over the estimated useful life or
contract term for periods not exceeding 20 years. The Company evaluates the
carrying value of intangibles periodically in relation to the projected future
undiscounted net cash flows of the related stations.
INCOME TAXES
The Company has elected to be treated as an S Corporation for federal income
tax purposes. Under this election the income or loss of the S Corporation is
included in the tax returns of the individual shareholders. Accordingly, federal
income taxes are not included in the accompanying financial statement.
F-283
<PAGE>
SUNNY BROADCASTERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996 (DOLLARS IN 000'S)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Building and improvements........................................ $ 171 $ 171
Broadcasting tower and equipment................................. 704 695
----- -----
875 866
Accumulated depreciation......................................... (672) (565)
Land............................................................. 298 298
----- -----
Property and equipment, net...................................... $ 501 $ 599
----- -----
----- -----
</TABLE>
Depreciation expense for the year ended December 31, 1997 and the year ended
December 31, 1996 and $107 and $103, respectively.
3. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
FCC license...................................................... $ 190 $ 190
Organization expense............................................. 2 2
----- -----
192 192
Accumulated amortization......................................... (78) (68)
----- -----
Intangible assets, net........................................... $ 114 $ 124
----- -----
----- -----
</TABLE>
Amortization expense for the year ended December 31, 1997 and the year ended
December 31, 1996 was $10 and $10, respectively.
F-284
<PAGE>
SUNNY BROADCASTERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996 (DOLLARS IN 000'S)
4. RELATED PARTY TRANSACTIONS:
The Company has receivables due from Seacoast Radio Company, LLC
("Seacoast"), which is under common ownership, totalling $112 and $90 at
December 31, 1997 and 1996, respectively.
Sunny performs certain corporate and accounting functions for Seacoast and
allocates corporate overhead expenses to Seacoast based upon estimated hours
expended on the operations of Seacoast. Corporate overhead allocations were
approximately $84 and $86 for the years ended December 31, 1997 and 1996,
respectively, including rent income for each of the periods ended December 31,
1997 and 1996.
5. NOTES PAYABLE:
Notes payable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Note payable $150 principal, principal and interest due in 35 monthly installments of
$1.5, interest at 7.5%, balance of $109 plus accrued interest due July 1999. Note
collateralized by land and building................................................ $ 122 $ 129
Note payable, $26 principal, principal and interest due in 60 monthly installments of
$.5, interest at 9.25%, through September 2001. Note collateralized by
equipment.......................................................................... 20 25
----- -----
142 154
Less current portion................................................................. (13) (12)
----- -----
$ 129 $ 142
----- -----
----- -----
</TABLE>
The Company's note payable agreement contains certain restrictions and
covenants. Under these restrictions, the Company must obtain the consent of the
lender to borrow from others, make any loan or advance to any individual,
partnership, corporation or other entity, sell, assign, dispose of, or transfer
any assets of the company or make capital expenditures in excess of $50 per
fiscal year. In addition, the Company must maintain a specified cash flow debt
coverage ratio.
Maturities of notes payable are as follows:
<TABLE>
<S> <C>
1998................................................................. $ 13
1999................................................................. 116
2000................................................................. 7
2001................................................................. 6
---------
$ 142
---------
---------
</TABLE>
F-285
<PAGE>
SUNNY BROADCASTERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996 (DOLLARS IN 000'S)
6. NOTE PAYABLE-STOCKHOLDERS
Notes payable-stockholders consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Note payable to stockholders, $755 principal, payable in 102 monthly installments of
$6 plus interest at prime plus 1%, which equaled 9.5% at December 31, 1997, final
payment due September 1998, collateralized by substantially all assets of the
Company............................................................................ $ 654 $ 729
Note payable to former stockholder, $277 principal, principal and interest due in 120
monthly installment of $3.4, interest at 8.5% through December 2004. Note secured
by the personal guarantees of the stockholders..................................... 216 237
----- -----
870 966
Less current portion................................................................. (678) (97)
----- -----
$ 192 $ 869
----- -----
----- -----
</TABLE>
The note payable to former stockholder is comprised of $164 due from the
Company for the repurchase of 333 1/3 shares of outstanding common stock into
treasury and $113 of dividends payable to the same stockholder.
Maturities of notes payable to stockholders are as follows:
<TABLE>
<S> <C>
1998................................................................. $ 678
1999................................................................. 26
2000................................................................. 28
2001................................................................. 31
2002................................................................. 33
Thereafter........................................................... 74
---------
$ 870
---------
---------
</TABLE>
7. COMMITMENTS AND CONTINGENCIES:
The Company is involved in various other claims and lawsuits which are
generally incidental to its business. The Company is vigorously contesting all
such matters and believes that their ultimate resolution will not have a
material adverse effect on its consolidated financial position, results of
operations or cash flows.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable and accrued liabilities approximates fair value due to their
short term nature. The fair value of notes payable are estimated based on
current market rates and approximate the carrying value.
F-286
<PAGE>
SUNNY BROADCASTERS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996 (DOLLARS IN 000'S)
9. OTHER TRANSACTIONS:
On October 11, 1997, the Company entered into an asset purchase agreements
to sell all of the assets of the Company to Cumulus Broadcasting, Inc. (a
wholly-owned subsidiary of Cumulus Media Inc.) for $4 million.
F-287
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of Tallahassee
Broadcasting, Inc., (the "Company") at December 31, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles. 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 audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 20, 1998
F-288
<PAGE>
TALLAHASSEE BROADCASTING, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................................... $ 6,653
Accounts receivable, less allowance for doubtful accounts of $7,693............................... 37,761
Other current assets.............................................................................. 19,517
------------
Total current assets.......................................................................... 63,931
Property and equipment, net......................................................................... 581,014
Other assets........................................................................................ 3,404
------------
Total assets.................................................................................. $ 648,349
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................................. $ 68,533
Accrued property taxes............................................................................ 27,870
Accrued compensation.............................................................................. 29,322
Due to related parties, net....................................................................... 1,843,178
------------
Total current liabilities..................................................................... 1,968,903
------------
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $1.00 par value, 500 shares authorized, issued and outstanding...................... 500
Accumulated deficit............................................................................... (1,321,054)
------------
Total stockholders' equity (deficit).......................................................... (1,320,554)
------------
Total liabilities and stockholders' equity (deficit).......................................... $ 648,349
------------
------------
</TABLE>
See Notes to Financial Statements.
F-289
<PAGE>
TALLAHASSEE BROADCASTING, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1997
------------------
<S> <C>
Revenues...................................................................................... $ 794,377
Less: agency commissions.................................................................... (75,516)
----------
Net revenues............................................................................ 718,861
Operating expenses:
Sales and promotions........................................................................ 307,705
Programming................................................................................. 197,185
Engineering................................................................................. 55,327
General and administrative.................................................................. 385,229
Depreciation................................................................................ 170,107
----------
Total operating expenses................................................................ 1,115,553
----------
Loss from operations.......................................................................... (396,692)
Other income.................................................................................. 39,494
----------
Loss before income taxes...................................................................... (357,198)
Income taxes benefit.......................................................................... --
----------
Net loss...................................................................................... $ (357,198)
----------
----------
</TABLE>
See Notes to Financial Statements.
F-290
<PAGE>
TALLAHASSEE BROADCASTING, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON ACCUMULATED
STOCK DEFICIT TOTAL
----------- ------------- -------------
<S> <C> <C> <C>
Balance at January 1, 1997............................................... $ 500 $ (963,856) $ (963,356)
Net loss................................................................. -- (357,198) (357,198)
----- ------------- -------------
Balance at December 31, 1997............................................. $ 500 $ (1,321,054) $ (1,320,554)
----- ------------- -------------
----- ------------- -------------
</TABLE>
See Notes to Financial Statements.
F-291
<PAGE>
TALLAHASSEE BROADCASTING, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1997
------------------
<S> <C>
Cash flows provided by operating activities:
Net loss.................................................................................... $ (357,198)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation.............................................................................. 170,107
Loss on equipment disposals............................................................... 15,947
Provision for doubtful accounts........................................................... 7,693
Decrease in accounts receivable........................................................... 77,210
Increase in other current assets.......................................................... (17,509)
Decrease in other assets.................................................................. 2,500
Increase in accounts payable.............................................................. 66,187
Increase in accrued property taxes........................................................ 27,870
Decrease in accrued compensation.......................................................... (17,776)
Increase in due to related parties........................................................ 28,883
----------
Net cash provided by operating activities............................................... 3,914
----------
Cash flows used in investing activities:
Purchases of property and equipment......................................................... (5,828)
----------
Cash used in investing activities....................................................... (5,828)
----------
Decrease in cash.............................................................................. (1,914)
Cash and cash equivalents at beginning of year................................................ 8,567
----------
Cash and cash equivalents at end of year...................................................... $ 6,653
----------
----------
Non-cash operating activities:
Trade revenue............................................................................... $ 127,141
----------
----------
Trade expense............................................................................... $ 127,141
----------
----------
</TABLE>
See Notes to Financial Statements.
F-292
<PAGE>
TALLAHASSEE BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Tallahassee Broadcasting Inc., a Florida corporation (the "Company"), owns
and operates the radio station WGLF-FM (the "Station") located in Tallahassee,
FL.
The Company shares common owners and officers with Timm Enterprises, Inc.
("Timm"), which provides certain services to the Station. As more fully
described in Note 2, the accompanying financial statements include expense
allocations from Timm for such services. In addition, the Company participates
in a centralized cash management program sponsored by Timm. The Company has
significant transactions with related parties and is dependent upon the related
parties and its owners for continued financial support.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated using the straight-line method over estimated useful lives
ranging from 5 to 40 years.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
F-293
<PAGE>
TALLAHASSEE BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES
The Company files consolidated federal and state income tax returns with an
affiliated company that shares common owners and officers, Sterling
Communications Corporation. The Company has provided for federal income taxes on
a stand-alone basis based on an informal tax allocation agreement between the
two companies.
Deferred tax assets and liabilities are determined based on differences
between financial reporting and the tax basis of assets and liabilities using
the enacted tax rates and laws. Deferred income tax expense or benefit is based
on the changes in the asset or liability from period to period. Future tax
benefits, such as net operating loss carryforwards, are recognized to the extent
that realization of such benefits is more likely than not.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value due to their short-term nature.
2. RELATED PARTY TRANSACTIONS:
Due to related parties consists of the following at December 31, 1997:
<TABLE>
<S> <C>
Net balance due to Timm......................................... $ 449,413
Advances due to other affiliates................................ 859,311
Advances due to shareholder..................................... 306,154
Accrued rent payable to shareholder............................. 228,300
---------
$1,843,178
---------
---------
</TABLE>
The Company participates in a centralized cash management program with Timm.
Accordingly, the Company's cash receipts and disbursements are controlled
centrally by Timm, and the net activity under this program is reflected in the
net balance due to Timm above. Additionally, the Company has been charged a fee
from Timm for certain services performed on behalf of the Station, including
management, employee benefit and accounting services. Management believes that
the fees charged have been allocated to the Station on a reasonable basis
(principally on the ratio of the Station's revenue to the combined revenues of
all affiliates receiving such services). Such fees totalled $66,674 in 1997.
Advances due to other affiliates represent amounts received from certain
affiliated companies who share common owners and officers. Amounts received were
used primarily to fund operating activities of the Station, including the
construction of the Station's broadcasting equipment. The advances are due on
demand and do not accrue interest.
During the period September 1994 through December 1996, the Station received
advances from a shareholder of the Company totalling $306,154. Such advances are
due on demand and do not accrue interest.
The Station leases its studio facility from a shareholder under the terms of
an informal leasing arrangement which management considers to be at arms-length.
Such leasing arrangement requires
F-294
<PAGE>
TALLAHASSEE BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. RELATED PARTY TRANSACTIONS: (CONTINUED)
monthly rent payments of $2,000 and is expected to terminate upon the closing of
the sale with Cumulus. The Company recorded rent expense of $24,000 during 1997
and has recorded an accrued rent payable to the shareholder of $228,300 at
December 31, 1997. In addition, the Company pays the property taxes associated
with this facility. Property taxes in 1997 totalled $7,097 and have been accrued
at December 31, 1997.
3. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Broadcasting tower and equipment................................ $1,339,500
Building and improvements....................................... 51,931
Studio equipment................................................ 119,920
Furniture and other equipment................................... 235,434
---------
1,746,785
Accumulated depreciation........................................ (1,222,771)
---------
524,014
Land............................................................ 57,000
---------
Property and equipment, net..................................... $ 581,014
---------
---------
</TABLE>
Depreciation expense for the year ended December 31, 1997 was $170,107.
4. INCOME TAXES:
The Company's effective income tax rate differs from the statutory federal
income tax rate as follows:
<TABLE>
<S> <C> <C>
Income tax benefit at federal statutory rate.............. $(121,447) (34.0%)
State income taxes (net of federal benefit)............... (12,862) (3.6%)
Non-deductible items...................................... 980 .3%
Change in valuation allowance............................. 133,329 37.3%
--------- ---------
$ -- --%
--------- ---------
--------- ---------
</TABLE>
The significant components of the deferred income tax expense (benefit) for
the year ended December 31, 1997 were as follows:
<TABLE>
<S> <C>
Provision for doubtful accounts................................... $ 2,221
Depreciation...................................................... (12,498)
Net operating loss carryforwards.................................. (123,052)
Increase in the valuation allowance for deferred tax assets....... 133,329
---------
$ --
---------
---------
</TABLE>
F-295
<PAGE>
TALLAHASSEE BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES: (CONTINUED)
Significant components of the deferred tax asset (liabilities) are as
follows:
<TABLE>
<S> <C>
Deferred tax assets (liabilities):
Net operating loss carryforwards.................................. $ 704,059
Allowance for doubtful accounts................................... 2,895
Depreciation...................................................... (51,522)
---------
Net deferred tax asset............................................ 655,432
Less valuation allowance.......................................... (655,432)
---------
Total net deferred tax asset...................................... $ --
---------
---------
</TABLE>
The net deferred tax asset at December 31, 1997 is fully offset by a
valuation allowance. The amount of the valuation allowance is reviewed
periodically by management and is determined based on management's assessment of
the Company's ability to generate future taxable income and realize the tax
benefits associated with the deferred tax assets.
Net operating losses expire as follows:
<TABLE>
<S> <C>
2007............................................................ $ 39,155
2008............................................................ 285,929
2009............................................................ 494,791
2010............................................................ 415,522
2011............................................................ 308,562
2012............................................................ 327,047
---------
$1,871,006
---------
---------
</TABLE>
5. SUBSEQUENT EVENTS:
On October 31, 1997, the Company entered into an asset purchase agreement
with Cumulus Broadcasting, Inc. ("Cumulus") to sell substantially all of the
assets and liabilities of the Station to Cumulus. The sale is subject to certain
events that must occur prior to closing which include, among other things,
obtaining the approval of the Federal Communications Commission. In conjunction
with the sale, the Company entered into a time-brokerage agreement ("TBA") with
Cumulus effective November 1, 1997. Under the terms of the TBA, Cumulus has the
right to broadcast certain programming and sell advertising on the Station until
the earlier of the closing or termination of the asset purchase agreement. In
exchange, Cumulus has agreed to pay the Company a monthly fee of $5,000. TBA
fees totaled $10,000 during 1997 and are recorded as a component of other
income.
F-296
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in stockholders' deficit and of cash flows present
fairly, in all material respects, the financial position of Tryon-Seacoast
Communications, Inc. at December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 20, 1998
F-297
<PAGE>
TRYON-SEACOAST COMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 13,869 $ 10,251
Accounts receivable, less allowance for
doubtful accounts of $26,600 and $21,606, respectively.............................. 185,503 260,327
----------- -----------
Total current assets............................................................ 199,372 270,578
Property and equipment, net............................................................. 194,266 162,632
Intangible assets, net.................................................................. 118,331 53,331
Other assets............................................................................ 28,000 3,362
----------- -----------
Total assets.................................................................... $ 539,969 $ 489,903
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities.............................................. $ 188,803 $ 182,458
Line of credit........................................................................ 125,000 125,000
Current maturities, long-term debt.................................................... 55,193 36,608
----------- -----------
Total current liabilities....................................................... 368,996 344,066
----------- -----------
Noncurrent liabilities:
Note payable--stockholders............................................................ 54,900 54,900
Long term debt........................................................................ 612,315 590,085
----------- -----------
Total noncurrent liabilities.................................................... 667,215 644,985
----------- -----------
Commitments and contingencies
Stockholders' deficit:
Common stock, no par value, 4,000 shares authorized, 200 shares issued and
outstanding......................................................................... -- --
Additional paid-in-capital............................................................ 61,000 --
Accumulated deficit................................................................... (557,242) (499,148)
----------- -----------
Total stockholders' deficit..................................................... (496,242) (499,148)
----------- -----------
Total liabilities and stockholders' deficit..................................... $ 539,969 $ 489,903
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements.
F-298
<PAGE>
TRYON-SEACOAST COMMUNICATIONS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues.............................................................................. $ 1,196,630 $ 1,289,985
Less: Agency commissions.............................................................. (61,045) (65,422)
------------ ------------
Net revenues.................................................................. 1,135,585 1,224,563
Operating expenses:
Programming......................................................................... 255,462 247,771
Sales and promotions................................................................ 388,961 341,231
Technical........................................................................... 102,170 95,840
General and administrative.......................................................... 326,201 332,498
Depreciation and amortization....................................................... 33,882 45,838
------------ ------------
Total operating expenses...................................................... 1,106,676 1,063,178
------------ ------------
Income from operations................................................................ 28,909 161,385
Interest income....................................................................... 1,689 883
Interest expense...................................................................... (88,692) (95,440)
------------ ------------
Income (loss) before income taxes..................................................... (58,094) 66,828
Income tax expense (benefit).......................................................... -- --
------------ ------------
Net income (loss)............................................................. $ (58,094) $ 66,828
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements.
F-299
<PAGE>
TRYON-SEACOAST COMMUNICATIONS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN- ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1996...................................... $ -- $ -- $ (565,976) $ (565,976)
Net income...................................................... 66,828 66,828
----------- ----------- ------------ -----------
Balance at December 31, 1996.................................... -- -- (499,148) (499,148)
Stockholder contribution........................................ -- 61,000 -- 61,000
Net loss........................................................ (58,094) (58,094)
----------- ----------- ------------ -----------
Balance at December 31, 1997.................................... $ -- $ 61,000 $ (557,242) $ (496,242)
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
See Notes to Financial Statements.
F-300
<PAGE>
TRYON-SEACOAST COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------
<S> <C> <C>
1997 1996
---------- ----------
Cash flows from operating activities:
Net income (loss)....................................................................... $ (58,094) $ 66,828
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization....................................................... 33,882 45,838
Provision for doubtful accounts..................................................... 4,994 2,563
Decrease (increase) in accounts receivable.......................................... 69,830 (25,305)
Increase (decrease) in accounts payable and other liabilities....................... 6,345 (29,542)
---------- ----------
Net cash provided by operating activities......................................... 56,957 60,382
---------- ----------
Cash flows from investing activities:
Acquisition of radio station............................................................ (40,000) --
Purchases of property and equipment..................................................... (14,956) (7,115)
Payment of escrow deposit............................................................... (25,000) --
Other................................................................................... 362 846
---------- ----------
Net cash used in investing activities............................................. (79,594) (6,269)
---------- ----------
Cash flows from financing activities:
Principal payments for debt reduction................................................... (34,745) (51,199)
Stockholder contribution................................................................ 61,000 --
---------- ----------
Net cash provided by (used in) financing activities............................... 26,255 (51,199)
---------- ----------
Increase in cash and cash equivalents..................................................... 3,618 2,914
Cash and cash equivalents at beginning of year............................................ 10,251 7,337
---------- ----------
Cash and cash equivalents at end of year.................................................. $ 13,869 $ 10,251
---------- ----------
---------- ----------
Supplemental disclosures of cash flow information:
Cash paid for interest.................................................................. $ 82,810 $ 95,440
---------- ----------
---------- ----------
Cash paid for income taxes.............................................................. $ -- $ --
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements.
F-301
<PAGE>
TRYON-SEACOAST COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Tryon-Seacoast Communications, Inc. (the "Company") is engaged in the
operation of radio broadcasting stations in central Maine. The Company has
stations licensed in Gardiner, Maine (WABK-FM and WFAU-FM), Augusta, Maine
(WKCG-FM) and Madison, Maine (WIGY-FM).
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Purchases of property and equipment are capitalized at cost and depreciated
on an accelerated basis over their estimated useful lives as follows:
<TABLE>
<S> <C>
Building and improvements......................................... 15 years
Broadcasting towers and equipment................................. 5-7 years
Office furniture and equipment.................................... 5 years
Automobiles....................................................... 5 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include goodwill and FCC licenses. Intangible assets are
stated at cost and are being amortized using the straight-line method over the
estimated useful life of 15 years. The Company evaluates the carrying value of
intangibles periodically in relation to the projected future undiscounted net
cash flows of the related businesses.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as advertising air time is
broadcast.
F-302
<PAGE>
TRYON-SEACOAST COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in broadcast operations. If the Company uses exchanged
products or services before advertising air time is provided, a trade liability
is recognized. Trade revenues were $119,937 and $118,347 for the years ended
December 31, 1997 and 1996, respectively. Trade expenses approximate trade
revenues for each period.
2. ACQUISITIONS:
In November 1997, the Company acquired WIGY-FM in Madison, Maine for
$125,000 consisting of $40,000 paid in cash and the assumption of debt. The
station was operated by the Company under a local marketing agreement from May
1997 through the date of acquisition. The acquisition was accounted for as a
purchase. Pro forma results of operations have not been presented as the effect
of the acquisition was not material in relation to the Company's reported
results of operations.
During 1997, the Company entered into an asset purchase agreement to
purchase WCME-FM from Bay Communications Co. for $537,000. The closure of the
sale is contingent upon Federal Communications Commission (FCC) approval. The
Company paid an escrow deposit of $25,000 related to this transaction, which has
been classified as other assets at December 31, 1997 in the accompanying balance
sheet.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
Building and improvements....................................... $ 158,945 $ 145,170
Broadcast towers and equipment.................................. 1,137,032 1,090,613
Office furniture and equipment.................................. 221,920 221,598
Automobiles..................................................... 49,414 49,414
------------- -------------
1,567,311 1,506,795
Less--Accumulated depreciation.............................. (1,414,530) (1,385,648)
------------- -------------
152,781 121,147
Land............................................................ 41,485 41,485
------------- -------------
Property and equipment, net..................................... $ 194,266 $ 162,632
------------- -------------
------------- -------------
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1996 was
$28,882 and $40,835, respectively.
F-303
<PAGE>
TRYON-SEACOAST COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
<S> <C> <C>
1997 1996
----------- -----------
Goodwill, FCC licenses and others....................................................... $ 240,668 $ 170,668
Accumulated amortization................................................................ (122,337) (117,337)
----------- -----------
Intangible assets, net.................................................................. $ 118,331 $ 53,331
----------- -----------
----------- -----------
</TABLE>
Amortization expense for the years ended December 31, 1997 and 1996 was
$5,000 and $5,003, respectively.
5. RELATED PARTY TRANSACTIONS:
During 1997, stockholders of the Company contributed $61,000 to fund
operations. This contribution is a transfer of capital to the Company and,
accordingly, is recorded as additional paid-in capital as of December 31, 1997.
Stockholders of the Company provide cash for operations as needed. At
December 31, 1997 and 1996, the Company had notes payable due to stockholders of
$54,900. These notes payable are due March 1999 ($40,800) and November 1999
($14,100). The interest rate applicable to the payable balance was 8% for the
two years ended December 31, 1997.
Included in long-term debt at December 31, 1997 and 1996, is a note payable
of $300,421 due to a trust of which a stockholder of the Company is a
beneficiary. (See Note 7).
6. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of approximately $1,441 and $4,538 for the
years ended December 31, 1997 and 1996, under operating leases for radio
broadcasting facilities and other operating leases. Future minimum annual
payments under these non-cancelable operating leases and agreements as of
December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................... $ 5,651
1999............................................................... 5,701
2000............................................................... 1,789
2001............................................................... 1,479
2002............................................................... 1,529
Thereafter......................................................... 2,245
---------
$ 18,394
---------
---------
</TABLE>
F-304
<PAGE>
TRYON-SEACOAST COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. DEBT:
Following is a summary of long-term debt at December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Note payable to bank, due March 1, 2003, payable in monthly
installments of $5,903, including interest at a variable interest
rate of prime + 2.5% (11% at December 31, 1997), secured by the
assets of the Company............................................... $ 291,527 $ 326,272
Note payable to bank, due December 31, 2006, payable in monthly
installments of $573, including interest at a variable interest
rate, (11% at December 31, 1997).................................... 38,166 --
Note payable to seller, non interest bearing, due in annual
installments of $12,465 payable November 1998, 1999, and 2000,
secured by an interest in the assets of WIGY-FM..................... 37,394 --
Note payable variable interest rate of prime + 2.5% requiring payments
of interest only, secured by the assets of the Company.............. 300,421 300,421
Less--Current maturities included in current liability................ (55,193) (36,608)
---------- ----------
$ 612,315 $ 590,085
---------- ----------
---------- ----------
</TABLE>
The Company also maintains a $150,000 line of credit at a financial
institution of which $25,000 was unused at December 31, 1997 and 1996. The
interest rate applied to outstanding balances is prime plus 2.5% (11% at
December 31, 1997). This line of credit is secured by certain fixed assets and
accounts receivable of the Company and is personally guaranteed by two officers
of the Company.
Maturities for long-term debt in subsequent years from December 31, 1997 are
as follows:
<TABLE>
<S> <C>
1998.............................................................................. $ 55,193
1999.............................................................................. 61,459
2000.............................................................................. 65,051
2001.............................................................................. 60,988
2002 and thereafter............................................................... 424,817
---------
$ 667,508
---------
---------
</TABLE>
8. INCOME TAXES:
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes." SFAS 109 requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, these deferred tax
assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities applying enacted
statutory tax rates in effect for the year in which the differences are expected
to reverse.
In 1996, the Company utilized prior year net operating losses to offset
taxable income of $82,826. The Company has established a valuation allowance
against all of its operating loss carryforwards following an assessment of the
likelihood of realizing such amounts. In arriving at the determination as to the
amount
F-305
<PAGE>
TRYON-SEACOAST COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES: (CONTINUED)
of the valuation allowance required, the Company considered its past operating
history, tax planning strategies and its expectation of the level and timing of
future taxable income. At December 31, 1997, the Company had net operating loss
carryforwards for federal income tax purposes of approximately $96,000. Other
temporary differences at December 31, 1997 and 1996 are insignificant.
9. PENDING SALE:
In December 1997, the Company entered into an agreement with Cumulus
Broadcasting, Inc., a wholly owned subsidiary of Cumulus Media Inc., to sell the
assets of the Company, including the assets of WCME-FM, subject to the approval
of the FCC, to Cumulus for $4,000,000.
F-306
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Value Radio
Corporation at August 30, 1997 and August 31, 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
August 30, 1997, in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 24, 1998
F-307
<PAGE>
VALUE RADIO CORPORATION
BALANCE SHEETS
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
AUGUST 30, AUGUST 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 167 $ 102
Accounts receivable, less allowance for doubtful accounts of $25 and $3, respectively... 606 222
Prepaid expenses........................................................................ 23 7
----------- -----------
Total current assets................................................................ 796 331
----------- -----------
Property and equipment, net............................................................... 1,570 739
Intangible assets, net.................................................................... 3,952 170
Other assets.............................................................................. 715 251
----------- -----------
Total assets........................................................................ $ 7,033 $ 1,491
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities................................................ $ 191 $ 52
Trade payable, net...................................................................... 77 18
Note payable to stockholder............................................................. 250 --
Current portion of notes payable........................................................ 1,807 696
----------- -----------
Total current liabilities........................................................... 2,325 766
----------- -----------
Notes payable............................................................................. 4,300 22
----------- -----------
Total liabilities 6,625 788
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 1,000 shares authorized, 591 shares issued and
outstanding........................................................................... 55 55
Retained earnings....................................................................... 353 648
----------- -----------
Total stockholders' equity.......................................................... 408 703
----------- -----------
Total liabilities and stockholders' equity.......................................... $ 7,033 $ 1,491
----------- -----------
----------- -----------
</TABLE>
See Notes to Financial Statements.
F-308
<PAGE>
VALUE RADIO CORPORATION
STATEMENTS OF OPERATIONS
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
-------------------------------------
AUGUST 30, AUGUST 31, AUGUST 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues...................................................................... $ 3,607 $ 2,259 $ 2,148
Less: agency commissions...................................................... (226) (105) (124)
----------- ----------- -----------
Net revenues............................................................ 3,381 2,154 2,024
----------- ----------- -----------
Operating expenses:
Programming................................................................. 728 488 438
Sales and promotions........................................................ 836 631 626
Technical................................................................... 150 100 106
General and administration.................................................. 470 316 341
Trade....................................................................... 278 153 162
Depreciation and amortization............................................... 624 174 77
----------- ----------- -----------
Total operating expenses................................................ 3,086 1,862 1,750
----------- ----------- -----------
Income from operations........................................................ 295 292 274
Other income (expense), net................................................... (1) (22) 2
Interest expense, net......................................................... (418) (36) (36)
----------- ----------- -----------
Net income (loss)............................................................. $ (124) $ 234 $ 240
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
F-309
<PAGE>
VALUE RADIO CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------ RETAINED
SHARES AMOUNT EARNINGS TOTAL
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Balance at August 31, 1994.................................................. 580 $ 18 $ 324 $ 342
Sale of stock............................................................... 11 37 -- 37
Net income.................................................................. -- -- 240 240
--- --- ----- ---------
Balance at August 31, 1995.................................................. 591 55 564 619
Distribution to stockholders................................................ -- -- (150) (150)
Net income.................................................................. -- -- 234 234
--- --- ----- ---------
Balance at August 31, 1996.................................................. 591 55 648 703
Distribution to stockholders................................................ -- -- (171) (171)
Net loss.................................................................... -- -- (124) (124)
--- --- ----- ---------
Balance at August 30, 1997.................................................. 591 $ 55 $ 353 $ 408
--- --- ----- ---------
--- --- ----- ---------
</TABLE>
See Notes to Financial Statements.
F-310
<PAGE>
VALUE RADIO CORPORATION
STATEMENTS OF CASH FLOWS
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
-----------------------------------------
AUGUST 30, AUGUST 31, AUGUST 31,
1997 1996 1995
----------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................... $ (124) $ 234 $ 240
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization................................................. 624 174 77
Provision for doubtful accounts 22 -- --
Decrease (increase) in accounts receivable.................................... (384) 34 (73)
Decrease (increase) in prepaid expenses....................................... (16) (1) 1
(Increase) in other assets.................................................... (464) (22) (15)
(Decrease) increase in accounts payable and accrued liabilities............... 139 (1) 2
(Decrease) increase in trade payable, net..................................... 59 (18) 8
----------- ----- -----
Net cash provided by (used in) operating activities......................... (144) 400 240
----------- ----- -----
Cash flows from investing activities:
Acquisition of broadcast properties............................................. (5,200) (500) --
Purchase of property and equipment.............................................. (59) (160) (111)
----------- ----- -----
Net cash used in investing activities....................................... (5,259) (660) (111)
----------- ----- -----
Cash flows from financing activities:
Proceeds from sale of stock..................................................... -- -- 37
Distribution to stockholders.................................................... (171) (150) --
Proceeds from note payable to stockholder....................................... 250 -- --
Proceeds from notes payable..................................................... 6,085 678 34
Repayment of notes payable...................................................... (696) (211) (199)
----------- ----- -----
Net cash provided by (used in) financing activities......................... 5,468 317 (128)
----------- ----- -----
Increase in cash and cash equivalents............................................. 65 57 1
Cash and cash equivalents at beginning of year.................................... 102 45 44
----------- ----- -----
Cash and cash equivalents at end of year.......................................... $ 167 $ 102 $ 45
----------- ----- -----
----------- ----- -----
Non-cash operating and financing activities:
Trade revenue................................................................... $ 194 $ 196 $ 168
----------- ----- -----
----------- ----- -----
Trade expense................................................................... $ 278 $ 153 $ 162
----------- ----- -----
----------- ----- -----
Supplemental cash information:
Cash paid for interest.......................................................... $ 355 $ 34 $ 36
----------- ----- -----
----------- ----- -----
</TABLE>
See Notes to Financial Statements.
F-311
<PAGE>
VALUE RADIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN 000'S)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Value Radio Corporation (the "Company") is an S-Corporation organized for
the purpose of owning and operating radio broadcasting stations in and around
the Appleton/Oshkosh, Wisconsin area. On August 30, 1997, the Company owned and
operated five stations, WOSH-AM, WVBO-FM, WOGB-FM, WUSW-AM and WNAM-FM (the
"Stations").
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on an accelerated basis over their estimated useful lives as
follows:
<TABLE>
<S> <C>
15-39
Buildings................................................... years
Broadcasting towers and equipment........................... 5-10 years
Office furniture and equipment.............................. 5-10 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets include Federal Communications Commission ("FCC") licenses
and are stated at cost and are being amortized using the straight-line method
over the estimated useful life of 15 years. The Company evaluates the carrying
value of intangibles periodically in relation to the projected future
undiscounted net cash flows of the related businesses.
INCOME TAXES
Income or loss of the S-Corporation is included in the tax returns of the
individual stockholders. Accordingly, federal and state income taxes are not
recognized by the Company.
F-312
<PAGE>
VALUE RADIO CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. ACQUISITION AND SWAP
In January 1997, the Company acquired the partnership interest in WUSW-AM
and WNAM-FM (the "Partnership") for the total consideration of approximately
$5.2 million. In conjunction with the acquisition of the Partnership, the
Company acquired the remaining ownership interest in Valley Radio Results
Partnership, an entity which provided the sales department for both the
Partnership and the Company, and has subsequently dissolved Valley Radio Results
into the Company.
In April 1996, the Company swapped the assets of WFDL-FM for the assets of
WOGB-FM and paid total consideration of approximately $0.5 million. The
acquisition and the swap were accounted for using the purchase method of
accounting.
The Company's results of operations for the periods ended August 30, 1997
and August 31, 1996 include the results of operations of WUSW-AM, WNAM-FM and
WOGB-FM from their respective dates of acquisition and the results of WFDL-FM
until its date of disposition. The following unaudited pro forma statement of
operations data give effect to the acquisitions as if they had occurred on
September 1, 1995. In addition, depreciation and amortization has been increased
each period to reflect initial purchase price allocations as if the transactions
had occurred on September 1, 1995.
<TABLE>
<CAPTION>
PRO FORMA FOR THE
YEAR ENDED
------------------------
<S> <C> <C>
AUGUST 30, AUGUST 31,
1997 1996
----------- -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Net revenues......................................................... $ 3,925 $ 3,557
----------- -----------
----------- -----------
Operating income..................................................... $ 305 $ 338
----------- -----------
----------- -----------
Net income (loss).................................................... $ 160 $ 142
----------- -----------
----------- -----------
</TABLE>
F-313
<PAGE>
VALUE RADIO CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AUGUST 30, AUGUST 31,
1997 1996
----------- -----------
<S> <C> <C>
Land and buildings................................................ $ 435 $ 346
Broadcasting towers and equipment................................. 1,716 911
Office furniture and equipment.................................... 662 289
----------- -----
2,813 1,546
Accumulated depreciation.......................................... (1,243) (807)
----------- -----
Property and equipment, net....................................... $ 1,570 $ 739
----------- -----
----------- -----
</TABLE>
Depreciation expense for the three years ended August 30, 1997 was $436,
$169 and $77, respectively.
4. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
AUGUST 30, AUGUST 31,
1997 1996
----------- -------------
<S> <C> <C>
FCC licenses...................................................... $ 4,145 $ 175
Accumulated amortization.......................................... (193) (5)
----------- -----
Intangible assets, net............................................ $ 3,952 $ 170
----------- -----
----------- -----
</TABLE>
Amortization expense for the three years ended August 30, 1997 was $188, $5
and $0, respectively.
5. OTHER ASSETS:
Other assets consist of the following:
<TABLE>
<CAPTION>
AUGUST 30, AUGUST 31,
1997 1996
------------- -------------
<S> <C> <C>
Cash Surrender value of life insurance............................ $ 110 $ 105
Investment in Radio Results....................................... -- 109
Note receivable................................................... 560 --
Deposits.......................................................... 45 37
----- -----
Other assets...................................................... $ 715 $ 251
----- -----
----- -----
</TABLE>
Prior to the January 1997 acquisition of the Partnership, the Company did
not have majority ownership in Valley Radio Results and; accordingly, accounted
for its investment in Radio Results using the equity method of accounting.
F-314
<PAGE>
VALUE RADIO CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
6. RELATED PARTY TRANSACTIONS:
Certain of the Company's stockholders are also stockholders in Mid-West
Management, Inc. ("Mid-West"), which provides accounting services, benefits
administration, legal assistance and programming consulting to the Company.
Mid-West allocates expenses to the Company, on a monthly basis, based on
estimated hours expended. Allocations were $46, $44 and $40 for the periods
ended August 30, 1997 and August 31, 1996 and 1995, respectively.
At August 30, 1997, the Company had a note payable due of $250 to a
stockholder, bearing interest at 9% and due on demand.
7. LONG-TERM DEBT
Long-term debt consists of the following at August 30, 1997:
<TABLE>
<CAPTION>
AUGUST 30, AUGUST 31,
1997 1996
----------- -----------
<S> <C> <C>
Note payable, $4,300 principal, interest only due the first six
months at 8.1%, interest and principal due monthly through
January 2002.................................................... $ 4,300 $ --
Note payable, $1,320 principal, interest at 8%, due quarterly,
principal due July 1998......................................... 1,292 --
Line of credit, interest at 9.25% due monthly, principal due on
demand.......................................................... 100 --
Note payable, $401 principal, interest at 8%, due quarterly,
principal due July 1998......................................... 392 --
Note payable, $678 principal, interest and principal due monthly
through 1998, interest at prime plus 3/4% (9% at August 31,
1996)........................................................... -- 678
Note payable, interest at 8%, $1.4 due monthly through November
1998............................................................ 23 40
----------- -----------
6,107 718
Less: current maturities.......................................... (1,807) (696)
----------- -----------
$ 4,300 $ 22
----------- -----------
----------- -----------
</TABLE>
A summary of the future maturities of long-term debt follows:
<TABLE>
<S> <C>
1998........................................................... $ 1,807
1999........................................................... --
2000........................................................... --
2001........................................................... --
2002........................................................... --
Thereafter..................................................... 4,300
-----------
$ 6,107
-----------
-----------
</TABLE>
F-315
<PAGE>
VALUE RADIO CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN 000'S)
8. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of approximately $42 for the year ended
December 31, 1997 and $22 for the year ended December 31, 1996, under operating
leases for radio broadcasting facilities.
Future minimum annual payments under these non-cancelable operating leases
and agreements as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
PAYMENT
AUGUST 31,
-------------
<S> <C>
1998.......................................................................... $ 44
1999.......................................................................... 35
2000.......................................................................... 19
2001.......................................................................... 4
-----
$ 102
-----
-----
</TABLE>
The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is vigorously contesting all
such matters and believes that their ultimate resolution will not have a
material adverse effect on its consolidated financial position, results of
operations or cash flows.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable and accrued liabilities approximates fair value due to their
short term nature. The fair value of notes payable is estimated based on current
market rates and approximates the carrying value.
10. SUBSEQUENT EVENT:
On August 31, 1997, the Company, through a series of simultaneous
transactions, sold the Stations to Cumulus Broadcasting, Inc. (a wholly-owned
subsidiary of Cumulus Media Inc.) ("Cumulus") for $12.15 million. WOSH-AM,
WVBO-FM and WOGB-FM (the "Swapped Stations") were swapped, in a tax related
transaction, with a third party, who simultaneously sold the Swapped Stations to
Cumulus. WUSW-AM and WNAM-FM were sold directly to Cumulus by the Company. These
financial statements report the financial position and results of operations of
the five Stations which were subsequently sold to Cumulus, as of and for the
period ended August 30, 1997, the last day of ownership of the Stations by the
Company.
F-316
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in shareholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of Wilks
Broadcast Acquisitions, Inc. at August 31, 1997 and December 31, 1996, and the
results of its operations and its cash flows for the eight months ended August
31, 1997 and each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 16, 1998
F-317
<PAGE>
WILKS BROADCAST ACQUISITIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 292,714 $ 55,372
Accounts receivable, less allowance for doubtful accounts of $113,525 and $73,114,
respectively..................................................................... 764,689 836,475
Prepaid expenses and other current assets.......................................... 25,371 17,087
------------ ------------
Total current assets........................................................... 1,082,774 908,934
Property and equipment, net.......................................................... 1,447,487 1,768,059
Intangible assets, net............................................................... 4,048,587 4,249,003
Other assets......................................................................... 94,660 80,887
------------ ------------
Total assets................................................................... $ 6,673,508 $7,006,883
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of note payable.................................................... $ 347,910 $ 225,544
Related party note payable......................................................... 3,232,348 3,201,097
Accounts payable................................................................... 114,982 113,079
Accrued and other current liabilities.............................................. -- 9,307
------------ ------------
Total current liabilities...................................................... 3,695,240 3,549,027
------------ ------------
Long-term liabilities:
Note payable, less current portion................................................. 3,039,941 3,274,456
------------ ------------
Total long-term liabilities.................................................... 3,039,941 3,274,456
------------ ------------
Commitments and contingencies
Shareholders' equity (deficit):
Common stock, no par value, 200 shares authorized, 100 issued and outstanding...... 25,000 25,000
Retained earnings (deficit)........................................................ (86,673) 158,400
------------ ------------
Total shareholders' equity (deficit)........................................... (61,673) 183,400
------------ ------------
Total liabilities and shareholders' equity (deficit)........................... $ 6,673,508 $7,006,883
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements.
F-318
<PAGE>
WILKS BROADCAST ACQUISITIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE EIGHT FOR THE YEAR ENDED
MONTHS ENDED DECEMBER 31,
AUGUST 31, --------------------------
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues.............................................................. $ 2,624,507 $ 3,410,871 $ 1,479,090
Less: agency commissions............................................ (22,716) (19,544) (5,803)
------------- ------------ ------------
Net revenues................................................... 2,601,791 3,391,327 1,473,287
Operating expenses:
Programming......................................................... 101,794 151,701 103,434
Sales and promotions................................................ 329,393 555,725 210,809
Technical........................................................... 34,779 47,349 23,944
General and administrative.......................................... 1,402,526 1,475,659 664,129
Depreciation and amortization....................................... 554,181 572,014 242,238
------------- ------------ ------------
Total operating expenses....................................... 2,422,673 2,802,448 1,244,554
------------- ------------ ------------
Income from operations................................................ 179,118 588,879 228,733
Interest expense...................................................... 424,191 352,221 131,123
------------- ------------ ------------
Net income (loss)..................................................... $ (245,073) $ 236,658 $ 97,610
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
See Notes to Financial Statements.
F-319
<PAGE>
WILKS BROADCAST ACQUISITIONS, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
RETAINED
EARNINGS
COMMON STOCK (DEFICIT) TOTAL
-------------- ----------- -----------
<S> <C> <C> <C>
Balance at January 1, 1995.............................................. $ 25,000 ($ 146,668) ($ 121,668)
Net income.............................................................. -- 97,610 97,610
------- ----------- -----------
Balance at December 31, 1995............................................ 25,000 (49,058) (24,058)
Net income.............................................................. -- 236,658 236,658
Distribution to shareholder............................................. -- (29,200) (29,200)
------- ----------- -----------
Balance at December 31, 1996............................................ 25,000 158,400 183,400
Net loss................................................................ -- (245,073) (245,073)
------- ----------- -----------
Balance at August 31, 1997.............................................. $ 25,000 ($ 86,673) ($ 61,673)
------- ----------- -----------
------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
F-320
<PAGE>
WILKS BROADCAST ACQUISITIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE EIGHT FOR THE YEAR ENDED
MONTHS ENDED DECEMBER 31,
AUGUST 31, ------------------------
1997 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................................... ($ 245,073) $ 236,658 $ 97,610
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 554,181 572,014 242,238
Decrease in accounts receivable, net.............................. 71,786 (470,562) (216,617)
(Increase) decrease in prepaid expenses
and other current assets........................................ (8,284) (53,287) 2,213
Decrease in other assets.......................................... (13,773) (22,256) --
Increase (decrease) increase in accounts payable.................. 1,903 49,822 (7,852)
Increase (decrease) in accrued and other liabilities.............. (9,307) 9,307 (1,067)
------------- ----------- -----------
Net cash provided by operating activities......................... 351,433 321,696 116,525
------------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment................................... (33,193) (317,366) (21,643)
Acquisitions of broadcasting properties............................... -- (5,009,438) --
------------- ----------- -----------
Cash used for investing activities.................................... (33,193) (5,326,804) (21,643)
------------- ----------- -----------
Cash flows from financing activities:
Proceeds from borrowings.............................................. 31,251 5,048,807 --
Repayment of borrowings............................................... (112,149) -- (68,073)
Distribution to shareholder........................................... -- (29,200) --
------------- ----------- -----------
Cash (used for) provided by financing activities...................... (80,898) 5,019,607 (68,073)
------------- ----------- -----------
Increase in cash and cash equivalents................................... 237,342 14,499 26,809
Cash and cash equivalents at beginning of period........................ 55,372 40,873 14,064
------------- ----------- -----------
Cash and cash equivalents at end of period.............................. $ 292,714 $ 55,372 $ 40,873
------------- ----------- -----------
------------- ----------- -----------
Supplemental disclosure of cash information:
Cash paid for interest................................................ $ 424,191 $ 352,221 $ 131,123
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
F-321
<PAGE>
WILKS BROADCAST ACQUISITIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Wilks Broadcast Acquisitions, Inc. (the "Company") owns and operates radio
stations on the Augusta, Georgia and South Carolina border. The Company owns and
operates radio stations WEKL-FM, WUUS-FM, WRXR-FM, and WGUS-AM ("the Stations").
The significant accounting principles followed by the Company and the
methods of applying those principles which materially affect the determination
of financial position, results of operations, and cash flows are summarized
below.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Trade revenues and
trade expenses are recognized in equal amounts at the fair market value of
products or services received as advertising air time is broadcast or as
services are received. Trade revenues and expenses for the eight months ended
August 31, 1997 and the years ended December 31, 1996 and 1995 were $320,652,
$433,105 and $138,341, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed using accelerated methods over the estimated useful
lives of the respective assets of five to fifteen years. Leasehold improvements
are amortized on the straight-line basis over their estimated useful lives of
thirty-nine years.
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets consist of FCC licenses. Intangible assets are recorded at
cost and amortized over 15 years.
F-322
<PAGE>
WILKS BROADCAST ACQUISITIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES
The Company has elected to be treated as an S-Corporation for federal income
tax purposes. Under this election the income or loss of the S-Corporation is
included in the tax returns of the individual shareholders. Accordingly, federal
and state income taxes are not included in the accompanying financial statements
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value due to their short-term nature. The
fair value of notes payable are estimated based on current market rates and
approximate the carrying value.
2. ACQUISITIONS
In March 1996, the Company entered into an asset purchase agreement to
acquire stations WUUS-FM (formerly WKBG-FM) and WRXR-FM in Augusta, Georgia for
$5,000,000 in cash plus specific acquisition costs.
The acquisitions discussed above were accounted for under the purchase
method of accounting. Under the purchase method of accounting, the purchase
price was allocated, on the closing date, to the assets acquired and liabilities
assumed based on their respective fair values.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Broadcasting towers and equipment................................ $ 1,987,243 $1,954,050
Buildings........................................................ 65,000 65,000
Office furniture and equipment................................... 176,366 176,366
Leasehold improvements........................................... 193,844 193,844
------------ ------------
2,422,453 2,389,260
Accumulated depreciation......................................... (974,966) (621,201)
------------ ------------
Property and equipment, net...................................... $ 1,447,487 $1,768,059
------------ ------------
------------ ------------
</TABLE>
Depreciation expense was $353,765, $388,708, and $145,693 for the eight
months ended August 31, 1997 and the years ended December 31, 1996 and 1995,
respectively.
F-323
<PAGE>
WILKS BROADCAST ACQUISITIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
FCC licenses..................................................... $ 4,509,298 $4,509,298
Accumulated amortization......................................... (460,711) (260,295)
------------ ------------
Intangible assets, net........................................... $ 4,048,587 $4,249,003
------------ ------------
------------ ------------
</TABLE>
Amortization expense was $200,416, $183,306, and $96,545 for the eight
months ended August 31, 1997 and the years ended December 31, 1996 and 1995,
respectively.
5. RELATED PARTY NOTES PAYABLE:
The Company has notes payable to a related party. As of August 31, 1997 and
December 31, 1996, the balances of these notes payable were $3,232,348 and
$3,201,097 respectively. The notes are due upon demand and bear interest at
rates ranging from 7% to 10%. Interest payments were $209,747, $176,406 and
$125,698 for the eight months ended August 31, 1997 and the years ended December
31, 1996 and 1995, respectively.
6. LONG-TERM DEBT
In July, 1996, the Company entered into a $3,500,000 term loan agreement
(the "Agreement") with a bank for the purpose of acquiring two radio stations,
WRXR-FM and WUUS-FM (formerly WKBG-FM). The term loan requires monthly interest
and principal payments beginning July 1, 1996 with the final payment due March
31, 2004 and bears interest at the one month LIBOR Rate plus 2.25% (7.94% at
August 31, 1997). The term loan is secured by substantially all of the company's
assets as well as a pledge of the common stock of the corporation. The Agreement
contains certain restrictive covenants, which among other things, require the
maintenance of a funded debt to cash flow and pro forma debt service ratio,
minimum net worth and limitations on dispositions of assets. The current portion
of $347,910 represents amounts due one year past the balance sheet date of
August 31, 1997. Subsequent to year end, all principal and remaining accrued
interest was paid by the Company.
A summary of the future maturities of long-term debt as of August 31, are as
follows:
<TABLE>
<S> <C>
Four months ended December 31, 1997............................. $ 100,667
1998............................................................ 385,974
1999............................................................ 444,038
2000............................................................ 487,671
2001............................................................ 533,881
2002............................................................ 587,164
Thereafter...................................................... 848,456
---------
$3,387,851
Less--current portion........................................... 347,910
---------
$3,039,941
---------
---------
</TABLE>
F-324
<PAGE>
WILKS BROADCAST ACQUISITIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of $27,209, $31,245, and $18,267 for the eight
months ended August 31, 1997 and the years ended December 31, 1996 and 1995,
respectively, under operating leases for radio broadcasting facilities,
broadcasting equipment automobiles, and land. Future minimum annual payments
under these non-cancelable operating leases and agreements as of August 31, are
as follows:
<TABLE>
<S> <C>
1997........................................................... $ 9,358
1998........................................................... 31,913
1999........................................................... 23,853
2000........................................................... 19,017
2001........................................................... 19,017
Thereafter..................................................... 275,900
---------
$ 379,058
---------
---------
</TABLE>
8. SUBSEQUENT EVENT:
On September 1, 1997, the Stations were acquired by Cumulus Broadcasting,
Inc. (a wholly-owned subsidiary of Cumulus Media Inc.) pursuant to an asset
purchase agreement with the Company for a purchase price of $15,500,000.
F-325
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Lewis Broadcasting Corporation
In our opinion, the accompanying balance sheets and the related statements
of income, of changes in owners' net investment and of cash flows present
fairly, in all material respects, the financial position of WJCL-FM (a division
of Lewis Broadcasting Corporation) at December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Atlanta, Georgia
February 27, 1998
F-326
<PAGE>
WJCL-FM
(A DIVISION OF LEWIS BROADCASTING CORPORATION)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Accounts receivable--trade (less allowance for doubtful accounts of $19,494 and $15,668 at
December 31, 1997 and 1996)............................................................. $ 370,387 $ 297,688
---------- ----------
Total current assets...................................................................... 370,387 297,688
Equipment and other fixed assets, net..................................................... 20,353 29,981
---------- ----------
Total assets.............................................................................. $ 390,740 $ 327,669
---------- ----------
---------- ----------
LIABILITIES AND OWNERS' NET INVESTMENT
Accounts payable.......................................................................... $ 8,693 $ 6,208
Accrued expenses.......................................................................... 23,107 13,484
---------- ----------
Total current liabilities................................................................. 31,800 19,692
Owners' net investment.................................................................... 358,940 307,977
---------- ----------
Total liabilities and owners' net investment.............................................. $ 390,740 $ 327,669
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
F-327
<PAGE>
WJCL-FM
(A DIVISION OF LEWIS BROADCASTING CORPORATION)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues.............................................................................. $ 1,800,955 $ 1,924,745
Less: agency commissions............................................................ (236,084) (261,440)
------------ ------------
Net revenues.................................................................... 1,564,871 1,663,305
------------ ------------
Operating expense
Programming......................................................................... 379,521 393,565
Sales and promotions................................................................ 413,957 459,593
Technical........................................................................... 52,024 57,623
General and administrative.......................................................... 622,857 621,430
Depreciation........................................................................ 13,043 8,333
------------ ------------
1,481,402 1,540,544
------------ ------------
Net income............................................................................ $ 83,469 $ 122,761
------------ ------------
------------ ------------
Pro forma adjustments (unaudited)
Net income before pro forma adjustment................................................ $ 83,469 $ 122,761
Pro forma adjustment for provision for federal and state income taxes................. 31,685 46,600
------------ ------------
Pro forma net income.................................................................. $ 51,784 $ 76,161
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
F-328
<PAGE>
WJCL-FM
(A DIVISION OF LEWIS BROADCASTING CORPORATION)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------
1997 1996
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................................. $ 83,469 $ 122,761
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation......................................................................... 13,043 8,333
(Increase) decrease in accounts receivable........................................... (72,699) 15,297
Increase (decrease) in accounts payable.............................................. 2,485 (5,091)
Increase in accrued expenses......................................................... 9,623 919
---------- -----------
Net cash provided by operating activities................................................ 35,921 142,219
---------- -----------
Net cash used in investing activities:
Purchases of equipment and other fixed assets.......................................... (3,415) (36,172)
---------- -----------
Net cash used in financing activities:
Distributions to owners................................................................ (32,506) (106,047)
---------- -----------
Change in cash........................................................................... -- --
Cash balance, beginning of year.......................................................... -- --
---------- -----------
Cash balance, end of year................................................................ $ -- $ --
---------- -----------
---------- -----------
</TABLE>
See notes to financial statements.
F-329
<PAGE>
\
WJCL-FM
(A DIVISION OF LEWIS BROADCASTING CORPORATION)
STATEMENTS OF CHANGES IN OWNERS' NET INVESTMENT
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1997 1996
---------- -----------
<S> <C> <C>
Owners' net investment, beginning........................................................ $ 307,977 $ 291,263
Net income............................................................................... 83,469 122,761
Net distributions to owners.............................................................. (32,506) (106,047)
---------- -----------
Owners' net investment, ending........................................................... $ 358,940 $ 307,977
---------- -----------
---------- -----------
</TABLE>
See notes to financial statements.
F-330
<PAGE>
WJCL-FM
(A DIVISION OF LEWIS BROADCASTING CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
WJCL-FM (the Business) is a division of Lewis Broadcasting Corporation
(Corporation). Lewis Broadcasting Corporation also owns and operates television
stations in Savannah and Columbus, Georgia, and Columbia, South Carolina. The
Business operates an FM radio station in Savannah, Georgia.
These financial statements have been derived from the historical accounting
records of Lewis Broadcasting Corporation and present the financial position and
results of operations as if the Business were a separate company. Accordingly,
the net investment in the Business (owners' net investment) is shown in lieu of
stockholders' equity.
The significant accounting principles followed by the Business and the
methods of applying these principles which materially affect the determination
of financial position, changes in owners' net investment and results of
operations are summarized as follows:
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
TRADE TRANSACTIONS
The Business trades unsold commercial advertising time for various goods and
services. These transactions are recorded at the estimated fair value of the
goods or services received. The related revenue is recognized when commercials
are broadcast; goods or services received are recorded as assets or expenses
when received or used, respectively. Trade revenues were $55,556 and $64,806 for
the years ended December 31, 1997 and 1996, respectively.
INCOME TAXES
Lewis Broadcasting Corporation, of which WJCL-FM is a division, is an S
corporation, and therefore, Lewis Broadcasting Corporation's stockholders are
subject to taxes on the income of the Corporation.
Proforma net income reflects the treatment of the business as a tax paying
entity assuming an estimated statutory rate of 38%. It is not necessarily
indicative of the actual results had the Business in fact been a tax paying
entity.
DEPRECIATION
Equipment and other fixed assets are being depreciated over five years using
accelerated methods.
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 and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
F-331
<PAGE>
WJCL-FM
(A DIVISION OF LEWIS BROADCASTING CORPORATION)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
2. PENDING SALE OF BUSINESS
On December 23, 1997 Lewis Broadcasting Corporation entered into an asset
purchase agreement with affiliates of Cumulus Media Inc. (Buyer) to sell the
WJCL-FM station license and other station assets. The assignment of the station
license and the transfer of the station assets is conditioned and subject to the
prior consent and approval of the Federal Communication Commission.
3. RELATED PARTY TRANSACTIONS
As part of a combined group, the Business is allocated various corporate
overhead costs. The allocation method requires management to estimate the
incremental overhead costs incurred as a result of servicing the Business.
Corporate overhead allocations were approximately $289,509 and $255,434 for the
years ended December 31, 1997 and 1996, respectively. The Business also leases a
broadcasting tower from an affiliate on a month to month basis, which amounted
to $30,000 per year for the years ended December 31, 1997 and 1996,
respectively.
The Business participates in Lewis Broadcasting Corporation's centralized
cash management system. Accordingly, all cash received and disbursed that
relates to operations of the Business is accounted for by Lewis Broadcasting
Corporation and the net of such activity is reflected in the owners' net
investment account in the accompanying balance sheet.
4. EQUIPMENT AND OTHER FIXED ASSETS
Equipment and other fixed assets consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Equipment and other fixed assets...................................... $ 114,289 $ 110,903
Accumulated depreciation.............................................. (93,936) (80,922)
---------- ----------
$ 20,353 $ 29,981
---------- ----------
---------- ----------
</TABLE>
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of accounts receivable and accounts payable approximate
fair value because of the short maturity of these instruments.
6. RETIREMENT PLAN
The Business participates in the Lewis Broadcasting Corporation National
Automobile Dealership Association Retirement Trust (NADART) Salary Deferral
401(k) Profit-Sharing Plan (the Plan), a defined contribution plan operated by
NADART which covers all employees who qualify and elect to participate. The
normal cost is funded by contributions from participants at a required rate of
2% of their compensation on a pre-tax basis. In addition to this required
contribution, participants may make additional contributions not to exceed
$9,500 in both 1997 and 1996. The Business makes a matching contribution equal
to the required 2% contribution made by all participants.
F-332
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of income, of changes in owner's equity and of cash flows
present fairly, in all material respects, the financial position of WKKO-FM,
WRQN-FM, WTOD-AM and WIMX-FM (the "Stations") at November 9, 1997, and the
results of their operations and their cash flows for the period from June 30,
1997 through November 9, 1997 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Stations'
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
Effective June 29, 1997, 62nd Street Broadcasting LLC (62nd Street) acquired
the Stations from Fritz Broadcasting, Inc. As discussed in Note 2 to the
financial statements, the acquisition was accounted for as a purchase.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 6, 1998
F-333
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Cumulus Media Inc.
In our opinion, the accompanying combined statements of income, of changes
in owner's equity and of cash flows present fairly, in all material respects,
the results of the operations and the cash flows of WKKO-FM, WRQN-FM, WTOD-AM
and WIMX-FM (the "Stations") for the period from January 1, 1997 through June
29, 1997 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Stations' management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Effective June 29, 1997, 62nd Street Broadcasting LLC (62nd Street) acquired
the Stations from Fritz Broadcasting, Inc. As discussed in Note 2 to the
financial statements, the acquisition was accounted for as a purchase.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
February 6, 1998
F-334
<PAGE>
WKKO-FM, WRQN-FM, WTOD-AM AND WIMX-FM
(A WHOLLY OWNED ENTITY OF 62ND STREET BROADCASTING LLC)
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
SUCCESSOR
-------------
<S> <C>
NOVEMBER 9,
1997
-------------
ASSETS
Current assets:
Cash............................................................................................. $ 30,137
Accounts receivable, less allowance for doubtful accounts of $45,311............................. 1,368,757
Related party receivable......................................................................... 145,443
Prepaid expenses and other current assets........................................................ 6,638
-------------
Total current assets......................................................................... 1,550,975
Property and equipment, net...................................................................... 2,825,890
Intangible assets, net........................................................................... 26,364,694
-------------
Total assets................................................................................. $ 30,741,559
-------------
-------------
LIABILITIES AND OWNER'S EQUITY
Current liabilities:
Accounts payable................................................................................. $ 77,786
Accrued expenses and other current liabilities................................................... 199,460
Capital lease obligations........................................................................ 2,632
-------------
Total current liabilities.................................................................... 279,878
-------------
Commitments and contingencies
Owner's equity:
Owner's capital.................................................................................. 29,922,401
Retained earnings................................................................................ 539,280
-------------
Total owner's equity......................................................................... 30,461,681
-------------
Total liabilities and owner's equity......................................................... $ 30,741,559
-------------
-------------
</TABLE>
See Notes to Combined Financial Statements.
F-335
<PAGE>
WKKO-FM, WRQN-FM, WTOD-AM AND WIMX-FM
(A WHOLLY OWNED ENTITY OF 62ND STREET BROADCASTING LLC)
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------------- -----------------
<S> <C> <C>
JUNE 30, 1997 JANUARY 1, 1997
TO TO
NOVEMBER 9, JUNE 29,
1997 1997
--------------- -----------------
Revenues...................................................................... $ 3,012,950 $ 3,362,862
Less: agency commissions.................................................... (393,697) (440,241)
--------------- -----------------
Net revenues............................................................ 2,619,253 2,922,621
Operating expenses:
Sales and promotions........................................................ 416,081 519,646
Programming................................................................. 392,442 530,953
Technical................................................................... 35,107 63,138
Sports and news............................................................. 18,557 24,124
General and administrative.................................................. 351,720 461,555
Depreciation and amortization............................................... 830,510 173,248
--------------- -----------------
Total operating expenses................................................ 2,044,417 1,772,664
--------------- -----------------
Income from operations........................................................ 574,836 1,149,957
Interest expense.............................................................. 1,009 143,309
--------------- -----------------
Income before income taxes.................................................... 573,827 1,006,648
Single business tax and other sale and local income taxes..................... 34,547 39,434
--------------- -----------------
Net income.................................................................... $ 539,280 $ 967,214
--------------- -----------------
--------------- -----------------
</TABLE>
See Notes to Combined Financial Statements.
F-336
<PAGE>
WKKO-FM, WRQN-FM, WTOD-AM AND WIMX-FM
(A WHOLLY OWNED ENTITY OF 62ND STREET BROADCASTING LLC)
COMBINED STATEMENTS OF CHANGES IN OWNER'S EQUITY
<TABLE>
<S> <C>
PREDECESSOR
Balance at January 1, 1997..................................................... $2,902,405
Net income..................................................................... 967,214
----------
Balance at June 29, 1997....................................................... 3,869,619
----------
----------
SUCCESSOR
Acquisition of the station at June 30, 1997.................................... 29,922,401
Net income..................................................................... 539,280
----------
Balance at November 9, 1997.................................................... $30,461,681
----------
----------
</TABLE>
See Notes to Combined Financial Statements.
F-337
<PAGE>
WKKO-FM, WRQN-FM, WTOD-AM AND WIMX-FM
(A WHOLLY OWNED ENTITY OF 62ND STREET BROADCASTING LLC)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------- --------------
<S> <C> <C>
JANUARY 1,
JUNE 30, 1997 1997
TO TO
NOVEMBER 9, JUNE 29,
1997 1997
------------- --------------
Cash flows from operating activities:
Net income....................................................................... $ 539,280 $ 967,214
Adjustments to reconcile net income to net cash provided by operating activities,
net of effects from acquisition:
Depreciation and amortization................................................ 830,510 173,248
Increase in accounts receivable.............................................. (1,446,356) (6,830)
Increase in related party receivable......................................... (145,443) (472,859)
Decrease (increase) in prepaid expenses and other current assets............. (6,638) 18,213
Increase in accounts payable................................................. 77,786 6,482
Increase (decrease) in accrued expenses and other current liabilities........ 196,009 (419,025)
------------- --------------
Net cash provided by operating activities.................................. 45,148 266,443
------------- --------------
Cash flows from financing activities:
Principal payments under capital lease obligations............................... (15,011) (175,908)
------------- --------------
Cash used for financing activities............................................... (15,011) (175,908)
------------- --------------
Increase in cash................................................................... 30,137 90,535
Cash at beginning of period........................................................ -- 61,813
------------- --------------
Cash at end of period.............................................................. $ 30,137 $ 152,348
------------- --------------
------------- --------------
</TABLE>
See Notes to Combined Financial Statements.
F-338
<PAGE>
WKKO-FM, WRQN-FM, WTOD-AM AND WIMX-FM
(A WHOLLY OWNED ENTITY OF 62ND STREET BROADCASTING LLC)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
62nd Street Broadcasting LLC (62nd Street) owns and operates radio stations
WKKO-FM, WRQN-FM, WTOD-AM, and WIMX-FM (the "Stations" or the "Company") located
in Toledo, Ohio. At the close of business on June 29, 1997, 62nd Street acquired
the stations from Fritz Broadcasting, Inc. ("Fritz"). As a result of the change
in ownership, the financial position, results of operations and cash flows of
the Stations subsequent to the date of the acquisition are labeled "Successor"
in the accompanying combined financial statements, and the results of operations
and cash flows of the Stations for the period prior to the acquisition are
labeled "Predecessor".
The significant accounting principles followed by the Successor and
Predecessor and the methods of applying those principles which materially affect
the determination of financial position, results of operations, and cash flows
are summarized below.
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 and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the periods
presented. Actual results could differ from these estimates.
CASH
The Successor and the Predecessor paid approximately $1,009 and $143,309,
respectively, in 1997 for interest.
RELATED PARTY RECEIVABLE
Related party receivable includes cash held by 62nd Street on behalf of the
Company in a centralized cash management system.
PROPERTY AND EQUIPMENT
Purchases of property and equipment, including additions and improvements
and expenditures for repairs and maintenance that significantly add to
productivity or extend the economic lives of the assets, are capitalized at cost
and depreciated on a straight-line basis over their estimated useful lives as
follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -------------
<S> <C> <C>
Building........................................................... 39 years 40 years
Broadcasting towers and equipment.................................. 5 years 5--20 years
Office furniture and equipment..................................... 5 years 5-20 years
Vehicles........................................................... 5 years 5 years
</TABLE>
Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.
F-339
<PAGE>
WKKO-FM, WRQN-FM, WTOD-AM AND WIMX-FM
(A WHOLLY OWNED ENTITY OF 62ND STREET BROADCASTING LLC)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INTANGIBLE ASSETS
Intangible assets include goodwill and FCC licenses. Intangible assets are
stated at cost and are being amortized using the straight-line method over the
estimated useful life or contract term for periods not exceeding 15 years for
the Successor and 40 years for the Predecessor. The Company evaluates the
carrying value of intangibles periodically in relation to the projected future
undiscounted net cash flows of the related businesses.
INCOME TAXES
The Company operated as an S Corporation under the provisions of the
Internal Revenue Code during the ownership by Fritz and as a Limited Liability
Company during the ownership by 62nd Street. Accordingly, no provision for
income taxes has been made since income or losses of the Company were allocated
to the owner.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
Fees paid pursuant to various time brokerage agreements are amortized to
expense, respectively, over the term of the agreement using the straight-line
method.
TRADE AGREEMENTS
The Company enters into trade agreements which give rise to sales of
advertising air time in exchange for products and services. Sales from trade
agreements are recognized at the fair market value of products or services
received as advertising air time is broadcast. Products and services received
are expensed when used in the broadcast operations. If the Company uses
exchanged products or services before advertising air time is provided, a trade
liability is recognized.
2. ACQUISITION:
Effective June 29, 1997, 62nd Street acquired selected assets from Fritz
which included a building, furniture and fixtures, vehicles, and broadcast
licenses of WKKO-FM, WRQN-FM, WTOD-AM and WIMX-FM in Toledo, Ohio for $30
million in cash plus various other direct acquisition costs. A substantial
portion of the purchase price was allocated to broadcast licenses, intangibles
and goodwill. As part of the purchase agreement, 62nd Street will collect
accounts receivable related to Fritz's operations of the stations and remit
payments to Fritz for such receivables. This agreement expires in March 1998 at
which time Fritz will be responsible for collecting any remaining receivables.
The acquisition discussed above was accounted for as a purchase business
combination by 62nd Street. 62nd Street elected, under generally accepted
accounting principles, to pushdown the acquisition basis to the Company level
through a non-cash capital contribution to the Company. Accordingly, the
accompanying combined financial statements include the results of operations of
the Stations from the date of acquisition. The effect of the acquisition on the
results of operations is to primarily increase depreciation and amortization
expense.
F-340
<PAGE>
WKKO-FM, WRQN-FM, WTOD-AM AND WIMX-FM
(A WHOLLY OWNED ENTITY OF 62ND STREET BROADCASTING LLC)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
SUCCESSOR
------------
<S> <C>
NOVEMBER 9,
1997
------------
Building........................................................................ $ 418,500
Broadcasting towers and equipment............................................... 1,960,000
Office furniture and equipment.................................................. 335,000
Vehicles........................................................................ 40,000
------------
2,753,500
Accumulated depreciation........................................................ (174,110)
Land............................................................................ 246,500
------------
Property and equipment, net..................................................... $ 2,825,890
------------
------------
</TABLE>
Successor depreciation expense for the period ended November 9, 1997 was
$174,110, and Predecessor depreciation expense for the period ended June 29,
1997 was $54,902.
4. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
SUCCESSOR
-------------
<S> <C>
NOVEMBER 9,
1997
-------------
Goodwill, FCC licenses and call letters........................................ $ 27,000,000
Other.......................................................................... 21,094
-------------
27,021,094
Accumulated amortization....................................................... (656,400)
-------------
Intangible assets, net......................................................... $ 26,364,694
-------------
-------------
</TABLE>
Successor amortization expense for the period ended November 9, 1997 was
$656,400, and the Predecessor amortization expense for the period ended June 29,
1997 was $118,346.
F-341
<PAGE>
WKKO-FM, WRQN-FM, WTOD-AM AND WIMX-FM
(A WHOLLY OWNED ENTITY OF 62ND STREET BROADCASTING LLC)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Accrued expenses and other current liabilities consist of the following at
November 9, 1997:
<TABLE>
<CAPTION>
SUCCESSOR
----------
<S> <C>
Accrued sales commission.......................................................... $ 97,554
Accrued payroll................................................................... 26,089
Accrued license fees.............................................................. 16,441
Accrued taxes..................................................................... 34,547
Other accrued expenses............................................................ 24,829
----------
$ 199,460
----------
----------
</TABLE>
6. RELATED PARTY TRANSACTIONS:
The Company participates in 62nd Street's centralized cash management
system. Accordingly, cash received from the Company's operations is pooled
centrally and allocated by 62nd Street based on operational, working capital and
capital expenditure requirements. The Company has no available lines of credit
or other sources of financing.
7. COMMITMENTS AND CONTINGENCIES:
The Company incurred expenses of approximately $6,160 for the period ended
November 9, 1997 under operating leases for radio broadcasting facilities.
Future minimum annual payments, adjusted based upon formulas related to the
Consumer Price Index, under the operating lease for the broadcast tower
approximate $7,200.
The Company also has a vehicle under a capital lease with a cost of $15,795
and accumulated depreciation of $13,163.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of cash, accounts receivable and accounts payable
approximates fair value due to their short-term nature.
9. EMPLOYEE BENEFIT PLAN:
Fritz sponsored a defined contribution 401(k) plan that covered all
employees meeting a one-year eligibility period. Contributions to the plan
included employee contributions and an employer amount determined on a yearly
basis by management.
Employer contributions to the plan for the period ended June 29, 1997
amounted to approximately $13,000.
10. SUBSEQUENT EVENTS:
Effective November 9, 1997, all of the assets of the Company were sold to
Cumulus Broadcasting, Inc. (a wholly-owned subsidiary of Cumulus Media Inc.).
F-342
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF CLASS A COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE
SHARES OF CLASS A COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................................ 5
Risk Factors...................................... 16
Use of Proceeds................................... 23
Dividend Policy................................... 23
Capitalization.................................... 24
Dilution.......................................... 25
Unaudited Pro Forma Combined Financial
Statements...................................... 26
Selected Historical Financial Data................ 34
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 35
Business.......................................... 42
Pending Acquisitions.............................. 63
Management........................................ 64
Certain Relationships and Related Transactions.... 72
Principal and Selling Stockholders................ 73
Description of Capital Stock...................... 74
Description of Credit Facility and Notes.......... 78
Shares Eligible for Future Sale................... 80
Underwriting...................................... 81
Certain United States Tax Consequences to
Non-United States Holders of Class A Common
Stock........................................... 85
Legal Matters..................................... 89
Experts........................................... 89
Additional Information............................ 89
Index to Financial Statements..................... F-1
</TABLE>
---------------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
SHARES
[LOGO]
CUMULUS MEDIA INC.
CLASS A COMMON STOCK
-------------------
PROSPECTUS
, 1998
-------------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
BT Alex. Brown
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold, nor may
offers to buy be accepted, prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL COMMON STOCK PROSPECTUS]
SUBJECT TO COMPLETION, DATED MARCH 30, 1998
PRELIMINARY PROSPECTUS
<TABLE>
<S> <C> <C>
[LOGO] Shares
CUMULUS MEDIA INC.
Class A Common Stock
</TABLE>
------------------------
Of the shares of Class A Common Stock, par value $.01 per share (the "Class
A Common Stock") offered hereby are being sold by (the "Company") and
shares are being sold by the Selling Stockholder (as defined herein). Of
the shares of Class A Common Stock being offered, shares are being
offered outside the U.S. and Canada (the "International Offering") by the
International Managers and shares are being offered in a concurrent
offering in the U.S. and Canada (the "U.S. Offering") by the U.S. Underwriters
(together with the International Managers, the "Underwriters"). The
International Offering and the U.S. Offering are collectively referred to as the
"Stock Offerings." The offering price and underwriting discounts and commissions
for each of the Stock Offerings will be identical.
Upon consummation of the Reorganization (as defined herein), the Company's
authorized capital stock will include Class A Common Stock and Class B Common
Stock, par value $.01 per share (the "Class B Common Stock" and, together with
the Class A Common Stock, the "Common Stock"). Except with respect to voting and
conversion, the rights of holders of Class A Common Stock and Class B Common
Stock are identical. Except upon the occurrence of certain events, holders of
Class B Common Stock are not entitled to vote, whereas each share of Class A
Common Stock entitles its holder to one vote. Under certain circumstances and
subject to prior governmental approval, shares of Class B Common Stock are
convertible into shares of Class A Common Stock on a one-for-one basis at the
option of the holder. Following the Stock Offerings, existing stockholders of
the Company, including the officers and directors of the Company, will continue
to own approximately % of the Common Stock (representing % of the voting
stock) and will have the ability to control the Company. See "Description of
Capital Stock."
Concurrently with the Stock Offerings, the Company is offering $
million of % Series A Cumulative Exchangeable Redeemable Preferred Stock Due
2009 (the "Series A Preferred Stock") (the "Preferred Stock Offering"), $
million of which are being offered directly by the Company, and not through the
Underwriters, to The Northwestern Mutual Life Insurance Company the sole owner
of the NML Preferred Stock (as defined herein) which had an accreted value as of
February 14, 1998 of $33,023,562, at a purchase price equal to the price to
public and $[ ] million of % Senior Subordinated Notes Due 2008 (the
"Notes")(the "Debt Offering" and, together with the Stock Offerings and the
Preferred Stock Offering, the "Offerings"). Consummation of each Offering is
contingent upon consummation of each of the other Offerings. A portion of the
proceeds of the Offerings will be used to repay the Credit Facility (as defined
herein) for which affiliates of Lehman Brothers, Inc. act as arranger and
lender.
Prior to the Stock Offerings, there has been no public market for the Class
A Common Stock of the Company. It is anticipated that the initial public
offering price will be between $ and $ per share. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price.
The Class A Common Stock of the Company is expected to be approved for
inclusion in the Nasdaq National Market under the symbol "CMLS". There can be no
assurance that an active public market for the Class A Common Stock will develop
or be maintained after consummation of the Stock Offerings.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE CLASS A COMMON STOCK.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the International Managers and the U.S.
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Stock Offerings payable by the Company
estimated to be $ .
(3) The Company has granted the International Managers a 30-day option to
purchase up to an additional shares of Class A Common Stock on the
same terms and conditions as set forth above solely to cover
over-allotments, if any. The U.S. Underwriters have been granted a similar
option to purchase up to additional shares solely to cover
over-allotments, if any. If both options are exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to the
Company, will be $ , $ and $ , respectively. See
"Underwriting."
------------------------
The shares of Class A Common Stock offered by this Prospectus are offered by
the International Managers subject to prior sale, to withdrawal, cancellation,
or modification of the offer without notice, to delivery to and acceptance by
the International Managers and to certain further conditions. It is expected
that delivery of the shares will be made at the offices of Lehman Brothers Inc.,
New York, New York, on or about , 1998.
------------------------
LEHMAN BROTHERS
BEAR, STEARNS INTERNATIONAL LIMITED
BT Alex. Brown International
CREDIT LYONNAIS SECURITIES
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL COMMON STOCK PROSPECTUS]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF CLASS A COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE
SHARES OF CLASS A COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary................................ 5
Risk Factors...................................... 16
Use of Proceeds................................... 23
Dividend Policy................................... 23
Capitalization.................................... 24
Dilution.......................................... 25
Unaudited Pro Forma Combined Financial
Statements...................................... 26
Selected Historical Financial Data................ 34
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 35
Business.......................................... 42
Pending Acquisitions.............................. 63
Management........................................ 64
Certain Relationships and Related Transactions.... 72
Principal and Selling Stockholders................ 73
Description of Capital Stock...................... 74
Description of Credit Facility and Notes.......... 78
Shares Eligible for Future Sale................... 80
Underwriting...................................... 81
Certain United States Tax Consequences to
Non-United States Holders of Class A Common
Stock........................................... 85
Legal Matters..................................... 89
Experts........................................... 89
Additional Information............................ 89
Index to Financial Statements..................... F-1
</TABLE>
---------------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
SHARES
[LOGO]
CUMULUS MEDIA INC.
CLASS A COMMON STOCK
-------------------
PROSPECTUS
, 1998
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LEHMAN BROTHERS
BEAR, STEARNS
INTERNATIONAL LIMITED
BT Alex. Brown
International
CREDIT LYONNAIS SECURITIES
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH
JURISDICTION.
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SUBJECT TO COMPLETION, DATED MARCH 30, 1998
PRELIMINARY PROSPECTUS
[LOGO]
$
CUMULUS MEDIA INC.
% SENIOR SUBORDINATED NOTES DUE 2008
The % Senior Subordinated Notes due 2008 (the "Notes") are being offered
hereby (the "Debt Offering") by Cumulus Media Inc. (the "Company"). Interest on
the Notes is payable semi-annually in arrears on and of each year,
commencing , 1998. The Notes will mature on , 2008. The Notes will
be redeemable at the option of the Company, in whole or in part, at any time on
or after , 2003 at the redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of redemption. In addition, on or
before , 2001, the Company may redeem up to 35% of the original aggregate
principal amount of the Notes at a redemption price of % of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
redemption, with the net proceeds of one or more Equity Offerings, (as defined
herein), PROVIDED, HOWEVER, that at least 65% of the original aggregate
principal amount of Notes remains outstanding following such redemption. The
Notes will not be subject to any sinking fund requirement. Upon the occurrence
of a Change of Control (as defined herein), the Company is required to make an
offer to repurchase the Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase.
There can be no assurance that the Company will have the financial resources
necessary to repurchase the Notes upon a change of control. See "Description of
Notes."
The Notes will be general unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior Debt (as defined herein)
of the Company, including all borrowings of the Company under the Credit
Facility (as defined herein). On a pro forma basis after giving effect to the
Transactions (as defined herein) as if they had occurred on December 31, 1997,
the Company would have had outstanding approximately $ million of
Senior Debt that would effectively rank senior to the Notes. See "Description of
Notes -- Subordination." The Indenture (as defined herein) pursuant to which the
Notes will be issued permits the Company and its subsidiaries to incur
additional Indebtedness (as defined herein), including Senior Debt, subject to
certain limitations. See "Capitalization" and "Description of Notes."
Concurrently with the Debt Offering, the Company is offering $
million of % Series A Cumulative Exchangeable Redeemable Preferred Stock Due
2009, (the "Series A Preferred Stock" )$ million of which are being offered
directly by the Company, and not through the Underwriters, to The Northwestern
Mutual Life Insurance Company, the sole owner of the NML Preferred Stock (as
defined herein) which had an accreted value as of February 14, 1998 of
$33,023,562, at a purchase price equal to the price to public (the "Preferred
Stock Offering") and shares of the Company's Class A Common Stock (the
"Stock Offering" and, together with the Debt Offering and the Preferred Stock
Offering, the "Offerings"). Consummation of each Offering is contingent upon
consummation of each of the other Offerings. A portion of the proceeds of the
Offerings will be used to repay the Credit Facility for which affiliates of
Lehman Brothers Inc. act as arranger and lender.
SEE "RISK FACTORS" ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS IN EVALUATING AN INVESTMENT IN THE
NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATIONS TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND THE
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
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Per Note........................................... % % %
Total.............................................. $ $ $
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(1) PLUS ACCRUED INTEREST, IF ANY, FROM THE DATE OF ISSUANCE.
(2) SEE "UNDERWRITING" FOR INDEMNIFICATION ARRANGEMENTS WITH THE UNDERWRITERS.
(3) BEFORE DEDUCTING EXPENSES OF THE DEBT OFFERING, PAYABLE BY THE COMPANY,
ESTIMATED AT $ .
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THE NOTES ARE OFFERED BY BEAR, STEARNS & CO. INC. AND LEHMAN BROTHERS INC.,
AS UNDERWRITERS (THE "UNDERWRITERS"), SUBJECT TO PRIOR SALE, WHEN, AS AND IF
DELIVERED TO AND ACCEPTED BY THE UNDERWRITERS, AND SUBJECT TO CERTAIN OTHER
CONDITIONS. THE UNDERWRITERS RESERVE THE RIGHT TO WITHDRAW, CANCEL OR MODIFY THE
OFFER AND TO REJECT ORDERS IN WHOLE OR IN PART. IT IS EXPECTED THAT THE NOTES
WILL BE AVAILABLE FOR DELIVERY IN NEW YORK, NEW YORK, ON OR ABOUT , 1998
IN BOOK-ENTRY FORM THROUGH THE FACILITIES OF THE DEPOSITORY TRUST COMPANY.
BEAR, STEARNS & CO. INC. LEHMAN BROTHERS
THE DATE OF THIS PROSPECTUS IS , 1998.
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CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENTS, STABILIZING BIDS AND SHORT COVERING TRANSACTIONS AND THE
IMPLEMENTATION OF PENALTY BIDS. SEE "UNDERWRITING."
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THE DEBT OFFERING
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ISSUER............................ Cumulus Media Inc.
SECURITIES OFFERED................ $ million in aggregate principal amount of % Senior
Subordinated Notes due 2008.
MATURITY.......................... , 2008.
INTEREST.......................... The Notes will bear interest at the rate of % per
annum, payable semi-annually in arrears on and
, commencing , 1998.
OPTIONAL REDEMPTION............... The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after
, 2003, at the redemption prices set forth herein,
plus accrued and unpaid interest, if any, to the date of
redemption. In addition, on or before , 2001, the
Company may redeem up to 35% of the original aggregate
principal amount of the Notes at a redemption price of
% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption, with
the net proceeds of one or more Equity Offerings;
PROVIDED, HOWEVER, that at least 65% of the original
aggregate principal amount of the Notes remains
outstanding following such redemption. See "Description
of Notes -- Optional Redemption."
CHANGE OF CONTROL OFFER........... Upon the occurrence of a Change of Control, the Company
will be required to make an offer to repurchase the
Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to
the date of repurchase. See "Description of Notes --
Repurchase at the Option of Holders -- CHANGE OF
CONTROL."
RANKING........................... The Notes will be general unsecured obligations of the
Company, subordinated in right of payment to all
existing and future Senior Debt of the Company,
including all obligations of the Company under the
Credit Facility. On a pro forma basis, after giving
effect to the Transactions as if they had occurred on
December 31, 1997, the Company would have had
outstanding $ million of Senior Debt. The Notes will be
effectively subordinated to all Indebtedness of the
Company's subsidiaries ($ million, on a pro forma basis
at December 31, 1997). See "Description of Notes --
Subordination."
CERTAIN COVENANTS................. The Indenture pursuant to which the Notes will be issued
(the "Indenture") will contain certain covenants that,
among other things, limit the ability of the Company and
its Restricted Subsidiaries to incur additional
Indebtedness, pay dividends or make other distributions,
repurchase any capital stock or subordinated
Indebtedness, make certain investments, create certain
liens, enter into certain transactions with affiliates,
sell assets or enter into certain mergers and
consolidations. In addition, the Indenture will contain
a covenant limiting the lines
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of business of certain Unrestricted Subsidiaries. See
"Description of Notes -- Certain Covenants."
SECURITY.......................... None.
USE OF PROCEEDS................... Approximately $ million of the net proceeds of
the Offerings will be used to finance the Pending
Acquisitions. The balance of the net proceeds of the
Offerings will be used to repay the principal amount of
Indebtedness currently outstanding under the Credit
Facility for which affiliates of Lehman Brothers Inc.
act as arranger and lender. See "Use of Proceeds" and
"Description of Credit Facility."
CONCURRENT OFFERINGS.............. Concurrently with the Debt Offering, the Company is
offering shares of its Class A Common Stock and
shares of its % Series A Cumulative Exchangeable
Redeemable Preferred Stock due 2009 (with a liquidation
preference of $1,000 per share). Each Offering is
conditioned upon consummation of each of the other
Offerings. See "Risk Factors -- Significant Capital
Requirements; Concurrent Offerings" and "Use of
Proceeds."
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RISK FACTORS
An investment in the Notes offered hereby involves a high degree of risk.
Prospective purchasers of the Notes offered hereby should carefully consider the
factors set forth in "Risk Factors", as well as the other information set forth
in this Prospectus, before making an investment in the Notes.
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RISK FACTORS
AN INVESTMENT IN THE NOTES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, AS
WELL AS THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, BEFORE MAKING AN
INVESTMENT IN THE NOTES OFFERED HEREBY.
RISKS OF ACQUISITION STRATEGY
The Company intends to pursue growth through internal expansion and the
acquisition of radio broadcasting companies, radio station groups and individual
radio stations in mid-size and smaller markets. The Company cannot predict
whether it will be successful in pursuing such acquisition opportunities or what
the consequences of any such acquisitions would be. The Company is currently
evaluating certain acquisitions; however, other than as described in "Pending
Acquisitions," the Company currently has no binding commitments to acquire any
specific business or other material assets. Consummation of the Pending
Acquisitions and any subsequent acquisitions is subject to various conditions,
including FCC and other regulatory approvals including, in some cases,
expiration or termination of applicable waiting periods and possible review by
the U.S. Department of Justice ("DOJ") and the Federal Trade Commission ("FTC")
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). There can be no assurance that any of these conditions will be
satisfied. Consummation of the Pending Acquisitions and any subsequent
acquisitions will also be subject to FCC limits on the number of stations a
broadcaster may own in a given local market and other FCC rules or policies such
as the cross-interest policy, which may limit the Company's ability to acquire
stations in certain markets where one or more of the Company's shareholders has
other media interests. In addition, in two markets in which there are Pending
Acquisitions (Augusta, GA and Dubuque, IA), petitions or informal objections
have been filed against the Company's FCC assignment applications and a third
objection is expected to be filed. All such petitions and objections must be
resolved before FCC approval can be obtained and the Pending Acquisitions can be
consummated.
The consummation of the Offerings is not conditioned on the consummation of
any of the Pending Acquisitions. No assurances can be given that such
transactions will be consummated or that, if completed, they will be successful.
The Company's acquisition strategy involves numerous risks, including
difficulties in identifying targets and negotiating definitive purchase
agreements on satisfactory terms, the integration of operations and systems and
the management of a large and geographically diverse group of stations, the
diversion of management's attention from other business concerns and the
potential loss of key employees at acquired stations. See "Business --
Integration of Acquired Businesses." There can be no assurance that the
Company's management will be able to manage effectively the resulting business
or that such acquisitions will benefit the Company. In addition, there can be no
assurance that the Company will be able to acquire properties at valuations as
favorable as previous acquisitions. Depending upon the nature, size and timing
of future acquisitions, the Company may be required to raise financing in
addition to the financing necessary to consummate the Pending Acquisitions.
There can be no assurance that the Credit Facility, the Indenture, the
Certificate of Designation (as defined herein) or the Exchange Debenture
Indenture (as defined herein) or any other agreements to which the Company may
become a party will permit such additional financing or that such additional
financing will be available to the Company or, if available, that such financing
would be on terms acceptable to its management. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations --Liquidity and
Capital Resources."
LIMITED OPERATING HISTORY; NET LOSS; MANAGEMENT OF RAPID GROWTH
The Company began operations in May 1997 and, consequently, has a limited
operating history and limited historical financial information upon which
investors may base their evaluation of the Company's performance. The Company
has grown very rapidly, through acquisitions, which will place significant
demands on its administrative, operational and financial resources. Although the
Company has been
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successful to date in completing the integration of many new properties, future
performance and profitability, if any, will depend in part on the Company's
continued ability to integrate successfully the operations and systems of
acquired radio stations and radio groups, to hire additional personnel, and to
implement necessary enhancements to its management systems to respond to changes
in its business. The inability of the Company to do any of the foregoing could
have a material adverse effect on the Company. See "Business." The Company had a
net loss attributable to common stockholders of approximately $3.9 million for
the period from inception on May 22, 1997 to December 31, 1997, and additional
losses can be expected to continue while the Company pursues its strategy of
acquiring and developing radio stations. Pro forma for the Transactions, net
loss attributable to common stockholders was approximately $27.7 million for the
year ended December 31, 1997. There can be no assurance that the Company will be
profitable in the future.
SIGNIFICANT CAPITAL REQUIREMENTS; CONCURRENT OFFERINGS
If consummated, the Pending Acquisitions and other acquisitions for which
the Company has entered into letters of intent will require substantial capital.
The Company estimates that it will have significant capital requirements for the
remainder of 1998, including approximately $260.5 million for the consummation
of the Pending Acquisitions. The Company expects that the net proceeds from the
Offerings, together with internally generated cash flows and borrowings under
the Credit Facility, will provide sufficient funds for the Company to complete
the Pending Acquisitions. The amount of the Company's future capital
requirements will depend upon many factors, however, including the volume of
future acquisitions, as well as regulatory, technological and competitive
developments in the radio broadcasting industry, and may differ materially from
the Company's current estimates.
The Company is currently offering the Notes, the Series A Preferred Stock
and Class A Common Stock pursuant to the Offerings. Consummation of each
Offering is contingent upon consummation of each of the other Offerings and
there can be no assurance that the Offerings will be consummated and, if so, on
what terms.
SUBSTANTIAL LEVERAGE
After giving effect to the Transactions, the Company will have consolidated
Indebtedness that is substantial in relation to its cash flow and stockholders'
equity. As of December 31, 1997, on a pro forma basis after giving effect to the
Transactions, the Company would have had outstanding, on a consolidated basis,
long-term Indebtedness (including current portion) of approximately $157.7
million, preferred stock subject to mandatory redemption of approximately $132.7
million and stockholders' equity of approximately $149.7 million. See
"Capitalization." The Credit Facility, the Indenture, the Certificate of
Designation and the Exchange Debenture Indenture, limit the incurrence of
additional indebtedness by the Company and its subsidiaries, in each case
subject to certain significant exceptions.
The level of the Company's Indebtedness could have several important
consequences to the holders of the Notes, including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from operations
will be dedicated to debt service and will not be available for other purposes;
(ii) the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions and general corporate or other purposes may
be impaired in the future; (iii) certain of the Company's borrowings will be at
variable rates of interest (including any borrowings under the Credit Facility),
which will expose the Company to the risk of increased interest rates; (iv) the
Company's leveraged position and the covenants contained in the Credit Facility,
the Indenture, the Certificate of Designation and the Exchange Debenture
Indenture could limit the Company's ability to compete, expand and make capital
improvements; (v) the Company's level of Indebtedness could make it more
vulnerable to economic downturns, limit its ability to withstand competitive
pressures and reduce its flexibility in responding to changing business and
economic conditions; and (vi) certain restrictive covenants contained in the
Credit
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Facility, the Indenture, the Certificate of Designation and the Exchange
Debenture Indenture limit the ability of Cumulus to pay dividends and make other
distributions to its stockholders.
ABILITY TO SERVICE DEBT OBLIGATIONS
The Company's ability to satisfy its debt service obligations, including the
Notes, will depend upon its future financial and operating performance, which,
in turn, is subject to prevailing economic conditions and financial, business
and other factors, certain of which are beyond its control. If the Company's
cash flow and capital resources are insufficient to fund its debt service
obligations, the Company may be forced to reduce or delay planned acquisitions,
expansion and capital expenditures, sell assets, obtain additional equity
capital or restructure its debt. There can be no assurance that the Company's
operating results, cash flow and capital resources will be sufficient for
payment of its debt service and other obligations in the future. In the absence
of such operating results and resources, the Company could face substantial
liquidity problems and might be required to sell material assets or operations
to meet its debt service and other obligations, and there can be no assurance as
to the timing of such sales or the proceeds that the Company could realize
therefrom or that such sales could be effected on terms satisfactory to the
Company or at all. As a result of the net loss attributable to common
stockholders, earnings were insufficient to cover fixed charges and preferred
stock dividend requirements by $3,785 for the period from inception on May 22,
1997 to December 31, 1997. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition -- Liquidity and Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS AND PREFERRED STOCK
The Credit Facility, the Indenture, the Certificate of Designation and the
Exchange Debenture Indenture contain certain covenants that restrict, among
other things, the ability of the Company and its subsidiaries to incur
additional indebtedness, pay dividends or make certain other restricted
payments, enter into certain transactions with affiliates, merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company. In addition,
the Credit Facility, the Indenture and the Exchange Debenture Indenture also
restrict the ability of the Company to incur liens or to consummate certain
asset sales. The Credit Facility also requires the Company to maintain specified
financial ratios and to satisfy certain financial condition tests. The Company's
ability to meet those financial ratios and financial condition tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet those tests. A breach of any of these covenants could result
in a default under the Credit Facility, the Indenture, the Certificate of
Designation and/or the Exchange Debenture Indenture. Upon the occurrence of an
event of default under the Credit Facility, the lenders thereunder could elect
to declare all amounts outstanding thereunder, together with accrued interest,
to be immediately due and payable. If Cumulus were unable to repay those
amounts, the lenders under the Credit Facility could proceed against the
collateral granted to them to secure that indebtedness. If the Indebtedness
under the Credit Facility were to be accelerated, there can be no assurance that
the assets of Cumulus would be sufficient to repay in full such Indebtedness and
the other Indebtedness of the Company, including the Notes. The ability of the
Company to comply with the restrictions and covenants in the Credit Facility,
the Indenture, the Certificate of Designation and the Exchange Debenture
Indenture will be dependent upon the Company's future performance and various
other factors, including factors beyond its control. If the Company fails to
comply with the restrictions and covenants in the Credit Facility, the
Indenture, the Certificate of Designation or the Exchange Debenture Indenture,
the Company's obligation to repay the Notes, the Exchange Debentures and its
Indebtedness under the Credit Facility may be accelerated.
RANKING OF THE NOTES; ASSET ENCUMBRANCES; STRUCTURAL SUBORDINATION
The Notes will be unsecured senior subordinated obligations of the Company
and, as such, will be subordinated in right of payment to all future Senior Debt
of the Company, including Indebtedness under
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the Credit Facility. The Notes will rank PARI PASSU in right of payment with all
other senior subordinated indebtedness, if any, of the Company. As of December
31, 1997, on a pro forma basis after giving effect to the Transactions, the
Company would have had approximately $ million in aggregate principal
amount of Indebtedness (as defined herein) outstanding which would have ranked
senior in right of payment to the Notes ($ of which would have been
secured) and $ Indebtedness outstanding which would have ranked PARI
PASSU in right of payment with the Notes. In addition, on such a pro forma
basis, at December 31, 1997, the Company would have had available an additional
$ million under the Credit Facility and, provided certain tests were
met, would have been able to borrow additional Senior Debt.
By reason of such subordination, in the event of the insolvency,
liquidation, reorganization, dissolution or other winding-up of the Company or
upon a default in payment with respect to, or the acceleration of, any Senior
Debt, the holders of such Senior Debt and any other creditors who are holders of
Senior Debt and creditors of subsidiaries must be paid in full before the
holders of the Notes may be paid. If the Company incurs additional PARI PASSU
debt, the holders of such debt would be entitled to share ratably with the
holders of the Notes in any proceeds distributed in connection with any
insolvency, liquidation, reorganization, dissolution or other winding-up of the
Company. This will have the effect of reducing the amount of proceeds paid to
holders of the Notes. In addition, no payments may be made with respect to the
principal of or interest on the Notes if a payment default exists with respect
to Designated Senior Debt (as defined herein) and, under certain circumstances,
no payments may be made with respect to the principal of or interest on the
Notes for certain periods of time if a non-payment default exists with respect
to Designated Senior Debt. See "Description of the Notes -- Subordination."
The Company conducts its business through its subsidiaries and has no
operations of its own. Consequently, the Company will be dependent on the cash
flow of such subsidiaries and distributions thereof from such subsidiaries to
the Company in order to meet its debt service obligations. As a result of the
structure of the Company, the holders of the Notes will be structurally
subordinated to all creditors of those subsidiaries of the Company. The
Company's rights, and the rights of its creditors, to participate in the
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization will be subject to the prior claims of such subsidiary's
creditors, except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subject to the claims of any secured creditor of such subsidiary of any
holder of indebtedness of such subsidiary senior to that held by the Company. As
of December 31, 1997, on a pro forma basis after giving effect to the
Transactions, there would have been $ Indebtedness of the Company's
subsidiaries outstanding.
The Company's obligations under the Credit Facility are secured by security
interests in substantially all of the current and future assets of the Company
and its domestic subsidiaries (including, to the extent permitted by applicable
law, FCC licenses held by such subsidiaries). In the event of a default on
secured Indebtedness (whether as a result of the failure to comply with a
payment or other covenant, a cross-default, or otherwise), the parties granted
such security interests will have a prior secured claim on the assets securing
such indebtedness. Moreover, if such parties should attempt to foreclose on
their collateral, it is possible that there may not be sufficient assets
remaining after satisfaction in full of all such Indebtedness to satisfy in full
or in part the claims of the holders of the Notes and the Company's financial
condition and the value of the Notes could be materially adversely affected. See
"Description of Credit Facility and Notes."
PURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon a Change of Control (as defined herein), the Company may be required to
offer to purchase all of the outstanding Notes at 101% of the principal amount
thereof plus accrued and unpaid interest to the date of purchase. The source of
funds for any such purchase would be the Company's available cash or cash
generated from other sources. However, there can be no assurance that sufficient
funds would be
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available at the time of any Change of Control to make any required purchases of
Notes tendered or, if applicable, that restrictions in the Credit Facility would
permit the Company to make such required purchases. The Credit Facility will
require that the Company repay all amounts outstanding under the Credit Facility
prior to making any payments on the Notes upon a Change of Control. The
Indenture may not afford holders of Notes the right to require the Company to
repurchase the Notes in the event of certain transactions, such as a highly
leveraged transaction, that may adversely affect holders of Notes if such
transaction is not a transaction defined as a Change of Control. Certain events
involving a Change of Control may result in an event of default under the Credit
Facility or other Indebtedness of the Company that may be incurred in the
future. The Company's failure to purchase tendered Notes would constitute an
Event of Default under the Indenture and the Credit Facility, which could have
adverse consequences for the Company and the holders of the Notes. The
definition of "Change of Control" in the Indenture includes a sale, lease,
conveyance or other disposition of "all or substantially all" of the assets of
the Company and its Subsidiaries taken as a whole to a person or group of
persons. There is little case law interpreting the phrase "all or substantially
all" in the context of an indenture. Because there is no precise established
definition of this phrase, the ability of a holder of the Notes to require the
Company to repurchase such Notes as a result of a sale, lease, conveyance or
transfer of all or substantially all of the Company's assets to a person or
group of persons may be uncertain. See "Description of the Notes -- Repurchase
at the Option of Holders."
FRAUDULENT CONVEYANCE RISKS
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the obligation
of, or liens securing, the Notes in favor of other existing or future creditors
of the Company.
Under applicable provisions of Federal bankruptcy law or comparable
provisions of state fraudulent transfer laws and state corporation law statutes,
if, among other things, the Company, at the time it incurred the Indebtedness
evidenced by the Notes, (i)(a) was or is insolvent or rendered insolvent by
reason of such occurrence or (b) was or is engaged or about to become engaged in
a business or transaction for which the assets remaining with the Company
constituted unreasonably small capital or (c) intended or intends to incur, or
believed or believes that it would incur, debts beyond its ability to pay such
debts as they mature or (d) was a defendant in an action for money damages or
had a judgment for money damages docketed against it (if, in either case, after
final judgment, the judgment is unsatisfied), and (ii) the Company received or
receives less than reasonably equivalent value or fair consideration for the
incurrence of the Indebtedness evidenced by the Notes, any pledge or other
security interest securing such Indebtedness could be voided, or claims in
respect of the Notes or the other security interest securing such Indebtedness
could be voided, or claims in respect of the Notes could be subordinated to all
other debts of the Company. The voiding or subordination of any of such pledges
or other security interests or of any of such Indebtedness could result in
acceleration thereof. In addition, the payment of interest and principal by the
Company pursuant to the Notes could be voided and required to be returned to the
person making such payment, or to a fund for the benefit of the creditors of the
Company.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company would be considered insolvent if (i)
the sum of its debts, including contingent liabilities, was greater than the
fair saleable value of all of its assets at a fair valuation or if the present
fair saleable value of its assets was less than the amount that would be
required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or (ii) it could not
pay its debts as they become due.
On the basis of the pro forma financial information included in this
Prospectus and other factors, the Company believes that after giving effect to
the Indebtedness being incurred in connection with the Notes, the Company will
be solvent and will continue to be solvent after issuing the Notes, will have
sufficient
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capital for carrying on its business after such issuance and will be able to pay
its debts as they mature. There can be no assurance, however, as to what
standard a court would apply in making such determinations.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes will be new securities for which there currently is no established
trading market. The Company does not intend to apply for listing of the Notes on
any national securities exchange or for quotation of the Notes on any automated
dealer quotation system. Although the Underwriters have informed the Company
that they currently intend to make a market in the Notes, the Underwriters are
not obligated to do so, and any such market making may be discontinued at any
time without notice. The liquidity of any market for the Notes will depend upon
the number of holders of the Notes, the interest of securities dealers in making
a market in the Notes and other factors. Accordingly, there can be no assurance
as to the development or liquidity of any market for the Notes. If an active
trading market for the Notes does not develop, the market price and liquidity of
the Notes may be adversely affected. If the Notes are traded, they may trade at
a discount from their initial offering price, depending upon prevailing interest
rates, the market for similar securities, the performance of the Company and
certain other factors. The liquidity of, and trading markets for, the Notes may
also be adversely affected by general declines in the market for non-investment
grade debt. Such declines may adversely affect the liquidity of, and trading
markets for, the Notes, independent of the financial performance of or prospects
for the Company.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the Notes. There can be no assurance that the market, if any, for the
Notes will not be subject to similar disruptions. Any such disruptions may have
an adverse effect on the holders of the Notes.
BUSINESS RISKS
Future operations of the Company are subject to many variables which could
have a material adverse effect upon the Company's financial performance. These
variables include economic conditions, both generally and relative to the radio
broadcasting industry; shifts in population and other demographics; shifts in
audience tastes; the level of competition for advertising dollars with other
radio stations, television stations and other entertainment and communications
media; fluctuations in operating costs; technological changes and innovations;
changes in labor conditions; and changes in laws and governmental regulations
and policies and actions of federal regulatory bodies, including the DOJ, the
FTC and the FCC. Although the Company believes that substantially all of its
radio stations, now owned or to be acquired upon completion of the Pending
Acquisitions, are positioned to compete effectively in their respective markets,
there can be no assurance that any such station will be able to maintain or
increase its current audience ratings and advertising revenues. See "Business
- --Competition." Radio broadcasting 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 the introduction of digital
audio broadcasting ("DAB"). DAB may deliver by satellite to nationwide and
regional audiences multi-channel, multi-format digital radio services with sound
quality equivalent to compact discs and may sell advertising. The Company cannot
predict the effect, if any, that any such new technologies may have on the radio
broadcasting industry or the Company. See "Business -- Competition."
COMPETITION
Radio broadcasting is a highly competitive business. The Company's radio
stations, now owned or to be acquired upon completion of the Pending
Acquisitions, compete for audiences and advertising revenues within their
respective markets directly with other radio stations, as well as with other
media, such as newspapers, magazines, cable and broadcast television, outdoor
advertising and direct mail. In addition, certain of the Company's stations
compete, and in the future other of the Company's stations may
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compete, with groups of two or more stations operated by a single operator.
Audience ratings and market shares are subject to change and any adverse change
in a particular market could have a material adverse effect on the revenue of
stations located in that market. While the Company already competes with other
stations with comparable programming formats in many of its markets, if another
radio station in the market were to convert its programming format to a format
similar to one of the Company's stations, or launch aggressive promotional
campaigns, or if a new station were to adopt a competitive format, or if an
existing competitor were to strengthen its operations, the Company's stations
could suffer a reduction in ratings and/or advertising revenue and could require
increased promotional and other expenses, and consequently would have a lower
Broadcast Cash Flow. The Telecommunications Act of 1996 (the "Telecom Act")
facilitates the consolidation of ownership of other radio broadcasting stations
in the markets in which the Company operates or may operate in the future. Some
of such competing in-market consolidated owners may be larger and have
substantially more financial and other resources than the Company. In addition,
increased consolidation in mid-size and smaller markets may result in greater
competition for acquisition properties and a corresponding increase in purchase
prices for such properties paid by the Company. See "Business--Competition."
GOVERNMENTAL REGULATION OF BROADCASTING INDUSTRY
The broadcasting industry is subject to extensive and changing federal
regulation that, among other things, requires approval by the FCC for the
issuance, renewal, modification, transfer of control, or assignment of
broadcasting station operating licenses, limits the number of broadcasting
properties that the Company may acquire in any market, and regulates certain
operating practices of radio stations. Additionally, the Communications Act of
1934, as amended (the "Communications Act") and FCC rules impose limitations on
alien ownership and voting of the capital stock of the Company. The Telecom Act
creates significant new opportunities for broadcasting companies but also
creates uncertainties as to how the FCC and the courts will enforce and
interpret the Telecom Act.
The number of radio stations the Company may acquire or operate pursuant to
an LMA in any market, overall and in each service (i.e., AM or FM), is limited
by the Telecom Act and FCC rules and may vary depending upon whether the
interests in other radio stations or certain other media properties of certain
individuals or entities affiliated with the Company are attributable to those
individuals or entities under FCC rules. The FCC generally applies its ownership
limits to "attributable" interests held by an individual, corporation,
partnership or other association. The interests of the Company's officers,
directors and 5% or greater voting stockholders are generally attributable to
the Company. Certain of the Company's officers and directors, and at least one
stockholder of the Company, have attributable broadcast interests outside of
their involvement with the Company, which will limit the number of radio
stations that the Company may acquire or own in any market in which such
officers or directors (or stockholders) hold or acquire such outside
attributable broadcast interests. Moreover, under the FCC's cross-interest
policy, the FCC, in certain instances, may prohibit one party from acquiring an
attributable interest in one media outlet and a substantial non-attributable
interest in another media outlet in the same market, thereby prohibiting a
particular acquisition by the Company. The markets in which the Company may be
subject to restrictions on ownership include Atlanta, GA, Nashville, TN and
Rochester, MN.
The consummation of radio broadcasting acquisitions requires prior approval
of the FCC with respect to the transfer of control or assignment of the
broadcast licenses of the acquired stations. Certain of the Pending Acquisitions
have not yet received FCC approval. Two Pending Acquisitions are being
challenged before the FCC by a competitor, and another is expected to be
challenged. There can be no assurance that the FCC will approve future
acquisitions by the Company (including the Pending Acquisitions). The
consummation of certain of the Pending Acquisitions is also subject to
applicable waiting periods and possible review by the DOJ or the FTC under the
HSR Act and acquisitions that are not required to be reported under the HSR Act
may still be investigated by the FTC or the DOJ under the antitrust laws before
or after consummation. The DOJ has been active in reviewing radio broadcasting
acquisitions and
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has challenged a number of such transactions, some of which have resulted in
consent decrees requiring divestitures of certain stations, terminations of LMAs
and other relief. In general, the DOJ has more closely scrutinized radio mergers
and acquisitions that result in local market shares in excess of 35% of radio
advertising revenues, depending on format, signal strength and other factors,
although there is no hard-and-fast numerical rule and certain transactions
resulting in more than 35% market share have not been challenged. The DOJ can be
expected to continue to enforce the antitrust laws in this manner, and there can
be no assurance that one or more of the Pending Acquisitions will not be the
subject of an investigation or enforcement action by the DOJ or the FTC. If the
DOJ or the FTC investigates or challenges one or more of the Pending
Acquisitions or any subsequent acquisitions, the Company may need to restructure
such transactions or divest other existing stations in a particular market.
However, the Company believes that its operating practices and sales and
demand-driven pricing policies serve to expand advertising volume and increase
competition in a market while providing more choice to advertisers and to
listeners.
The Company's business will be dependent upon maintaining its broadcasting
licenses issued by the FCC, which are ordinarily issued for a maximum term of
eight years. Although it is rare for the FCC to deny a license renewal
application, there can be no assurance that the future renewal applications of
the Company will be approved or that such renewals will not include conditions
or qualifications that could adversely affect the Company. Moreover,
governmental regulations and policies may change over time and there can be no
assurance that such changes would not have a material adverse impact upon the
Company. See "Business --Federal Regulation of Radio Broadcasting."
REGULATORY APPROVAL
The Company believes that the consummation of the Reorganization and the
Offerings will require the prior consent of the FCC. The process of obtaining
such consent will involve the application therefore being placed on public
notice, and the public may file objections to such application. In addition, the
FCC itself may decline to grant the application based upon its own review. There
can be no assurance that such consent ultimately will be granted. While the
Company believes that it might be able to obtain the required FCC consent on a
so-called "short-form" application, there is no assurance that the FCC will not
require a "long-form" application. A "long-form" application, if required, will
involve a longer processing period, will be subject to formal petitions to deny
by other parties, and will involve a more detailed review by the FCC, all of
which would increase the risk that FCC consent would be delayed or denied.
POTENTIAL CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES
Mr. Weening and Mr. Dickey each have direct interests in entities that have
entered into service agreements with the Company. These interests may give rise
to certain conflicts of interest with respect to transactions between these
entities and the Company.
QUAESTUS, an entity controlled by Mr. Weening, and Stratford Research, an
entity controlled by Mr. Dickey, have acted as the Company's financial and
strategic advisor and market research and programming advisor, respectively,
since the Company's inception. New advisory agreements between each of QUAESTUS
and Stratford Research and the Company will be entered into immediately prior to
the consummation of the Offerings. See "Certain Relationships and Related
Transactions."
EFFECTS OF ECONOMIC RECESSION
The Company derives substantially all of its revenue from the sale of
advertising time on its radio stations. The Company's broadcasting revenue could
be adversely affected by a future national recession, although in the most
recent national recession, in 1991, radio revenues in small radio markets ranked
below 100 were impacted less severely on average than those in the larger
markets. In addition, because a substantial portion of the Company's revenue is
derived from local advertisers, the Company's ability to
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generate advertising revenue in specific markets could be adversely affected by
local or regional economic downturns. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Advertising
Sales."
YEAR 2000 RISK
The Company has implemented a Year 2000 program to ensure that the Company's
computer systems and applications will function properly beyond 1999. The
Company believes that it has allocated adequate resources for this purpose and
expects its Year 2000 date conversion program to be successfully completed on a
timely basis. There can, however, be no assurance that this will be the case.
The Company does not expect to incur significant expenditures to address this
issue. The ability of third parties with whom the Company transacts business to
adequately address their Year 2000 issues is outside of the Company's control.
There can be no assurance that the failure of the Company or such third parties
to adequately address their respective Year 2000 issues will not have a material
adverse effect on the Company's business, financial condition, cash flows and
results of operations.
RELIANCE ON KEY PERSONNEL
The Company's business is managed by a small number of key management and
operating personnel, the loss of certain of whom could have a material adverse
effect on the Company. The Company believes that its future success will depend
in large part on its ability to attract and retain highly skilled and qualified
personnel and to expand, train and manage its employee base. The Company has
entered into employment agreements with Messrs. Weening, Dickey, Bungeroth and
Bonick which include provisions restricting the ability of Messrs. Weening,
Dickey, Bungeroth and Bonick to compete against the Company in certain
circumstances. The Company intends to arrange for "key-man" insurance on the
lives of Messrs. Weening, Dickey and Bungeroth. See "Management -- Employment
Agreements."
The Company also employs several on-air personalities with large loyal
audiences in their respective markets. The loss of one of these personalities
could result in a short-term loss of audience share, but the Company does not
believe that any such loss would have a material adverse effect on the Company's
financial condition or results of operations, taken as a whole.
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DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to an Indenture (the "Indenture") between
the Company and , as trustee (the "Trustee"). Copies of the Indenture will
be made available to prospective purchasers of the Notes upon request. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Notes are subject to all such terms, and Holders of
the Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summary of certain provisions of the Indenture
does not purport to be complete and is qualified in its entirety by reference to
the Indenture, including the definitions therein of certain terms used below.
The definitions of certain terms used in the following summary are set forth
below under "-- Certain Definitions."
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to Senior Debt. As of , 1998, on a pro
forma basis after giving effect to the Transactions, the Company would have had
Senior Debt of approximately $ million. The Indenture will permit the
incurrence of additional Senior Debt in the future.
For purposes of this section, the term "Company" means Cumulus Media Inc.
and not its Subsidiaries. As of the date of the Indenture, all of the Company's
Subsidiaries will be Restricted Subsidiaries. Under certain circumstances, the
Company will be able to designate current and future Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to many
of the restrictive covenants set forth in the Indenture. See "--Certain
Covenants."
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes and
any other payment obligations of the Company in respect of the Notes (including
any obligation to repurchase the Notes) will be subordinated in certain
circumstances in right of payment, as set forth in the Indenture, to the prior
payment in full in cash of all Senior Debt, whether outstanding on the date of
the Indenture or thereafter incurred.
Upon any payment or distribution of property or securities to creditors of
the Company in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, or in an assignment for the benefit of creditors or any
marshalling of the Company's assets and liabilities, the holders of Senior Debt
will be entitled to receive payment in full of all Obligations due in respect of
such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt, whether or not a
claim for such interest would be allowed in a proceeding) before the Holders of
the Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Debt are paid in full, any
distribution to which the Holders of the Notes would be entitled shall be made
to the holders of Senior Debt (except in each case that Holders of the Notes may
receive securities that are subordinated at least to the same extent as the
Notes are subordinated to Senior Debt (or securities issued in exchange for
Senior Debt) and payments made from the trust described under "-- Legal
Defeasance and Covenant Defeasance").
The Company also may not make any payment (whether by redemption, purchase,
retirement, defeasance or otherwise) upon or in respect of the Notes (except in
such subordinated securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if (i) a default in the payment of the
principal of, premium, if any, or interest on Designated Senior Debt occurs,
(ii) any other default on Senior Debt occurs and the maturity of such Senior
Debt is accelerated in accordance with its terms (together with clause (i), a
"payment default") or (iii) any other default occurs and is continuing with
respect to Designated Senior Debt that permits, or with the giving of notice or
passage of time or both
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(unless cured or waived) will permit, holders of the Designated Senior Debt as
to which such default relates to accelerate its maturity ("non-payment default")
and (solely with respect to this clause (iii)) the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or the holders of
any Designated Senior Debt. Cash payments on the Notes shall be resumed (a) in
the case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived, the date on which the applicable
Payment Blockage Notice is retracted by written notice to the Trustee or 179
days after the date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Senior Debt has been accelerated or a
default of the type described in clause (vii) under the caption "Events of
Default" has occurred and is continuing. No new period of payment blockage may
be commenced unless and until 360 days have elapsed since the date of
commencement of the payment blockage period resulting from the immediately prior
Payment Blockage Notice. No nonpayment default in respect of Designated Senior
Debt that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice unless such default shall have been cured or waived for
a period of no less than 181 days.
The Indenture will further require that the Company promptly notify holders
of Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency of the Company, Holders of the Notes may recover
less ratably than creditors of the Company who are holders of Senior Debt. On a
pro forma basis, after giving effect to the Transactions, the principal amount
of Senior Debt outstanding at , 1998 would have been approximately
$ million, which includes $ million of borrowings under the Credit
Facility. See "Description of Credit Facility." In addition, as of , 1998 on a
pro forma basis, the Company will have approximately $ million of undrawn
availability under the Credit Facility. Although the Indenture contains
limitations on the amount of additional Indebtedness, including Senior Debt,
that the Company and its Subsidiaries may incur, under certain circumstances the
amount of such Indebtedness may be substantial and, in any case, such
Indebtedness may be Senior Debt. See "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $100.0 million,
all of which will be issued on the Issue Date. The Notes will mature on
, 2008. Interest on the Notes will accrue at the rate of % per annum
and will be payable semi-annually in arrears on and of each year,
commencing on , 1998, to Holders of the Notes of record on the immediately
preceding and . Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Principal, premium, if any, and interest on the Notes will be
payable at the office or agency of the Company maintained for such purpose
within the City and State of New York or, in the event the Notes do not remain
in book entry form, at the option of the Company, payment of interest may be
made by check mailed to the Holders of the Notes at their respective addresses
set forth in the applicable register of Holders of the Notes. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The Notes will be fully
registered as to principal and interest in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof.
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OPTIONAL REDEMPTION
Except as otherwise described below, the Notes will not be redeemable at the
Company's option prior to , 2003. Thereafter, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -------------
<S> <C>
2003.............................................................................. %
2004.............................................................................. %
2005.............................................................................. %
2006 and thereafter............................................................... 100%
</TABLE>
Prior to , 2001, the Company may, at its option, on any one or
more occasions, redeem up to 35% of the original aggregate principal amount of
the Notes at a redemption price equal to % of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the redemption
date, with all or a portion of the net proceeds of one or more Equity Offerings
(as defined below); PROVIDED that at least 65% of the original aggregate
principal amount of the Notes remains outstanding immediately after the
occurrence of such redemption; and PROVIDED, FURTHER, that such redemption shall
occur within 90 days of the date of the closing of any such Equity Offering.
As used in the preceding paragraph, "Equity Offering" means any public or
private sale of Common Stock of the Company pursuant to which the Company
receives net proceeds of at least $25.0 million, other than issuances of Common
Stock of the Company pursuant to employee benefit plans or as compensation to
employees.
SELECTION AND NOTICE
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed, or, if such
Notes are not so listed, on a pro rata basis, by lot or by such method as such
Trustee shall deem fair and appropriate; PROVIDED that no Note of $1,000 or less
shall be redeemed in part. Notices of redemption shall be mailed by first class
mail at least 30 but not more than 60 days before the redemption date to each
Holder of the Notes to be redeemed at its registered address. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original Note. On and
after the redemption date, interest will cease to accrue on the Notes or
portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of the Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
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cash equal to 101% of the aggregate principal amount of the Notes plus accrued
and unpaid interest, if any, thereon to the date of purchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, the Company
will (i) mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offer to repurchase the Notes pursuant
to the procedures required by the Indenture and described in such notice on a
date no earlier than 30 days nor later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date") and (ii) (a) offer to repay in
full all Obligations under the Credit Facility and to repay in full all
Obligations of each lender who has accepted such offer or (b) obtain the
requisite consent under agreements evidencing Senior Debt to permit the purchase
of the Notes as described herein. The Company will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all the Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the relevant Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of such Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each Holder of
the Notes so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each tendering Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the Indenture
will not contain provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Company and purchases all
Notes (or portions thereof) validly tendered and not withdrawn under such Change
of Control Offer.
The Credit Facility will prohibit the Company from repurchasing any Notes
pursuant to a Change of Control Offer prior to the repayment in full of the
Senior Debt under the Credit Facility. Moreover, the occurrence of certain
change of control events identified in the Credit Facility will constitute a
default under the Credit Facility. Any future Credit Agreements or other
agreements relating to the Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. If a Change of Control were to
occur, the Company may not have sufficient available funds to pay the Change of
Control Payment for all Notes that might be delivered by Holders of the Notes
seeking to accept the Change of Control Offer after first satisfying its
obligations under the Credit Facility or other agreements relating to Senior
Debt. The failure of the Company to make or consummate the Change of Control
Offer or pay the Change of Control Payment when due will constitute a Default
under the Indenture and will otherwise give the Trustee and the Holders of the
Notes the rights described under "--Events of Default and Remedies."
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of the Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer,
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conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the
Company or the Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the fair market value (as
determined in good faith by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee, which determination shall be
conclusive evidence of compliance with this provision) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet), of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (y) any non-cash
consideration received by the Company or any such Restricted Subsidiary from
such transferee that are converted by the Company or such Restricted Subsidiary
into cash within 30 days of closing such Asset Sale, shall be deemed to be cash
for purposes of this provision (to the extent of the cash received).
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Restricted Subsidiary may apply such Net Proceeds, at its
option, (a) to permanently reduce Senior Debt (and to correspondingly
permanently reduce commitments with respect thereto in the case of revolving
borrowings), or (b) to an investment in any one or more businesses, capital
expenditures or acquisitions of other assets, in each case, used or useful in a
Permitted Business. Pending the final application of any such Net Proceeds, the
Company may temporarily reduce Senior Debt that is revolving debt or otherwise
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied as provided in the first
sentence of this paragraph will (after the expiration of the periods specified
in this paragraph) be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0 million, the
Company will be required to make an offer to all Holders of the Notes and, to
the extent required by the terms thereof, to all holders or lenders of Pari
Passu Indebtedness (an "Asset Sale Offer") to purchase the maximum principal
amount of the Notes and any such Pari Passu Indebtedness to which the Asset Sale
Offer applies that may be purchased out of the Excess Proceeds, at an offer
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon to the date of purchase, in accordance with the
procedures set forth in the Indenture or the agreements governing the Pari Passu
Indebtedness, as applicable. To the extent that the aggregate principal amount
of the Notes and Pari Passu Indebtedness tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
the Notes surrendered by Holders thereof and other Pari Passu Indebtedness
surrendered by holders or lenders thereof, collectively, exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and the trustee or other
lender representative for the Pari Passu Indebtedness shall select the Pari
Passu Indebtedness to be purchased on a pro rata basis, based on the aggregate
principal amount thereof surrendered in such Asset Sale Offer. Upon completion
of such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
The Credit Facility may prohibit the Company from purchasing any Notes from
the Net Proceeds of Asset Sales. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event an Asset Sale Offer
occurs at a time when the Company is prohibited from purchasing the Notes, the
Company could seek the consent of its lenders to the purchase or could attempt
to refinance the Senior Debt that contains such
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prohibition. If the Company does not obtain such a consent or repay such Senior
Debt, the Company may remain prohibited from purchasing the Notes. In such case,
the Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture which would, in turn, constitute a default under the
Credit Facility and possibly a default under other agreements relating to Senior
Debt. In such circumstances, the subordination provisions in the Indenture would
likely restrict payments to the Holders of the Notes.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any other payment or distribution on account of the
Company's Equity Interests (including, without limitation, any payment to
holders of the Company's Equity Interests in connection with any merger or
consolidation involving the Company) to the direct or indirect holders of the
Company's Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any direct or indirect parent or other
Affiliate of the Company that is not a Wholly Owned Restricted Subsidiary of the
Company; (iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Notes, except at final maturity; or (iv) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the test set
forth in the first paragraph of the covenant described below under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (2), (3),(5),(6) and (7) of the next succeeding paragraph), is less
than the sum of (i) (A) 100% of the aggregate Consolidated Cash Flow of the
Company (or, in the event such Consolidated Cash Flow shall be a deficit,
minus 100% of such deficit) accrued for the period beginning on the first
day of the Company's fiscal quarter commencing after the Issue Date and
ending on the last day of the Company's most recent fiscal quarter for which
financial information is available to the Company ending prior to the date
of such proposed Restricted Payment, taken as one accounting period, less
(B) 1.4 times Consolidated Interest Expense for the same period, PLUS (ii)
100% of the aggregate net cash proceeds and the fair market value of
marketable securities (as determined in good faith by the Company) received
by the Company from the issue or sale since the date of the Indenture of
Equity Interests of the Company or of debt securities of the Company that
have been converted into or exchanged for such Equity Interests (other than
Equity Interests (or convertible debt securities) sold to a Subsidiary of
the Company, other than Disqualified Stock or debt securities that have been
converted into Disqualified Stock and other than the Common Stock issued in
the Common Stock Offering), PLUS (iii) to the extent that any Restricted
Investment that was made after the date of the Indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser of (A) the net proceeds
of such sale, liquidation or repayment and (B) the amount of such Restricted
Investment, PLUS (iv) $5.0 million.
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The foregoing provisions will not prohibit (1) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (2) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified Stock);
PROVIDED that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c)(ii) of the preceding paragraph; (3) the defeasance, redemption
or repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of subordinated Permitted Refinancing Debt or the substantially
concurrent sale (other than to a Subsidiary of the Company) of Equity Interests
of the Company (other than Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (4) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Subsidiary of
the Company held by any of the Company's (or any of its Subsidiaries') employees
pursuant to any management equity subscription agreement or stock option
agreement in effect as of the date of the Indenture in connection with the
termination of such person's employment for any reason (including by reason of
death or disability); provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$500,000 in any twelve-month period; and PROVIDED FURTHER that no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction; (5) repurchases of Equity Interests deemed to occur upon exercise
of stock options if such Equity Interests represent a portion of the exercise
price of such options; (6) (a) the issuance by the Company of shares of Series A
Preferred Stock as dividends paid in kind on the Series A Preferred Stock and
(b) commencing , 2003, the payment of cash dividends by the Company on the
Series A Preferred Stock or on any Preferred Stock issued in exchange for the
Series A Preferred Stock, or any dividends on such Preferred Stock to the extent
such dividends are made pursuant to the terms of the Certificate of Designation
of such Preferred Stock, so long as the Company would be able to Incur, on a pro
forma basis, an additional $1.00 of Indebtedness under "Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock"; and (7) the
exchange of Series A Preferred Stock for Exchange Debentures in accordance with
the terms of the Certificate of Designation for such Series A Preferred Stock as
in effect on the Issue Date; PROVIDED, HOWEVER, that the Company may only effect
such exchange so long as the Company would be able to Incur, on a pro forma
basis, an additional $1.00 of Indebtedness under " -- Incurrence of Indebtedness
and Issuance of Preferred Stock."
The amount of all Restricted Payments (other than cash) shall be the fair
market value (as determined in good faith by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee, which
determination shall be conclusive evidence of compliance with this provision) on
the date of the Restricted Payment of the asset(s) proposed to be transferred by
the Company or the applicable Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment. Not later than five days after the date of
making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed.
DESIGNATION OF UNRESTRICTED SUBSIDIARIES
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under clause (c) of the first paragraph of the covenant
"Restricted Payments." All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the greater of the fair market
value or the book value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Company's Leverage Ratio at the time of the incurrence of such
Indebtedness, after giving pro-forma effect thereto and to the use of proceeds
therefrom, is less than 7.0 to 1:
Notwithstanding the foregoing, the Indenture will not prohibit any of the
following (collectively, "Permitted Indebtedness"): (a) the Indebtedness
evidenced by the Notes; (b) the incurrence by the Company of Indebtedness
pursuant to Credit Agreements, so long as the aggregate principal amount of all
Indebtedness outstanding under all Credit Agreements does not, at any one time,
exceed $190 million, less the aggregate amount of all proceeds from all Asset
Sales that have been applied since the date of the Indenture to permanently
reduce the outstanding amount of such Indebtedness pursuant to the provisions
described under the caption "Repurchase at the Option of Holders -- Asset
Sales"; (c) all Indebtedness of the Company and its Restricted Subsidiaries in
existence as of the date of the Indenture; (d) intercompany Indebtedness between
or among the Company and any of its Wholly Owned Restricted Subsidiaries;
PROVIDED, HOWEVER, that (i) if the Company is the obligor on such Indebtedness,
such Indebtedness is expressly subordinate to the payment in full of all
Obligations with respect to the Notes and (ii)(A) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being held by
a Person other than the Company or a Wholly Owned Restricted Subsidiary and (B)
any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Restricted Subsidiary shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be; (e) the incurrence by the
Company or its Restricted Subsidiaries of Indebtedness represented by Capital
Lease Obligations, mortgage financings or purchase money obligations, in each
case incurred for the purpose of financing all or any part of the purchase
price, lease or cost of construction or improvement of property, plant or
equipment used in a Permitted Business in an aggregate principal amount not to
exceed $15.0 million at any time outstanding; (f) the incurrence by the Company
or its Restricted Subsidiaries of Permitted Refinancing Debt in exchange for, or
the net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by the Indenture to be
incurred; (g) the incurrence by the Company or its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating or variable rate Indebtedness or
for the purpose of protecting against fluctuations in interest rates or the
value of foreign currencies purchased or received, in each case in respect of
Indebtedness that is permitted by the terms of the Indenture to be outstanding;
PROVIDED, HOWEVER, that in the case of Hedging Obligations that are incurred for
the purpose of fixing or hedging interest rate risks with respect to
Indebtedness, the notional principal amount of any such Hedging Obligation does
not exceed the principal amount of the Indebtedness to which such Hedging
Obligation relates and in the case of Hedging Obligations incurred for the
purpose of protecting against fluctuations in interest rates or the value of
foreign currencies purchased or received, such Hedging Obligations do not
increase the Indebtedness of the Company and its Restricted Subsidiaries
outstanding other than as a result of fluctuations in foreign currency exchange
rates or by reason of fees, indemnities and compensation payable thereunder; (h)
Indebtedness incurred solely in respect of performance, surety and similar bonds
or completion guarantees, to the extent that such incurrence does not result in
the incurrence of any obligation for the payment of borrowed money to others;
(i) Indebtedness arising out of standby letters of credit covering workers
compensation, performance or similar obligations in an aggregate amount not to
exceed $500,000 at any time outstanding; (j) any guarantee of the Company of
Indebtedness or other obligations of any of its Restricted Subsidiaries so long
as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is
permitted under the terms of the Indenture; (k) the
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incurrence by the Company of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding not to exceed
$10.0 million; (l) the issuance of Series A Preferred Stock issued as payment in
kind dividends on the Series A Preferred Stock outstanding on the Issue Date or
issued subsequent to the Issue Date as dividends permitted pursuant to this
clause (l), to the extent such dividends are made pursuant to the terms of the
Certificate of Designation for such Series A Preferred Stock as in effect on the
Issue Date, on any Preferred Stock issued in exchange for the Series A Preferred
Stock, or any dividends on such Preferred Stock to the extent such dividends are
made pursuant to the terms of the Certificate of Designation of such Preferred
Stock; and (m) the incurrence by the Company of Indebtedness in respect of
Exchange Debentures issued as payment in kind interest on Exchange Debentures
issued on the exchange of Series A Preferred Stock, to the extent such interest
payments are made pursuant to the terms of the Exchange Debenture Indenture.
The Indenture will provide that the Company will not permit any Unrestricted
Subsidiary to incur any Indebtedness other than Non-Recourse Debt; provided,
however, if any such Indebtedness ceases to be Non-Recourse Debt, such event
shall be deemed to constitute an incurrence of Indebtedness by the Company.
ASSET SWAPS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, in one or a series of related
transactions, directly or indirectly, engage in any Asset Swaps, unless: (i) at
the time of entering into the agreement to swap assets and immediately after
giving effect to the proposed Asset Swap, no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof; (ii)
the Company would, after giving PRO FORMA effect to the proposed Asset Swap,
have been permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Leverage Ratio in the covenant "Incurrence of Indebtedness and Issuance
of Preferred Stock"; (iii) the respective fair market values of the assets being
purchased and sold by the Company or any of its Restricted Subsidiaries (as
determined in good faith by the management of the Company or, if such Asset Swap
includes consideration in excess of $ million by the Board of Directors
of the Company, as evidenced by a Board Resolution) are substantially the same
at the time of entering into the agreement to swap assets; and (iv) at the time
of the consummation of the proposed Asset Swap, the percentage of any decline in
the fair market value (determined as aforesaid) of the asset or assets being
acquired by the Company and its Restricted Subsidiaries shall not be
significantly greater than the percentage of any decline in the fair market
value (determined as aforesaid) of the assets being disposed of by the Company
or its Restricted Subsidiaries, calculated from the time the agreement to swap
assets was entered into.
NO LAYERING
The Indenture will provide that the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes PROVIDED, HOWEVER, THAT the foregoing
limitations will not apply to distinctions between categories of Indebtedness
that exist by reason of any Liens arising or created in accordance with the
provisions of the Indenture in respect of some but not all such Indebtedness.
LIENS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause
or suffer to exist or become effective any Lien securing Indebtedness of any
kind (other than Permitted Liens) upon any of its property or assets, now owned
or hereafter acquired.
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DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(x) pay dividends
or make any other distributions to the Company or any of the Restricted
Subsidiaries of the Company (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (y) pay any
indebtedness owed to the Company or any Restricted Subsidiaries of the Company,
(ii) make loans or advances to the Company or any Restricted Subsidiaries of the
Company or (iii) transfer any of its properties or assets to the Company or any
Restricted Subsidiaries of the Company, except for such encumbrances or
restrictions existing under or by reason of (a) the Credit Facility as in effect
as of the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof or any other Credit Facility, PROVIDED that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements, refinancings or other Credit Agreements are no more
restrictive with respect to such dividend and other payment restrictions than
those contained in the Credit Facility as in effect on the date of the
Indenture, (b) the Indenture and the Notes, (c) applicable law, (d) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except, in the case of Indebtedness, to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person and its
Subsidiaries, or the property or assets of the Person and its Subsidiaries, so
acquired, PROVIDED that, such Indebtedness or Disqualified Stock was permitted
by the terms of the Indenture to be incurred, (e) by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business, (f) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, or (g) Permitted Refinancing Debt,
PROVIDED that the restrictions contained in the agreements governing such
Permitted Refinancing Debt are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets, in one or more related transactions, to another
Person, and the Company may not permit any of its Restricted Subsidiaries to
enter into any such transaction or series of transactions if such transaction or
series of transactions would, in the aggregate, result in a sale, assignment,
transfer, lease, conveyance, or other disposition of all or substantially all of
the properties or assets of the Company to another Person unless: (i) the
Company is the surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (the "Surviving Entity") is a corporation organized or existing under the
laws of the United States, any state thereof or the District of Columbia; (ii)
the Surviving Entity (if the Company is not the continuing obligor under the
Indenture) assumes all the obligations of the Company under the Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately before and after giving effect to such
transaction or series of transactions no Default or Event of Default exists;
(iv) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (and treating any Indebtedness not previously
an obligation of the Company and its Subsidiaries which becomes the obligation
of the Company or any of its Subsidiaries as a result of such transaction or
series of transactions as having been incurred at the time of such transaction
or series of transactions), the Consolidated Net Worth of the Company and its
Subsidiaries or the Surviving Entity (if the Company is not the continuing
obligor under the Indenture) is equal to or greater than the Consolidated Net
Worth of
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the Company and its Subsidiaries immediately prior to such transaction or series
of transactions; and (v) the Company or the Surviving Entity (if the Company is
not the continuing obligor under the Indenture) will, at the time of such
transaction or series of transactions and after giving pro forma effect thereto
as if such transaction or series of transactions had occurred at the beginning
of the applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the test set forth in the first paragraph of
the covenant described above under the caption "-- Incurrence of Indebtedness
and Issuance of Preferred Stock." Notwithstanding the restrictions described in
the foregoing clauses (iv) and (v), any Restricted Subsidiary may consolidate
with, merge into or transfer all or part of its properties and assets to the
Company, and any Wholly Owned Restricted Subsidiary may consolidate with, merge
into or transfer all or part of its properties and assets to another Wholly
Owned Restricted Subsidiary.
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any of its Affiliates (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction or series of Affiliated Transactions
complies with clause (i) above and that such Affiliate Transaction or series of
Affiliated Transactions has been approved in good faith by a majority of the
members of the Board of Directors who are disinterested with respect to such
Affiliate Transaction or series of Affiliated Transactions, which resolution
shall be conclusive evidence of compliance with this provision, and (b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10.0 million, the Company
delivers an Officer's Certificate certifying that such Affiliate Transaction or
series of related Affiliate Transactions complies with clause (i) above and that
such Affiliate Transaction or series of related Affiliate Transactions has been
approved in good faith by a resolution adopted by a majority of the members of
the Board of Directors of the Company who are disinterested with respect to such
Affiliate Transaction nor series of related Affiliate Transactions and an
opinion as to the fairness to the Company or such Subsidiary of such Affiliate
Transaction or series of related Affiliate Transactions from a financial point
of view issued by an accounting, appraisal, engineering or investment banking
firm of national standing (which resolution and fairness opinion shall be
conclusive evidence of compliance with this provision); PROVIDED that the
foregoing provisions will not apply to the following: (1) transactions
contemplated by any employment agreement or other compensation plan or
arrangement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary; (2) transactions between or among the
Company and/or its Restricted Subsidiaries; (3) Restricted Payments and
Permitted Investments that are permitted by the provisions of the Indenture
described above under the caption "-- Restricted Payments"; (4) indemnification
payments made to officers, directors and employees of the Company or any
Restricted Subsidiary pursuant to charter, bylaw, statutory or contractual
provisions; and (5) any agreement as in effect as of the Issue Date or any
transaction contemplated thereby.
ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED SUBSIDIARIES
The Indenture will provide that the Company (i) will not, and will not
permit any Wholly Owned Restricted Subsidiary of the Company to, transfer,
convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly
Owned Restricted Subsidiary of the Company to any Person (other than the Company
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or a Wholly Owned Restricted Subsidiary of the Company), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock of such Wholly Owned Restricted Subsidiary and (b) the Net Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant described above under the caption "--Asset Sales,"
and (ii) will not permit any Wholly Owned Restricted Subsidiary of the Company
to issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly Owned Restricted Subsidiary; PROVIDED that the
Company may, and may permit any Wholly Owned Restricted Subsidiary of the
Company to, take any of the actions referred to in (i) and (ii) above so long as
immediately after giving effect to such action no more than 10% of the
Consolidated Net Tangible Assets of the Company and its Subsidiaries is owned by
other than Wholly Owned Restricted Subsidiaries of the Company.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any material respect in any business other than a Permitted Business.
PAYMENTS FOR CONSENT
The Indenture will provide that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or is paid to all Holders of the Notes that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
REPORTS
The Indenture will provide that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports, in each case within the time periods set forth in the Commission's
rules and regulations. In addition, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of such information
and report with the Commission for public availability within the time periods
set forth in the Commission's rules and regulations (unless the Commission will
not accept such a filing).
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event
of Default: (i) a default for 30 days in the payment when due of interest on the
Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) a default in payment when due of the principal of or premium,
if any, on the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (iii) the failure by the Company or any of its Restricted
Subsidiaries to comply with the provisions described under the caption
"Repurchase at the Option of Holders" and "Certain Covenants"; (iv) failure by
the Company for 30 days after notice from the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding to comply with
any of its other agreements in the Indenture or the Notes; (v) a default under
any mortgage, indenture or instrument under which there may be issued or by
which there
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may be secured or evidenced any Indebtedness for money borrowed by the Company
or any of its Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there is then existing a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) the failure by the Company or
any of its Restricted Subsidiaries to pay final, non-appealable judgments
aggregating in excess of $5.0 million, which judgments remain unpaid or
discharged for a period of 60 days; and (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries or
any group of Subsidiaries that, taken together would constitute a Significant
Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the Notes then outstanding may declare
the principal of and accrued but unpaid interest on such Notes to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect to
the Company or any Significant Subsidiary or any group of Subsidiaries that,
taken together, would constitute a Significant Subsidiary, all outstanding Notes
will become due and payable without further action or notice. Holders of the
Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the Notes then outstanding may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest or premium on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, within
five business days of becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of such outstanding Notes to
receive payments in respect of the principal of, premium, if any, interest on
such Notes when such payments are due from the trust referred to below, (ii) the
Company's obligations with respect to such Notes concerning issuing temporary
Notes, registration of such Notes, mutilated, destroyed, lost or stolen Notes
and the maintenance of an office or agency for payment and money for security
payments held in trust, (iii) the rights, powers, trusts, duties and immunities
of the Trustee, and the Company's obligations in connection therewith and (iv)
the Legal Defeasance provisions of the Indenture. In addition, the Company may,
at its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default and Remedies" will no longer constitute an Event of Default.
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In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to such Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to such Trustee
confirming that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit: (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
the Notes over the other creditors of the Company, or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or others;
and (viii) the Company must deliver to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of the Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of,
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or tender offer or exchange offer for, the Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of the Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes
(except as provided above with respect to "Asset Sale Offers" and "Change of
Control Offers"), (iii) reduce the rate of or change the time for payment of
interest on any Note, (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in principal
amount of such Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Note payable in money other than that stated in the
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of the Notes to receive
payments of principal of or premium, if any, or interest on the Notes or (vii)
make any change in the foregoing amendment and waiver provisions. In addition,
any amendment to the provisions described under "Repurchase at the Option of
Holders" or the provisions of Article of the Indenture (which relate to
subordination) will require the consent of the Holders of at least 66 2/3% in
principal amount of the Notes then outstanding if such amendment would adversely
affect the rights of Holders of such Notes. However, no amendment may be made to
the subordination provisions of the Indenture that adversely affects the rights
of any holder of Senior Debt then outstanding unless the holders of such Senior
Debt (or any group or representative thereof authorized to give a consent)
consents to such change.
Notwithstanding the foregoing, without the consent of any Holder of the
Notes the Company and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in the case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
secure the Notes or to comply with requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest, it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of the Notes, unless such Holder shall have offered to
such Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
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GOVERNING LAW
The Indenture and the Notes provide that they will be governed by the laws
of the State of New York.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full definition of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition
(but excluding the creation of a Lien) of any assets including, without
limitation, by way of a sale and leaseback (PROVIDED that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by the provisions
of the Indenture described above under the caption "-- Repurchase at the Option
of Holders -- Change of Control" and/or the provisions described above under the
caption "-- Certain Covenants -- Merger, Consolidation, or Sale of Assets" and
not by the provisions described above under "-- Repurchase at the Option of
Holders -- Asset Sales"), and (ii) the issue or sale by the Company or any of
its Restricted Subsidiaries of Equity Interests of any of the Company's
Subsidiaries (including the sale by the Company or a Restricted Subsidiary of
Equity Interests in an Unrestricted Subsidiary), in the case of either clause
(i) or (ii), whether in a single transaction or a series of related transactions
(a) that have a fair market value in excess of $1.0 million or (b) for net
proceeds in excess of $1.0 million. Notwithstanding the foregoing, the following
shall not be deemed to be Asset Sales: (i) a transfer of assets by the Company
to a Wholly Owned Restricted Subsidiary of the Company or by a Wholly Owned
Restricted Subsidiary of the Company to the Company or to another Wholly Owned
Restricted Subsidiary of the Company; (ii) an issuance of Equity Interests by a
Wholly Owned Restricted Subsidiary of the Company to the Company or to another
Wholly Owned Restricted Subsidiary of the Company; (iii) the making of a
Restricted Payment or Permitted Investment that is permitted by the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments";
(iv) a disposition of cash or Cash Equivalents; (v) a disposition of either
obsolete equipment or equipment that is damaged, worn out or otherwise no longer
useful in the business; (vi) any sale of Equity Interests in, or Indebtedness or
other securities of, an Unrestricted Subsidiary; (vii) any sale and leaseback of
an asset within 90 days after the completion of construction or acquisition of
such asset; (viii) any surrender or waiver of contract rights or a settlement,
release or surrender of contract, tort or other claims of any kind or a grant of
any Lien not prohibited by the Indenture; (ix) any transfer of properties or
assets that is governed by the provisions of the Indenture described under the
caption "-- Certain Covenants -- Asset Swaps"; or (x) a disposition of inventory
in the ordinary course of business.
"ASSET SWAP" means the execution of a definitive agreement, subject only to
regulatory approval and other customary closing conditions, that the Company in
good faith believes will be satisfied, for a
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substantially concurrent purchase and sale, or exchange, of assets used or
useful in a Permitted Business between the Company or any of its Restricted
Subsidiaries and another person or group of affiliated persons; provided that
any amendment to or waiver of any closing conditions which individually or in
the aggregate is material to the Asset Swap shall be deemed to be a new Asset
Swap.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company or
similar entity, any membership or similar interests therein and (v) any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any lender party to the Credit Facility or with any
domestic commercial bank having capital and surplus in excess of $500 million
and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with
a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above and (v)
commercial paper having a rating of at least P2 from Moody's Investors Service,
Inc. (or its successor) and a rating of at least A2 from Standard & Poor's
Ratings Services (or its successor) and (vi) investments in money market or
other mutual funds substantially all of whose assets comprise securities of
types described in clauses (ii) through (v) above.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" or group of related "persons" (a "Group") (as such terms
are used in Section 13(d)(3) of the Exchange Act) other than a Principal or a
Related Party of a Principal, (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any purchase, sale, acquisition,
disposition, merger or consolidation) the result of which is that any "person"
(as defined above) or Group other than a Principal or a Related Party of a
Principal becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act) of more than 50% of the aggregate voting
power of all classes of Capital Stock of the Company having the right to elect
directors under ordinary circumstances or (iv) the first day on which a majority
of the members of the Board of Directors of the Company are not Continuing
Directors.
"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the sum of, without duplication, the Consolidated Net Income of such Person for
such period plus (i) provision for taxes based
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on income or profits of such Person and its Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (ii) Consolidated Interest Expense of such Person for such
period, to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iii) the product of (a) all cash dividend
payments, on any series of preferred stock of such Person or any of its
Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests (other than Disqualified Stock) of the
Company, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
effective tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP, plus (iv) consolidated
depreciation, amortization and other non-cash charges of the Person and its
Subsidiaries deducted in computing Consolidated Net Income of such Person for
such period, plus (v) cash payments with respect to any non-cash charges
previously added back pursuant to clause (iv). Notwithstanding the foregoing,
the provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary of the referent Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
to the extent (and in same proportion) that the Net Income of such Subsidiary
was included in calculating the Consolidated Net Income of such Person.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum, without duplication of (i) the consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Interest Rate Hedging Agreements), (ii) the consolidated interest expense of
such Person and its Restricted Subsidiaries that was capitalized during such
period, (iii) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or any of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or any of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon) and (iv) the product of (a) all cash
dividend payments (and non-cash dividend payments in the case of a Person that
is a Restricted Subsidiary) on any series of preferred stock of such Person or
any of its Restricted Subsidiaries, times (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; PROVIDED
that (i) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Restricted Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
government approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, and (v) all other extraordinary gains
and extraordinary losses shall be excluded.
"CONSOLIDATED NET TANGIBLE ASSETS" of a Person means the consolidated total
assets of such Person and its consolidated Subsidiaries determined in accordance
with GAAP, less the sum of (i) all current liabilities and current liability
items, and (ii) all goodwill, trade names, trademarks, patents, organization
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expense, unamortized debt discount and expense and other similar intangibles
properly classified as intangibles in accordance with GAAP.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of original issuance of the Notes or (ii) was nominated
for election or elected to such Board of Directors with the approval of (x)
two-thirds of the Continuing Directors who were members of such Board at the
time of such nomination or election or (y) two-thirds of those Directors who
were previously approved by Continuing Directors.
"CREDIT AGREEMENTS" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Credit Facility) or commercial
paper facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, production payments, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Credit Facilities outstanding on the date on which the Notes are first issued
and authenticated under the Indenture (after giving effect to the use of
proceeds thereof) shall be deemed to have been incurred on such date in reliance
on the exception provided by clause (b) of the definition of Permitted
Indebtedness.
"CREDIT FACILITY" means that certain Credit Agreement, dated as of March 2,
1998, by and among the Company, Lehman Brothers Inc., as Arranger, and Lehman
Brothers Commercial Paper Inc., as Syndication Agent and Administrative Agent,
and certain banks, financial institutions and other entities, as lenders,
providing for up to $190.0 million of Indebtedness, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, restated, modified, renewed,
refunded, replaced or refinanced, in whole or in part, from time to time,
whether or not with the same lenders or agents.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) the Credit Facility and (ii) any other
Senior Debt permitted under the Indenture the principal amount of which is $25.0
million or more and that has been designated by the Company as "Designated
Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, is convertible
or exchangeable for Indebtedness or Disqualified Stock or redeemable at the
option of the holder thereof, in whole or in
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part, on or prior to the date that is 91 days after the date on which the Notes
mature, PROVIDED HOWEVER, that any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof (or of any security into
which it is convertible or for which it is exchangeable) have the right to
require the issuer to repurchase such Capital Stock (or such security into which
it is convertible or for which it is exchangeable) upon the occurrence of any of
the events constituting an Asset Sale or a Change of Control shall not
constitute Disqualified Stock if such Capital Stock (and all such securities
into which it is convertible or for which it is exchangeable) provides that the
issuer thereof will not repurchase or redeem any such Capital Stock (or any such
security into which it is convertible or for which it is exchangeable) pursuant
to such provisions prior to compliance by the Company with the provisions of the
Indenture described under the caption "Repurchase at the Option of
Holders--Change of Control" or "Repurchase at the Option of Holders--Asset
Sales," as the case may be.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements with respect to Indebtedness that
is permitted by the terms of the Indenture and (ii) other agreements or
arrangements designed to protect such Person against fluctuation in interest
rates or the value of foreign currencies purchased or received by such Person in
the ordinary course of business.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, (i) in respect of borrowed money, or (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or reimbursement agreements in respect thereof (other than letters of
credit securing obligations not constituting Indebtedness that are issued in the
ordinary course of business by a Person to the extent not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit) or bankers' acceptances, or (iii)
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or services, except any such balance that
constitutes an accrued expense or trade payable for such property or services,
or (iv) representing any Hedging Obligations, in each case if and to the extent
any of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any Indebtedness of any other Person.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business and
extensions of trade credit in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a
A-31
<PAGE>
balance sheet prepared in accordance with GAAP. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of.
"ISSUE DATE" means the date on which the Notes are originally issued.
"LEVERAGE RATIO" means the ratio of (i) the aggregate outstanding amount of
Indebtedness of the Company and its Subsidiaries as of the date of calculation
on a consolidated basis in accordance with GAAP (subject to the terms described
in the next paragraph) plus the aggregate liquidation preference of all
outstanding Disqualified Stock of the Company and preferred stock of the
Company's Subsidiaries (except preferred stock issued to the Company or a Wholly
Owned Subsidiary of the Company) on such date to (ii) the Consolidated Cash Flow
of the Company for the four full fiscal quarters (the "Four Quarter Period")
ending on or prior to the date of determination.
For purposes of this definition, (i) the amount of Indebtedness which is
issued at a discount shall be deemed to be the accreted value of such
Indebtedness at the end of the Four Quarter Period, whether or not such amount
is the amount then reflected on a balance sheet prepared in accordance with
GAAP, and (ii) the aggregate outstanding principal amount of Indebtedness of the
Company and its Subsidiaries and the aggregate liquidation preference of all
outstanding preferred stock of the Company's Subsidiaries for which such
calculation is made shall be determined on a pro forma basis as if the
Indebtedness and preferred stock giving rise to the need to perform such
calculation had been incurred and issued and the proceeds therefrom had been
applied, and all other transactions in respect of which such Indebtedness is
being incurred or preferred stock is being issued had occurred, on the first day
of the Four Quarter Period. In addition to the foregoing, for purposes of this
definition, Consolidated Cash Flow shall be calculated on a pro forma basis
after giving effect to (i) the incurrence of the Indebtedness of such Person and
its Subsidiaries and the issuance of the preferred stock of such Subsidiaries
(and the application of the proceeds therefrom) giving rise to the need to make
such calculation and any incurrence (and the application of the proceeds
therefrom) or repayment of other Indebtedness, other than the incurrence or
repayment of Indebtedness pursuant to working capital facilities, at any time
subsequent to the beginning of the Four Quarter Period and on or prior to the
date of determination, as if such incurrence or issuance (and the application of
the proceeds thereof), or the repayment, as the case may be, occurred on the
first day of the Four Quarter Period, (ii) any acquisition (including, without
limitation, any acquisition giving rise to the need to make such calculation as
a result of such Person or one of its Subsidiaries (including any Person that
becomes a Subsidiary as a result of such acquisition) incurring, assuming or
otherwise becoming liable for Indebtedness or such Person's Subsidiaries issuing
preferred stock) at any time on or subsequent to the first day of the Four
Quarter Period and on or prior to the date of determination, as if such
acquisition (including the incurrence, assumption or liability for any such
Indebtedness and the issuance of such preferred stock and also including any
Consolidated Cash Flow associated with such acquisition) occurred on the first
day of the Four Quarter Period. For purposes of this definition, whenever pro
forma effect is to be given to a transaction, the pro forma calculations shall
be made in good faith by a responsible financial or accounting officer of the
Company consistent with Article 11 of Regulation S-X, promulgated pursuant to
the Securities Act, as such Regulation is in effect on the date of the
Indenture. Furthermore, in calculating "Consolidated Interest Expense" for
purposes of the calculation of "Consolidated Cash Flow," (i) interest on
Indebtedness determined on a fluctuating basis as of the date of determination
(including Indebtedness actually incurred on the date of the transaction giving
rise to the need to calculate the Leverage Ratio) and which will continue to be
so determined thereafter shall be deemed to have accrued at a fixed rate per
annum equal to the rate of interest on such Indebtedness as in effect on the
date of determination and (ii) notwithstanding (i) above, interest determined on
a fluctuating
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<PAGE>
basis, to the extent such interest is covered by Hedging Obligations, shall be
deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other
than a precautionary financing statement with respect to a lease not intended as
a security agreement).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and after any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring gain or loss, together
with any related provision for taxes on such extraordinary or nonrecurring gain
or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale, but excluding cash amounts
placed in escrow, until such amounts are released to the Company), net of the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and expenses, and sales commissions) and
any relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Indebtedness under the Credit
Facility) secured by a Lien on the asset or assets that were the subject of such
Asset Sale and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP and any reserve established
for future liabilities.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness), or (b) is directly or
indirectly liable (as a guarantor or otherwise); and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) the explicit terms of which provide that there is
no recourse against any of the assets of the Company or its Restricted
Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PARI PASSU INDEBTEDNESS" means Indebtedness that ranks PARI PASSU in right
of payment to the Notes.
"PERMITTED BUSINESS" means the broadcasting business or any business that
is reasonably similar thereto or a reasonable extension, development or
expansion thereof or ancillary thereto.
"PERMITTED INDEBTEDNESS" has the meaning given in the covenant described
under the caption "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock."
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<PAGE>
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents or securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof having
maturities of not more than one year from the date of acquisition; (c) any
Investment by the Company or any Restricted Subsidiary of the Company in a
Person if, as a result of such Investment, (i) such Person becomes a Wholly
Owned Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys all or
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Restricted Subsidiary of the Company; (d) any Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "-- Repurchase at the Option of Holders -- Asset Sales"; (e) other
Investments in any Person or Persons having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (e) that are at the time outstanding without giving
effect to subsequent changes in value or increases or decreases attributable to
the accounting for the net income of such Investment, not to exceed $15.0
million; (f) any Investment acquired by the Company in exchange for Equity
Interests in the Company (other than Disqualified Stock); (g) any Investment
acquired by the Company or any of its Restricted Subsidiaries (A) in exchange
for any other Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or accounts receivable or (B) as a result of the transfer of title
with respect to any secured investment in default as a result of a foreclosure
by the Company or any of its Restricted Subsidiaries with respect to such
secured Investment; (h) Hedging Obligations permitted under the "--Certain
Covenants; Incurrence of Indebtedness and Issuance of Preferred Stock" covenant;
(i) loans and advances to officers, directors and employees for business-related
travel expenses, moving expenses and other similar expenses, in each case,
incurred in the ordinary course of business; and (j) any guarantees permitted to
be made pursuant to the covenant entitled "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
"PERMITTED LIENS" means (i) Liens securing Indebtedness of a Subsidiary or
Liens securing Senior Debt that is outstanding on the date of issuance of the
Notes and Liens securing Senior Debt that is permitted by the terms of the
Indenture to be incurred; (ii) Liens in favor of the Company; (iii) Liens on
property existing at the time of acquisition thereof by the Company or any
Subsidiary of the Company and Liens on property or assets of a Subsidiary
existing at the time it became a Subsidiary, PROVIDED that such Liens were in
existence prior to the contemplation of the acquisition and do not extend to any
assets other than the acquired property; (iv) Liens incurred or deposits made in
the ordinary course of business in connection with workers' compensation,
unemployment insurance or other kinds of social security, or to secure the
payment or performance of tenders, statutory or regulatory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (v) Liens existing on the date of
the Indenture; (vi) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, PROVIDED
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (vii) statutory liens of
landlords, mechanics, suppliers, vendors, warehousemen, carriers or other like
Liens arising in the ordinary course of business; (viii) judgment Liens not
giving rise to an Event of Default so long as any appropriate legal proceeding
that may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceeding may be
initiated shall not have expired; (ix) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (f) of the second paragraph of
the covenant entitled "--Certain Covenants-- Incurrence of Indebtedness and
Issuance of Preferred Stock" covering only the assets acquired with such
Indebtedness; (x) Liens incurred in the ordinary course of business of the
Company or any Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (A) are not incurred in
A-34
<PAGE>
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (B) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Subsidiary; (xi) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries; (xii) easements, rights-of-way,
zoning and similar restrictions and other similar encumbrances or title defects
incurred or imposed, as applicable, in the ordinary course of business and
consistent with industry practices which, in the aggregate, are not substantial
in amount, and which do not in any case materially detract from the value of the
property subject thereto (as such property is used by the Company or its
Subsidiary) or interfere with the ordinary conduct of the business of the
Company or such Subsidiary; provided, however, that any such Liens are not
incurred in connection with any borrowing of money or any commitment to loan any
money or to extend any credit; and (xiii) customary Liens (other than any Lien
imposed by ERISA) incurred or deposits made in the ordinary course of business
in connection with worker's compensation, unemployment insurance and other types
of social security legislation.
"PERMITTED REFINANCING DEBT" means any Indebtedness of the Company or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness (other than Indebtedness incurred under a Credit Agreement) of the
Company or any of its Restricted Subsidiaries; PROVIDED that: (i) the principal
amount of such Permitted Refinancing Indebtedness does not exceed the principal
amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased
or refunded (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date on or later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable taken as a whole to the Holders of the Notes as
those contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"PRINCIPAL" means Richard W. Weening and Lewis W. Dickey, Jr..
"RELATED PARTY" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned subsidiary, or spouse or immediate family
member (in the case of an individual) of such principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means any direct or indirect Subsidiary of the
Company that is not an Unrestricted Subsidiary.
"SENIOR DEBT" means (i) Indebtedness of the Company or any Subsidiary of
the Company under or in respect of any Credit Agreement, whether for principal,
interest (including interest accruing after the filing of a petition initiating
any proceeding pursuant to any bankruptcy law, whether or not the claim for such
interest is allowed as a claim in such proceeding), reimbursement obligations,
fees, commissions, expenses, indemnities or other amounts, and (ii) any other
Indebtedness permitted under the terms of the Indenture, unless the instrument
under which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes. Notwithstanding
anything to the contrary in
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<PAGE>
the foregoing sentence, Senior Debt will not include (w) any liability for
federal, state, local or other taxes owed or owing by the Company, (x) any
Indebtedness of the Company to any of its Subsidiaries or other Affiliates or
(y) any Indebtedness that is incurred in violation of the Indenture (other than
Indebtedness under (i) the Credit Facility or (ii) any other Credit Agreement
that is incurred on the basis of a representation by the Company to the
applicable lenders that it is permitted to incur such Indebtedness under the
Indenture).
"SIGNIFICANT SUBSIDIARY" means any Subsidiary which would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock, entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company which at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary or a Person becoming a Subsidiary through merger or
consolidation or Investment therein) to be an Unrestricted Subsidiary only if
(a) such Subsidiary does not own any Capital Stock of, or own or hold any Lien
on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary; (b) all the Indebtedness of such Subsidiary shall, at the date of
designation, and will at all times thereafter, consist of Non-Recourse Debt; (c)
the Company certifies that such designation complies with the "Limitation on
Restricted Payments" covenant; (d) such Subsidiary, either alone or in the
aggregate with all other Unrestricted Subsidiaries, does not operate, directly
or indirectly, all or substantially all of the business of the Company and its
Subsidiaries; (e) such Subsidiary does not, directly or indirectly, own any
Indebtedness of or Equity Interest in, and has no investments in, the Company or
any Restricted Subsidiary; (f) such Subsidiary is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (1) to subscribe for additional Equity Interests or (2) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (g) on the date such
Subsidiary is designated an Unrestricted Subsidiary, such Subsidiary is not a
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary with terms substantially less favorable to the
Company than those that might have been obtained from Persons who are not
Affiliates of the Company. Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by filing with the Trustee a
resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions. If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred as of such date. The Board of Directors of the Company may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
that (i) immediately after giving effect to such designation, no Default or
Event of Default shall have occurred and be continuing or would occur as a
consequence thereof and the Company could incur at least $1.00 of additional
Indebtedness (excluding Permitted Indebtedness) pursuant to the first paragraph
of the "Incurrence of Indebtedness and Issuance
A-36
<PAGE>
of Preferred Stock" covenant on a pro forma basis taking into account such
designation and (ii) such Subsidiary executes a Guarantee pursuant to the terms
of the Indenture.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one--twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned, directly or indirectly, by such Person or by one or more
Wholly Owned Restricted Subsidiaries of such Person.
A-37
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of , 1998 and as adjusted to give
effect to the sale of Class A Common Stock offered hereby, certain information
regarding beneficial ownership of the Company's Common Stock by (i) each person
who is known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each director, (iii) each of the Named
Executive Officers and (iv) all directors and executive officers as a group. All
persons listed have sole voting and investment power with respect to their
shares unless otherwise indicated.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK
-------------------------------------------------------------------------
PRIOR TO STOCK AFTER STOCK OFFERINGS
OFFERINGS
---------------------------- SHARES BEING ----------------------------
NAME NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- --------------------------------------------------- ----------- --------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
State of Wisconsin Investment Board
NationsBanc Capital Corp.
Heller Equity Capital Corporation
The Northwestern Mutual Life Insurance Company
CML Holdings, LLC
QUAESTUS Management Corporation
DBBC of Georgia, LLC
Richard W. Weening
Lewis W. Dickey, Jr.
William M. Bungeroth
Richard J. Bonick, Jr.
Robert H. Sheridan, III
Ralph B. Everett
<CAPTION>
CLASS B COMMON STOCK(1)
----------------------------------------------------------
PRIOR TO STOCK AFTER STOCK OFFERINGS
OFFERINGS
---------------------------- ----------------------------
NAME NUMBER PERCENTAGE NUMBER PERCENTAGE
- --------------------------------------------------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
State of Wisconsin Investment Board
NationsBanc Capital Corp.
Heller Equity Capital Corporation
The Northwestern Mutual Life Insurance Company
CML Holdings, LLC
QUAESTUS Management Corporation
DBBC of Georgia, LLC
Richard W. Weening
Lewis W. Dickey, Jr.
William M. Bungeroth
Richard J. Bonick, Jr.
Robert H. Sheridan, III
Ralph B. Everett
</TABLE>
- ------------------------
(1) Except upon the occurrence of certain events, holders of Class B Common
Stock are not entitled to vote, whereas each share of Class A Common Stock
entitles its holders to one vote. Under certain conditions and subject to
prior governmental approval, shares of Class B Common Stock are convertible
into shares of Class A Common Stock
(2) Less than 1%.
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<PAGE>
DESCRIPTION OF CREDIT FACILITY
THE CREDIT FACILITY
GENERAL. In March 1998, the Company entered into a $190.0 million senior
credit facility with Lehman Brothers Inc., as Arranger and Lehman Commercial
Paper Inc., as Lender, Syndication Agent and Administrative Agent pursuant to
which the Company has available a revolving credit line of $110.0 million until
March 2, 2006, and an eight-year term loan facility of $80.0 million. The
proceeds of the borrowings under the Credit Facility have been used to finance
acquisitions and repay the Company's outstanding indebtedness under the Old
Credit Facility, and to secure outstanding Letters of Credit issued under the
Old Credit Facility in an aggregate amount equal to approximately $10.0 million.
As of March 27, 1998 approximately $120.0 million was outstanding under the
Credit Facility. See "Use of Proceeds."
SECURITY; GUARANTEES. The Company's obligations under the Credit Facility
are secured by substantially all of its assets in which a security interest may
lawfully be granted, (including to the extent permitted by applicable law, FCC
licenses held by the Company's subsidiaries) including, without limitation,
intellectual property, real property, and all of the capital stock of the
Company's direct and indirect domestic subsidiaries and 65% of the capital stock
of any foreign subsidiaries. The obligations under the Credit Facility are also
guaranteed by each of the domestic subsidiaries of the Company and are required
to be guaranteed by any additional subsidiaries acquired by the Company.
INTEREST RATES; FEES; REPAYMENTS. Both revolving credit and term loan
borrowings under the Credit Facility bear interest, at the Company's option, at
a rate equal to the Base Rate (as defined under the terms of the Credit
Facility) plus a margin ranging between 0.50% to 1.75%, or the Eurodollar Rate
(as defined under the terms of the Credit Facility) plus a margin ranging
between 1.50% to 2.75% (in each case dependent upon the leverage ratio of the
Company). A commitment fee calculated at a rate ranging from 0.375% to 0.50% per
annum (depending upon the Company's leverage ratio) of the average daily amount
available under the revolving line of credit and the amount available under the
term loan facility is payable quarterly in arrears fees in respect of letters of
credit issued under the Credit Facility equal to the lesser of (i) the interest
rate margin then applicable to Eurodollar Rate loans and (ii) 2.50%. In
addition, a fronting fee to be agreed to by the Company and the issuing bank of
such Letter of Credit calculated at a rate not to exceed 0.0125% per annum on
the maximum payable amount of each letter of credit is payable quarterly to the
issuing bank.
The revolving credit and term loan borrowings are repayable in equal
quarterly installments beginning in 2000. The scheduled annual amortization of
the term loans is $10.0 million in each of the years 2000 through 2002, $15.0
million in each of the years 2003 through 2005, and $5.0 million at maturity.
The scheduled annual reduction in availability under the revolving credit loans
is $10.0 million in each of the years 2000 and 2001, $15.0 million in 2002,
$20.0 million in year 2003, $25.0 million in each of the years 2004 and 2005,
and $5.0 million at maturity in 2006. Certain mandatory prepayments of the term
loan facility and the revolving credit line and reductions in the availability
of the revolving credit line are required to be made including: (i) subject to
certain exceptions (including the issuance of capital stock or the incurrence of
senior subordinated indebtedness prior to September 2, 1998) 100% of the net
proceeds from any issuance of capital stock in connection with an initial public
offering or incurrence of indebtedness; (ii) 100% of the net proceeds from
certain asset sales; and (iii) between 50% and 75% (dependent on the leverage
ratio of the Company) of the excess cash flow of the Company.
COVENANTS. The terms of the Credit Facility contain operating and financial
covenants, including, without limitation, requirements to maintain minimum
ratios of cash flow to debt service and maximum ratios of total debt to cash
flow and senior debt to cash flow. In addition, the terms of the Credit Facility
A-39
<PAGE>
restrict, among other things, the ability of the Company and its subsidiaries to
incur additional indebtedness, incur liens, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with affiliates, merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company.
EVENTS OF DEFAULT. The terms of the Credit Facility contain events of
default after expiration of applicable grace periods, including failure to make
payments on the Credit Facility, breach of covenants, breach of representations
and warranties, invalidity of the agreement governing the Credit Facility and
related documents, cross default under other agreements or conditions relating
to indebtedness of the Company or its subsidiaries, certain events of
liquidation, moratorium, insolvency, bankruptcy or similar events, enforcement
of security, certain litigation or other proceedings, and certain events
relating to changes in control.
Upon the occurrence of an event of default under the terms of the Credit
Facility, the majority of the banks may declare all amounts under the Credit
Facility to be due and payable and take certain other actions, including
enforcement of rights in respect of the collateral. The majority of the banks
extending credit under the term loan facility and the majority of the banks
under the revolving credit line may terminate the term loan facility and the
revolving credit line, respectively.
A-40
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement dated
, 1998 (the "Underwriting Agreement") among the Company and the
Underwriters, the Underwriters named below (collectively, the "Underwriters"),
acting through their representatives, Bear, Stearns & Co. Inc. and Lehman
Brothers Inc. (the "Representatives") have agreed, severally and not jointly, to
purchase from the Company and the Company has agreed to sell to the Underwriters
the respective principal amounts of Notes set forth opposite their names below.
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Bear, Stearns & Co. Inc......................................................................... $
Lehman Brothers Inc.............................................................................
----------------
Total........................................................................................... $
----------------
----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, and that the Underwriters are
severally committed to take and pay for $ million aggregate principal
amount of Notes if any are taken. The Company has agreed to indemnify the
Underwriters against certain liabilities in connection with the offer and sale
of the Notes, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), and to contribute to payments that the Underwriters may
be required to make in respect thereof. The closing of each Offering is
conditioned upon the closing of each of the other Offerings.
The Underwriters propose to offer all or part of the Notes directly to the
public at the public offering price set forth on the cover page hereof and all
or part to certain dealers at a price which represents concessions not to exceed
% of the principal amount of the Notes. The Underwriters may allow, and any
such dealer may reallow, concessions to certain other dealers not to exceed %
of the principal amount of the Notes. After the initial public offering, the
public offering price and such concessions may be changed.
The Notes will constitute a new class of securities with no established
trading market. The Company does not intend to list the Notes on any national
securities exchange or to seek the admission thereof to trading in the Nasdaq
National Market. The Company has been advised by the Representatives that
following the completion of the Offering, the Representatives intend to make a
market in the Notes. However, they are not obligated to do so and any
market-making activities with respect to the Notes may be discontinued at any
time without notice.
In order to facilitate the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the Notes
during and after the Offering. Specifically, the Underwriters may over-allot or
otherwise create a short position in the Notes for their own account by selling
more Notes than have been sold to them by the Company. The Underwriters may
elect to cover any such short position by purchasing Notes in the open market.
In addition, the Underwriters may stabilize or maintain the price of the Notes
by bidding for or purchasing Notes in the open market and may impose penalty
bids, under which selling concessions allowed to syndicate members or other
broker-dealers participating in the Offering are reclaimed if Notes previously
distributed in the Offering are repurchased in connection with stabilization
transactions or otherwise. The effect of these transactions may be to stabilize
or maintain the market price of the Notes at a level above that which might
otherwise prevail in the open market. The imposition of a penalty bid may also
affect the price of the Notes to the extent that it
A-41
<PAGE>
discourages resales thereof. No representation is made as to the magnitude or
effect of any such stabilization or other transactions. Such transactions, if
commenced may be discontinued at any time.
Lehman Brothers Inc. and Lehman Brothers Commercial Paper Inc., an affiliate
of Lehman Brothers Inc., act as Arranger, and Syndication Agent and
Administrative Agent, respectively, in connection with the Credit Facility and
will receive any repayment by the Company of amounts outstanding under the
Credit Facility from the proceeds of the Offerings. The Representatives will act
as representatives of the underwriters in the concurrent Stock Offering and the
concurrent Preferred Stock Offering. Each of the Representatives has engaged
from time to time and may in the future engage in general financing and banking
transactions with the Company or affiliates thereof.
The Offering is being made pursuant to the provisions of Section 2710(c)(8)
of the Conduct Rules of the National Association of Securities Dealers, Inc.
Bear, Stearns & Co. Inc. ("Bear Stearns") has agreed to act as Qualified
Independent Underwriter for the Offering, and as such has assumed
responsibilities of conducting due diligence and has reviewed and participated
in the preparation of the Registration Statement. The yield on the Notes will
not be lower than that recommended by Bear Stearns.
A-42
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following summary describes certain United States federal income tax
consequences of the acquisition, ownership and disposition of the Notes as of
the date hereof by a person who acquires the Notes from the Initial Purchasers.
Except where noted, it deals only with Notes held as capital assets and does not
deal with special situations, such as those of dealers in securities or
currencies, tax exempt organizations, individual retirement accounts and other
tax deferred accounts, financial institutions, life insurance companies, persons
holding Notes as a part of a hedging or conversion transaction or a straddle,
persons subject to the alternative minimum tax or holders of Notes whose
"functional currency" is not the U.S. dollar. Furthermore, the discussion below
is based upon the provisions of the Internal Revenue Code of 1986, as amended,
and regulations, rulings and judicial decisions thereunder as of the date
hereof, and such authorities may be repealed, revoked or modified so as to
result in federal income tax consequences different from those discussed below.
In addition, except as otherwise indicated, the following does not consider the
effect of any applicable foreign, state, local or other tax laws or estate or
gift tax considerations. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR
DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS, AS WELL
AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
As used herein, a "United States Holder" of a Note means an initial holder
that is a citizen or resident of the United States, a corporation, partnership
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, an estate the income of which is subject
to United States federal income taxation regardless of its source, or a trust if
(i) a U.S. court is able to exercise primary supervision over the administration
of the trust and (ii) one or more U.S. trustees or fiduciaries have the
authority to control all substantial decisions of the trust. A "Non-United
States Holder" is a holder that is not a United States Holder.
The Company does not intend to treat the Notes, the Class A Common Stock and
the Series A Preferred Stock, all of which are being offered concurrently, as an
investment unit for United States federal income tax purposes.
STATED INTEREST ON NOTES
Except as set forth below, interest on a Note will generally be taxable to a
United States Holder as ordinary income at the time it is paid or accrued in
accordance with the United States Holder's method of accounting for tax
purposes.
MARKET DISCOUNT
If a United States Holder purchases a Note for an amount that is less than
its principal amount, the amount of the difference will be treated as "market
discount" for U.S. federal income tax purposes, unless such difference is less
than a specified DE MINIMIS amount. Under the market discount rules, a United
States Holder will be required to treat any partial principal payment on, or any
gain on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the market discount which has not previously
been included in income and is treated as having accrued on such Note at the
time of such payment or disposition. In addition, the United States Holder may
be required to defer, until the maturity of the Note or its earlier disposition
in a taxable transaction, the deduction of all or a portion of the interest
expense on any indebtedness incurred or continued to purchase or carry such
Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder may elect to include market discount in income currently as it accrues
(on either a ratable or constant interest method), in which case the rule
described above regarding deferral of interest deductions will not apply. This
election to include market discount in income currently, once made, applies to
all market discount obligations acquired on or after the first taxable year to
which
A-43
<PAGE>
the election applies and may not be revoked without the consent of the Internal
Revenue Service (the "IRS").
AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a Note for an amount in excess of the
principal amount will be considered to have purchased the Note at a "premium." A
United States Holder generally may elect to amortize the premium over the
remaining term of the Note on a constant yield method. However, if the Note is
purchased at a time when the Note may be optionally redeemed for an amount that
is in excess of its principal amount, special rules would apply that could
result in a deferral of the amortization of bond premium until later in the term
of the Note. The amount amortized in any year will be treated as a reduction of
the United States Holder's interest income from the Note. Bond premium on a Note
held by a United States Holder that does not make such an election will decrease
the gain or increase the loss otherwise recognized on disposition of the Note.
The election to amortize premium on a constant yield method, once made, applies
to all debt obligations held or subsequently acquired by the electing United
States Holder on or after the first day of the first taxable year to which the
election applies and may not be revoked without the consent of the IRS.
SALE, EXCHANGE AND RETIREMENT OF NOTES
Upon the sale, exchange, redemption, retirement or other disposition of a
Note, a United States Holder generally will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange, redemption,
retirement or other disposition and such holder's adjusted tax basis of the
Note. A United States Holder's adjusted tax basis in a Note will, in general, be
the United States Holder's cost therefor, increased by market discount
previously included in income by the United States Holder and reduced by any
amortized premium previously deducted from income by the United States Holder.
Except as described above with respect to market discount or except to the
extent the gain or loss is attributable to accrued but unpaid stated interest,
such gain or loss will be capital gain or loss. Under recently enacted
legislation, an individual United States Holder generally will be subject to tax
on the net amount of his or her capital gain realized on the sale or exchange of
a Note at a maximum rate of (i) 28% for a note held for more than one year but
not more than eighteen months and (ii) 20% for a Note held for more than
eighteen months. Special rules (and generally lower maximum rates) apply for
individuals whose taxable income is below certain levels. The deductibility of
capital losses is subject to limitations.
NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(i) no United States federal withholding tax will be imposed with
respect to the payment by the Company or its paying agent of principal,
premium, if any, or interest on a Note owned by a Non-United States Holder
(the "Portfolio Interest Exception"), provided (i) that such Non-United
States Holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote within the meaning of section 871(h)(3) of the Code and the
regulations thereunder, (ii) such Non-United States Holder is not a
controlled foreign corporation that is related, directly or indirectly, to
the Company through stock ownership, (iii) such Non-United States Holder is
not a bank whose receipt of interest on a Note is described in section
881(c)(3)(A) of the Code and (iv) such Non-United States Holder satisfies
the statement requirement (described generally below) set forth in section
871(h) and section 881(c) of the Code and the regulations thereunder.
A-44
<PAGE>
(ii) no United States federal withholding tax will be imposed generally
with respect to any gain or income realized by a Non-United States Holder
upon the sale, exchange, redemption, retirement or other disposition of a
Note; and
(iii) a Note beneficially owned by an individual who at the time of
death is a Non-United States Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote within the meaning of section 871(h)(3) of the Code and provided
that the interest payments with respect to such Note would not have been, if
received at the time of such individuals death, effectively connected with
the conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Company with a statement to the effect that the beneficial owner is
not a United States Holder. Pursuant to current temporary U.S. Treasury
regulations, these requirements will be met if (1) the beneficial owner provides
his name and address, and certifies, under penalties of perjury, that he is not
a United States Holder (which certification may be made on an IRS Form W-8 (or
substitute form)) or (2) a financial institution holding the Note on behalf of
the beneficial owner certifies, under penalties of perjury, that such statement
has been received by it and furnishes a paying agent with a copy thereof.
United States Treasury Regulations recently issued by the Internal Revenue
Service, which will be effective for payments made after December 31, 1999
(subject to certain transition rules), made modifications to the certification
procedure applicable to Non-United States Holders. In general, these regulations
unify certain certification procedures and forms and clarify and modify reliance
standards. A Non-United States Holder should consult its own tax advisor
regarding the effect of the new Regulations.
If a Non-United States Holder cannot satisfy the requirements of the
Portfolio Interest Exception described in (a) above, payments on a Note made to
such Non-United States Holder will be subject to a 30% withholding tax unless
the beneficial owner of the Note provides the Company or its paying agent, as
the case may be, with a properly executed (1) IRS Form 1001 (or substitute form)
claiming an exemption from or reduction of withholding under the benefit of a
tax treaty or (2) IRS Form 4224 (or substitute form) stating that interest paid
on the Note is not subject to withholding tax because is is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States. Under recently finalized Treasury regulations, for payments made
after December 31, 1999, non-United States Holders will generally be required to
provide an IRS Form W-8 in lieu of IRS Form 1001 and IRS Form 4224, although
alternative documentation may be applicable in certain situations.
If a Non-United States Holder is engaged in a trade or business in the
United States and payment on a note is effectively connected with the conduct of
such trade or business, the Non-United States Holder, although exempt from
United States federal withholding tax as discussed above, will be subject to
United States federal income tax on such payment on a net income basis in the
same manner as if it were a United States Holder. In addition, if such Holder is
a foreign corporation, it may be subject to a branch profits tax equal to 30% of
its effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, such payment on a Note will be included in such
foreign corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with a trade
or business in the United States of the Non-United States Holder or (ii) in the
case of a Non-United States Holder who is an individual, such individual is
present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met.
A-45
<PAGE>
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments on a
Note and to the proceeds of the sale of a Note made to United States Holders
other than certain exempt recipients (such as corporations). A 31% backup
withholding tax will apply to such payments if the United States Holder fails to
provide a taxpayer identification number or certification of foreign or other
exempt status or fails to report in full dividend and interest income.
No information reporting or backup withholding will be required with respect
to payments made by the Company or any paying agent to Non-United States Holders
if a statement described in (a)(iv) under "-- Non-United States Holders" has
been received and the payor does not have actual knowledge that the beneficial
owner is a United States person.
In addition, backup withholding and information reporting will not apply if
payments on a Note are paid or collected by a foreign office of a custodian,
nominee or other foreign agent on behalf of the beneficial owner of such Note,
or if a foreign office of a broker (as defined in applicable U.S. Treasury
regulations) pays the proceeds of the sale of a Note to the owner thereof. If,
however, such nominee, custodian agent or broker is, for United States federal
income tax purposes, a United States person, a controlled foreign corporation or
a foreign person that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States, such
payments will be subject to information reporting (but not backup withholding),
unless (1) such custodian, nominee, agent or broker has documentary evidence in
its records that the beneficial owner is not a United States person and certain
other conditions are met or (2) the beneficial owner otherwise establishes an
exemption. Temporary U.S. Treasury regulations provide that the U.S. Treasury is
considering whether backup withholding will apply with respect to payments of
principal, premium, if any, interest or the proceeds of a sale that are subject
to backup withholding under the current regulations.
Payments on a Note paid to the beneficial owner of a Note by a United States
office of a custodian, nominee or agent, or the payment by the United States
office of a broker of the proceeds of sale of a Note, will be subject to both
backup withholding and information reporting unless the beneficial owner
provides the statement referred to in (a)(iv) above and the payor does not have
actual knowledge that the beneficial owner is a United States person or
otherwise establishes an exemption.
In October 1997, United States Treasury Regulations were issued which alter
the foregoing rules in certain respects and which generally will apply to any
payments in respect of a Note or proceeds from the sale of a Note that are made
after December 31, 1999. Among other things, such regulations expand the number
of foreign intermediaries that are potentially subject to information reporting
and address certain documentary evidence requirements relating to exemption from
the general backup withholding requirements. Holders of the Notes should consult
their tax advisors concerning the possible application of such regulations to
any payments made on or with respect to the Notes.
Any amounts withheld under the backup withholding rules will be credited
toward such Holder's United States federal income tax liability, if any. To the
extent that the amounts withheld exceed the Holder's tax liability, the excess
may be refunded to the Holder provided the required information is furnished to
the IRS. In addition to providing the necessary information, the Holder must
file a United States tax return in order to obtain a refund of the excess
withholding.
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<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION TO OR MAKE ANY
REPRESENTATIONS NOT IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CUMULUS
MEDIA INC. OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE NOTES
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE NOTES TO ANYONE IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
INFORMATION SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary........................
Risk Factors..............................
Use of Proceeds...........................
Capitalization............................
Unaudited Pro Forma Combined Financial
Statements..............................
Selected Historical Financial Data........
Management's Discussion and Analysis of
Financial Condition and Results of
Operations..............................
Business..................................
Pending Acquisitions......................
Management................................
Pending Acquisitions......................
Certain Relationships and Related
Transactions............................
Principal Stockholders....................
Description of Capital Stock..............
Description of Credit Facility............
Description of Notes......................
Underwriting..............................
Certain Federal Income Tax
Considerations..........................
Legal Matters.............................
Experts...................................
Additional Information....................
Index to Financial Statements............. F-1
</TABLE>
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$
CUMULUS MEDIA INC.
% SENIOR SUBORDINATED
NOTES DUE 2008
--------------
PROSPECTUS
--------------
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH
JURISDICTION.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 30, 1998
PRELIMINARY PROSPECTUS
[LOGO]
$
CUMULUS MEDIA INC.
% SERIES A CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK DUE 2009
------------------
Cumulus Media Inc. is offering $ million of its % Series A
Cumulative Exchangeable Redeemable Preferred Stock due 2009 (the "Series A
Preferred Stock"), $ million of which are being offered directly by the
Company, and not through the Underwriters (as defined herein), to The
Northwestern Mutual Life Insurance Company, the sole owner of the NML Preferred
Stock (as defined herein), which had an accreted value as of February 14, 1998
of $33,023,562, at a purchase price equal to the price to public (the "Preferred
Stock Offering"). The Company will issue shares of the Series A Preferred
Stock. Each share of Series A Preferred Stock will have a liquidation preference
of $1,000 per share. All dividends will be cumulative from the date of issuance
of the Series A Preferred Stock and will be payable quarterly in arrears on
, , and of each year commencing on , 1998. On
or before , 2003, the Company may, at its option, pay dividends in cash
or in additional fully-paid and non-assessable shares of Series A Preferred
Stock having an aggregate liquidation preference equal to the amount of such
dividends. Thereafter, dividends may be paid in cash only. It is not expected
that the Company will pay any dividends in cash for the period ending on or
prior to , 2003. On any scheduled dividend payment date, the Company may,
at its option, but subject to certain conditions, exchange all but not less than
all of the shares of the Series A Preferred Stock for the Company's %
Subordinated Exchange Debentures Due 2009 (the "Exchange Debentures").
The Company will be required, subject to certain conditions, to redeem all
of the Series A Preferred Stock or the Exchange Debentures, as the case may be,
on , 2009. Except as described below, the Company may not redeem the
Series A Preferred Stock or the Exchange Debentures prior to , 2003. On
or after such date, the Company may, at its option, redeem the Series A
Preferred Stock or the Exchange Debentures, in whole or in part, for cash, at
the redemption prices set forth herein together with, in the case of the Series
A Preferred Stock, all accumulated and unpaid dividends to the date of
redemption, or in the case of the Exchange Debentures, all accrued and unpaid
interest to the date of redemption. Prior to , 2001, the Company may
redeem up to 35% of the original aggregate liquidation preference of the Series
A Preferred Stock or the original aggregate principal amount of the Exchange
Debentures, as the case may, be with the proceeds of one or more Equity
Offerings (as defined herein) at the redemption price set forth herein. Upon the
occurrence of a Change of Control, the Company will be required to make an offer
to purchase the Series A Preferred Stock or the Exchange Debentures, for cash,
at a price equal to 101% of the liquidation preference or aggregate principal
amount, as the case may be, thereof, together with, in the case of the Series A
Preferred Stock, all accumulated and unpaid dividends to the date of purchase,
or in the case of the Exchange Debentures, all accrued and unpaid interest
thereon. See "Description of the Series A Preferred Stock and Exchange
Debentures."
The Exchange Debentures will be general unsecured obligations of the
Company, subordinated in right of payment to all existing and future Exchange
Debenture Senior Debt (as defined herein) of the Company, including all
borrowings of the Company under the Company's credit facility (the "Credit
Facility") and the Notes (as defined herein). On a pro forma basis after giving
effect to the Transactions (as defined herein) as if they had occurred on
December 31, 1997, the Company would have had outstanding approximately
$ million of Exchange Debenture Senior Debt that would effectively rank
senior to the Exchange Debentures. See "Description of Series A Preferred
Stock--Subordination." The Exchange Debenture Indenture (as defined herein)
permit the Company and its subsidiaries to incur additional indebtedness,
including Exchange Debenture Senior Debt, subject to certain limitations. See
"Capitalization" and "Description of the Series A Preferred Stock and Exchange
Debentures."
Concurrently with the Preferred Stock Offering, $ million of %
Senior Subordinated Notes Due 2008 (the "Notes") and shares of the
Company's Class A Common Stock (the "Class A Common Stock") are being offered to
the public by the Company (the "Debt Offering" and the "Stock Offering",
respectively, and together with the Preferred Stock Offering, the "Offerings").
Consummation of each Offering is contingent upon the consummation of each of the
other Offerings. A portion of the proceeds of the Offerings will be used to
repay the Credit Facility for which affiliates of Lehman Brothers Inc. act as
arranger and lender.
------------------------------
SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS IN EVALUATING AN INVESTMENT IN THE
SERIES A PREFERRED STOCK.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATIONS TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) THE COMPANY(1)(3)
<S> <C> <C> <C>
Per Share of Exchangeable Preferred Stock............ % % %
Total................................................ $ $ $
</TABLE>
(1) Plus accumulated dividends, if any, from the date of issuance.
(2) See "Underwriting" for indemnification arrangements with the Underwriters.
(3) Before deducting expenses of the Preferred Stock Offering, payable by the
Company, estimated at $ .
The Series A Preferred Stock is offered by Bear, Stearns & Co. Inc. and
Lehman Brothers Inc., as Underwriters (the "Underwriters"), subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify the offer and to reject orders in whole or in part. It is
expected that the Series A Preferred Stock will be available for delivery in New
York, New York, on or about , 1998 in book-entry form through the
facilities of The Depository Trust Company.
BEAR, STEARNS & CO. INC. LEHMAN BROTHERS
The date of this Prospectus is , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SERIES A PREFERRED
STOCK, INCLUDING OVER-ALLOTMENTS, STABILIZING BIDS AND SHORT COVERING
TRANSACTIONS AND THE IMPLEMENTATION OF PENALTY BIDS. SEE "UNDERWRITING."
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<PAGE>
THE PREFERRED STOCK OFFERING
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<S> <C>
ISSUER....................................... Cumulus Media Inc.
SECURITIES OFFERED........................... shares of % Series A Cumulative
Exchangeable Redeemable Preferred Stock due
2009. Each share of Series A Preferred Stock
will have a liquidation preference of $1,000
per share.
MATURITY..................................... , 2009.
DIVIDEND..................................... All dividends will be cumulative from the
date of issuance of the Series A Preferred
Stock and will be payable quarterly in
arrears on , , and of
each year, commencing on , 1998.
On or before , 2003, the Company
may, at its option, pay dividends in cash or
in additional fully paid and non-assessable
shares of Series A Preferred Stock having an
aggregate liquidation preference equal to the
amount of such dividends. After ,
2003, dividends may be paid only in cash.
VOTING RIGHTS................................ Holders of Series A Preferred Stock will have
no voting rights with respect to general
corporate matters except as provided by law
or, in certain limited circumstances, as set
forth in the Certificate of Designation (as
defined herein). See "Description of the
Series A Preferred Stock-- Voting Rights."
MANDATORY REDEMPTION......................... The Company is required, subject to certain
conditions, to redeem all of the Series A
Preferred Stock outstanding on ,
2009 at a redemption price equal to 100% of
the liquidation preference thereof, plus,
without duplication, accumulated and unpaid
dividends to the date of redemption.
OPTIONAL REDEMPTION.......................... Except as described below, the Company may
not redeem the Series A Preferred Stock prior
to , 2003. On or after such date,
the Company may, at its option redeem the
Series A Preferred Stock, in whole or in
part, at the redemption prices set forth
herein together with accumulated and unpaid
dividends, if any, to the date of redemption.
Prior to , 2001, the Company, at
its option, may redeem up to 35% of the
liquidation preference of the Series A
Preferred Stock, with the proceeds of one or
more Equity Offerings at a redemption price
equal to % of the original aggregate
liquidation preference thereof, together with
accumulated and
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<TABLE>
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unpaid dividends, if any, to the date of
redemption.
CHANGE OF CONTROL............................ Upon the occurrence of a Change of Control,
the Company will be required to make an offer
to purchase the Series A Preferred Stock for
cash at a purchase price of 101% of the
liquidation preference thereof, together with
all accumulated and unpaid dividends to the
date of purchase.
RANKING...................................... The Series A Preferred Stock will rank (i)
senior to all other classes of Capital Stock
of the Company established after the issue
date of the Series A Preferred Stock which do
not expressly provide that such classes rank
on a parity with the Series A Preferred Stock
as to dividends and distributions upon the
liquidation, winding up and dissolution of
the Company and (ii) subject to certain
conditions, on a parity with any class of
Capital Stock established after the date of
issuance of the Series A Preferred Stock the
terms of which expressly provide that such
class or series will rank on a parity with
the Series A Preferred Stock as to dividends
and distributions upon the liquidation,
winding up and dissolution of the Company.
Creditors of the Company will have priority
over the Series A Preferred Stock with
respect to claims on the assets of the
Company. See "Description of the Series A
Preferred Stock and Exchange
Debentures--Series A Preferred Stock--Rank."
CERTAIN COVENANTS............................ The Certificate of Designation for the
issuance of the Preferred Stock will limit:
(i) the incurrence of additional indebtedness
by the Company and its Restricted
Subsidiaries; (ii) the redemption or
repurchase of Junior Securities or Parity
Securities (each as defined) and the payment
of dividends thereon; (iii) certain
investments; (iv) consolidations or mergers;
and (v) certain transactions with affiliates.
However, all these limitations and
prohibitions are subject to a number of
important qualifications and exceptions. See
"Description of the Series A Preferred Stock
and Exchange Debentures-- Series A Preferred
Stock--Certain Covenants."
SECURITY..................................... None.
EXCHANGE FEATURE............................. On any scheduled dividend payment date,
subject to provisions of the Company's debt
instruments, the Company may, at its option,
exchange all but not less than all of the
shares of the Series A Preferred Stock then
outstanding for the
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<PAGE>
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Company's Exchange Debentures. See
"Description of the Series A Preferred Stock
and Exchange Debentures--Series A Preferred
Stock--Exchange."
THE EXCHANGE DEBENTURES
THE EXCHANGE DEBENTURES...................... % Subordinated Exchange Debentures Due 2009.
MATURITY..................................... , 2009.
INTEREST..................................... Interest on the Exchange Debentures will be
payable semi-annually in cash (or on or prior
to , 2003, in additional Exchange
Debentures, at the option of the Company) in
arrears on and of each
year, commencing with the first such date
after the Exchange Date.
OPTIONAL REDEMPTION.......................... Except as described below, the Company may
not redeem the Exchange Debentures prior to
, 2003. On or after such date, the
Company may, at its option, redeem the
Exchange Debentures, in whole or in part, at
the redemption prices set forth herein
together with accrued and unpaid interest, if
any, to the date of redemption. Prior to
, 2001, the Company may, at its
option, redeem up to 35% of the original
aggregate principal amount of the Exchange
Debentures with the proceeds of one or more
Equity Offerings at a redemption price equal
to % of the principal amount of the
Exchange Debentures to be redeemed, together
with accrued and unpaid interest, if any, to
the date of redemption.
CHANGE OF CONTROL............................ Upon the occurrence of a Change of Control,
subject to certain restrictions in the
Company's debt instruments, the Company will
be required to make an offer to repurchase
the Exchange Debentures held by such holder
at a price equal to 101% of the principal
amount thereof, together with accrued and
unpaid interest, if any, to the date of
repurchase.
RANKING...................................... The Exchange Debentures will be unsecured and
will be subordinated in right of payment to
all existing and future Exchange Debenture
Senior Debt of the Company, including the
Credit Facility and the Notes, and will be
effectively subordinated to all obligations
of the subsidiaries of the Company. The
Exchange Debentures will rank senior to all
other Exchange Debenture Subordinated Debt of
the Company. The
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<PAGE>
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<S> <C>
indenture under which the Exchange Debentures
will be issued (the "Exchange Debenture
Indenture") permits the Company to incur
additional indebtedness, including Exchange
Debenture Senior Debt, subject to certain
limitations. See "Risk Factors" and
"Description of the Exchangeable Preferred
Stock and Exchange Debentures--Exchange
Debentures-- Subordination and Ranking."
RESTRICTIVE COVENANTS........................ The Exchange Debenture Indenture will limit:
(i) the incurrence of additional indebtedness
by the Company and its Restricted
Subsidiaries (as defined); (ii) the payment
of dividends on, and redemption of, capital
stock of the Company and its Restricted
Subsidiaries and the redemption of certain
subordinated obligations of the Company and
its Restricted Subsidiaries; (iii)
investments; (iv) sales of assets and
Restricted Subsidiary stock; (v) certain
transactions with affiliates; (vi) the sale
or issuance of capital stock of Restricted
Subsidiaries; (vii) the creation and
existence of liens; and (viii)
consolidations, mergers and transfers of all
or substantially all of the Company's assets.
The Exchange Debenture Indenture will also
prohibit certain restrictions on
distributions from Restricted Subsidiaries.
However, all of these limitations and
prohibitions are subject to a number of
important qualifications and exceptions. See
"Description of the Series A Preferred Stock
and Exchange Debentures--Exchange
Debentures--Certain Covenants."
USE OF PROCEEDS.............................. Approximately $ million of the net
proceeds of the Offerings will be used to
finance the Pending Acquisitions. The balance
of the net proceeds of the Offerings will be
used to repay the principal amount of
Indebtedness currently outstanding under the
Credit Facility for which affiliates of
Lehman Brothers Inc. act as arranger and
lender. See "Use of Proceeds" and
"Description of Credit Facility and Notes."
CONCURRENT OFFERINGS......................... Concurrently with the Preferred Stock
Offering, the Company is offering
shares of its Class A Common Stock and
$ million aggregate principal amount of
its % Senior Subordinated Notes due 2008.
Each Offering is conditioned upon
consummation of each of the other Offerings.
See "Risk Factors--Significant Capital
Requirements; Concurrent Offerings" and "Use
of Proceeds."
</TABLE>
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<PAGE>
RISK FACTORS
An investment in the Series A Preferred Stock offered hereby involves a high
degree of risk. Prospective purchasers of the Series A Preferred Stock offered
hereby should carefully consider the factors set forth in "Risk Factors", as
well as the other information set forth in this Prospectus, before making an
investment in the Series A Preferred Stock.
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<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF SERIES A PREFERRED STOCK OFFERED HEREBY
INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY
THE FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS, BEFORE MAKING AN INVESTMENT IN THE SERIES A PREFERRED STOCK OFFERED
HEREBY.
RISKS OF ACQUISITION STRATEGY
The Company intends to pursue growth through internal expansion and the
acquisition of radio broadcasting companies, radio station groups and individual
radio stations in mid-size and smaller markets. The Company cannot predict
whether it will be successful in pursuing such acquisition opportunities or what
the consequences of any such acquisitions would be. The Company is currently
evaluating certain acquisitions; however, other than as described in "Pending
Acquisitions," the Company currently has no binding commitments to acquire any
specific business or other material assets. Consummation of the Pending
Acquisitions and any subsequent acquisitions is subject to various conditions,
including FCC and other regulatory approvals including, in some cases,
expiration or termination of applicable waiting periods and possible review by
the U.S. Department of Justice ("DOJ") and the Federal Trade Commission ("FTC")
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). There can be no assurances that any of these conditions will be
satisfied. Consummation of the Pending Acquisitions and any subsequent
acquisitions will also be subject to FCC limits on the number of stations a
broadcaster may own in a given local market and other FCC rules or policies such
as the cross-interest policy, which may limit the Company's ability to acquire
stations in certain markets where one or more of the Company's shareholders has
other media interests. In addition, in two markets in which there are Pending
Acquisitions (Augusta, GA and Dubuque, IA), petitions or informal objections
have been filed against the Company's FCC assignment applications and a third
objection is expected to be filed. All such petitions and objections must be
resolved before FCC approval can be obtained and the Pending Acquisitions can be
consummated.
The consummation of the Offerings is not conditioned on the consummation of
any of the Pending Acquisitions. No assurances can be given that such
transactions will be consummated or that, if completed, they will be successful.
The Company's acquisition strategy involves numerous risks, including
difficulties in identifying targets and negotiating definitive purchase
agreements on satisfactory terms, the integration of operations and systems and
the management of a large and geographically diverse group of stations, the
diversion of management's attention from other business concerns and the
potential loss of key employees at acquired stations. See "Business --
Integration of Acquired Businesses." There can be no assurance that the
Company's management will be able to manage effectively the resulting business
or that such acquisitions will benefit the Company. In addition, there can be no
assurance that the Company will be able to acquire properties at valuations as
favorable as previous acquisitions. Depending upon the nature, size and timing
of future acquisitions, the Company may be required to raise financing in
addition to the financing necessary to consummate the Pending Acquisitions.
There can be no assurance that the Credit Facility, the Indenture (as defined
herein), the Certificate of Designation or the Exchange Debenture Indenture or
any other agreements to which the Company may become a party will permit such
additional financing or that such additional financing will be available to the
Company or, if available, that such financing would be on terms acceptable to
its management. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
LIMITED OPERATING HISTORY; NET LOSS; MANAGEMENT OF RAPID GROWTH
The Company began operations in May 1997 and, consequently, has a limited
operating history and limited historical financial information upon which
investors may base their evaluation of the Company's performance. The Company
has grown very rapidly, through acquisitions, which will place significant
demands on its administrative, operational and financial resources. Although the
Company has been successful to date in completing the integration of many new
properties, future performance and
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<PAGE>
profitability, if any, will depend in part on the Company's continued ability to
integrate successfully the operations and systems of acquired radio stations and
radio groups, to hire additional personnel, and to implement necessary
enhancements to its management systems to respond to changes in its business.
The inability of the Company to do any of the foregoing could have a material
adverse effect on the Company. See "Business." The Company had a net loss
attributable to common stockholders of approximately $3.9 million for the period
from inception on May 22, 1997 to December 31, 1997, and additional losses can
be expected to continue while the Company pursues its strategy of acquiring and
developing radio stations. Pro forma for the Transactions, net loss attributable
to common stockholders was approximately $27.7 million for the year ended
December 31, 1997. There can be no assurance that the Company will be profitable
in the future.
SIGNIFICANT CAPITAL REQUIREMENTS; CONCURRENT OFFERINGS
If consummated, the Pending Acquisitions and other acquisitions for which
the Company has entered into letters of intent will require substantial capital.
The Company estimates that it will have significant capital requirements for the
remainder of 1998, including approximately $260.5 million for the consummation
of the Pending Acquisitions. The Company expects that the net proceeds from the
Offerings, together with internally generated cash flows and borrowings under
the Credit Facility, will provide sufficient funds for the Company to complete
the Pending Acquisitions. The amount of the Company's future capital
requirements will depend upon many factors, however, including the volume of
future acquisitions, as well as regulatory, technological and competitive
developments in the radio broadcasting industry, and may differ materially from
the Company's current estimates.
The Company is currently offering the Series A Preferred Stock, the Notes
and the Class A Common Stock pursuant to the Offerings. Consummation of each
Offering is contingent upon consummation of each other Offering and there can be
no assurance that the Offerings will be consummated and, if so, on what terms.
SUBSTANTIAL LEVERAGE
After giving effect to the Transactions, the Company will have consolidated
Indebtedness that is substantial in relation to its cash flow and stockholders'
equity. As of December 31, 1997, on a pro forma basis after giving effect to the
Transactions, the Company would have had outstanding, on a consolidated basis,
long-term Indebtedness (including current portion) of approximately $157.7
million, preferred stock subject to mandatory redemption of approximately $132.7
million and stockholders' equity of approximately $149.7 million. See
"Capitalization." The Credit Facility, the Indenture, the Certificate of
Designation and the Exchange Debenture Indenture limit the incurrence of
additional Indebtedness by the Company and its subsidiaries, in each case
subject to certain significant exceptions.
The level of the Company's Indebtedness could have several important
consequences to the holders of the Series A Preferred Stock, including, but not
limited to, the following: (i) a substantial portion of the Company's cash flow
from operations will be dedicated to debt service and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing for
working capital, capital expenditures, acquisitions and general corporate or
other purposes may be impaired in the future; (iii) certain of the Company's
borrowings will be at variable rates of interest (including any borrowings under
the Credit Facility), which will expose the Company to the risk of increased
interest rates; (iv) the Company's leveraged position and the covenants
contained in the Credit Facility, the Indenture, the Certificate of Designation
and the Exchange Debenture Indenture could limit the Company's ability to
compete, expand and make capital improvements; (v) the Company's level of
Indebtedness could make it more vulnerable to economic downturns, limit its
ability to withstand competitive pressures and reduce its flexibility in
responding to changing business and economic conditions; and (vi) certain
restrictive covenants contained in the Credit Facility, the Indenture, the
Certificate of Designation and the Exchange Debenture Indenture limit the
ability of Cumulus to pay dividends and make other distributions to its
stockholders.
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<PAGE>
ABILITY TO SERVICE DEBT OBLIGATIONS
The Company's ability to satisfy its debt service obligations, including the
Exchange Debentures, and pay dividends on the Series A Preferred Stock will
depend upon its future financial and operating performance, which, in turn, is
subject to prevailing economic conditions and financial, business and other
factors, certain of which are beyond its control. If the Company's cash flow and
capital resources are insufficient to fund its debt service obligations, the
Company may be forced to reduce or delay planned acquisitions, expansion and
capital expenditures, sell assets, obtain additional equity capital or
restructure its debt. There can be no assurance that the Company's operating
results, cash flow and capital resources will be sufficient for payment of its
debt service and other obligations in the future. In the absence of such
operating results and resources, the Company could face substantial liquidity
problems and might be required to sell material assets or operations to meet its
debt service and other obligations, and there can be no assurance as to the
timing of such sales or the proceeds that the Company could realize therefrom or
that such sales could be effected on terms satisfactory to the Company or at
all. As a result of the net loss attributable to common stockholders, earnings
were insufficient to cover fixed charges and preferred stock dividend
requirements by $3,785 for the period from inception on May 22, 1997 to December
31, 1997. See "Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Liquidity and Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS AND PREFERRED STOCK
The Credit Facility, the Indenture, the Certificate of Designation and the
Exchange Debenture Indenture contain certain covenants that restrict, among
other things, the ability of the Company and its subsidiaries to incur
additional Indebtedness, pay dividends or make certain other restricted
payments, enter into certain transactions with affiliates, merge or consolidate
with any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company. In addition,
the Credit Facility, the Indenture and the Exchange Debenture Indenture also
restrict the ability of the Company to incur liens or to consummate certain
asset sales. The Credit Facility also requires the Company to maintain specified
financial ratios and to satisfy certain financial condition tests. The Company's
ability to meet those financial ratios and financial condition tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet those tests. A breach of any of these covenants could result
in a default under the Credit Facility, the Indenture, the Certificate of
Designation and/or the Exchange Debenture Indenture. Upon the occurrence of an
event of default under the Credit Facility, the lenders thereunder could elect
to declare all amounts outstanding thereunder, together with accrued interest,
to be immediately due and payable. If Cumulus were unable to repay those
amounts, the lenders under the Credit Facility could proceed against the
collateral granted to them to secure that Indebtedness. If the Indebtedness
under the Credit Facility were to be accelerated, there can be no assurance that
the assets of Cumulus would be sufficient to repay in full such Indebtedness and
the other Indebtedness of the Company, including the Exchange Debentures. The
ability of the Company to comply with the restrictions and covenants in the
Credit Facility, the Indenture, the Certificate of Designation and the Exchange
Debenture Indenture will be dependent upon the Company's future performance and
various other factors, including factors beyond its control. If the Company
fails to comply with the restrictions and covenants in the Credit Facility, the
Indenture, the Certificate of Designation or the Exchange Debenture Indenture,
the Company's obligation to repay the Notes, the Exchange Debentures and its
Indebtedness under the Credit Facility may be accelerated.
REDEMPTION OF SERIES A PREFERRED STOCK UPON CHANGE OF CONTROL
Upon a Change of Control (as defined herein), the Company may be required to
offer to purchase all of the outstanding shares of the Series A Preferred Stock
or the Exchange Debentures at 101% of the principal amount or liquidation
preference thereof, as the case may be, plus accrued and unpaid dividends or
interest to the date of purchase. The source of funds for any such purchase
would be the Company's available cash or cash generated from other sources.
However, there can be no assurance that sufficient
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<PAGE>
funds would be available at the time of any Change of Control to make any
required purchases of Series A Preferred Stock tendered or, if applicable, that
restrictions in the Credit Facility or the Indenture would permit the Company to
make such required purchases. The Credit Facility and the Indenture will require
that the Company repay all amounts outstanding under the Credit Facility and the
Notes prior to making any payments on the Series A Preferred Stock upon a Change
of Control. The Certificate of Designation may not afford holders of Series A
Preferred Stock the right to require the Company to repurchase the Series A
Preferred Stock in the event of certain transactions, such as a highly leveraged
transaction, that may adversely affect holders of Series A Preferred Stock if
such transaction is not a transaction defined as a Change of Control. Certain
events involving a Change of Control may result in an event of default under the
Credit Facility or the Indenture or other Indebtedness of the Company that may
be incurred in the future. The Company's failure to purchase tendered Series A
Preferred Stock would constitute an Event of Default under the Indenture and the
Credit Facility, which could have adverse consequences for the Company and the
holders of the Series A Preferred Stock. The definition of "Change of Control"
includes a sale, lease, conveyance or other disposition of "all or substantially
all" of the assets of the Company and its Subsidiaries taken as a whole to a
person or group of persons. There is little case law interpreting the phrase
"all or substantially all" in the context of an indenture. Because there is no
precise established definition of this phrase, the ability of a holder of the
Series A Preferred Stock to require the Company to repurchase such Series A
Preferred Stock as a result of a sale, lease, conveyance or transfer of all or
substantially all of the Company's assets to a person or group of persons may be
uncertain. See "Description of Capital Stock -- Description of the Series A
Preferred Stock -- Repurchase at the Option of Holders."
SUBORDINATION OF THE EXCHANGE DEBENTURES
The Exchange Debentures will be subordinated in right of payment to all
Exchange Debenture Senior Debt (as defined herein) of the Company. In the event
of bankruptcy, liquidation or reorganization of the Company, the assets of the
Company will be available to pay obligations on the Exchange Debentures only
after all Exchange Debenture Senior Debt has been paid in full and there may not
be sufficient assets remaining to pay amounts due on any or all of the Exchange
Debentures then outstanding. In addition, Indebtedness outstanding under the
Credit Facility is secured by substantially all of the assets of the Company and
its subsidiaries in which a security interest may lawfully be granted.
Additional Exchange Debenture Senior Debt may be incurred by the Company from
time to time subject to certain restrictions contained in the Credit Facility
and the Indenture.
TAX CONSEQUENCES OF DISTRIBUTIONS WITH RESPECT TO THE SERIES A PREFERRED STOCK
AND EXCHANGE DEBENTURES; POTENTIAL FOR UNPLANNED DEEMED DIVIDEND INCOME AND
ORIGINAL ISSUE DISCOUNT
If the redemption price of the Series A Preferred Stock exceeds its issue
price by more than a DE MINIMIS amount, such excess may be treated as a
constructive distribution with respect to the Series A Preferred Stock of
additional stock over the term of the Series A Preferred Stock using a constant
interest rate method similar to that used for accruing original issue discount.
In addition, because the issue price of the Series A Preferred Stock
distribution in lieu of payment of cash dividends (the "Dividend Shares") will
be equal to the fair market value of the Series A Preferred Stock at the time of
distribution, it is possible depending on its fair market value at the time,
that such Dividend Shares will be issued with a redemption premium large enough
to be considered a dividend as described above. In such event, holders would be
required to include such premium in income as a distribution over some period in
advance of receiving the cash attributable to such income, and such Series A
Preferred Stock might trade separately, which might adversely affect the
liquidity of the Series A Preferred Stock.
The Company may, at its option and under certain circumstances, issue
Exchange Debentures in exchange for the Series A Preferred Stock. Any such
exchange will be a taxable event to holders of the Series A Preferred Stock.
Furthermore, the Exchange Debentures may in certain circumstances be treated as
having been issued with original issue discount for U.S. federal income tax
purposes. In such event,
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holders of Exchange Debentures will be required to include such original issue
discount (as ordinary income) in income over the life of the Exchange
Debentures, in advance of the receipt of cash attributable to such income.
HOLDING COMPANY STRUCTURE; DEPENDENCE UPON OPERATIONS OF SUBSIDIARIES
The Company conducts its business through its subsidiaries and has no
operations of its own. Consequently, the Company will be dependent upon the cash
flow of such subsidiaries and distributions thereof from such subsidiaries to
the Company in order to pay the liquidation preference of and dividends when due
on the Series A Preferred Stock and interest and principal when due to holders
of the Exchange Debentures. The Company's subsidiaries will have no obligation,
contingent or otherwise, to make any funds available to the Company for payment
of the aggregate liquidation preference and dividends on the Series A Preferred
Stock or interest or principal on the Exchange Debentures. Under the Indenture
and the Credit Facility, the Certificate of Designation and the Exchange
Debenture Indenture, the Company's subsidiaries will be restricted in their
ability to incur debt in the future.
FRAUDULENT CONVEYANCE RISKS
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the obligation
of, or liens securing, the Exchange Debentures in favor of other existing or
future creditors of the Company.
Under applicable provisions of Federal bankruptcy law or comparable
provisions of state fraudulent transfer laws and state corporation law statutes,
if, among other things, the Company, at the time it incurred the Indebtedness
evidenced by the Exchange Debentures, (i)(a) was or is insolvent or rendered
insolvent by reason of such occurrence or (b) was or is engaged or about to
become engaged in a business or transaction for which the assets remaining with
the Company constituted unreasonably small capital or (c) intended or intends to
incur, or believed or believes that it would incur, debts beyond its ability to
pay such debts as they mature or (d) was a defendant in an action for money
damages or had a judgment for money damages docketed against it (if, in either
case, after final judgment, the judgment is unsatisfied), and (ii) the Company
received or receives less than reasonably equivalent value or fair consideration
for the incurrence of the Indebtedness evidenced by the Exchange Debentures, any
pledge or other security interest securing such Indebtedness could be voided, or
claims in respect of the Exchange Debentures or the other security interest
securing such Indebtedness could be voided, or claims in respect of the Exchange
Debentures could be subordinated to all other debts of the Company. The voiding
or subordination of any of such pledges or other security interests or of any of
such Indebtedness could result in acceleration thereof. In addition, the payment
of interest and principal by the Company pursuant to the Exchange Debentures
could be voided and required to be returned to the person making such payment,
or to a fund for the benefit of the creditors of the Company.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company would be considered insolvent if (i)
the sum of its debts, including contingent liabilities, was greater than the
fair saleable value of all of its assets at a fair valuation or if the present
fair saleable value of its assets was less than the amount that would be
required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or (ii) it could not
pay its debts as they become due.
On the basis of the pro forma financial information included in this
Prospectus and other factors, the Company believes that after giving effect to
the Indebtedness being incurred in connection with the Notes, the Company will
be solvent and will continue to be solvent after issuing the Exchange
Debentures, will have sufficient capital for carrying on its business after such
issuance and will be able to pay its debts as they mature. There can be no
assurance, however, as to what standard a court would apply in making such
determinations.
B-10
<PAGE>
ABSENCE OF PUBLIC MARKET FOR THE SERIES A PREFERRED STOCK
The Series A Preferred Stock will be new securities for which there
currently is no established trading market. The Company does not intend to apply
for listing of the Series A Preferred Stock on any national securities exchange
or for quotation of the Series A Preferred Stock on any automated dealer
quotation system. Although the Underwriters have informed the Company that they
currently intend to make a market in the Series A Preferred Stock and, if
issued, the Exchange Debentures, the Underwriters are not obligated to do so,
and any such market making may be discontinued at any time without notice. The
liquidity of any market for the Series A Preferred Stock and, if issued, the
Exchange Debentures will depend upon the number of holders of the Series A
Preferred Stock, the interest of securities dealers in making a market in the
Series A Preferred Stock and, if issued, the Exchange Debentures and other
factors. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Series A Preferred Stock and, if issued, the
Exchange Debentures. If an active trading market for the Series A Preferred
Stock and, if issued, the Exchange Debentures does not develop, the market price
and liquidity of the Series A Preferred Stock and, if issued, the Exchange
Debentures may be adversely affected. If the Series A Preferred Stock are
traded, they may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities, the
performance of the Company and certain other factors. The liquidity of, and
trading markets for, the Series A Preferred Stock and, if issued, the Exchange
Debentures may also be adversely affected by general declines in the market for
non-investment grade debt. Such declines may adversely affect the liquidity of,
and trading markets for, the Series A Preferred Stock, independent of the
financial performance of or prospects for the Company.
BUSINESS RISKS
Future operations of the Company are subject to many variables which could
have a material adverse effect upon the Company's financial performance. These
variables include economic conditions, both generally and relative to the radio
broadcasting industry; shifts in population and other demographics; shifts in
audience tastes; the level of competition for advertising dollars with other
radio stations, television stations and other entertainment and communications
media; fluctuations in operating costs; technological changes and innovations;
changes in labor conditions; and changes in laws and governmental regulations
and policies and actions of federal regulatory bodies, including the DOJ, the
FTC and the FCC. Although the Company believes that substantially all of its
radio stations, now owned or to be acquired upon completion of the Pending
Acquisitions, are positioned to compete effectively in their respective markets,
there can be no assurance that any such station will be able to maintain or
increase its current audience ratings and advertising revenues. See "Business --
Competition." Radio broadcasting 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 the introduction of digital
audio broadcasting ("DAB"). DAB may deliver by satellite to nationwide and
regional audiences multi-channel, multi-format digital radio services with sound
quality equivalent to compact discs and may sell advertising. The Company cannot
predict the effect, if any, that any such new technologies may have on the radio
broadcasting industry or the Company. See "Business -- Competition."
COMPETITION
Radio broadcasting is a highly competitive business. The Company's radio
stations, now owned or to be acquired upon completion of the Pending
Acquisitions, compete for audiences and advertising revenues within their
respective markets directly with other radio stations, as well as with other
media, such as newspapers, magazines, cable and broadcast television, outdoor
advertising and direct mail. In addition, certain of the Company's stations
compete, and in the future other of the Company's stations may compete, with
groups of two or more stations operated by a single operator. Audience ratings
and market shares are subject to change, and any adverse change in a particular
market could have a material adverse effect on the revenue of stations located
in that market. While the Company already competes with other stations with
comparable programming formats in many of its markets, if another radio station
in the
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<PAGE>
market were to convert its programming format to a format similar to one of the
Company's stations, or launch aggressive promotional campaigns, or if a new
station were to adopt a competitive format, or if an existing competitor were to
strengthen its operations, the Company's stations could suffer a reduction in
ratings and/or advertising revenue and could require increased promotional and
other expenses, and consequently would have a lower Broadcast Cash Flow. The
Telecommunications Act of 1996 (the "Telecom Act") facilitates the consolidation
of ownership of other radio broadcasting stations in the markets in which the
Company operates or may operate in the future. Some of such competing in-market
consolidated owners may be larger and have substantially more financial and
other resources than the Company. In addition, increased consolidation in
mid-size and smaller markets may result in greater competition for acquisition
properties and a corresponding increase in purchase prices for such properties
paid by the Company. See "Business--Competition."
GOVERNMENTAL REGULATION OF BROADCASTING INDUSTRY
The broadcasting industry is subject to extensive and changing federal
regulation that, among other things, requires approval by the FCC for the
issuance, renewal, modification, transfer of control, or assignment of
broadcasting station operating licenses, limits the number of broadcasting
properties that the Company may acquire in any market, and regulates certain
operating practices of radio stations. Additionally, the Communications Act of
1934, as amended (the "Communications Act") and FCC rules impose limitations on
alien ownership and voting of the capital stock of the Company. The Telecom Act
creates significant new opportunities for broadcasting companies but also
creates uncertainties as to how the FCC and the courts will enforce and
interpret the Telecom Act.
The number of radio stations the Company may acquire or operate pursuant to
an LMA in any market, overall and in each service (i.e., AM or FM), is limited
by the Telecom Act and FCC rules and may vary depending upon whether the
interests in other radio stations or certain other media properties of certain
individuals or entities affiliated with the Company are attributable to those
individuals or entities under FCC rules. The FCC generally applies its ownership
limits to "attributable" interests held by an individual, corporation,
partnership or other association. The interests of the Company's officers,
directors and 5% or greater voting stockholders are generally attributable to
the Company. Certain of the Company's officers and directors, and at least one
stockholder of the Company, have attributable broadcast interests outside of
their involvement with the Company, which will limit the number of radio
stations that the Company may acquire or own in any market in which such
officers or directors (or stockholders) hold or acquire such outside
attributable broadcast interests. Moreover, under the FCC's cross-interest
policy, the FCC, in certain instances, may prohibit one party from acquiring an
attributable interest in one media outlet and a substantial non-attributable
interest in another media outlet in the same market, thereby prohibiting a
particular acquisition by the Company. The markets in which the Company may be
subject to restricitons on ownership include Atlanta, GA, Nashville, TN and
Rochester, MN.
The consummation of radio broadcasting acquisitions requires prior approval
of the FCC with respect to the transfer of control or assignment of the
broadcast licenses of the acquired stations. Certain of the Pending Acquisitions
have not yet received FCC approval. Two Pending Acquisitions are being
challenged before the FCC by a competitor, and another is expected to be
challenged. There can be no assurance that the FCC will approve future
acquisitions by the Company (including the Pending Acquisitions). The
consummation of certain of the Pending Acquisitions is also subject to
applicable waiting periods and possible review by the DOJ or the FTC under the
HSR Act, and acquisitions that are not required to be reported under the HSR Act
may still be investigated by the FTC or the DOJ under the antitrust laws before
or after consummation. The DOJ has been active in reviewing radio broadcasting
acquisitions and has challenged a number of such transactions, some of which
have resulted in consent decrees requiring divestitures of certain stations,
terminations of LMAs and other relief. In general, the DOJ has more closely
scrutinized radio mergers and acquisitions that result in local market shares in
excess of 35% of radio advertising revenues, depending on format, signal
strength and other factors, although there is no hard-and-fast numerical rule
and certain transactions resulting in more than 35% market share have not
B-12
<PAGE>
been challenged. The DOJ can be expected to continue to enforce the antitrust
laws in this manner, and there can be no assurance that one or more of the
Pending Acquisitions will not be the subject of an investigation or enforcement
action by the DOJ or the FTC. If the DOJ or the FTC investigates or challenges
one or more of the Pending Acquisitions or any subsequent acquisitions, the
Company may need to restructure such transactions or divest other existing
stations in a particular market. However, the Company believes that its
operating and sales practices and demand-driven pricing policies serve to expand
advertising volume and increase competition in a market while providing more
choice to advertisers and to listeners.
The Company's business will be dependent upon maintaining its broadcasting
licenses issued by the FCC, which are ordinarily issued for a maximum term of
eight years. Although it is rare for the FCC to deny a license renewal
application, there can be no assurance that the future renewal applications of
the Company will be approved or that such renewals will not include conditions
or qualifications that could adversely affect the Company. Moreover,
governmental regulations and policies may change over time and there can be no
assurance that such changes would not have a material adverse impact upon the
Company. See "Business -- Federal Regulation of Radio Broadcasting."
REGULATORY APPROVAL
The Company believes that the consummation of the Reorganization and the
Offerings will require the prior consent of the FCC. The process of obtaining
such consent will involve the application therefor being placed on public
notice, and the public may file objections to such application. In addition, the
FCC itself may decline to grant the application based upon its own review. There
can be no assurance that such consent ultimately will be granted. While the
Company believes that it might be able to obtain the required FCC consent on a
so-called "short-form" application, there is no assurance that the FCC will not
require a "long-form" application. A "long-form" application, if required, will
involve a longer processing period, will be subject to formal petitions to deny
by other parties, and will involve a more detailed review by the FCC, all of
which would increase the risk that FCC consent would be delayed or denied.
POTENTIAL CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES
Mr. Weening and Mr. Dickey each have direct interests in entities that have
entered into service agreements with the Company. These interests may give rise
to certain conflicts of interest with respect to transactions between these
entities and the Company.
QUSTUS, an entity controlled by Mr. Weening, and Stratford Research, an
entity controlled by Mr. Dickey, have acted as the Company's financial and
strategic advisor and market research and programming advisor, respectively,
since the Company's inception. New advisory agreements between each of QUSTUS
and Stratford Research and the Company will be entered into immediately prior to
the consummation of the Offerings. See "Certain Relationships and Related
Transactions."
EFFECTS OF ECONOMIC RECESSION
The Company derives substantially all of its revenue from the sale of
advertising time on its radio stations. The Company's broadcasting revenue could
be adversely affected by a future national recession, although in the most
recent national recession, in 1991, radio revenues in small radio markets ranked
below 100 were impacted less severely on average than those in the larger
markets. In addition, because a substantial portion of the Company's revenue is
derived from local advertisers, the Company's ability to generate advertising
revenue in specific markets could be adversely affected by local or regional
economic downturns. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Advertising Sales."
B-13
<PAGE>
YEAR 2000 RISK
The Company has implemented a Year 2000 program to ensure that the Company's
computer systems and applications will function properly beyond 1999. The
Company believes that it has allocated adequate resources for this purpose and
expects its Year 2000 date conversion program to be successfully completed on a
timely basis. There can, however, be no assurance that this will be the case.
The Company does not expect to incur significant expenditures to address this
issue. The ability of third parties with whom the Company transacts business to
adequately address their Year 2000 issues is outside of the Company's control.
There can be no assurance that the failure of the Company or such third parties
to adequately address their respective Year 2000 issues will not have a material
adverse effect on the Company's business, financial condition, cash flows and
results of operations.
RELIANCE ON KEY PERSONNEL
The Company's business is managed by a small number of key management and
operating personnel, the loss of certain of whom could have a material adverse
effect on the Company. The Company believes that its future success will depend
in large part on its ability to attract and retain highly skilled and qualified
personnel and to expand, train and manage its employee base. The Company has
entered into employment agreements with Messrs. Weening, Dickey, Bungeroth and
Bonick which include provisions restricting the ability of Messrs. Weening,
Dickey, Bungeroth and Bonick to compete against the Company in certain
circumstances. The Company intends to arrange for "key-man" insurance on the
lives of Messrs. Weening, Dickey and Bungeroth. See "Management -- Employment
Agreements."
The Company also employs several on-air personalities with large loyal
audiences in their respective markets. The loss of one of these personalities
could result in a short-term loss of audience share, but the Company does not
believe that any such loss would have a material adverse effect on the Company's
financial condition or results of operations, taken as a whole.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Preferred Stock Offering, the Company will have
outstanding shares of Series A Preferred Stock. Of these shares, the
shares of Series A Preferred Stock offered hereby will be freely
transferable without restriction (subject to any FCC consent that might be
required) under the Securities Act of 1933, as amended (the "Securities Act") or
further registration under the Securities Act, except that shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 promulgated
under the Securities Act ("Rule 144"), may generally only be sold subject to
certain restrictions as to timing, manner and volume.
Future sales of substantial amounts of Preferred Stock, or the perception
that such sales could occur, may affect the market price of the Preferred Stock
prevailing from time to time. See "Shares Eligible for Future Sale" and
"Underwriting."
DIVIDEND POLICY
The Company does not anticipate paying any dividends except for the payment
of scheduled dividends on the Series A Preferred Stock. The Company has never
declared or paid any cash dividends on its capital stock and does not anticipate
paying cash dividends on the Series A Preferred Stock prior to ,
2003. In addition, the Indenture, the Credit Facility, the Certificate of
Designation and the Exchange Debenture Indenture will restrict the ability of
the Company to pay dividends. See "Dividend Policy."
B-14
<PAGE>
DESCRIPTION OF THE SERIES A PREFERRED STOCK
AND EXCHANGE DEBENTURES
SERIES A PREFERRED STOCK
The Series A Preferred Stock will be issued by the Company pursuant to a
certificate of designation relating to the Series A Preferred Stock (the
"Certificate of Designation"). The summary contained herein of certain
provisions of the Series A Preferred Stock does not purport to be complete and
is qualified in its entirety by reference to the provisions of the Certificate
of Designation. Definitions of certain capitalized terms used in the Certificate
of Designation and in the following summary are set forth below under "--
Exchange Debentures--Certain Definitions."
GENERAL
The Board of Directors of the Company intends to adopt resolutions creating
a maximum of shares of Series A Preferred Stock, which consist of the
shares of Series A Preferred Stock to be issued in the Preferred Stock Offering
plus additional shares of Series A Preferred Stock which, among other
things, may be used to pay certain dividends on the Series A Preferred Stock
issued in the Preferred Stock Offering at the election of the Company. The
Company will file a Certificate of Designation with respect thereto with the
Secretary of State of the State of Illinois as required by Illinois law. Subject
to certain conditions, the Series A Preferred Stock will be exchangeable for
Exchange Debentures at the option of the Company on any dividend payment date.
The Series A Preferred Stock, when issued and paid for by the Underwriters in
accordance with the terms of the Underwriting Agreement (as defined under
"Underwriting"), will be fully paid and non-assessable, and the holders thereof
will not have any subscription or preemptive rights related thereto.
will be the transfer agent and registrar for the Series A
Preferred Stock.
RANK
The Series A Preferred Stock will, with respect to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of the
Company, rank (i) senior to all other classes of Capital Stock of the Company
established after the date of the Prospectus by the Board of Directors of the
Company the terms of which do not expressly provide that it ranks on a parity
with the Series A Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up and dissolution of the Company (collectively
referred to with the Common Stock of the Company as "Junior Securities"); and
(ii) subject to certain conditions, on a parity with each series of Preferred
Stock existing on the date of the Prospectus the terms of which do not expressly
provide that it ranks junior to any Preferred Stock as to dividend distributions
and distributions upon the liquidation, winding-up and dissolution of the
Company, and any class of Capital Stock established after the date of this
prospectus by the Board of Directors of the Company, the terms of which
expressly provide that such class or series will rank on a parity with the
Series A Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Parity Securities"). Creditors of the Company will have priority over the
Series A Preferred Stock with respect to claims on the assets of the Company. In
addition, creditors and stockholders of the Company's Subsidiaries will have
priority over the Series A Preferred Stock with respect to claims on the assets
of such Subsidiaries. The Series A Preferred Stock will be subject to the
issuance of new classes of Restricted Securities and Parity Securities, PROVIDED
that the Company may not issue any new class of Parity Securities without the
approval of the holders of at least 50% of the shares of Series A Preferred
Stock then outstanding, voting or consenting, as the case may be, separately as
one class, except that without the approval of the holders of Series A Preferred
Stock, the Company may issue and have outstanding shares of Parity Securities
issued from time to time in exchange for, or the proceeds of which are used to
redeem or repurchase, any or all of the shares of Series A Preferred Stock or
other Parity Securities.
B-15
<PAGE>
DIVIDENDS
Series A Preferred Stock Holders will be entitled to receive, when, as and
if declared by the Board of Directors of the Company, out of funds legally
available therefor, dividends on the Series A Preferred Stock at a rate per
annum equal to % of the liquidation preference per share of the Series A
Preferred Stock. All dividends will be cumulative whether or not earned or
declared on a daily basis from the date of issuance of the Series A Preferred
Stock and will be payable quarterly in arrears on , ,
and of each year, commencing on , 1998. On or
before , 2003 the Company may, at its option, pay dividends in cash or
in additional fully paid and non-assessable shares of Series A Preferred Stock
having an aggregate liquidation preference equal to the amount of such
dividends. After , 2003, dividends may be paid only in cash. It is not
expected that the Company will pay any dividends in cash for any period ending
on or prior to , 2003. The terms of certain debt instruments of the
Company, including the Credit Facility and the Notes, restrict the payment of
cash dividends by the Company, and future agreements may provide the same. See
"Risk Factors--Substantial Leverage," "Risk Factors--Restrictions Imposed by
Terms of Indebtedness and Preferred Stock," and "Description of Credit Facility
and Notes."
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid in full or
declared and, if payable in cash, a sum in cash set apart for such payment on
the Series A Preferred Stock. If full dividends are not so paid, the Series A
Preferred Stock will share dividends pro rata with the Parity Securities. No
dividends may be paid or set apart for such payment on Restricted Securities
(except dividends on Restricted Securities in additional shares of Restricted
Securities) and no Restricted Securities or Parity Securities may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full cumulative dividends have not been paid on
the Series A Preferred Stock.
OPTIONAL REDEMPTION
The Series A Preferred Stock may be redeemed for cash (subject to
contractual and other restrictions with respect thereto and to the legal
availability of funds therefor) at any time on or after , 2003, in
whole or in part, at the option of the Company, at the following redemption
prices (expressed as percentages of the liquidation preference thereof) if
redeemed during the 12-month period beginning on of each of the years
set forth below, in each case together with an amount in cash equal to all
accumulated and unpaid dividends (including an amount in cash equal to a
prorated dividend for the period from the dividend payment date immediately
prior to the redemption date to the redemption date):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -------------
<S> <C>
2003.................................................................................. %
2004.................................................................................. %
2005.................................................................................. %
2006.................................................................................. %
2007 and thereafter................................................................... 100%
</TABLE>
Prior to , 2001, the Company may, at its option, on any one or
more occasions, redeem up to 35% of the original aggregate liquidation
preference of the Series A Preferred Stock, in whole or in part, at the option
of the Company, at a redemption price equal to % of the liquidation
preference thereof, plus an amount in cash equal to all accumulated and unpaid
dividends thereon (including an amount in cash equal to a prorated dividend for
the period from the dividend payment date immediately prior to the redemption
date to the redemption date), with the proceeds of one or more Equity Offerings
(as defined below); PROVIDED that at least 65% of the original aggregate
liquidation preference of the Series A Preferred Stock remains outstanding
immediately after the occurrence of such redemption; and PROVIDED FURTHER that
such redemption shall occur within 90 days of the date of the closing of such
Equity Offering.
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<PAGE>
As used in the preceding paragraph, "Equity Offering" means any public or
private sale of the Common Stock of the Company pursuant to which the Company
receives net proceeds of at least $25.0 million, other than issuances of Common
Stock of the Company pursuant to employee benefit plans or as compensation to
employees.
No optional redemption may be authorized or made (i) unless prior thereto or
contemporaneously therewith full unpaid cumulative dividends shall have been
paid or a sum set apart for such payment on the Series A Preferred Stock or (ii)
at less than 101% of the liquidation preference of the Series A Preferred Stock
at any time when the Company is making an offer to purchase shares of Series A
Preferred Stock under a Change of Control Offer (as defined) in accordance with
the provisions of "--Repurchase at the Option of Series A Preferred Stock
Holders--Change of Control."
In the event of partial redemptions of Series A Preferred Stock, the shares
to be redeemed will be determined PRO RATA or by lot, as determined by the
Company, except that the Company may redeem such shares held by any holders of
fewer than 100 shares (or shares held by holders who would hold less than 100
shares as a result of such redemption), without regard to any PRO RATA
redemption requirement. The terms of certain debt instruments of the Company,
including the Credit Facility and the Notes, restrict, directly or indirectly,
the ability of the Company to redeem the Series A Preferred Stock, and future
agreements to which the Company or its subsidiaries are parties may provide the
same. See "Description of Credit Facility and Notes."
MANDATORY REDEMPTION
On , 2009, the Company will be required to redeem (subject to the
legal availability of funds therefor) all outstanding shares of Series A
Preferred Stock at a price equal to the then effective liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends to
the date of redemption.
PROCEDURES FOR REDEMPTIONS
On and after a redemption date, unless the Company defaults in the payment
of the applicable redemption price, dividends will cease to accrue on shares of
Series A Preferred Stock called for redemption and all rights of holders of such
shares will terminate except for the right to receive the redemption price,
without interest. The Company will send a written notice of redemption by first
class mail to each holder of record of shares of Series A Preferred Stock, not
fewer than 30 days nor more than 60 days prior to the date fixed for such
redemption. Shares of Series A Preferred Stock issued and reacquired will, upon
compliance with the applicable requirements of Illinois law, have the status of
authorized but unissued shares of preferred stock of the Company undesignated as
to series and may with any and all other authorized but unissued shares of
preferred stock of the Company be designated or redesignated and issued or
reissued, as the case may be, as part of any series of preferred stock of the
Company, except that any issuance or reissuance of shares of Series A Preferred
Stock must be in compliance with the Certificate of Designation.
REPURCHASE AT THE OPTION OF SERIES A PREFERRED STOCK HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of the Series A
Preferred Stock will have the right to require the Company to repurchase all or
any part of such Holder's Series A Preferred Stock pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate liquidation preference thereof, plus an amount in cash
equal to all accumulated and unpaid dividends per share (including an amount in
cash equal to a prorated dividend for the period from the dividend payment date
immediately prior to the repurchase date to the repurchase date), if any, to the
date of repurchase (subject to the right of Series A Preferred Stock Holders of
record on the relevant
B-17
<PAGE>
record date to receive dividends due on the relevant dividend payment date);
PROVIDED, HOWEVER, that notwithstanding the occurrence of a Change of Control,
the Company shall not be obligated to purchase the Series A Preferred Stock
pursuant to this covenant in the event that it has exercised its right to redeem
all of the Series A Preferred Stock as described under "--Optional Redemption."
In the event that at the time of such Change of Control, the terms of any
Credit Agreement restricts or prohibits the repurchase of Series A Preferred
Stock pursuant to this covenant, then prior to the mailing of the notice to
Series A Preferred Stock Holders provided for in the immediately following
paragraph but in any event within 30 days following any Change of Control
(unless the Company has exercised its right to redeem all the Series A Preferred
Stock as described under "--Optional Redemption"), the Company shall (i) repay
in full all Obligations under such Credit Agreements or offer to repay in full
all Obligations under such Credit Agreements and repay the Obligations of each
lender who has accepted such offer or (ii) obtain the requisite consent under
the agreements governing the Exchange Debenture Senior Debt to permit the
repurchase of the Series A Preferred Stock as provided for in the immediately
following paragraph.
The Company shall, within 30 days following any Change of Control (or at the
Company's option, prior to such Change of Control but after the public
announcement thereof), mail a notice to each Series A Preferred Stock Holder
stating: (1) that a Change of Control has occurred or will occur and that such
Series A Preferred Stock Holder has (or upon such occurrence will have) the
right to require the Company to purchase such Series A Preferred Stock Holder's
Series A Preferred Stock at a purchase price in cash equal to 101% of the
aggregate liquidation preference thereof, plus an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount in cash equal to
a prorated dividend for the period from the dividend payment date immediately
prior to the repurchase date to the repurchase date), if any, to the date of
redemption (subject to the right of Series A Preferred Stock Holders of record
on a record date to receive dividends on the relevant dividend payment date);
(2) the circumstances and relevant facts and financial information regarding
such Change of Control; (3) the repurchase date (which shall be no earlier than
30 days nor later than 60 days from the date such notice is mailed); (4) the
instructions determined by the Company, consistent with this covenant, that an
Series A Preferred Stock Holder must follow in order to have its Series A
Preferred Stock repurchased; and (5) that, if such offer is made prior to such
Change of Control, payment is conditioned on the occurrence of such Change of
Control.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Series A Preferred Stock pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this paragraph by virtue thereof.
The occurrence of a Change of Control would constitute a default under the
Credit Facility. Future Indebtedness of the Company may contain prohibitions of
certain events which would constitute a Change of Control or require such
Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise
by the Series A Preferred Stock Holders of their right to require the Company to
repurchase the Series A Preferred Stock could cause a default under such
Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the Series A Preferred Stock Holders upon a repurchase
may be limited by the Company's then existing financial resources. There can be
no assurance that sufficient funds will be available when necessary to make any
required repurchases.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, holders of Series A Preferred Stock will be entitled to be paid,
out of the assets of the Company available for
B-18
<PAGE>
distribution, the liquidation preference per share, plus an amount in cash equal
to all accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a prorated
dividend for the period from the last dividend payment date to the date fixed
for liquidation, dissolution or winding-up), before any distribution is made on
any Junior Securities, including, without limitation, Common Stock of the
Company. If, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the amounts payable with respect to the Series A
Preferred Stock and all other Parity Securities are not paid in full, the
holders of the Series A Preferred Stock and the Parity Securities will share
equally and ratably in any distribution of assets of the Company in proportion
to the full liquidation preference and accumulated and unpaid dividends to which
each is entitled. After payment of the full amount of the liquidation preference
and accumulated and unpaid dividends to which they are entitled, the holders of
shares of Series A Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company. However, neither the
sale, conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Company nor the consolidation or merger of the Company with or into one or
more corporations will be deemed to be a liquidation, dissolution or winding-up
of the Company.
The Certificate of Designation does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Series A
Preferred Stock, although such liquidation preference will be substantially in
excess of the par value of such shares of Series A Preferred Stock. In addition,
the Company is not aware of any provision of Illinois law or any controlling
decision of the courts of the State of Illinois (the state of incorporation of
the Company) that requires a restriction upon any surplus of the Company solely
because the liquidation preference of the Series A Preferred Stock will exceed
its par value. Consequently, there will be no restriction upon any surplus of
the Company solely because the liquidation preference of the Series A Preferred
Stock will exceed the par value and there will be no remedies available to
holders of the Series A Preferred Stock before or after the payment of any
dividend, other than in connection with the liquidation of the Company, solely
by reason of the fact that such dividend would reduce the surplus of the Company
to an amount less than the difference between the liquidation preference of the
Series A Preferred Stock and its par value.
VOTING RIGHTS
Series A Preferred Stock Holders will have no voting rights with respect to
general corporate matters except as required by law or as set forth in the
Certificate of Designation. The Certificate of Designation will provide that (a)
if (i) dividends on the Series A Preferred Stock are in arrears and unpaid (and,
in the case of dividends payable after , 2003, are not paid in cash)
for four consecutive quarterly periods, (ii) the Company fails to discharge any
redemption obligation with respect to the Series A Preferred Stock (whether or
not the Company is permitted to do so by the terms of the Credit Facility, the
Notes or any other obligation of the Company), (iii) the Company fails to make
an offer to purchase all of the outstanding shares of Series A Preferred Stock
following a Change of Control (whether or not the Company is permitted to do so
by the terms of the Credit Facility, the Notes or any other obligation of the
Company) or fails to purchase shares of Series A Preferred Stock from holders
who elect to have such shares repurchased pursuant to the Change of Control
Offer, (iv) a breach or violation of the provisions described under the caption
"--Certain Covenants" occurs and the breach or violation continues for a period
of 60 days or more after the Company receives notice thereof specifying the
default from holders of 25% of the Series A Preferred Stock then outstanding, or
(v) a default under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of the Certificate of Designation, which default (A) is caused by
a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment
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Default") or (B) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there is then existing a Payment Default or the maturity of which
has been so accelerated, aggregates $5.0 million or more, then the number of
directors constituting the Board of Directors of the Company will be adjusted to
permit the holders of the majority of the then outstanding Series A Preferred
Stock, voting separately as a class, to elect two directors, and (b) the
approval of holders of a majority of the outstanding shares of Series A
Preferred Stock, voting as a separate class, will be required for (i) any
merger, consolidation or sale of all or substantially all of the assets of the
Company except as permitted pursuant to the covenant below under "--Certain
Covenants--Merger or Consolidation" and (ii) for any modification of the
Certificate of Designation or the Exchange Debenture Indenture. Each such event
described in clause (a) above is referred to herein as a "Voting Rights
Triggering Event." Voting rights arising as a result of a Voting Rights
Triggering Event will continue until such time as all dividends in arrears on
the Series A Preferred Stock are paid in full (and after , 2003, paid
in cash) and any failure, breach or default referred to in clause (a) is
remedied.
In addition, the Certificate of Designation will provide that the Company
will not authorize any class of Parity Securities without the affirmative vote
or consent of holders of at least 50% of the shares of Series A Preferred Stock
then outstanding, voting or consenting, as the case may be, as one class. The
Certificate of Designation will also provide that the Company may not amend the
Certificate of Designation so as to affect adversely the specified rights,
preferences, privileges or voting rights of holders of shares of the Series A
Preferred Stock, or authorize the issuance of any additional shares of Series A
Preferred Stock, without the affirmative vote or consent of the holders of at
least 50% of the then outstanding shares of Series A Preferred Stock, voting or
consenting, as the case may be, as one class. The Certificate of Designation
will also provide that, except as set forth above, (a) the creation,
authorization or issuance of any shares of Junior Securities or Parity
Securities, (b) the decrease in the amount of authorized capital stock of any
class, including any Series A Preferred Stock or (c) the increase in the amount
of authorized capital stock of any class of Junior Securities shall not require
the consent of the holders of Series A Preferred Stock and shall not be deemed
to affect adversely the rights, preferences, privileges or voting rights of
holders of shares of Series A Preferred Stock.
Under Illinois law, holders of Series A Preferred Stock will be entitled to
vote as a class upon a proposed amendment to the Articles of Incorporation,
whether or not entitled to vote thereon by the Articles of Incorporation, if the
amendment would increase or decrease the par value of the shares of such class,
or alter or change the powers, preferences or special rights of the shares or
such class so as to affect them adversely.
CERTAIN COVENANTS
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Certificate of Designation will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt) and that the Company will
not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock if the Company's Leverage Ratio at the time of the incurrence
of such Indebtedness, after giving pro-forma effect thereto and to the use of
proceeds therefrom, is less than 7.0 to 1:
Notwithstanding the foregoing, the Certificate of Designation will not
prohibit any of the following (collectively, "Permitted Indebtedness"): (a) the
Indebtedness evidenced by the Notes; (b) the incurrence by the Company of
Indebtedness pursuant to Credit Agreements, so long as the aggregate principal
amount of all Indebtedness outstanding under all Credit Agreements do not, at
any one time, exceed $190.0 million, less the aggregate amount of all mandatory
prepayments of principal applied since the date
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of the Certificate of Designation to permanently reduce the outstanding amount
of such Indebtedness; (c) all Indebtedness of the Company and its Restricted
Subsidiaries in existence as of the date of the Certificate of Designation; (d)
intercompany Indebtedness between or among the Company and any of its Wholly
Owned Restricted Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly subordinate to the
payment in full of all Obligations with respect to the Exchange Debentures and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a Wholly
Owned Restricted Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Wholly Owned
Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence
of such Indebtedness by the Company or such Restricted Subsidiary, as the case
may be; (e) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price, lease or cost of construction or
improvement of property, plant or equipment used in a Permitted Business in an
aggregate principal amount not to exceed $15.0 million at any time outstanding;
(f) the incurrence by the Company or its Restricted Subsidiaries of Permitted
Refinancing Debt in exchange for, or the net proceeds of which are used to
refund, refinance or replace Indebtedness (other than intercompany Indebtedness)
that was permitted by the Certificate of Designation to be incurred; (g) the
incurrence by the Company or its Restricted Subsidiaries of Hedging Obligations
that are incurred for the purpose of fixing or hedging interest rate risk with
respect to any floating or variable rate Indebtedness or for the purpose of
protecting against fluctuations in interest rates or the value of foreign
currencies purchased or received, in each case in respect of Indebtedness that
is permitted by the terms of the Certificate of Designation to be outstanding;
PROVIDED, HOWEVER, that in the case of Hedging Obligations that are incurred for
the purpose of fixing or hedging interest rate risks with respect to
Indebtedness, the notional principal amount of any such Hedging Obligation does
not exceed the principal amount of the Indebtedness to which such Hedging
Obligation relates and in the case of Hedging Obligations incurred for the
purpose of protecting against fluctuations in interest rates or the value of
foreign currencies purchased or received, such Hedging Obligations do not
increase the Indebtedness of the Company and its Restricted Subsidiaries
outstanding other than as a result of fluctuations in foreign currency exchange
rates or by reason of fees, indemnities and compensation payable thereunder; (h)
Indebtedness incurred solely in respect of performance, surety and similar bonds
or completion guarantees, to the extent that such incurrence does not result in
the incurrence of any obligation for the payment of borrowed money to others;
(i) Indebtedness arising out of standby letters of credit covering workers
compensation, performance or similar obligations in an aggregate amount not to
exceed $500,000 at any time outstanding; (j) any guarantee of the Company of
Indebtedness or other obligations of any of its Restricted Subsidiaries so long
as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is
permitted under the terms of the Certificate of Designation; (k) the incurrence
by the Company of additional Indebtedness in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding not to exceed $10.0
million; and (l) the issuance of Series A Preferred Stock issued as payment in
kind dividends on the Series A Preferred Stock outstanding on the Issue Date or
issued subsequent to the Issue Date as dividends permitted pursuant to this
clause (l), to the extent such dividends are made pursuant to the terms of the
Certificate of Designation for such Series A Preferred Stock as in effect on the
Issue Date, on any Preferred Stock issued in exchange for the Series A Preferred
Stock, or any dividends on such Preferred Stock to the extent such dividends are
made pursuant to the terms of the Certificate of Designation of such Preferred
Stock.
The Certificate of Designation will provide that the Company will not permit
any Unrestricted Subsidiary to incur any Indebtedness other than Non-Recourse
Debt; provided, however, if any such Indebtedness ceases to be Non-Recourse
Debt, such event shall be deemed to constitute an incurrence of Indebtedness by
the Company.
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<PAGE>
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Certificate of Designation will provide that the Company may not
consolidate or merge with or into (whether or not the Company is the surviving
corporation), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets, in one or more related
transactions, to another Person, and the Company may not permit any of its
Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions would, in the
aggregate, result in a sale, assignment, transfer, lease, conveyance, or other
disposition of all or substantially all of the properties or assets of the
Company to another Person unless: (i) the Company is the surviving corporation
or the Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made (the "Surviving Entity") is a
corporation organized or existing under the laws of the United States, any state
thereof or the District of Columbia; (ii) the Series A Preferred Stock shall be
converted into or exchanged for and shall become shares of the Surviving Entity,
having in respect of such successor, transferee or resulting corporation
substantially the same powers, preferences and relative participating, optional
or other special rights, and the qualifications, limitations or restrictions
thereon that the Series A Preferred Stock had immediately prior to such
transaction; (iii) immediately after such transaction, no Voting Rights
Triggering Event, and no event that after the giving of notice or lapse of time
or both would become a Voting Rights Triggering Event, shall have occurred and
be continuing; and (iv) the Company or the Surviving Entity will, at the time of
such transaction or series of transactions and after giving pro forma effect
thereto as if such transaction or series of transactions had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the test set forth in the first
paragraph of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock." Notwithstanding the restrictions
described in the foregoing clause (iv), any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company, and any Wholly Owned Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to another Wholly Owned Restricted Subsidiary.
RESTRICTED PAYMENTS
The Certificate of Designation will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend or make any distribution on account of any
Junior Securities (other than dividends or distributions payable in Junior
Securities (other than Disqualified Stock)), (ii) purchase, redeem or otherwise
acquire or retire for value any Junior Securities or (iii) make any Investment
(other than a Permitted Investment) in any Person (all such dividends,
distributions, purchases, redemptions, acquisitions, retirements and Investments
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Junior Payment:
(a) no Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof;
(b) all dividends on the Series A Preferred Stock payable on dividend
payment dates after , 2003, have been declared and paid in cash;
and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Certificate of Designation (excluding Restricted
Payments permitted by clause (2) of the next succeeding paragraph), is less
than the sum of (i) (A) 100% of the aggregate Consolidated Cash Flow of the
Company (or, in the event such Consolidated Cash Flow shall be a deficit,
minus 100% of such deficit) accrued for the period beginning on the first
day of the Company's fiscal quarter commencing after the Issue Date and
ending on the last day of the Company's most recent fiscal quarter for which
financial information is available to the Company ending prior to the date
of such proposed Restricted Payment, taken as one
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accounting period, less (B) 1.4 times Consolidated Interest Expense for the
same period, PLUS (ii) 100% of the aggregate net cash proceeds and the fair
market value of marketable securities (as determined in good faith by the
Company) received by the Company from the issue or sale since the date of
the Certificate of Designation of Equity Interests of the Company or of debt
securities of the Company that have been converted into or exchanged for
such Equity Interests (other than Equity Interests (or convertible debt
securities) sold to a Subsidiary of the Company, other than Disqualified
Stock or debt securities that have been converted into Disqualified Stock
and other than the Common Stock issued in the Stock Offerings), PLUS (iii)
to the extent that any Restricted Investment that was made after the date of
the Exchange Debenture Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the net proceeds of such sale,
liquidation or repayment and (B) the amount of such Restricted Investment,
PLUS (iv) $5.0 million.
The foregoing provisions will not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Certificate of Designation; (2) the redemption, repurchase, retirement or other
acquisition of any Junior Securities or Parity Securities of the Company in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company) of other Junior Securities or Parity
Securities of the Company (other than any Disqualified Stock); (3) the
repurchase, redemption or other acquisition or retirement for value of any
Junior Securities or Parity Securities of the Company or any Subsidiary of the
Company held by any of the Company's (or any of its Subsidiaries') employees
pursuant to any management equity subscription agreement or stock option
agreement in connection with the termination of such person's employment for any
reason (including by reason of death or disability); PROVIDED that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Junior
Securities or Parity Securities shall not exceed $500,000 in any twelve-month
period; and PROVIDED FURTHER that no Voting Rights Triggering Event shall have
occurred and be continuing immediately after such transaction; and (4)
repurchases of Junior Securities or Parity Securities deemed to occur upon
exercise of stock options if such Junior Securities or Parity Securities
represent a portion of the exercise price of such options.
DESIGNATION OF UNRESTRICTED SUBSIDIARIES
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under clause (c) of the first paragraph of the covenant
"Restricted Payments." All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the greater of the fair market
value or the book value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
TRANSACTIONS WITH AFFILIATES
The Certificate of Designation will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, make any payment to, or
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any of its Affiliates (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, such Affiliate Transaction or
series
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of Affiliated Transactions has been approved in good faith by a majority of the
members of the Board of Directors who are disinterested with respect to such
Affiliate Transaction or series of Affiliated Transactions, and (b) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10.0 million, such Affiliate
Transaction or series of related Affiliate Transactions has been approved in
good faith by a resolution adopted by a majority of the members of the Board of
Directors of the Company who are disinterested with respect to such Affiliate
Transaction or series of related Affiliate Transactions and an opinion as to the
fairness to the Company or such Subsidiary of such Affiliate Transaction or
series of related Affiliate Transactions from a financial point of view has been
issued to the Company by an accounting, appraisal, engineering or investment
banking firm of national standing PROVIDED that the foregoing provisions will
not apply to the following: (1) transactions contemplated by any employment
agreement or other compensation plan or arrangement entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted Subsidiary,
(2) transactions between or among the Company and/or its Restricted
Subsidiaries, (3) Restricted Payments and Permitted Investments that are
permitted by the provisions of the Certificate of Designation described above
under the caption "-- Restricted Payments", (4) indemnification payments made to
officers, directors and employees of the Company or any Restricted Subsidiary
pursuant to charter, bylaw, statutory or contractual provisions and (5) any
agreement in effect as of the Issue Date or any transaction contemplated
thereby.
REPORTS. The Certificate of Designation will provide that, whether or not
required by the rules and regulations of the Commission, so long as any shares
of Series A Preferred Stock are outstanding, the Company will furnish Series A
Preferred Stock Holders, (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Company and its consolidated Subsidiaries and, with respect to the annual
information only, a report thereon by the Company certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company was required to file such reports, in
each case within the time periods set forth in the Commission's rules and
regulations. In addition, whether or not required by the rules and regulations
of the Commission, the Company will file a copy of such information and reports
with the Commission for public availability within the time periods set forth in
the Commission's rules and regulations (unless the Commission will not accept
such filing).
EXCHANGE
The Company may at its option exchange all, but not less than all, of the
then outstanding shares of Series A Preferred Stock into Exchange Debentures on
any dividend payment date, PROVIDED that on the date of such exchange: (a) there
are no contractual impediments to such exchange; (b) such exchange would comply
with the Business Corporation Act of Illinois; (c) immediately after giving
effect to such exchange, no Default or Event of Default (each as defined in the
Exchange Debenture Indenture) would exist under the Exchange Debenture
Indenture; and (d) the Company shall have delivered a written opinion of
counsel, dated the date of exchange, regarding the satisfaction of the
conditions set forth in clauses (a) and (b) and certain other matters. The
Company shall send a written notice of exchange by mail to each holder of record
of shares of Series A Preferred Stock, which notice shall state, among other
things, (i) that the Company is exercising its option to exchange the Series A
Preferred Stock for Exchange Debentures pursuant to the Certificate of
Designation and (ii) the date of exchange (the "Exchange Date"), which date
shall not be less than 30 days nor more than 60 days following the date on which
such notice is mailed. On the Exchange Date, holders of outstanding shares of
Series A Preferred Stock will be entitled to receive a principal amount of
Exchange Debentures equal to the liquidation preference per share, plus an
amount in cash equal to all accrued and unpaid dividends (including an amount in
cash equal to a prorated dividend for the period from the dividend payment date
immediately prior to the Exchange Date to the Exchange Date), as provided below.
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The Exchange Debentures will be issued in registered form, without coupons.
Exchange Debentures issued in exchange for Series A Preferred Stock will be
issued in principal amounts of $1,000 and integral multiples thereof to the
extent possible, and will also be issued in principal amounts less than $1,000
so that each holder of Series A Preferred Stock will receive certificates
representing the entire amount of Exchange Debentures to which his shares of
Series A Preferred Stock entitle him, provided that the Company may, at its
option, pay cash in lieu of issuing an Exchange Debenture in a principal amount
less than $1,000. On and after the Exchange Date, dividends will cease to accrue
on the outstanding shares of Series A Preferred Stock, and all rights of the
holders of Series A Preferred Stock (except the right to receive the Exchange
Debentures, an amount in cash equal to the accrued and unpaid dividends to the
Exchange Date and if the Company so elects, cash in lieu of any Exchange
Debenture which is in an amount that is not an integral multiple of $1,000) will
terminate. The person entitled to receive the Exchange Debentures issuable upon
such exchange will be treated for any purposes as the registered holder of such
Exchange Debentures.
The Credit Facility contains limitations with respect to the Company's
ability to issue the Exchange Debentures, and any future Credit Agreements or
other agreements relating to indebtedness to which the Company or any of its
Subsidiaries become a party may contain similar limitations. See "Description of
Credit Facility and Notes."
The Company intends to comply with the provisions of Rule 13e-4 promulgated
pursuant to the Exchange Act in connection with any exchange, to the extent
applicable.
TRANSFER AGENT AND REGISTRAR. is the transfer agent and
registrar for the Series A Preferred Stock.
EXCHANGE DEBENTURES
GENERAL
The Exchange Debentures, if issued, will be issued under an indenture (the
"Exchange Debenture Indenture") between the Company and , as
trustee (the "Trustee"). The terms of the Exchange Debentures include those
stated in the Exchange Debenture Indenture and those made part of the Exchange
Debenture Indenture by reference to The Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The Exchange Debentures will be subject to all such
terms, and prospective holders of the Exchange Debentures are referred to the
Exchange Debenture Indenture and the Trust Indenture Act for a statement of such
terms. The following summary of certain provisions of the Exchange Debenture
Indenture does not purport to be complete and is qualified in its entirety by
reference to the Exchange Debenture Indenture, including the definitions therein
of certain terms. Definitions of certain capitalized terms used in the Exchange
Debenture Indenture and in the following summary are set forth below under
"--Certain Definitions."
The Exchange Debentures, if issued, will be general unsecured obligations of
the Company, subordinated to all existing and future Exchange Debenture Senior
Debt, including the Notes and the Credit Facility. The Exchange Debentures will
be issued in fully registered form only in denominations of $1,000 and integral
multiples thereof (other than as described in "--Series A Preferred
Stock--Exchange" or with respect to additional Exchange Debentures issued in
lieu of cash interest as described herein).
PRINCIPAL, MATURITY AND INTEREST
The Exchange Debentures will mature on , 2009. Interest
on the Exchange Debentures will accrue at a rate of % per annum from the
Exchange Date or from the most recent interest payment date to which interest
has been paid or provided for. Interest will be payable semi-annually in cash
(or, on or prior to , 2003, in additional Exchange Debentures, at the
option of the Company) in arrears on and of each year, commencing
with the first such date after the Exchange Date, to Exchange Debenture Holders
of record on the immediately preceding and
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. Interest on the Exchange Debentures will be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days elapsed.
Principal, premium, if any, and interest on the Exchange Debentures will be
payable at the office or agency of the Company maintained for such purpose
within the City and State of New York or, at the option of the Company, payment
of interest may be made by check mailed to the Exchange Debenture Holders at
their respective addresses set forth in the register of Exchange Debenture
Holders. Until otherwise designated by the Company, the Company's office or
agency will be the office of the Trustee maintained for such purpose. The
Company may change such office without prior notice to holders of the Exchange
Debentures, and the Company or any of its Subsidiaries may act as Paying Agent
or Registrar.
SUBORDINATION
The Indebtedness evidenced by the Exchange Debentures will be unsecured and
subordinated in right of payment, as set forth in the Exchange Debenture
Indenture, to the payment when due of all existing and future Exchange Debenture
Senior Debt of the Company, including the Company's obligations under the Credit
Facility and the Notes, will rank PARI PASSU in right of payment with all
existing and future Exchange Debenture Pari Passu Debt of the Company and will
be senior in right of payment to all existing and future Exchange Debenture
Subordinated Debt of the Company.
Although the Exchange Debenture Indenture contains limitations on the amount
of additional Indebtedness which the Company may incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in any
case, such Exchange Debenture Indebtedness may be Exchange Debenture Senior
Debt. See "--Certain Covenants--Limitation on Indebtedness" below.
Only Indebtedness of the Company that is Exchange Debenture Senior Debt will
rank senior to the Exchange Debentures in accordance with the provisions of the
Indenture. The Exchange Debentures will in all respects rank PARI PASSU with all
other Exchange Debenture Pari Passu Debt of the Company.
Upon any payment or distribution of property or securities to creditors of
the Company in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, or in an assignment for the benefit of creditors or any
marshalling of the Company's assets and liabilities, the holders of Exchange
Debenture Senior Debt will be entitled to receive payment in full of all
Obligations due in respect of such Exchange Debenture Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Exchange Debenture Senior Debt, whether or not a claim for such
interest would be allowed in a proceeding) before the Holders of the Exchange
Debentures will be entitled to receive any payment with respect to the Exchange
Debentures, and until all Obligations with respect to Exchange Debenture Senior
Debt are paid in full, any distribution to which the Holders of the Exchange
Debentures would be entitled shall be made to the holders of Exchange Debenture
Senior Debt (except in each case that Holders of the Exchange Debentures may
receive securities that are subordinated at least to the same extent as the
Exchange Debentures are subordinated to Exchange Debenture Senior Debt (or
securities issued in exchange for Exchange Debenture Senior Debt) and payments
made from the trust described under "-- Legal Defeasance and Covenant
Defeasance").
The Company also may not make any payment (whether by redemption, purchase,
retirement, defeasance or otherwise) upon or in respect of the Exchange
Debentures (except in such subordinated securities or from the trust described
under "--Legal Defeasance and Covenant Defeasance") if (i) a default in the
payment of the principal of, premium, if any, or interest on Designated Exchange
Debenture Senior Debt occurs, (ii) any other default on Designated Exchange
Debenture Senior Debt occurs and the maturity of such Designated Exchange
Debenture Senior Debt is accelerated in accordance with its terms (together with
clause (i), a "payment default") or (iii) any other default occurs and is
continuing with respect to Designated Exchange Debenture Senior Debt that
permits, or with the giving of notice or passage of time or both (unless cured
or waived) will permit, holders of the Designated Exchange Debenture Senior Debt
as to which such default relates to accelerate its maturity ("non-payment
default")
B-26
<PAGE>
and (solely with respect to this clause (iii)) the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or the holders of
any Designated Exchange Debenture Senior Debt. Cash payments on the Exchange
Debentures shall be resumed (a) in the case of a payment default, upon the date
on which such default is cured or waived and (b) in case of a nonpayment
default, the earliest of the date on which such nonpayment default is cured or
waived, the date on which the applicable Payment Blockage Notice is retracted by
written notice to the Trustee or 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any Designated
Exchange Debenture Senior Debt has been accelerated or a default of the type
described in clause (vii) under the caption "Events of Default" has occurred and
is continuing. No new period of payment blockage may be commenced unless and
until 360 days have elapsed since the date of commencement of the payment
blockage period resulting from the immediately prior Payment Blockage Notice. No
nonpayment default in respect of Designated Exchange Debenture Senior Debt that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of no
less than 181 days.
The Exchange Debenture Indenture will further require that the Company
promptly notify holders of Exchange Debenture Senior Debt if payment of the
Exchange Debentures is accelerated because of an Event of Default.
By reason of such subordination provisions contained in the Exchange
Debenture Indenture, in the event of insolvency, (i) creditors of the Company
who are holders of Exchange Debenture Senior Debt may recover more, ratably,
than the Exchange Debenture Holders, and (ii) trade creditors of the Company who
are not holders of Exchange Debenture Senior Debt or of Exchange Debenture Pari
Passu Debt (including the Exchange Debentures) may recover less, ratably, than
holders of Exchange Debenture Senior Debt and may recover more, ratably, than
the holders of Exchange Debenture Pari Passu Debt.
OPTIONAL REDEMPTION
Except as set forth below, the Exchange Debentures may not be redeemed at
the option of the Company prior to , 2003. Thereafter, the Exchange
Debentures will be subject to redemption for cash at the option of the Company,
in whole or in part, upon not less than 30 nor more than 60 days' notice to each
holder of Exchange Debentures to be redeemed, at the following redemption prices
(expressed as percentages of principal amount) if redeemed during the
twelve-month period beginning on of each of the years indicated below,
in each case together with any accrued and unpaid interest thereon to the
applicable redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
2003.................................................................................. %
2004.................................................................................. %
2005.................................................................................. %
2006.................................................................................. %
2007 and thereafter................................................................... 100.00%
</TABLE>
Prior to , 2001, the Company may, at its option, on any one or
more occasions redeem up to 35% of the original aggregate principal amount of
the Exchange Debentures at a redemption price equal to % of the principal
amount thereof, plus an amount in cash equal to all accrued and unpaid interest,
if any, thereon to the redemption date, with all or a portion of the net
proceeds of one or more Equity Offerings (as defined below); PROVIDED that at
least 65% of the original aggregate principal amount of the Exchange Debentures
remains outstanding immediately after the occurrence of such redemption; and
PROVIDED, FURTHER, that such redemption shall occur within 90 days of the date
of the closing of such Equity Offering.
B-27
<PAGE>
As used in the preceding paragraph, "Equity Offering" means any public or
private sale of Common Stock of the Company pursuant to which the Company
receives net proceeds of at least $25 million other than issuances of Common
Stock of the Company pursuant to employee benefit plans or as compensation to
employees.
No optional redemption of Exchange Debentures may be authorized or made at
less than 101% of the principal amount thereof at any time when the Company is
making or purchasing Exchange Debentures under a Change of Control Offer in
accordance with the provisions of "--Repurchase at the Option of Exchange
Debenture Holders--Change of Control."
If less than all of the Exchange Debentures are to be redeemed at any time,
selection of Exchange Debentures for redemption will be made by the Trustee on a
PRO RATA basis, by lot or by such method as the Trustee will deem fair and
appropriate; provided that no Exchange Debentures of $1,000 or less will be
redeemed in part. Notices of redemption will be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Exchange
Debenture Holder to be redeemed at its registered address. If any Exchange
Debenture is to be redeemed in part only, the notice of redemption that relates
to such Exchange Debenture will state the portion of the principal amount
thereof to be redeemed. A new Exchange Debenture in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Exchange
Debenture Holder thereof upon cancellation of the original Exchange Debenture.
On and after the redemption date, interest will cease to accrue on Exchange
Debentures or portions of them called for redemption unless the Company defaults
in the payment thereof.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Exchange
Debenture Holders," the Company is not required to make any mandatory
redemption, purchase or sinking fund payments with respect to the Exchange
Debentures prior to the maturity date.
REPURCHASE AT THE OPTION OF EXCHANGE DEBENTURE HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of the Exchange
Debentures will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Exchange
Debentures pursuant to the offer described below (the "Change of Control Offer")
at an offer price in cash equal to 101% of the aggregate principal amount of the
Exchange Debentures plus accrued and unpaid interest, if any, thereon to the
date of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control (unless the Company has exercised its rights to redeem all the
Exchange Debentures), the Company will (i) mail a notice to each Exchange
Debenture Holder describing the transaction or transactions that constitute the
Change of Control and offer to repurchase the Exchange Debentures pursuant to
the procedures required by the Exchange Debenture Indenture and described in
such notice on a date no earlier than 30 days nor later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date") and (ii) (a)
offer to repay in full all Obligations under the Credit Facility and Obligations
in respect of the Notes and to repay in full all Obligations of each lender and
each Holder of Notes who has accepted such offer or (b) obtain the requisite
consent under agreements evidencing Exchange Debenture Senior Debt to permit the
purchase of the Exchange Debentures as described herein. The Company will comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Exchange
Debentures as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Exchange Debentures or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in
B-28
<PAGE>
respect of all the Exchange Debentures or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee the relevant Exchange Debentures
so accepted together with an Officers' Certificate stating the aggregate
principal amount of such Exchange Debentures or portions thereof being purchased
by the Company. The Paying Agent will promptly mail to each Holder of the
Exchange Debentures so tendered the Change of Control Payment for such Exchange
Debentures, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each tendering Holder a new Note equal in
principal amount to any unpurchased portion of the Exchange Debentures
surrendered, if any; PROVIDED that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the Exchange
Debenture Indenture will not contain provisions that permit the Holders of the
Exchange Debentures to require that the Company repurchase or redeem the
Exchange Debentures in the event of a takeover, recapitalization or similar
transaction.
The Company will not be required to make a Change of Control Offer if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the Exchange
Debenture Indenture applicable to a Change of Control Offer made by the Company
and purchases all Exchange Debentures (or portions thereof) validly tendered and
not withdrawn under such Change of Control Offer.
The Credit Facility will prohibit the Company from repurchasing any Exchange
Debentures pursuant to a Change of Control Offer prior to the repayment in full
of all Obligations under the Credit Facility. Moreover, the occurrence of
certain change of control events identified in the Credit Facility will
constitute a default under the Credit Facility. Any future Credit Agreements or
other agreements relating to Exchange Debenture Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions. If a Change of
Control were to occur, the Company may not have sufficient available funds to
pay the Change of Control Payment for all Exchange Debentures that might be
delivered by Holders of the Exchange Debentures seeking to accept the Change of
Control Offer after first satisfying its obligations under the Credit Facility
or other agreements relating to Exchange Debenture Senior Debt. The failure of
the Company to make or consummate the Change of Control Offer or pay the Change
of Control Payment when due will constitute a Default under the Exchange
Debenture Indenture and will otherwise give the Trustee and the Holders of the
Exchange Debentures the rights described under "--Events of Default and
Remedies."
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of the Exchange Debentures to require
the Company to repurchase such Exchange Debentures as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of the
Company and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
The Exchange Debenture Indenture will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, engage in an Asset Sale
unless (i) the Company or the Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value (as determined in good faith by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee, which
determination shall be conclusive evidence of compliance with this provision) of
the assets or Equity Interests issued or sold or otherwise disposed of and (ii)
at least 75% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of cash
B-29
<PAGE>
or Cash Equivalents; PROVIDED that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet), of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Exchange Debentures or
any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any non-cash consideration
received by the Company or any such Restricted Subsidiary from such transferee
that are converted by the Company or such Restricted Subsidiary into cash within
30 days of closing such Asset Sale, shall be deemed to be cash for purposes of
this provision (to the extent of the cash received).
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Restricted Subsidiary may apply such Net Proceeds, at its
option, (a) to permanently reduce Exchange Debenture Senior Debt (and to
correspondingly permanently reduce commitments with respect thereto in the case
of revolving borrowings), or (b) to an investment in any one or more businesses,
capital expenditures or acquisitions of other assets, in each case, used or
useful in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce Exchange Debenture Senior Debt that
is revolving debt or otherwise invest such Net Proceeds in any manner that is
not prohibited by the Exchange Debenture Indenture. Any Net Proceeds from Asset
Sales that are not applied as provided in the first sentence of this paragraph
will (after the expiration of the periods specified in this paragraph) be deemed
to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0 million, the
Company will be required to make an offer to all Holders of the Exchange
Debentures and, to the extent required by the terms thereof, to all holders or
lenders of Exchange Debenture Pari Passu Debt (an "Asset Sale Offer") to
purchase the maximum principal amount of the Exchange Debentures and any such
Exchange Debenture Pari Passu Debt to which the Asset Sale Offer applies that
may be purchased out of the Excess Proceeds, at an offer price in cash equal to
100% of the principal amount thereof plus accrued and unpaid interest thereon to
the date of purchase, in accordance with the procedures set forth in the
Exchange Debenture Indenture or the agreements governing the Exchange Debenture
Pari Passu Debt, as applicable. To the extent that the aggregate principal
amount of the Exchange Debentures and Exchange Debenture Pari Passu Debt
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of the Exchange Debentures surrendered by Holders
thereof and other Exchange Debenture Pari Passu Debt surrendered by holders or
lenders thereof, collectively, exceeds the amount of Excess Proceeds, the
Trustee shall select the Exchange Debentures and the trustee or other lender
representative for the Exchange Debenture Pari Passu Debt shall select the
Exchange Debenture Pari Passu Debt to be purchased on a pro rata basis, based on
the aggregate principal amount thereof surrendered in such Asset Sale Offer.
Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
The Credit Facility may prohibit the Company from purchasing any Exchange
Debentures from the Net Proceeds of Asset Sales. Any future Credit Agreements or
other agreements relating to Exchange Debenture Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions. In the event an
Asset Sale Offer occurs at a time when the Company is prohibited from purchasing
the Exchange Debentures, the Company could seek the consent of its lenders to
the purchase or could attempt to refinance the Exchange Debenture Senior Debt
that contains such prohibition. If the Company does not obtain such a consent or
repay such Exchange Debenture Senior Debt, the Company may remain prohibited
from purchasing the Exchange Debentures. In such case, the Company's failure to
purchase tendered Exchange Debentures would constitute an Event of Default under
the Exchange Debenture Indenture which would, in turn, constitute a default
under the Credit Facility and possibly a default under other agreements relating
to Exchange Debenture Senior Debt. In such circumstances, the subordination
provisions in the Exchange Debenture Indenture would likely restrict payments to
the Holders of the Exchange Debentures.
B-30
<PAGE>
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Exchange Debenture Indenture will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other payment or distribution on
account of the Company's Equity Interests (including, without limitation, any
payment to holders of the Company's Equity Interests in connection with any
merger or consolidation involving the Company) to the direct or indirect holders
of the Company's Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for
value any Equity Interests of the Company or any direct or indirect parent or
other Affiliate of the Company that is not a Wholly Owned Restricted Subsidiary
of the Company; (iii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Exchange Debenture
Subordinated Debt, except at final maturity; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the test set
forth in the first paragraph of the covenant described below under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Exchange Debenture Indenture (excluding Restricted
Payments permitted by clauses (2), (3) and (5) of the next succeeding
paragraph), is less than the sum of (i) (A) 100% of the aggregate
Consolidated Cash Flow of the Company (or, in the event such Consolidated
Cash Flow shall be a deficit, minus 100% of such deficit) accrued for the
period beginning on the first day of the Company's fiscal quarter commencing
after the Issue Date and ending on the last day of the Company's most recent
fiscal quarter for which financial information is available to the Company
ending prior to the date of such proposed Restricted Payment, taken as one
accounting period, less (B) 1.4 times Consolidated Interest Expense for the
same period, PLUS (ii) 100% of the aggregate net cash proceeds and the fair
market value of marketable securities (as determined in good faith by the
Company) received by the Company from the issue or sale since the date of
the Exchange Debenture Indenture of Equity Interests of the Company or of
debt securities of the Company that have been converted into or exchanged
for such Equity Interests (other than Equity Interests (or convertible debt
securities) sold to a Subsidiary of the Company, other than Disqualified
Stock or debt securities that have been converted into Disqualified Stock
and other than the Common Stock issued in the Common Stock Offering), PLUS
(iii) to the extent that any Restricted Investment that was made after the
date of the Exchange Debenture Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the net proceeds of such
sale, liquidation or repayment and (B) the amount of such Restricted
Investment, PLUS (iv) $5.0 million.
The foregoing provisions will not prohibit (1) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the Exchange
Debenture Indenture; (2) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a Subsidiary
of the Company) of other Equity Interests of the Company (other than any
Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that
B-31
<PAGE>
are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(ii) of the preceding paragraph;
(3) the defeasance, redemption or repurchase of Exchange Debenture Subordinated
Debt with the net cash proceeds from an incurrence of subordinated Permitted
Refinancing Debt or the substantially concurrent sale (other than to a
Subsidiary of the Company) of Equity Interests of the Company (other than
Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(ii) of the preceding paragraph;
(4) the repurchase, redemption or other acquisition or retirement for value of
any Equity Interests of the Company or any Subsidiary of the Company held by any
of the Company's (or any of its Subsidiaries') employees pursuant to any
management equity subscription agreement or stock option agreement in effect as
of the date of the Exchange Debenture Indenture in connection with the
termination of such person's employment for any reason (including by reason of
death or disability); PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$500,000 in any twelve-month period; and PROVIDED FURTHER that no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction; and (5) repurchases of Equity Interests deemed to occur upon
exercise of stock options if such Equity Interests represent a portion of the
exercise price of such options.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (as determined in good faith by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee, which
determination shall be conclusive evidence of compliance with this provision) on
the date of the Restricted Payment of the asset(s) proposed to be transferred by
the Company or the applicable Restricted Subsidiary, as the case may be,
pursuant to the Restricted Payment. Not later than five days after the date of
making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed.
DESIGNATION OF UNRESTRICTED SUBSIDIARIES
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under clause (c) of the first paragraph of the covenant
"Restricted Payments." All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the greater of the fair market
value or the book value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Exchange Debenture Indenture will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively,
"Incur") any Indebtedness (including Acquired Debt) and that the Company will
not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock if the Company's Leverage Ratio at the time of the incurrence
of such Indebtedness, after giving pro-forma effect thereto and to the use of
proceeds therefrom, is less than 7.0 to 1.
Notwithstanding the foregoing, the Exchange Debenture Indenture will not
prohibit any of the following (collectively, "Permitted Indebtedness"): (a) the
Indebtedness evidenced by the Exchange Debentures; (b) the incurrence by the
Company of Indebtedness pursuant to Credit Agreements or the
B-32
<PAGE>
Notes, so long as the aggregate principal amount of all Indebtedness outstanding
under all Credit Agreements does not, at any one time, exceed $190 million, less
the aggregate amount of all proceeds from all Asset Sales that have been applied
since the date of the Exchange Debenture Indenture to permanently reduce the
outstanding amount of such Indebtedness pursuant to the provisions described
under the caption "Repurchase at the Option of Holders--Asset Sales"; (c) all
Indebtedness of the Company and its Restricted Subsidiaries in existence as of
the date of the Exchange Debenture Indenture; (d) intercompany Indebtedness
between or among the Company and any of its Wholly Owned Restricted
Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinate to the payment in full
of all Obligations with respect to the Exchange Debentures and (ii)(A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Wholly Owned
Restricted Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Wholly Owned
Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence
of such Indebtedness by the Company or such Restricted Subsidiary, as the case
may be; (e) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price, lease or cost of construction or
improvement of property, plant or equipment used in a Permitted Business in an
aggregate principal amount not to exceed $15.0 million at any time outstanding;
(f) the incurrence by the Company or its Restricted Subsidiaries of Permitted
Refinancing Debt in exchange for, or the net proceeds of which are used to
refund, refinance or replace Indebtedness (other than intercompany Indebtedness)
that was permitted by the Exchange Debenture Indenture to be incurred; (g) the
incurrence by the Company or its Restricted Subsidiaries of Hedging Obligations
that are incurred for the purpose of fixing or hedging interest rate risk with
respect to any floating or variable rate Indebtedness or for the purpose of
protecting against fluctuations in interest rates or the value of foreign
currencies purchased or received, in each case in respect of Indebtedness that
is permitted by the terms of the Exchange Debenture Indenture to be outstanding;
PROVIDED, HOWEVER, that in the case of Hedging Obligations that are incurred for
the purpose of fixing or hedging interest rate risks with respect to
Indebtedness, the notional principal amount of any such Hedging Obligation does
not exceed the principal amount of the Indebtedness to which such Hedging
Obligation relates and in the case of Hedging Obligations incurred for the
purpose of protecting against fluctuations in interest rates or the value of
foreign currencies purchased or received, such Hedging Obligations do not
increase the Indebtedness of the Company and its Restricted Subsidiaries
outstanding other than as a result of fluctuations in foreign currency exchange
rates or by reason of fees, indemnities and compensation payable thereunder; (h)
Indebtedness incurred solely in respect of performance, surety and similar bonds
or completion guarantees, to the extent that such incurrence does not result in
the incurrence of any obligation for the payment of borrowed money to others;
(i) Indebtedness arising out of standby letters of credit covering workers
compensation, performance or similar obligations in an aggregate amount not to
exceed $500,000 at any time outstanding; (j) any guarantee of the Company of
Indebtedness or other obligations of any of its Restricted Subsidiaries so long
as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is
permitted under the terms of the Exchange Debenture Indenture; (k) the
incurrence by the Company of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding not to exceed
$10.0 million; and (l) the incurrence by the Company of Indebtedness in respect
of Exchange Debentures issued as payment in kind interest on Exchange Debentures
issued on the exchange of Series A Preferred Stock, to the extent such interest
payments are made pursuant to the terms of the Exchange Debenture Indenture.
The Exchange Debenture Indenture will provide that the Company will not
permit any Unrestricted Subsidiary to incur any Indebtedness other than
Non-Recourse Debt; provided, however, if any such Indebtedness ceases to be
Non-Recourse Debt, such event shall be deemed to constitute an incurrence of
Indebtedness by the Company.
B-33
<PAGE>
ASSET SWAPS
The Exchange Debenture Indenture will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, in one or a series of
related transactions, directly or indirectly, engage in any Asset Swaps, unless:
(i) at the time of entering into the agreement to swap assets and immediately
after giving effect to the proposed Asset Swap, no Default or Event of Default
shall have occurred and be continuing or would occur as a consequence thereof;
(ii) the Company would, after giving PRO FORMA effect to the proposed Asset
Swap, have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Leverage Ratio in the covenant "Incurrence of Indebtedness and
Issuance of Preferred Stock"; (iii) the respective fair market values of the
assets being purchased and sold by the Company or any of its Restricted
Subsidiaries (as determined in good faith by the management of the Company or,
if such Asset Swap includes consideration in excess of $ million by the
Board of Directors of the Company, as evidenced by a Board Resolution) are
substantially the same at the time of entering into the agreement to swap
assets; and (iv) at the time of the consummation of the proposed Asset Swap, the
percentage of any decline in the fair market value (determined as aforesaid) of
the asset or assets being acquired by the Company and its Restricted
Subsidiaries shall not be significantly greater than the percentage of any
decline in the fair market value (determined as aforesaid) of the assets being
disposed of by the Company or its Restricted Subsidiaries, calculated from the
time the agreement to swap assets was entered into.
LIENS
The Exchange Debenture Indenture will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, create, incur, assume or
otherwise cause or suffer to exist or become effective any Lien securing
Indebtedness of any kind (other than Permitted Liens) upon any of its property
or assets, now owned or hereafter acquired.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Exchange Debenture Indenture will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any Restricted Subsidiary to (i)(x) pay
dividends or make any other distributions to the Company or any of the
Restricted Subsidiaries of the Company (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured by, its profits,
or (y) pay any indebtedness owed to the Company or any Restricted Subsidiaries
of the Company, (ii) make loans or advances to the Company or any Restricted
Subsidiaries of the Company or (iii) transfer any of its properties or assets to
the Company or any Restricted Subsidiaries of the Company, except for such
encumbrances or restrictions existing under or by reason of (a) the Credit
Facility as in effect as of the date of the Exchange Debenture Indenture, and
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof or any other Credit Agreements,
PROVIDED that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements, refinancings or other Credit Agreements
are no more restrictive with respect to such dividend and other payment
restrictions than those contained in the Credit Facility as in effect on the
date of the Exchange Debenture Indenture, (b) the Indenture and the Notes; (c)
the Exchange Debenture Indenture and the Exchange Debentures, (d) applicable
law, (e) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except, in the case of Indebtedness, to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person and its
Subsidiaries, or the property or assets of the Person and its Subsidiaries, so
acquired, PROVIDED that, such Indebtedness or Disqualified Stock was permitted
by the terms of the Exchange Debenture Indenture to be incurred, (f) by reason
of customary non-assignment provisions in leases entered into in the ordinary
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course of business, (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, or (h) Permitted Refinancing
Debt, PROVIDED that the restrictions contained in the agreements governing such
Permitted Refinancing Debt are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Exchange Debenture Indenture will provide that the Company may not
consolidate or merge with or into (whether or not the Company is the surviving
corporation), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets, in one or more related
transactions, to another Person, and the Company may not permit any of its
Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions would, in the
aggregate, result in a sale, assignment, transfer, lease, conveyance, or other
disposition of all or substantially all of the properties or assets of the
Company to another Person unless (i) the Company is the surviving corporation or
the Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made (the "Surviving Entity") is a
corporation organized or existing under the laws of the United States, any state
thereof or the District of Columbia; (ii) the Surviving Entity (if the Company
is not the continuing obligor under the Exchange Debenture Indenture) assumes
all the obligations of the Company under the Exchange Debentures and the
Exchange Debenture Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately before and after
giving effect to such transaction or series of transactions no Default or Event
of Default exists; (iv) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (and treating any Indebtedness not
previously an obligation of the Company and its Subsidiaries which becomes the
obligation of the Company or any of its Subsidiaries as a result of such
transaction or series of transactions as having been incurred at the time of
such transaction or series of transactions), the Consolidated Net Worth of the
Company and its Subsidiaries or the Surviving Entity (if the Company is not the
continuing obligor under the Exchange Debenture Indenture) is equal to or
greater than the Consolidated Net Worth of the Company and its Subsidiaries
immediately prior to such transaction or series of transactions; and (v) the
Company or the Surviving Entity (if the Company is not the continuing obligor
under the Exchange Debenture Indenture) will, at the time of such transaction or
series of transactions and after giving pro forma effect thereto as if such
transaction or series of transactions had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the test set forth in the first paragraph of
the covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock." Notwithstanding the restrictions described in the
foregoing clauses (iv) and (v), any Restricted Subsidiary may consolidate with,
merge into or transfer all or part of its properties and assets to the Company,
and any Wholly Owned Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to another Wholly Owned
Restricted Subsidiary.
TRANSACTIONS WITH AFFILIATES
The Exchange Debenture Indenture will provide that the Company will not, and
will not permit any of its Restricted Subsidiaries to, make any payment to, or
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any of its Affiliates (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
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million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction or series of Affiliated
Transactions complies with clause (i) above and that such Affiliate Transaction
or series of Affiliated Transactions has been approved in good faith by a
majority of the members of the Board of Directors who are disinterested with
respect to such Affiliate Transaction or series of Affiliated Transactions,
which resolution shall be conclusive evidence of compliance with this provision,
and (b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, the
Company delivers an Officer's Certificate certifying that such Affiliate
Transaction or series of related Affiliate Transactions complies with clause (i)
above and that such Affiliate Transaction or series of related Affiliate
Transactions has been approved in good faith by a resolution adopted by a
majority of the members of the Board of Directors of the Company who are
disinterested with respect to such Affiliate Transaction or series of related
Affiliate Transactions and an opinion as to the fairness to the Company or such
Subsidiary of such Affiliate Transaction or series of related Affiliate
Transactions from a financial point of view issued by an accounting, appraisal,
engineering or investment banking firm of national standing (which resolution
and fairness opinion shall be conclusive evidence of compliance with this
provision); PROVIDED that the foregoing provisions will not apply to the
following: (1) transactions contemplated by any employment agreement or other
compensation plan or arrangement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
the past practice of the Company or such Restricted Subsidiary, (2) transactions
between or among the Company and/or its Restricted Subsidiaries, (3) Restricted
Payments and Permitted Investments that are permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments," (4)
indemnification payments made to officers, directors and employees of the
Company or any Restricted Subsidiary pursuant to charter, bylaw, statutory or
contractual provisions and (5) any agreement as in effect as of the Issue Date
or any transaction contemplated thereby.
ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED SUBSIDIARIES
The Exchange Debenture Indenture will provide that the Company (i) will not,
and will not permit any Wholly Owned Subsidiary of the Company to, transfer,
convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly
Owned Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Subsidiary of the Company), unless (a) such transfer, conveyance,
sale, lease or other disposition is of all the Capital Stock of such Wholly
Owned Subsidiary and (b) the Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with the covenant described
above under the caption "--Asset Sales," and (ii) will not permit any Wholly
Owned Subsidiary of the Company to issue any of its Equity Interests (other
than, if necessary, shares of its Capital Stock constituting directors'
qualifying shares) to any Person other than to the Company or a Wholly Owned
Subsidiary; provided that the Company may, and may permit any Wholly Owned
Subsidiary of the Company to, take any of the actions referred to in (i) and
(ii) above so long as immediately after giving effect to such action, no more
than 10% of the Consolidated Net Tangible Assets of the Company and its
Subsidiaries is owned by other than Wholly Owned Subsidiaries of the Company.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any material respect in any business other than a Permitted Business.
PAYMENTS FOR CONSENT
The Exchange Debenture Indenture will provide that neither the Company nor
any of its Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of any Exchange Debentures for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Exchange Debenture Indenture
or the Exchange Debentures unless such consideration is offered to be paid or is
paid to all Holders of the Exchange Debentures that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
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REPORTS
The Exchange Debenture Indenture will provide that, whether or not required
by the rules and regulations of the Commission, so long as any Exchange
Debentures are outstanding, the Company will furnish to the Holders of Exchange
Debentures (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries and, with respect to the annual information only,
a report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports, in each case within the
time periods set forth in the Commission's rules and regulations. In addition,
whether or not required by the rules and regulations of the Commission, the
Company will file a copy of such information and report with the Commission for
public availability within the time periods set forth in the Commission's rules
and regulations (unless the Commission will not accept such a filing).
EVENTS OF DEFAULT AND REMEDIES
The Exchange Debenture Indenture will provide that each of the following
constitutes an Event of Default: (i) a default for 30 days in the payment when
due of interest on the Exchange Debentures (whether or not prohibited by the
subordination provisions of the Exchange Debenture Indenture); (ii) a default in
payment when due of the principal of or premium, if any, on the Exchange
Debentures (whether or not prohibited by the subordination provisions of the
Exchange Debenture Indenture); (iii) the failure by the Company or any of its
Restricted Subsidiaries to comply with the provisions described under the
caption "Repurchase at the Option of Holders" and "Certain Covenants"; (iv)
failure by the Company for 30 days after notice from the Trustee or the Holders
of at least 25% in aggregate principal amount of the Exchange Debentures then
outstanding to comply with any of its other agreements in the Exchange Debenture
Indenture or the Exchange Debentures; (v) a default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Exchange Debenture
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there is then existing a Payment Default or the maturity of which
has been so accelerated, aggregates $5.0 million or more; (vi) the failure by
the Company or any of its Restricted Subsidiaries to pay final, non-appealable
judgments aggregating in excess of $5.0 million, which judgments remain unpaid
or discharged for a period of 60 days; and (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries or
any group of Subsidiaries that, taken together would constitute a Significant
Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the Exchange Debentures then outstanding
may declare the principal of and accrued but unpaid interest on such Exchange
Debentures to be due and payable immediately. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company or any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Exchange Debentures will become due and payable
without further action or notice. Holders of the Exchange Debentures may not
enforce the Exchange Debenture Indenture or the Exchange Debentures except as
provided in the Exchange Debenture Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the Exchange
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Debentures then outstanding may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Exchange Debentures
notice of any continuing Default or Event of Default (except a Default or Event
of Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Exchange
Debentures then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Exchange Debentures waive any existing Default or Event of
Default and its consequences under the Exchange Debenture Indenture except a
continuing Default or Event of Default in the payment of interest or premium on,
or the principal of, the Exchange Debentures.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Exchange Debenture Indenture, and the Company is
required, within five business days of becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or Event
of Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Exchange Debentures
("Legal Defeasance") except for (i) the rights of Holders of such outstanding
Exchange Debentures to receive payments in respect of the principal of, premium,
if any, and interest on such Exchange Debentures when such payments are due from
the trust referred to below, (ii) the Company's obligations with respect to such
Exchange Debentures concerning issuing temporary Exchange Debentures,
registration of such Exchange Debentures, mutilated, destroyed, lost or stolen
Exchange Debentures and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Exchange
Debenture Indenture. In addition, the Company may, at its option and at any
time, elect to have the obligations of the Company released with respect to
certain covenants that are described in the Exchange Debenture Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default and Remedies" will no longer constitute an Event of Default.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Exchange Debentures, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding Exchange Debentures on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Exchange Debentures are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
such Trustee confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the date
of the Exchange Debenture Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders of the outstanding
Exchange Debentures will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to such Trustee
confirming that the Holders of the outstanding Exchange Debentures will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
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amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied
to such deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than the Exchange Debenture Indenture) to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound; (vi) the Company must have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of the Exchange Debentures over the other creditors of
the Company, or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Exchange Debentures in accordance with the
Exchange Debenture Indenture. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Exchange Debenture Indenture. The Company is
not required to transfer or exchange any Note selected for redemption. Also, the
Company is not required to transfer or exchange any Note for a period of 15 days
before a selection of the Exchange Debenture to be redeemed.
The registered Holder of an Exchange Debenture will be treated as the owner
of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Exchange
Debenture Indenture or the Exchange Debentures may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Exchange Debentures then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, the Exchange Debentures), and any existing default or compliance with
any provision of the Exchange Debenture Indenture or the Exchange Debentures may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Exchange Debentures (including consents obtained in
connection with a tender offer or exchange offer for the Exchange Debentures).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Exchange Debentures held by a non-consenting Holder): (i)
reduce the principal amount of the Exchange Debentures whose Holders must
consent to an amendment, supplement or waiver, (ii) reduce the principal of or
change the fixed maturity of any Exchange Debenture or alter the provisions with
respect to the redemption of the Exchange Debentures (except as provided above
with respect to "Asset Sale Offers" and "Change of Control Offers"), (iii)
reduce the rate of or change the time for payment of interest on any Exchange
Debenture, (iv) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Exchange Debentures (except a
rescission of acceleration of the Exchange Debentures by the Holders of at least
a majority in principal amount of such Exchange Debentures and a waiver of the
payment default that resulted from such acceleration), (v) make any Exchange
Debenture payable in money other than that stated in the Exchange Debentures,
(vi) make any change in the provisions of the Exchange Debenture Indenture
relating to waivers of past Defaults or the rights of
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Holders of the Exchange Debentures to receive payments of principal of or
premium, if any, or interest on the Exchange Debentures or (vii) make any change
in the foregoing amendment and waiver provisions. In addition, any amendment to
the provisions described under "Repurchase at the Option of Holders" or the
provisions of Article [ ] of the Exchange Debenture Indenture (which relate
to subordination) will require the consent of the Holders of at least 66 2/3% in
principal amount of the Exchange Debentures then outstanding if such amendment
would adversely affect the rights of Holders of such Exchange Debentures.
However, no amendment may be made to the subordination provisions of the
Exchange Debenture Indenture that adversely affects the rights of any holder of
Exchange Debenture Senior Debt then outstanding unless the holders of such
Exchange Debenture Senior Debt (or any group or representative thereof
authorized to give a consent) consents to such change.
Notwithstanding the foregoing, without the consent of any Holder of the
Exchange Debentures the Company and the Trustee may amend or supplement the
Exchange Debenture Indenture or the Exchange Debentures to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Exchange Debentures in
addition to or in place of certificated Exchange Debentures, to provide for the
assumption of the Company's obligations to Holders of the Exchange Debentures in
the case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Exchange Debentures or that
does not adversely affect the legal rights under the Exchange Debenture
Indenture of any such Holder, to secure the Exchange Debentures or to comply
with requirements of the Commission in order to effect or maintain the
qualification of the Exchange Debenture Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Exchange Debenture Indenture contains certain limitations on the rights
of the Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest,
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Exchange Debentures will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Exchange Debenture Indenture provides that in
case an Event of Default shall occur (which shall not be cured), the Trustee
will be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Exchange Debenture Indenture at the request of any Holder of the
Exchange Debentures, unless such Holder shall have offered to such Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
GOVERNING LAW
The Exchange Debenture Indenture and the Exchange Debentures provide that
they will be governed by the laws of the State of New York.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Certificate of
Designation and in the Exchange Debenture Indenture. Reference is made to the
Certificate of Designation and the Exchange Debenture Indenture for a full
definition of all such terms, as well as any other capitalized terms used herein
for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified
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Person, including, without limitation, Indebtedness incurred in connection with,
or in contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition (but
excluding the creation of a Lien) of any assets including, without limitation,
by way of a sale and leaseback (PROVIDED that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Exchange Debenture Indenture described above under the caption "-- Repurchase at
the Option of Holders -- Change of Control" and/or the provisions described
above under the caption "-- Certain Covenants -- Merger, Consolidation, or Sale
of Assets" and not by the provisions described above under "-- Repurchase at the
Option of Holders -- Asset Sales"), and (ii) the issue or sale by the Company or
any of its Restricted Subsidiaries of Equity Interests of any of the Company's
Subsidiaries (including the sale by the Company or a Restricted Subsidiary of
Equity Interests in an Unrestricted Subsidiary), in the case of either clause
(i) or (ii), whether in a single transaction or a series of related transactions
(a) that have a fair market value in excess of $1.0 million or (b) for net
proceeds in excess of $1.0 million. Notwithstanding the foregoing, the following
shall not be deemed to be Asset Sales: (i) a transfer of assets by the Company
to a Wholly Owned Restricted Subsidiary of the Company or by a Wholly Owned
Restricted Subsidiary of the Company to the Company or to another Wholly Owned
Restricted Subsidiary of the Company; (ii) an issuance of Equity Interests by a
Wholly Owned Restricted Subsidiary of the Company to the Company or to another
Wholly Owned Restricted Subsidiary of the Company; (iii) the making of a
Restricted Payment or Permitted Investment that is permitted by the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments";
(iv) a disposition of cash or Cash Equivalents; (v) a disposition of either
obsolete equipment or equipment that is damaged, worn out or otherwise no longer
useful in the business; (vi) any sale of Equity Interests in, or Indebtedness or
other securities of, an Unrestricted Subsidiary; (vii) any sale and leaseback of
an asset within 90 days after the completion of construction or acquisition of
such asset; (viii) any surrender or waiver of contract rights or a settlement,
release or surrender of contract, tort or other claims of any kind or a grant of
any Lien not prohibited by the Exchange Debenture Indenture; (ix) any transfer
of properties or assets that is governed by the provisions of the Exchange
Debenture Indenture described under the caption "--Certain Covenants--Asset
Swaps"; or (x) a disposition of inventory in the ordinary course of business.
"ASSET SWAP" means the execution of a definitive agreement, subject only to
regulatory approval and other customary closing conditions, that the Company in
good faith believes will be satisfied, for a substantially concurrent purchase
and sale, or exchange, of assets used or useful in a Permitted Business between
the Company or any of its Restricted Subsidiaries and another person or group of
affiliated persons; provided that any amendment to or waiver of any closing
conditions which individually or in the aggregate is material to the Asset Swap
shall be deemed to be a new Asset Swap.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
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"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company or
similar entity, any membership or similar interests therein and (v) any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any lender party to the Credit Facility or with any
domestic commercial bank having capital and surplus in excess of $500 million
and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with
a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above and (v)
commercial paper having a rating of at least P2 from Moody's Investors Service,
Inc. (or its successor) and a rating of at least A2 from Standard & Poor's
Ratings Services (or its successor) and (vi) investments in money market or
other mutual funds substantially all of whose assets comprise securities of
types described in clauses (ii) through (v) above.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" or group of related "persons" (a "Group") (as such terms
are used in Section 13(d)(3) of the Exchange Act) other than a Principal or a
Related Party of a Principal, (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any purchase, sale, acquisition,
disposition, merger or consolidation) the result of which is that any "person"
(as defined above) or Group other than a Principal or a Related Party of a
Principal becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act) of more than 35% of the aggregate voting
power of all classes of Capital Stock of the Company having the right to elect
directors under ordinary circumstances or (iv) the first day on which a majority
of the members of the Board of Directors of the Company are not Continuing
Directors.
"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the sum of, without duplication, the Consolidated Net Income of such Person for
such period plus (i) provision for taxes based on income or profits of such
Person and its Subsidiaries for such period, to the extent that such provision
for taxes was included in computing such Consolidated Net Income, plus (ii)
Consolidated Interest Expense of such Person for such period, to the extent that
any such expense was deducted in computing such Consolidated Net Income, plus
(iii) the product of (a) all cash dividend payments, on any series of preferred
stock of such Person or any of its Restricted Subsidiaries, other than dividend
payments on Equity Interests payable solely in Equity Interests (other than
Disqualified Stock) of the Company, times (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined
federal, state and local effective tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP, plus
(iv) consolidated depreciation, amortization and other non-cash charges of the
Person and its Subsidiaries deducted in computing Consolidated Net Income of
such Person for such period plus (v) cash payments with respect to any non-cash
charges previously
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added back pursuant to clause (iv). Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization and
other non-cash charges of, a Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in same proportion) that the Net Income of such Subsidiary was included in
calculating the Consolidated Net Income of such Person.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum, without duplication of (i) the consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Interest Rate Hedging Agreements), (ii) the consolidated interest expense of
such Person and its Restricted Subsidiaries that was capitalized during such
period, (iii) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or any of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or any of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon) and (iv) the product of (a) all cash
dividend payments (and non-cash dividend payments in the case of a Person that
is a Restricted Subsidiary) on any series of preferred stock of such Person or
any of its Restricted Subsidiaries, times (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; PROVIDED
that (i) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Restricted Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
government approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, and (v) all other extraordinary gains
and extraordinary losses shall be excluded.
"CONSOLIDATED NET TANGIBLE ASSETS" of a Person means the consolidated total
assets of such Person and its consolidated Subsidiaries determined in accordance
with GAAP, less the sum of (i) all current liabilities and current liability
items, and (ii) all goodwill, trade names, trademarks, patents, organization
expense, unamortized debt discount and expense and other similar intangibles
properly classified as intangibles in accordance with GAAP.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Exchange Debenture Indenture in
the book value of any asset owned by such Person or a consolidated Subsidiary of
such
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Person, (y) all investments as of such date in unconsolidated Subsidiaries and
in Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of original issuance of the Exchange Debentures or (ii)
was nominated for election or elected to such Board of Directors with the
approval of (x) two-thirds of the Continuing Directors who were members of such
Board at the time of such nomination or election or (y) two-thirds of those
Directors who were previously approved by Continuing Directors.
"CREDIT AGREEMENTS" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Credit Facility) or commercial
paper facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, production payments, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Credit Agreements outstanding on the date on which the Exchange Debentures are
first issued and authenticated under the Exchange Debenture Indenture (after
giving effect to the use of proceeds thereof) shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (b) of the
definition of Permitted Indebtedness.
"CREDIT FACILITY" means that certain Credit Agreement, dated as of March 2,
1998 by and among the Company, Lehman Brothers Inc., as Arranger, and Lehman
Brothers Commercial Paper Inc., as Syndication Agent and Administrative Agent,
and certain banks, financial institutions and other entities, as lenders,
providing for up to $190 million of Indebtedness, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, restated, modified, renewed,
refunded, replaced or refinanced, in whole or in part, from time to time,
whether or not with the same lenders or agents.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, is convertible
or exchangeable for Indebtedness or Disqualified Stock or redeemable at the
option of the holder thereof, in whole or in part, on or prior to the date that
is 91 days after the date on which the Exchange Debentures mature, PROVIDED
HOWEVER, that any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof (or of any security into which it is convertible or
for which it is exchangeable) have the right to require the issuer to repurchase
such Capital Stock (or such security into which it is convertible or for which
it is exchangeable) upon the occurrence of any of the events constituting an
Asset Sale or a Change of Control shall not constitute Disqualified Stock if
such Capital Stock (and all such securities into which it is convertible or for
which it is exchangeable) provides that the issuer thereof will not repurchase
or redeem any such Capital Stock (or any such security into which it is
convertible or for which it is exchangeable) pursuant to such provisions prior
to compliance by the Company with the provisions of the Exchange Debenture
Indenture described under the caption "Repurchase at the Option of Holders--
Change of Control" or "Repurchase at the Option of Holders--Asset Sales," as the
case may be.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
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<PAGE>
"EXCHANGE DEBENTURE DESIGNATED SENIOR DEBT" means (i) the Credit Facility,
(ii) the Notes and (iii) any other Senior Debt permitted under the Exchange
Debenture Indenture the principal amount of which is $25.0 million or more and
that has been designated by the Company as "Exchange Debenture Designated Senior
Debt."
"EXCHANGE DEBENTURE HOLDER" means the Person in whose name an Exchange
Debenture is registered.
"EXCHANGE DEBENTURE PARI PASSU DEBT" means the Exchange Debentures and any
other Indebtedness of the Company that (i) specifically provides that such
Indebtedness is to rank PARI PASSU with the Exchange Debentures or is otherwise
entitled "Senior Subordinated" Indebtedness and (ii) is not expressly
subordinated by its terms in right of payment to any Indebtedness of the Company
that is not Exchange Debenture Senior Debt.
"EXCHANGE DEBENTURE SENIOR DEBT" means (i) Indebtedness of the Company or
any Subsidiary of the Company under or in respect of any Credit Agreement and
the Notes, whether for principal, interest (including interest accruing after
the filing of a petition initiating any proceeding pursuant to any bankruptcy
law, whether or not the claim for such interest is allowed as a claim in such
proceeding), reimbursement obligations, fees, commissions, expenses, indemnities
or other amounts, and (ii) any other Indebtedness permitted under the terms of
the Exchange Debenture Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Exchange Debentures. Notwithstanding
anything to the contrary in the foregoing sentence, Exchange Debenture Senior
Debt will not include (w) any liability for federal, state, local or other taxes
owed or owing by the Company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates or (y) any Indebtedness that is incurred in
violation of the Exchange Debenture Indenture (other than Indebtedness under (i)
the Credit Facility or (ii) any other Credit Agreement that is incurred on the
basis of a representation by the Company to the applicable lenders that it is
permitted to incur such Indebtedness under the Exchange Debenture Indenture).
"EXCHANGE DEBENTURE SUBORDINATED DEBT" means any Indebtedness of the Company
(whether outstanding on the date of the Exchange Debenture Indenture or
thereafter Incurred) which is expressly subordinate in right of payment to the
Exchange Debentures pursuant to a written agreement.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issuance Date.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements with respect to Indebtedness that
is permitted by the terms of the Exchange Debenture Indenture and (ii) other
agreements or arrangements designed to protect such Person against fluctuation
in interest rates or the value of foreign currencies purchased or received by
such Person in the ordinary course of business.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, (i) in respect of borrowed money, or (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or reimbursement agreements in respect thereof (other than letters of
credit securing obligations not constituting Indebtedness that are issued in the
ordinary course of business by a Person to the extent not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit) or bankers' acceptances, or (iii)
representing Capital Lease
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Obligations or the balance deferred and unpaid of the purchase price of any
property or services, except any such balance that constitutes an accrued
expense or trade payable for such property or services, or (iv) representing any
Hedging Obligations, in each case if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all Indebtedness of others secured by a Lien on any asset of
such Person (whether or not such Indebtedness is assumed by such Person) and, to
the extent not otherwise included, the Guarantee by such Person of any
Indebtedness of any other Person.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business and
extensions of trade credit in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such Person is
no longer a Subsidiary of the Company, the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Subsidiary not sold or disposed of.
"ISSUE DATE" means the date on which the Series A Preferred Stock was
originally issued.
"LEVERAGE RATIO" means the ratio of (i) the aggregate outstanding amount of
Indebtedness of the Company and its Subsidiaries as of the date of calculation
on a consolidated basis in accordance with GAAP (subject to the terms described
in the next paragraph) plus the aggregate liquidation preference of all
outstanding Disqualified Stock of the Company and preferred stock of the
Company's Subsidiaries (except preferred stock issued to the Company or a Wholly
Owned Subsidiary of the Company) on such date to (ii) the Consolidated Cash Flow
of the Company for the four full fiscal quarters (the "Four Quarter Period")
ending on or prior to the date of determination.
For purposes of this definition, (i) the amount of Indebtedness which is
issued at a discount shall be deemed to be the accreted value of such
Indebtedness at the end of the Four Quarter Period, whether or not such amount
is the amount then reflected on a balance sheet prepared in accordance with
GAAP, and (ii) the aggregate outstanding principal amount of Indebtedness of the
Company and its Subsidiaries and the aggregate liquidation preference of all
outstanding preferred stock of the Company's Subsidiaries for which such
calculation is made shall be determined on a pro forma basis as if the
Indebtedness and preferred stock giving rise to the need to perform such
calculation had been incurred and issued and the proceeds therefrom had been
applied, and all other transactions in respect of which such Indebtedness is
being incurred or preferred stock is being issued had occurred, on the first day
of the Four Quarter Period. In addition to the foregoing, for purposes of this
definition, Consolidated Cash Flow shall be calculated on a pro forma basis
after giving effect to (i) the incurrence of the Indebtedness of such Person and
its Subsidiaries and the issuance of the preferred stock of such Subsidiaries
(and the application of the proceeds therefrom) giving rise to the need to make
such calculation and any incurrence (and the application of the proceeds
therefrom) or repayment of other Indebtedness, other than the incurrence or
repayment of Indebtedness pursuant to working capital facilities, at any time
subsequent to the beginning of the Four Quarter Period and on or prior to the
date of determination, as if such incurrence or issuance (and the application of
the proceeds thereof), or the repayment, as the case may be, occurred on the
first day of the Four Quarter Period, (ii) any acquisition (including, without
limitation, any acquisition giving rise to the need to make such calculation as
a result of such Person or one of its Subsidiaries (including any Person that
becomes a Subsidiary as a result of such acquisition) incurring, assuming or
otherwise becoming liable for Indebtedness or such Person's Subsidiaries issuing
preferred stock) at any time on or
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subsequent to the first day of the Four Quarter Period and on or prior to the
date of determination, as if such acquisition (including the incurrence,
assumption or liability for any such Indebtedness and the issuance of such
preferred stock and also including any Consolidated Cash Flow associated with
such acquisition) occurred on the first day of the Four Quarter Period. For
purposes of this definition, whenever pro forma effect is to be given to a
transaction, the pro forma calculations shall be made in good faith by a
responsible financial or accounting officer of the Company consistent with
Article 11 of Regulation S-X, promulgated pursuant to the Securities Act, as
such Regulation is in effect on the date of the Exchange Debenture Indenture.
Furthermore, in calculating "Consolidated Interest Expense" for purposes of the
calculation of "Consolidated Cash Flow," (i) interest on Indebtedness determined
on a fluctuating basis as of the date of determination (including Indebtedness
actually incurred on the date of the transaction giving rise to the need to
calculate the Leverage Ratio) and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined on a
fluctuating basis, to the extent such interest is covered by Hedging
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction other than a
precautionary financing statement with respect to a lease not intended as a
security agreement).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and after any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring gain or loss, together
with any related provision for taxes on such extraordinary or nonrecurring gain
or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale, but excluding cash amounts
placed in escrow, until such amounts are released to the Company), net of the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and expenses, and sales commissions) and
any relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Indebtedness under any Credit
Agreement) secured by a Lien on the asset or assets that were the subject of
such Asset Sale and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP and any reserve
established for future liabilities.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness), or (b) is directly or
indirectly liable (as a guarantor or otherwise); and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) the explicit terms of which provide that there is
no recourse against any of the assets of the Company or its Restricted
Subsidiaries.
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"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED BUSINESS" means the broadcasting business or any business that is
reasonably similar thereto or a reasonable extension, development or expansion
thereof or ancillary thereto.
"PERMITTED INDEBTEDNESS" has the meaning given in the covenant described
under the caption "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock."
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents or securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof having
maturities of not more than one year from the date of acquisition; (c) any
Investment by the Company or any Restricted Subsidiary of the Company in a
Person if, as a result of such Investment, (i) such Person becomes a Wholly
Owned Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys all or
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Restricted Subsidiary of the Company; (d) any Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "-- Repurchase at the Option of Holders -- Asset Sales"; (e) other
Investments in any Person or Persons having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (e) that are at the time outstanding without giving
effect to subsequent changes in value or increases or decreases attributable to
the accounting for the net income of such Investment, not to exceed $15.0
million; (f) any Investment acquired by the Company in exchange for Equity
Interests in the Company (other than Disqualified Stock); (g) any Investment
acquired by the Company or any of its Restricted Subsidiaries (A) in exchange
for any other Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or accounts receivable or (B) as a result of the transfer of title
with respect to any secured investment in default as a result of a foreclosure
by the Company or any of its Restricted Subsidiaries with respect to such
secured Investment; (h) Hedging Obligations permitted under the "--Certain
Covenants; Incurrence of Indebtedness and Issuance of Preferred Stock" covenant;
(i) loans and advances to officers, directors and employees for business-related
travel expenses, moving expenses and other similar expenses, in each case,
incurred in the ordinary course of business; and (j) any guarantees permitted to
be made pursuant to the covenant entitled "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
"PERMITTED LIENS" means (i) Liens securing Indebtedness of a Subsidiary or
Liens securing Exchange Debenture Senior Debt that is outstanding on the date of
issuance of the Exchange Debentures and Liens securing Exchange Debenture Senior
Debt that is permitted by the terms of the Exchange Debenture Indenture to be
incurred; (ii) Liens in favor of the Company; (iii) Liens on property existing
at the time of acquisition thereof by the Company or any Subsidiary of the
Company and Liens on property or assets of a Subsidiary existing at the time it
became a Subsidiary, PROVIDED that such Liens were in existence prior to the
contemplation of the acquisition and do not extend to any assets other than the
acquired property; (iv) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance or
other kinds of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the ordinary
course of business; (v) Liens existing on the date of the Exchange Debenture
Indenture; (vi) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, PROVIDED
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (vii) statutory liens of
landlords,
B-48
<PAGE>
mechanics, suppliers, vendors, warehousemen, carriers or other like Liens
arising in the ordinary course of business; (viii) judgment Liens not giving
rise to an Event of Default so long as any appropriate legal proceeding that may
have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceeding may be initiated
shall not have expired; (ix) Liens to secure Indebtedness (including Capital
Lease Obligations) permitted by clause (f) of the second paragraph of the
covenant entitled "--Certain Covenants-- Incurrence of Indebtedness and Issuance
of Preferred Stock" covering only the assets acquired with such Indebtedness;
(x) Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed $5.0
million at any one time outstanding and that (A) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (B) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Subsidiary; (xi)
Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries; (xii) easements, rights-of-way, zoning and similar
restrictions and other similar encumbrances or title defects incurred or
imposed, as applicable, in the ordinary course of business and consistent with
industry practices which, in the aggregate, are not substantial in amount, and
which do not in any case materially detract from the value of the property
subject thereto (as such property is used by the Company or its Subsidiary) or
interfere with the ordinary conduct of the business of the Company or such
Subsidiary; provided, however, that any such Liens are not incurred in
connection with any borrowing of money or any commitment to loan any money or to
extend any credit; and (xiii) customary Liens (other than any Lien imposed by
ERISA) incurred or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance and other types of
social security legislation.
"PERMITTED REFINANCING DEBT" means any Indebtedness of the Company or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness (other than Indebtedness incurred under a Credit Agreement) of the
Company or any of its Restricted Subsidiaries; PROVIDED that: (i) the principal
amount of such Permitted Refinancing Indebtedness does not exceed the principal
amount of the Indebtedness so extended, refinanced, renewed, replaced, defeased
or refunded (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date on or later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is Exchange Debenture Subordinated Debt, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Exchange
Debentures on terms at least as favorable taken as a whole to the Holders of the
Exchange Debentures as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"PRINCIPAL" means Richard W. Weening and Lewis W. Dickey, Jr.
"RELATED PARTY" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned subsidiary, or spouse or immediate family
member (in the case of an individual) of such principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means any direct or indirect Subsidiary of the
Company that is not an Unrestricted Subsidiary.
B-49
<PAGE>
"SERIES A PREFERRED STOCK HOLDER" means the Person in whose name a share of
Series A Preferred Stock is registered.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary which would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Exchange Debenture Indenture.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock, entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company which at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary or a Person becoming a Subsidiary through merger or
consolidation or Investment therein) to be an Unrestricted Subsidiary only if
(a) such Subsidiary does not own any Capital Stock of, or own or hold any Lien
on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary; (b) all the Indebtedness of such Subsidiary shall, at the date of
designation, and will at all times thereafter, consist of Non-Recourse Debt; (c)
the Company certifies that such designation complies with the "Limitation on
Restricted Payments" covenant; (d) such Subsidiary, either alone or in the
aggregate with all other Unrestricted Subsidiaries, does not operate, directly
or indirectly, all or substantially all of the business of the Company and its
Subsidiaries; (e) such Subsidiary does not, directly or indirectly, own any
Indebtedness of or Equity Interest in, and has no investments in, the Company or
any Restricted Subsidiary; (f) such Subsidiary is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (1) to subscribe for additional Equity Interests or (2) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (g) on the date such
Subsidiary is designated an Unrestricted Subsidiary, such Subsidiary is not a
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary with terms substantially less favorable to the
Company than those that might have been obtained from Persons who are not
Affiliates of the Company. Any such designation by the Board of Directors of the
Company shall be evidenced to the Trustee by filing with the Trustee a
resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions. If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Exchange Debenture Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred as of such date. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, that (i) immediately after giving effect to
such designation, no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof and the Company could incur
at least $1.00 of additional Indebtedness (excluding Permitted Indebtedness)
pursuant to the first paragraph of the "Incurrence of Indebtedness and Issuance
of Preferred Stock" covenant on a pro forma basis taking into account such
designation and (ii) such Subsidiary executes a Guarantee pursuant to the terms
of the Exchange Debenture Indenture.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each
B-50
<PAGE>
then remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect thereof,
by (b) the number of years (calculated to the nearest one-twelfth) that will
elapse between such date and the making of such payment, by (ii) the then
outstanding principal amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned, directly or indirectly, by such Person or by one or more
Wholly Owned Restricted Subsidiaries of such Person.
B-51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Preferred Stock Offering, the Company will have
outstanding shares of Series A Preferred Stock. Of these shares, the
shares of Series A Preferred Stock offered hereby will be freely
transferable without restriction (subject to any FCC consent that might be
required) or further registration under the Securities Act, except that any
shares purchased by "affiliates" of the Company, as that term is defined in Rule
144 may generally only be sold subject to certain restrictions as to timing,
manner and volume.
In general, under Rule 144 as currently in effect, a shareholder, including
an Affiliate, who has beneficially owned his or her restricted securities (as
that term is defined in Rule 144) for at least one year from the later of the
date such securities were acquired from the Company or (if applicable) the date
they were acquired from an Affiliate is entitled to sell, within any three-month
period, a number of such shares that does not exceed the greater of 1% of the
then outstanding shares of Series A Preferred Stock or the average weekly
trading volume in the Series A Preferred Stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, under Rule 144(k),
if a period of at least two years has elapsed between the later of the date
restricted securities were acquired from the Company or (if applicable) the date
they were acquired from an Affiliate of the Company, a stockholder who is not an
Affiliate of the Company at the time of sale and has not been an Affiliate of
the Company for at least three months prior to the sale is entitled to sell the
shares immediately without compliance with the foregoing requirements under Rule
144.
Prior to the Preferred Stock Offering, there has been no public market for
the Series A Preferred Stock. No prediction can be made as to the effect, if
any, that market sales of shares of Series A Preferred Stock or the availability
of shares for sale will have on the market price of the Series A Preferred Stock
prevailing from time to time. Nevertheless, sales of significant numbers of
shares of Series A Preferred Stock in the public market could adversely affect
the market price of the Series A Preferred Stock and could impair the Company's
ability to raise capital through an offering of its equity securities. See
"Underwriting."
B-52
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of , 1998 and as adjusted to
give effect to the sale of Class A Common Stock offered hereby, certain
information regarding beneficial ownership of the Company's Common Stock by (i)
each person who is known to the Company to be the beneficial owner of more than
5% of the outstanding shares of common stock, (ii) each director, (iii) each of
the Named Executive Officers and (iv) all directors and executive officers as a
group. All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK
-------------------------------------------------------------------------------------------
PRIOR TO STOCK AFTER STOCK OFFERINGS
OFFERINGS
---------------------------------- SHARES BEING ----------------------------------
NAME NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ---------------------------- --------------- ----------------- ------------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
State of Wisconsin
Investment Board
NationsBanc Capital Corp.
Heller Equity Capital
Corporation
The Northwestern Mutual Life
Insurance Company
CML Holdings, LLC
QUAESTUS Management
Corporation
DBBC of Georgia, LLC
Richard W. Weening
Lewis W. Dickey, Jr.
William M. Bungeroth
Richard J. Bonick, Jr.
Robert H. Sheridan, III
Ralph B. Everett
<CAPTION>
CLASS B COMMON STOCK(1)
----------------------------------------------------------------------
PRIOR TO STOCK AFTER STOCK OFFERINGS
OFFERINGS
---------------------------------- ----------------------------------
NAME NUMBER PERCENTAGE NUMBER PERCENTAGE
- ---------------------------- --------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
State of Wisconsin
Investment Board
NationsBanc Capital Corp.
Heller Equity Capital
Corporation
The Northwestern Mutual Life
Insurance Company
CML Holdings, LLC
QUAESTUS Management
Corporation
DBBC of Georgia, LLC
Richard W. Weening
Lewis W. Dickey, Jr.
William M. Bungeroth
Richard J. Bonick, Jr.
Robert H. Sheridan, III
Ralph B. Everett
</TABLE>
- ------------------------
(1) Except upon the occurrence of certain events, holders of Class B Common
Stock are not entitled to vote, whereas each share of Class A Common Stock
entitles its holder to one vote. Under certain conditions and subject to
prior governmental approval, shares of Class B Common Stock are convertible
into shares of Class A Common Stock.
(2) Less than 1%.
B-53
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement dated
, 1998 (the "Underwriting Agreement") among the Company and the
Underwriters, the Underwriters named below (collectively, the "Underwriters"),
acting through their representatives, Bear, Stearns & Co., Inc. and Lehman
Brothers Inc. (the "Representatives") have agreed, severally and not jointly, to
purchase from the Company and the Company has agreed to sell to the Underwriters
the number of shares of the Series A Preferred Stock set forth opposite their
names below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Bear, Stearns & Co. Inc........................................................................
Lehman Brothers Inc............................................................................
-----------------
Total........................................................................................
-----------------
-----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, and that the Underwriters are
severally committed to take and pay for all of the Shares of Series A Preferred
Stock if any are taken. The closing of the Stock Offerings and the Debt Offering
are conditions to the closing of the Preferred Stock Offering. The Company has
agreed to indemnify the Underwriters against certain liabilities in connection
with the offer and sale of the Series A Preferred Stock, including liabilities
under the Securities Act, and to contribute to payments that the Underwriters
may be required to make in respect thereof.
The Underwriters propose to offer all or part of the Series A Preferred
Stock directly to the public at the public offering price set forth on the cover
page hereof and all or part to certain dealers at a price which represents
concessions not to exceed % of the principal amount of the Series A Preferred
Stock. The Underwriters may allow, and any such dealer may reallow, concessions
to certain other dealers not to exceed % of the principal amount of the
Series A Preferred Stock. After the initial public offering, the public offering
price and such concessions may be changed.
The Series A Preferred Stock will constitute a new class of securities with
no established trading market. The Company does not intend to list the Series A
Preferred Stock on any national securities exchange or to seek the admission
thereof to trading in the Nasdaq National Market. The Company has been advised
by the Representatives that following the completion of the Preferred Stock
Offering, the Representatives intend to make a market in the Series A Preferred
Stock. However, they are not obligated to do so and any market-making activities
with respect to the Series A Preferred Stock may be discontinued at any time
without notice.
In order to facilitate the Preferred Stock Offering, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Series A Preferred Stock during and after the Preferred Stock Offering.
Specifically, the Underwriters may over-allot or otherwise create a short
position in the Series A Preferred Stock for their own account by selling more
Series A Preferred Stock than have been sold to them by the Company. The
Underwriters may elect to cover any such short position by purchasing Series A
Preferred Stock in the open market. In addition, the Underwriters may stabilize
or maintain the price of the Series A Preferred Stock by bidding for or
purchasing shares of the Series A Preferred Stock in the open market and may
impose penalty bids, under which selling concessions allowed to syndicate
members or other broker-dealers participating in the Preferred Stock Offering
are reclaimed
B-54
<PAGE>
if Series A Preferred Stock previously distributed in the Preferred Stock
Offering are repurchased in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize or maintain the
market price of the Series A Preferred Stock at a level above that which might
otherwise prevail in the open market. The imposition of a penalty bid may also
affect the price of the Series A Preferred Stock to the extent that it
discourages resales thereof. No representation is made as to the magnitude or
effect of any such stabilization or other transactions. Such transactions, if
commenced may be discontinued at any time.
Lehman Brothers Inc. and Lehman Brothers Commercial Paper Inc., an affiliate
of Lehman Brothers Inc., act as Arranger, and Syndication Agent and
Administrative Agent, respectively, in connection with the Credit Facility and
will receive any repayment by the Company of amounts outstanding under the
Credit Facility from the proceeds of the Offerings. Lehman Brothers Inc. and
Bear, Stearns & Co. Inc. ("Bear Stearns") will act as representatives of the
Underwriters in the concurrent Debt Offering and the concurrent Stock Offerings.
Each of the Representatives has engaged from time to time and may in the future
engage in general financing and banking transactions with the Company or
affiliates thereof.
The Preferred Stock Offering is being made pursuant to the provisions of
Section 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. Bear Stearns has agreed to act as Qualified Independent
Underwriter for the Preferred Stock Offering, and as such has assumed
responsibilities of conducting due diligence and has reviewed and participated
in the preparation of the Registration Statement. The public offering price of
the Series A Preferred Stock will not be higher than the price recommended by
Bear Stearns.
B-55
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal income
tax consequences generally applicable to purchasers of the Preferred Stock
offered hereby. The federal income tax considerations set forth below are based
upon currently existing provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), applicable Treasury Regulations ("Treasury Regulations"),
judicial authority, and current administrative rulings and pronouncements of the
Internal Revenue Service (the "IRS"). There can be no assurance that the IRS
will not take a contrary view, and no ruling from the IRS has been, or will be,
sought on the issues discussed herein. Legislative, judicial, or administrative
changes or interpretations may be forthcoming that could alter or modify the
statements and conclusions set forth herein. Any such changes or interpretations
may or may not be retroactive and could affect the tax consequences discussed
below. This discussion applies only to a person who is an initial beneficial
owner of the Series A Preferred Stock and (i) an individual citizen or resident
of the United States for U.S. federal income tax purposes, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is subject to United States federal income tax regardless of source,
(iv) a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust, or (v) any other
person whose income or gain in respect of the Series A Preferred Stock or
Exchange Debentures is effectively connected with the conduct of a United States
trade or business (or, if applicable, attributable to a permanent establishment
situated in the United States (a "Holder").
The summary is not a complete analysis or description of all potential
federal tax considerations that may be relevant to, or of the actual tax effect
that any of the matters described herein will have on, particular Holders, and
does not address foreign, state, local or other tax consequences. This summary
does not address the federal income tax consequences to (a) special classes of
taxpayers (such as S corporations, mutual funds, insurance companies, financial
institutions, small business investment companies, foreign companies,
nonresident alien individuals, regulated investment companies, real estate
investment trusts, dealers in securities or currencies, broker-dealers and
tax-exempt organizations) who are subject to special treatment under the federal
income tax laws, (b) Holders that hold the Series A Preferred Stock as part of a
position in a "straddle", or as part of a "hedging", "conversion", or other
integrated investment transaction for federal income tax purposes, (c) Holders
that do not hold the Series A Preferred Stock, and the Exchange Debentures that
may be issued in redemption of the Series A Preferred Stock as capital assets
within the meaning of section 1221 of the Code or (d) Holders whose functional
currency is not the U.S. dollar. Furthermore, estate and gift tax consequences
are not discussed herein. The Company does not intend to treat the Series A
Preferred Stock, the Notes and the Class A Common Stock, all of which are being
offered concurrently, as an investment unit for United States federal income tax
purposes.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH PROSPECTIVE PURCHASER OF
THE SERIES A PREFERRED STOCK IS STRONGLY URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO HIS OR HER PARTICULAR TAX SITUATION AND AS TO ANY
FEDERAL, FOREIGN, STATE, LOCAL OR OTHER TAX CONSIDERATIONS (INCLUDING ANY
POSSIBLE CHANGES IN TAX LAW) AFFECTING THE PURCHASE, HOLDING AND DISPOSITION OF
THE SERIES A PREFERRED STOCK OR THE EXCHANGE DEBENTURES.
DIVIDENDS ON THE SERIES A PREFERRED STOCK
Dividends paid on the Series A Preferred Stock (including dividends paid
through the issuance of additional shares of Series A Preferred Stock) will be
taxable as ordinary income to the extent of the Company's current or accumulated
earnings and profits (as determined for federal income tax purposes). To the
extent that the amount of distributions paid on the Series A Preferred Stock
exceeds the Company's
B-56
<PAGE>
current or accumulated earnings and profits, the distributions will be treated
as a return of capital, thus reducing the Holder's adjusted tax basis in such
Series A Preferred Stock and increasing the amount of gain (or reducing the
amount of loss) that may be realized by such Holder upon a sale or exchange of
the Series A Preferred Stock. The amount of any distribution which exceeds the
Holder's adjusted basis in the Series A Preferred Stock will be taxed as capital
gain, and generally will be long-term capital gain if the Holder's holding
period for such Series A Preferred Stock exceeds one year. For purposes of the
remainder of this discussion, the term "dividend" refers to a distribution paid
out of the Company's allocable earnings and profits unless the context indicates
otherwise.
DIVIDENDS RECEIVED DEDUCTION. Dividends paid to a corporate Holder who owns
less than 20 percent of the Company (by vote or value) will be eligible for the
70 percent dividends-received deduction under section 243 of the Code, subject
to the limitations contained in sections 246 and 246A of the Code. In general,
the dividends-received deduction is available only if the stock in respect of
which the dividend is paid is held for at least 46 days during the 90-day period
that begins 45 days before the stock becomes ex-dividend with respect to the
dividend (91 days during the 180-day period that begins 90 days before the stock
becomes ex-dividend with respect to a dividend in the case of a dividend
attributable to a period or periods aggregating more than 366 days). Under
section 246(c) of the Code, a taxpayer's holding period for these purposes is
reduced by periods during which the taxpayer's risk of loss with respect to the
stock is considered diminished by reason of the existence of options, contracts
to sell and similar transactions. The dividends-received deduction will also not
be available if the taxpayer is under an obligation to make related payments
with respect to positions in substantially similar or related property. The
dividends-received deduction is limited to specified percentages of a corporate
Holder's taxable income and may be reduced or eliminated if the corporate Holder
has indebtedness "directly attributable" to its investment in the stock.
Prospective corporate purchasers of the Series A Preferred Stock should consult
their own tax advisors to determine whether these limitations might apply to
them.
For purposes of computing its alternative minimum tax, dividends eligible
for the 70 percent dividends-received deduction are included in a corporate
Holder's "adjusted current earnings." If such adjusted current earnings exceed
the corporate Holder's alternative minimum taxable income (determined without
regard to the adjustments for adjusted current earnings or the alternative tax
net operating loss deduction), 75 percent of the excess is added to the Holder's
alternative minimum taxable income.
EXTRAORDINARY DIVIDENDS. Under section 1059 of the Code, if a corporate
Holder receives an "extraordinary dividend" from the Company with respect to the
Series A Preferred Stock which it has not held for more than two years on the
dividend announcement date, the basis of the Series A Preferred Stock will be
reduced (but not below zero) by the non-taxed portion of the dividend. The
reduction in basis is treated as occurring at the beginning of the ex-dividend
date of the extraordinary dividend to which the reduction relates. If, because
of the limitation on reducing basis below zero, any amount of the non-taxed
portion of an extraordinary dividend has not been applied to reduce basis, such
amount will be treated as gain from the sale or exchange of the Series A
Preferred Stock in the year in which the extraordinary dividend is received.
Generally, the non-taxed portion of an extraordinary dividend is the amount
excluded from income under section 243 of the Code (relating to the
dividends-received deduction). An extraordinary dividend on the Series A
Preferred Stock generally would include any dividend that (i) equals or exceeds
five percent of the Holder's adjusted tax basis in the Series A Preferred Stock,
treating all dividends having ex-dividend dates within an 85-day period as one
dividend or (ii) exceeds 20 percent of the Holder's adjusted tax basis in the
Series A Preferred Stock, treating all dividends having ex-dividend dates within
a 365-day period as one dividend. In determining whether a dividend paid on the
Series A Preferred Stock is an extraordinary dividend, a Holder may elect to use
the fair market value of such stock rather than its adjusted tax basis for
purposes of determining the applicable percentage limitation if the Holder is
able to establish to the satisfaction of the IRS the fair market value of the
Series A Preferred Stock as of the day before the ex-dividend date. An
extraordinary dividend would also include any amount treated as a dividend in
the case of a redemption of the Series A Preferred Stock that is either non-pro
rata
B-57
<PAGE>
as to all holders of Company stock or part of a partial liquidation, without
regard to the period the Holder held the stock. Corporate Holders should see
"Redemption of the Series A Preferred Stock" for a discussion of when a
redemption of the Series A Preferred Stock will constitute an extraordinary
dividend.
Certain "qualified preferred dividends," however, are not considered
extraordinary dividends. A qualified preferred dividend is any fixed dividend
payable with respect to preferred stock which (i) provides for fixed preferred
dividends payable not less frequently than annually and (ii) is not in arrears
as to dividends when acquired, provided, however, that the actual rate of return
(as determined under section 1059(e)(3) of the Code) on such stock does not
exceed 15 percent. If a qualified preferred dividend announced within two years
of the date of acquisition of the preferred stock exceeds the five percent (or
20 percent) threshold for extraordinary dividend status described above, (i)
section 1059(a) will not apply (and no reduction in basis will be required) if
the Holder holds the stock for more than five years and (ii) if the Holder
disposes of the stock before it has been held for more than five years, the
aggregate reduction in basis under section 1059(a) will not exceed the excess of
the qualified preferred dividends paid on such stock during the period held by
the Holder over the qualified preferred dividends that would have been paid
during such period on the basis of the stated rate of return, as determined
under section 1059(e)(3) of the Code. The length of time that a Holder is deemed
to have held stock for purposes of section 1059 of the Code is determined under
principles similar to those contained in section 246(c) of the Code discussed
above.
PREFERRED STOCK DISCOUNT
The Series A Preferred Stock is subject to mandatory redemption on
, 2009 (the "Mandatory Redemption"). In addition, on or after
, 2003 and subject to certain restrictions, the Series A Preferred
Stock is redeemable at any time at the option of the Company at specified
redemption prices (the "Optional Redemption"). See "Preferred Stock--Optional
Redemption" and "Mandatory Redemption." Pursuant to section 305(c) of the Code,
Holders of Series A Preferred Stock generally may be required to treat a portion
of the difference between the Series A Preferred Stock's issue price and its
redemption price as constructive distributions of property includible in income
on a periodic basis. For purposes of determining whether such constructive
distribution treatment applies, the Mandatory Redemption and the Optional
Redemption are tested separately. Constructive distribution treatment is
required if either (or both) of these tests is satisfied.
Section 305(c) of the Code provides that the entire amount of a redemption
premium with respect to preferred stock that is subject to mandatory redemption
is treated as being distributed to the Holders of such preferred stock on an
economic accrual basis. Preferred stock generally is considered to have a
redemption premium for this purpose if the price at which it must be redeemed
(the "Redemption Price") exceeds its issue price by more than a DE MINIMIS
amount. For this purpose, such excess (the "Series A Preferred Stock Discount")
will be treated as zero if it is less than 1/4 of 1% of the Redemption Price
multiplied by the number of complete years from the date of issuance of the
stock until the stock must be redeemed. Series A Preferred Stock Discount is
taxable as a constructive distribution to the Holder (treated as a dividend to
the extent of the Company's current and accumulated earnings and profits and
otherwise subject to the treatment described above for distributions) over the
term of the Series A Preferred Stock using a constant interest rate method
similar to that employed for accruing original issue discount pursuant to the
Code.
Series A Preferred Stock Discount will arise due to the Optional Redemption
feature only if, based on all of the facts and circumstances as of the date the
Series A Preferred Stock is issued, redemption pursuant to the Optional
Redemption is more likely than not to occur. Even if redemption were more likely
than not to occur, however, constructive distribution treatment would not result
if the redemption premium were solely in the nature of a penalty for premature
redemption. For this purpose, a penalty for premature redemption is a premium
paid as a result of changes in economic or market conditions over which neither
the issuer not the Holder has legal or practical control, such as changes in
prevailing
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dividend rates. The Treasury Regulations provide a safe harbor pursuant to which
constructive distribution treatment will not result from an issuer call right if
(i) the issuer and the Holder are unrelated, (ii) there are no arrangements that
effectively require the issuer to redeem the stock and (iii) exercise of the
option to redeem would not reduce the yield of the stock. Although the issue is
not free from doubt, the Company believes that the Series A Preferred Stock
should not be considered to have been issued with Series A Preferred Stock
Discount by reason of the Optional Redemption feature.
Any additional shares of Series A Preferred Stock distributed by the Company
in lieu of cash dividend payments on the Series A Preferred Stock ("Dividend
Shares") received by Holders of the Series A Preferred Stock may bear Series A
Preferred Stock Discount depending upon the issue price of such shares (I.E.,
the fair market value of the Dividend Shares on the date of their issuance). A
Holder's initial tax basis in Dividend Shares will equal the fair market value
of such Dividend Shares on their date of distribution. Depending on the fair
market value of the Series A Preferred Stock on the date of issuance, Holders
may be required to include additional Series A Preferred Stock Discount in
income based on the difference between (x) the fair market value of such shares
on the date of their issuance and (y) the amount payable on redemption of such
shares, unless the difference is DE MINIMUS, as described above. If shares of
Series A Preferred Stock (including Dividend Shares) bear Series A Preferred
Stock Discount, such shares generally will have different tax characteristics
from other shares of Series A Preferred Stock (including other Dividend Shares)
and might trade separately, which might adversely affect the liquidity of such
shares.
REDEMPTION OF THE PREFERRED STOCK
A redemption of shares of the Series A Preferred Stock for cash or for
Exchange Debentures will be a taxable event. A redemption of shares of the
Series A Preferred Stock for cash will be treated as a dividend to the extent of
the Company's current or accumulated earnings and profits, unless the redemption
(i) results in a "complete termination" of the Holder's stock interest in the
Company under section 302(b) (3) of the Code, or (ii) is "not essentially
equivalent to a dividend" with respect to the Holder under section 302(b)(l) of
the Code. In determining whether the redemption is treated as a dividend, the
Holder must take into account not only stock he or she actually owns, but also
stock constructively owned within the meaning of section 318 of the Code. A
distribution to a Holder will be "not essentially equivalent to a dividend" if
it results in a "meaningful reduction" in the Holder's stock interest in the
company. For these purposes, a redemption of Series A Preferred Stock from a
Holder whose actual and constructive ownership of Company Common Stock does not
result in such Holder having actual or practical control of the Company should
satisfy the "not essentially equivalent to a dividend" test of section
302(b)(l).
If the redemption of the Series A Preferred Stock for cash or for Exchange
Debentures is not treated as a distribution taxable as a dividend, the
redemption would result in capital gain or loss equal to the difference between
the amount of cash (or the issue price of the Exchange Debentures (as described
under "--Issue Price of Exchange Debentures")) received and the Holder's
adjusted tax basis in the Series A Preferred Stock redeemed. This gain or loss
would be long-term capital gain or loss. See the discussion under "Disposition
of the Series A Preferred Stock," regarding certain rules applicable to such
gain or loss.
If a redemption of the Series A Preferred Stock is treated as a distribution
rather than a sale or exchange, the amount of the distribution will be measured
by the amount of cash (or the issue price of the Exchange Debentures) received
by a Holder. As described above, the distribution will be taxable as a dividend
to the extent of the Company's earnings and profits. The amount of the
distribution in excess of the Company's earnings and profits will reduce the
Holder's basis in the redeemed Series A Preferred Stock, and, to the extent the
amount of the distribution exceeds such basis, will result in capital gain. If a
Holder is left with basis in the redeemed Series A Preferred Stock, such basis
will be transferred to any remaining stock holdings in the Company.
Under section 1059 of the Code, as discussed above, the term extraordinary
dividend includes any non-liquidating redemption of stock that is treated as a
divided that is (i) non-pro rata as to all holders of
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the stock of the Company or (ii) which would not be treated as a dividend if
options had not be taken into account, in both cases, irrespective of the
holding period. Consequently, to the extent an exchange of the Series A
Preferred Stock constitutes a dividend, it will constitute an extraordinary
dividend to a corporate Holder.
DISPOSITION OF THE PREFERRED STOCK
Unless a nonrecognition provision applies, the sale or other disposition of
Series A Preferred Stock will be a taxable event for U.S. federal income tax
purposes. In such event, in general, a Holder of Series A Preferred Stock will
recognize gain or loss equal to the difference between (i) the amount of cash
plus the fair market value of property received and (ii) the Holder's tax basis
in the Series A Preferred Stock. A Holder's tax basis in the Series A Preferred
Stock will equal the initial tax basis of such stock. A corporate Holder's tax
basis may be adjusted by virtue of an extraordinary dividend, as discussed
above. Any such gain or loss will generally be capital gain or loss. Recently
enacted legislation includes substantial changes to the federal taxation of
capital gains recognized by individuals, including a 20% maximum tax rate for
certain gains from the sale of capital assets held for more than 18 months. The
deduction for capital losses is subject to certain limitations. Prospective
investors should consult their tax advisors regarding the treatment of capital
gains and losses.
INTEREST ON THE EXCHANGE NOTES
Except as set forth below, interest on the Exchange Debentures will be
taxable to a Holder as ordinary interest income at the time such amounts are
accrued or received, in accordance with the Holder's method of accounting for
U.S. federal income tax purposes.
ORIGINAL ISSUE DISCOUNT. The Exchange Debentures may be issued with
original issue discount ("OID") equal to the excess of their "stated redemption
price at maturity" over their "issue price" if such excess is greater than a DE
MINIMIS amount. Holders of Exchange Debentures will be subject to special tax
accounting rules, as described in greater detail below. Holders of Exchange
Debentures should be aware that they generally must include OID in gross income
for U.S. federal income tax purposes on an annual basis under a constant yield
accrual method. As a result, such Holders will include OID in income in advance
of the receipt of cash attributable to that income. However, Holders of Exchange
Debentures generally will not be required to include separately in income cash
payments received on such Exchange Debentures, even if denominated as interest,
to the extent such payments do not constitute qualified stated interest (as
defined below). The Company will report to Holders of any OID Exchange
Debentures on a timely basis the reportable amount of OID and interest income
based on its understanding of applicable law.
The "stated redemption price at maturity" of a debt instrument is the sum of
its principal amount plus all other payments required thereunder, other than
payments of "qualified stated interest." For this purpose, "qualified stated
interest" means stated interest that is unconditionally payable in cash or in
property (other than the debt instruments of the issuer), at least annually at a
single fixed rate during the entire term of the debt instrument that
appropriately takes into account the length of the intervals between payments).
If the Exchange Debentures are issued at a time when the Company has the right
to make interest payments with additional Exchange Debentures in lieu of cash,
none of the stated interest on such Exchange Debentures will be treated as
qualified stated interest. The "issue price" of an Exchange Debenture will be
determined as described under "--Issue Price of Exchange Debentures."
The amount of OID includible in income by the initial Holder of an Exchange
Debenture is the sum of the "daily portions" of OID with respect to the Exchange
Debenture for each day during the taxable year or portion of the taxable year in
which such Holder held such Exchange Debenture ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. The "accrual period"
for an Exchange Debenture may be of any
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length and may vary in length over the term of the Exchange Debenture, provided
that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs on the first day or the final day of an accrual
period. The amount of OID allocable to any accrual period is an amount equal to
the excess, if any, of (a) the product of the Exchange Debenture's adjusted
issue price at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period and
properly adjusted for the length of the accrual period) over (b) the sum of any
qualified stated interest allocable to the accrual period. OID allocable to a
final accrual period is the difference between the amount payable at maturity
(other than a payment of qualified stated interest) and the adjusted issue price
at the beginning of the final accrual period. Special rules will apply for
calculating OID for an initial short accrual period. The "adjusted issue price"
of an Exchange Debenture at the beginning of any accrual period is equal to its
issue price increased by the accrued OID for each prior accrual period
(determined without regard to the amortization of any bond premium, as described
below) and reduced by any payments made on such Exchange Debenture (other than
qualified stated interest) on or before the first day of the accrual period.
Under these rules, a United States Holder will have to include in income
increasingly greater amounts of OID in successive accrual periods.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
CONSEQUENCES OF OWNING EXCHANGE DEBENTURES.
ISSUE PRICE OF EXCHANGE DEBENTURES
The issue price of an Exchange Debenture would be equal to (i) its fair
market value as of the exchange date if the Exchange Debentures are traded on an
established securities market on or at any time during a specified period or
(ii) the fair market value at the exchange date of the Exchangeable Series A
Preferred Stock if such Exchangeable Series A Preferred Stock is traded on an
established securities market during a specified period but the Exchange
Debentures are not. If neither the Exchangeable Series A Preferred Stock nor the
Exchange Debentures are so traded, the issue price of the Exchange Debentures
would be determined under Section 1274 of the Code, in which case the issue
price would be the stated principal amount of the Exchange Debentures provided
that the yield on the Exchange Debentures is equal to or greater than the
"applicable federal rate" in effect at the time the Exchange Debentures are
issued. If the yield on the Exchange Debentures is less than such applicable
federal rate, its issue price under section 1274 of the Code would be equal to
the present value as of the issue date of all payments to be made on the
Exchange Debentures, discounted at the applicable federal rate. It can not be
determined at the present time whether the Series A Preferred Stock or the
Exchange Debentures will be, at the relevant time, traded on an established
securities market within the meaning of the Regulations or whether the yield on
the Exchange Debentures will equal or exceed the applicable federal rate.
ELECTION
A Holder of Exchange Debentures, subject to certain limitations, may elect
to include all interest and discount on the Exchange Debentures in gross income
under the constant yield method. For this purpose, interest includes stated and
unstated interest, acquisition discount, and OID and DE MINIMIS OID, as adjusted
by any amortizable bond premium.
AMORTIZABLE BOND PREMIUM
If the Series A Preferred Stock is exchanged for Exchange Debentures at a
time when the "issue price" of the Exchange Debentures exceeds the amount
payable at maturity of the Exchange Debenture, such excess will constitute
amortizable bond premium that the Holder may elect to amortize under the
constant yield method over the term of the Exchange Debenture. A Holder who
elects to amortize bond premium must reduce the tax basis in the Exchange
Debenture by the amount of the aggregate amortization allowable for amortizable
bond premium. Amortizable bond premium will be treated under the Code as an
offset to interest income on the related debt instrument for federal income tax
purposes.
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DISPOSITION OF THE EXCHANGE DEBENTURES
Unless a nonrecognition provision applies, the sale, exchange, redemption
(including pursuant to an offer by the Company) or other disposition of an
Exchange Debenture, will be a taxable event for U.S. federal income tax
purposes. In such event, in general, a Holder of Exchange Debentures will
recognize gain or loss equal to the difference between (i) the amount of cash
plus the fair market value of property received (except to the extent
attributable to accrued interest on the Exchange Debentures which will be
treated as such if not previously included in income) and (ii) the Holders's tax
basis in the Exchange Debentures (as increased by any OID previously included in
income by the Holder and decreased by any amortizable bond premium, if any,
deducted over the term of the Exchange Debentures). Any such gain or loss
generally will be long-term capital gain or loss. At the time of sale, exchange,
disposition, retirement or redemption, a Holder of the Exchange Debentures must
also include in income any previously accrued but unrecognized OID.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
The Exchange Debentures will be treated as "applicable high yield discount
obligations" ("AHYDO"), under section 163(e) of the Code if they have a term of
more than five years, have a yield to maturity that equals or exceeds five
percentage points over the "applicable federal rate" for the month in which the
Exchange Debentures are issued and have "significant" OID. A debt instrument is
treated as having "significant" OID if the aggregate amount that would be
includible in gross income with respect to such debt instrument for periods
before the close of any accrual period ending five years or more after the date
of issue exceeds the sum of (i) the aggregate amount of interest to be paid in
cash under the debt instrument before the close of such accrual period and (ii)
the product of the initial issue price of such debt instrument and its yield to
maturity. For purposes of determining whether an Exchange Debenture is an AHYDO,
Holders are bound by the issuer's determination of the appropriate accrual
period. Under sections 163(e) and 163(i) of the Code, a C corporation that is an
issuer of a debt obligation subject to the AHYDO rules may not deduct any
portion of OID until such portion is actually paid.
In addition, if the Exchange Debentures are AHYDOs and the yield to maturity
of the Exchange Debentures exceeds the sum of the AFR plus six percentage
points, a portion of the OID under the Exchange Debentures, equal to the product
of the total OID under the Exchange Debentures times the ratio of (a) the excess
of the yield to maturity over the sum of the AFR plus six percentage points to
(b) the yield to maturity, will not be deductible by the issuer and will be
treated for some purposes as dividends to the holders of the Exchange Debentures
(to the extent that such amounts would have been treated as dividends to the
holders of Exchange Debentures if they had been distribution's with respect to
the issuer's stock). Amounts treated as dividends will be nondeductible by the
issuer, and may qualify for the dividends-received deduction for corporate
Holders.
Because the amount of OID, if any, attributable to the Exchange Debentures
will be determined at such time that the Exchange Debentures are issued and the
AFR at such time is not predictable, it is impossible to determine at the
present time whether the Exchange Debentures will be treated as AHYDOs.
BACKUP WITHHOLDING
Under section 3406 of the Code and applicable Treasury Regulations, a
noncorporate Holder of the Series A Preferred Stock or the Exchange Debentures
may be subject to backup withholding at the rate of 31 percent with respect to
"reportable payments," which include interest and dividends paid on or the
proceeds of a sale, exchange or redemption of Series A Preferred Stock or the
Exchange Debentures, as the case may be. The payor will be required to deduct
and withhold the prescribed amounts if (i) the payee fails to furnish a Taxpayer
identification Number ("TIN") to the payor in the manner required, (ii) the IRS
notifies the payor that the TIN furnished by the payee is incorrect, (iii) there
has been a "notified payee
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underreporting" described in section 3406(c) of the Code or (iv) there has been
a failure of the payee to certify under penalty of perjury that the payee is not
subject to withholding under section 3406(a) (l)(C) of the Code. As a result, if
any one of the events listed above occurs, the payor will be required to
withhold an amount equal to 31 percent from any dividend or interest payment
made with respect to the Series A Preferred Stock or the Exchange Debentures or
any payment or proceeds of a redemption of the Series A Preferred Stock or the
Exchange Debentures to a noncorporate Holder. Amounts paid as backup withholding
do not constitute an additional tax and will be credited against the Holder's
federal income tax liability, so long as the required information is provided to
the IRS. The payor generally will report to the Holders of the Series A
Preferred Stock and the Exchange Debentures and to the IRS the amount of any
"reportable payments" for each calendar year and the amount of tax withheld, if
any, with respect to payment on those securities.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION TO OR MAKE ANY
REPRESENTATIONS NOT IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CUMULUS
MEDIA INC. OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE NOTES
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE NOTES TO ANYONE IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
INFORMATION SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary.............................
Risk Factors...................................
Use of Proceeds................................
Capitalization.................................
Unaudited Pro Forma Combined Financial
Statements...................................
Selected Historical Financial Data.............
Management's Discussion and Analysis of
Financial Condition and Results of
Operations...................................
Business.......................................
Pending Acquisitions...........................
Management.....................................
Pending Acquisitions...........................
Certain Relationships and Related
Transactions.................................
Principal Stockholders.........................
Description of Capital Stock...................
Description of Credit Facility.................
Description of Notes...........................
Underwriting...................................
Certain Federal Income Tax Considerations......
Legal Matters..................................
Experts........................................
Additional Information.........................
Index to Financial Statements.................. F-1
</TABLE>
Until ____________, 1998, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
$
[LOGO]
CUMULUS MEDIA INC.
% SERIES A CUMULATIVE
EXCHANGEABLE REDEEMABLE
PREFERRED STOCK
----------------
PROSPECTUS
----------------
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
, 1998
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, to be paid in connection with the sale
of the Class A Common Stock, the Notes, and the Series A Preferred Stock being
registered, all of which will be paid by the Registrant. All amounts are
estimates except the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee.................................................. $ 102,660
NASD filing fee................................................... 30,500
Nasdaq National Market listing fee................................ *
Blue Sky fees and expenses........................................ *
Accounting fees and expenses...................................... *
Legal fees and expenses........................................... *
Transfer agent and registrar fees................................. *
Printing and engraving expenses................................... *
Miscellaneous expenses *
---------
Total........................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The general effect of the provisions in the Company's Articles of
Incorporation and Illinois Law is to provide that the Company shall indemnify
its directors and officers against all liabilities and expenses actually and
reasonably incurred in connection with the defense or settlement of any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) in which they have become involved by
reason of their status as corporate directors or officers, if they acted in good
faith and in the reasonable belief that their conduct was neither unlawful (in
the case of criminal proceedings) nor opposed to the best interests of the
Company. With respect to legal proceedings by or in the right of the Company in
which a director or officer is adjudged liable for improper performance of his
duty to the Company or another enterprise which such person served in a similar
capacity at the request of the Company, indemnification is limited by such
provisions of that amount which is permitted by the court.
The Company will maintain officers' and directors' liability insurance which
will insure against liabilities that officers and directors of the Company may
incur in such capacities. The company has also entered into indemnification
agreements with its directors and officers.
The Underwriting Agreements will provide for indemnification of the
directors and officers of the Company signing the Registration Statement and
certain controlling persons of the Company against certain liabilities,
including those arising under the Securities Act in certain instances, of the
Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Upon the initial formation of the Company in April 1997, 1,000 shares of
common stock of the Company were issued to Media LLC for nominal consideration.
On November 17, 1997, the Company issued 16,250 shares of NML Preferred
Stock to NML for $16,250,000. On February 5, 1998, the Company issued an
additional 16,250 shares of NML Preferred Stock to NML for $16,250,000.
All of the above transactions were exempt from registration pursuant to
Section 4(2) of the Securities Act. The transactions did not involve a public
offering because of the limited number of offerees, the financial sophistication
of such offerees, and the fact that no underwriters or investment bankers
participated in such transactions.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
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<S> <C>
1.1** Form of U.S. Underwriting Agreement between the Registrant and the U.S.
Underwriters.
1.2** Form of International Underwriting Agreements between the Registrant and the
International Managers
1.3** Form of Underwriting Agreement between the Registrant and the Underwriters ( %
Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009)
1.4** Form of Underwriting Agreement between the Registrant and the Underwriters ( %
Senior Subordinated Notes)
1.5** Agreement Between U.S. Underwriters and International Managers
3.1** Articles of Incorporation of the Registrant
3.2** Form of Amended and Restated Articles of Incorporation of the Registrant
3.3** Bylaws of the Registrant
3.4** Form of Amended and Restated Bylaws of Registrant
4.1** Form of Class A Common Stock Certificate
4.2** Form of 12% Class A Cumulative Preferred Stock Certificate
5.1** Opinion of Paul, Hastings, Janofsky & Walker LLP as to the validity of the Common
Stock
10.1** Credit Facility dated March 2, 1998 among the Registrant, Lehman Brothers Inc. and
Lehman Commercial Paper Inc.
10.2** Employment Agreement between the Registrant and Richard W. Weening
10.3** Employment Agreement between the Registrant and Lewis W. Dickey, Jr.
10.4** Employment Agreement between the Registrant and William M. Bungeroth
10.5** Employment Agreement between the Registrant and Richard J. Bonick, Jr.
10.6** Cumulus Media Inc. 1998 Employee Stock Purchase Plan
10.7* Local Programming and Marketing Agreement dated December 17, 1997 between the
Cumulus Broadcasting, Inc. and New Frontier Communications, Inc.
10.8* Local Programming and Marketing Agreement dated January 1, 1998 between Cumulus
Broadcasting, Inc. and Westwind Broadcasting, Inc.
10.9* Local Marketing Agreement dated February 10, 1998 between Cumulus Broadcasting,
Inc. and Wiskes/Abaris Communications KQIZ Partnership
10.10* Time Brokerage Agreement dated December 15, 1997 between Cumulus Broadcasting, Inc.
and Clearly Superior Radio, L.L.C.
10.11* Local Marketing Agreement dated February 16, 1998 between Cumulus Broadcasting,
Inc. and Lyle Evans d/b/a Brillion Radio Company
10.12* Program Service and Time Brokerage Agreement dated October 31, 1997 between Cumulus
Broadcasting, Inc. and Tallahassee Broadcasting Company
10.13* Local Marketing Agreement dated January 14, 1998 between Cumulus Broadcasting, Inc.
and Savannah Communications, L.P.
10.14* Local Programming and Marketing Agreement dated December 23, 1997, between Cumulus
Broadcasting, Inc. and Lewis Broadcasting Corporation
10.15* Local Marketing Agreement dated February 16, 1998 between Cumulus Broadcasting,
Inc. and Jon A. LeDuc
10.16* Program Services and Time Brokerage Agreement dated February 12, 1998 between
Cumulus Broadcasting, Inc. and Pamplico Broadcasting, L.P.
10.17* Asset Purchase Agreement dated December 1, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation and West Jewell Management, Inc.
10.18* Asset Purchase Agreement dated October 30, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, and KIKR Inc.
10.19* Asset Purchase Agreement dated December 5, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, and Wiskes/Abaris Communications KQIZ Partnership
10.20* Asset Purchase Agreement dated January 30, 1998 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, Pacific Broadcasting of Beaumont, Inc., Beaumont
Skyware Inc., and Richard Dames
10.21* Asset Purchase Agreement dated December 30, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, and Sovereign Communications Corporation
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.22* Asset Purchase Agreement dated December 19, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, Tryon-Seacoast Communications, Inc., Seacoast
Broadcasting, Inc., and Kennebec-Tryon Communications Corp.
10.23* Asset Purchase Agreement dated February 18, 1998 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, and George H. Buck, Jr., d/b/a WHSC Radio
10.24* Asset Purchase Agreement dated February 12, 1998 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, and Pamplico Broadcasting L.P.
10.25* Asset Purchase Agreement dated October 8, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, Connor FM Broadcasting Co., Connor Broadcasting
Corp., J. Parker Connor and Susan C. Connor
10.26* Stock Purchase Agreement dated December 17, 1997 among Cumulus Holdings, Inc.,
Tommy R. Vascocu, Elizabeth L. Young, Michael L. Owens, Alan Owens, Robert
Podolsky, Larry Daniels, Sonja Erskine, and Jeffrey D. Erskine
10.27* Stock Purchase Agreement dated February 17, 1998 among Cumulus Holdings, Inc. and
John M. Borders, Don L. Turner, Jerry Goos and Kan-D Land, Inc.
10.28* Asset Purchase Agreement dated December 15, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, Clearly Superior Radio, L.L.C., 3-D Communications
Corporation and Dennis F. Doelitzsch
10.29* Asset Purchase Agreement dated February 12, 1998 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation and Lyle R. Evans d/b/a Brillion Radio Company
10.30* Asset Purchase Agreement dated January 14, 1998 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation and Savannah Communications, L.P.
10.31* Asset Purchase Agreement dated December 23, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation and Lewis Broadcasting Corporation
10.32* Asset Purchase Agreement dated February 12, 1998 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, Jon A. LeDuc and American Communications Company,
Inc.
10.33* Asset Purchase Agreement dated January, 1998 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, Lesnick Communications, Inc. and Mrs. Betty Carey
10.34* Asset Purchase Agreement dated October 29, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, Big Country Broadcasting, Inc., and Tye
Broadcasting, Inc.
10.35* Asset Purchase Agreement dated October 29, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation and Arbor Radio, L.P.
10.36* Asset Purchase Agreement dated March 5, 1997 between Wilks Broadcast Acquisitions,
Inc. and Cumulus Media, LLC
10.37* Asset Purchase Agreement dated August 15, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation and M & M Partners
10.38* Stock Purchase Agreement dated October 16, 1997 between Cumulus Holdings, Inc. and
Philip T. Kelly
10.39* Stock Purchase Agreement dated November 7, 1997 between Cumulus Holdings, Inc. and
James Maurer
10.40* Asset Purchase Agreement dated October 29, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, Carolina Broadcasting, Inc., and Georgetown Radio,
Inc.
10.41* Asset Purchase Agreement dated October 9, 1997 among Seacoast Radio Company, LLC,
Cumulus Broadcasting, Inc. and Cumulus Licensing Corporation
10.42* Asset Purchase Agreement dated October 9, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation
10.43* Asset Purchase Agreement dated June 26, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation, Venice Michel and Venice Broadcasting Corporation
10.44* Agreement of Sale dated September 4, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and Medical College of Georgia Foundation
10.45* Program Service and Time Brokerage Agreement dated August 18, 1997 between Cumulus
Broadcasting, Inc. and Tally Radio, LLC
10.46* Asset Purchase Agreement dated August 18, 1997 among Tally Radio, LLC and Cumulus
Broadcasting, Inc. and Cumulus Licensing Corporation
10.47* Asset Purchase Agreement dated August 18, 1997 among HVS Partners and Cumulus
Broadcasting, Inc. and Cumulus Licensing Corporation
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
10.48* Asset Purchase Agreement dated August 25, 1997 among HVS Partners and Cumulus
Broadcasting, Inc. and Cumulus Licensing Corporation
10.49* Letter Agreement dated January 16, 1998 between Benchmark Radio Acquisition Fund IV
Limited Partnership, Cumulus Broadcasting, Inc. and Cumulus Licensing Corp.
10.50* WZNY Agreement of Sale dated September 4, 1997 among George G. Weiss and Cumulus
Broadcasting, Inc. and Cumulus Licensing Corporation
10.51* Asset Purchase Agreement dated May 1, 1997 between HVS Partners and Cumulus Media,
LLC
10.52* Asset Purchase Agreement dated April 30, 1997 among Hara Broadcasting, Inc. and DLM
Communications, Inc. and Cumulus Media, LLC
10.53* Asset Purchase Agreement dated June 24, 1997 among 62nd Street Broadcasting of
Toledo, L.L.C., 62nd Street Broadcasting of Toledo License, L.L.C., 62nd Street
Broadcasting, L.L.C., Cumulus Broadcasting, Inc. and Cumulus Licensing
Corporation
10.54* Local Marketing Agreement dated February 15, 1998 among Cumulus Broadcasting, Inc.,
Pacific Broadcasting of Beaumont, Inc., and Beaumont Skyware Inc.
10.55* Local Marketing Agreement dated December 31, 1997 between Cumulus Broadcasting,
Inc. and Sovereign Communications Corporation and Madison Radio Group Inc.
10.56** Indenture dated , 1998, between the Registrant and , as
Trustee.
10.57** Exchange Debenture Indenture dated , 1998, between the Registrant
and , as Trustee.
10.58** Certificate of Designation with respect to Series A Cumulative Exchangeable
Redeemable Preferred Stock Due 2009
10.59* Asset Purchase Agreement dated March 23, 1998 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation and Esprit Communications Corporation.
10.60* Purchase Agreement dated November 20, 1996 between IQ Radio, Inc. and Taylor
Country Broadcasting, Inc.
10.61* Assignment and Assumption Agreement dated January 20, 1998 among Taylor Country
Broadcasting, Inc., Cumulus Licensing Corp. and Cumulus Broadcasting, Inc.
10.62* Asset Purchase Agreement dated January 2, 1997 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation and Westwind Broadcasting Inc.
10.63* Asset Purchase Agreement dated March 16, 1998 among Cumulus Broadcasting, Inc.,
Cumulus Licensing Corporation and P and T Broadcasting, Inc.
10.64* Asset Purchase Agreement dated March 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and Crystal Radio Group, Inc.
10.65* Asset Purchase Agreement dated March 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and Ocmulgee Broadcasting Co., Inc.
10.66* Local Marketing Agreement dated March 16, 1998 between Cumulus Broadcasting, Inc.
and Phoenix Broadcast Partners, Inc.
10.67* Asset Purchase Agreement dated February 1997 between Cumulus Media, LLC and Value
Radio Corporation (WVBO-FM/WOSH-FM/WOGB-FM)
10.68* Asset Purchase Agreement dated February 1997 between Cumulus Media, LLC and Value
Radio Corporation (WUSW-FM/WNAM-AM)
12.1* Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividend Requirements
21.1** Subsidiaries of the Company
23.1* Consent of Price Waterhouse LLP
23.2* Consent of Coopers & Lybrand L.L.P.
23.3* Consent of Coopers & Lybrand L.L.P.
23.4* Consent of Johnson, Miller & Co.
23.5* Consent of McGladrey & Pullen, LLP
23.6* Consent of Plante & Moran, LLP
23.7** Consent of Paul, Hastings, Janofsky & Walker LLP (included in Exhibit 5.1)
24.1* Powers of Attorney, included on page II-6
27.1*** Financial Data Schedule
99.1* Affidavit to dispense with consent of certain directors
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
*** All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
II-4
<PAGE>
(b) Financial Statement Schedules
ITEM 17. UNDERTAKINGS.
(a) The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted against
the Registrant by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(c) The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
(Section 230.424(b)(1) or (4) or Section 230.497(h)) shall be deemed to be
part of this Registration Statement as of the time the Commission declared
it effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement for the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on March 30, 1998.
CUMULUS MEDIA INC.
BY: /S/ RICHARD W. WEENING
-----------------------------------------
Richard W. Weening
EXECUTIVE CHAIRMAN
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard W. Weening and Lewis W. Dickey, Jr. and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and any other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or either of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
Executive Chairman,
/s/ RICHARD W. WEENING Treasurer and Director
- ------------------------------ (Principal Executive March 30, 1998
Richard W. Weening Officer)
/s/ LEWIS W. DICKEY, JR. Executive Vice Chairman and
- ------------------------------ Director March 30, 1998
Lewis W. Dickey, Jr.
/s/ WILLIAM M. BUNGEROTH President and Director
- ------------------------------ March 30, 1998
William M. Bungeroth
Vice President and Chief
/s/ RICHARD J. BONICK, JR. Financial Officer
- ------------------------------ (Principal Accounting March 30, 1998
Richard J. Bonick, Jr. Officer)
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
NO. DESCRIPTION NUMBER
- --------- --------------------------------------------------------------------------------------------- -------------
<S> <C> <C>
1.1** Form of U.S. Underwriting Agreement between the Registrant and the U.S. Underwriters.
1.2** Form of International Underwriting Agreements between the Registrant and the International
Managers
1.3** Form of Underwriting Agreement between the Registrant and the Underwriters ( % Series A
Cumulative Exchangeable Redeemable Preferred Stock due 2009)
1.4** Form of Underwriting Agreement between the Registrant and the Underwriters ( % Senior
Subordinated Notes)
1.5** Agreement Between U.S. Underwriters and International Managers
3.1** Articles of Incorporation of the Registrant
3.2** Form of Amended and Restated Articles of Incorporation of the Registrant
3.3** Bylaws of the Registrant
3.4** Form of Amended and Restated Bylaws of Registrant
4.1** Form of Class A Common Stock Certificate
4.2** Form of 12% Class A Cumulative Preferred Stock Certificate
5.1** Opinion of Paul, Hastings, Janofsky & Walker LLP as to the validity of the Common Stock
10.1** Credit Facility dated March 2, 1998 among the Registrant, Lehman Brothers Inc. and Lehman
Commercial Paper Inc.
10.2** Employment Agreement between the Registrant and Richard W. Weening
10.3** Employment Agreement between the Registrant and Lewis W. Dickey, Jr.
10.4** Employment Agreement between the Registrant and William M. Bungeroth
10.5** Employment Agreement between the Registrant and Richard J. Bonick, Jr.
10.6** Cumulus Media Inc. 1998 Employee Stock Purchase Plan
10.7* Local Programming and Marketing Agreement dated December 17, 1997 between the Cumulus
Broadcasting, Inc. and New Frontier Communications, Inc.
10.8* Local Programming and Marketing Agreement dated January 1, 1998 between Cumulus Broadcasting,
Inc. and Westwind Broadcasting, Inc.
10.9* Local Marketing Agreement dated February 10, 1998 between Cumulus Broadcasting, Inc. and
Wiskes/Abaris Communications KQIZ Partnership
10.10* Time Brokerage Agreement dated December 15, 1997 between Cumulus Broadcasting, Inc. and
Clearly Superior Radio, L.L.C.
10.11* Local Marketing Agreement dated February 16, 1998 between Cumulus Broadcasting, Inc. and Lyle
Evans d/b/a Brillion Radio Company
10.12* Program Service and Time Brokerage Agreement dated October 31, 1997 between Cumulus
Broadcasting, Inc. and Tallahassee Broadcasting Company
10.13* Local Marketing Agreement dated January 14, 1998 between Cumulus Broadcasting, Inc. and
Savannah Communications, L.P.
10.14* Local Programming and Marketing Agreement dated December 23, 1997, between Cumulus
Broadcasting, Inc. and Lewis Broadcasting Corporation
10.15* Local Marketing Agreement dated February 16, 1998 between Cumulus Broadcasting, Inc. and Jon
A. LeDuc
10.16* Program Services and Time Brokerage Agreement dated February 12, 1998 between Cumulus
Broadcasting, Inc. and Pamplico Broadcasting, L.P.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
NO. DESCRIPTION NUMBER
- --------- --------------------------------------------------------------------------------------------- -------------
<S> <C> <C>
10.17* Asset Purchase Agreement dated December 1, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and West Jewell Management, Inc.
10.18* Asset Purchase Agreement dated October 30, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, and KIKR Inc.
10.19* Asset Purchase Agreement dated December 5, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, and Wiskes/Abaris Communications KQIZ Partnership
10.20* Asset Purchase Agreement dated January 30, 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, Pacific Broadcasting of Beaumont, Inc., Beaumont Skyware Inc., and
Richard Dames
10.21* Asset Purchase Agreement dated December 30, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, and Sovereign Communications Corporation
10.22* Asset Purchase Agreement dated December 19, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, Tryon-Seacoast Communications, Inc., Seacoast Broadcasting, Inc.,
and Kennebec-Tryon Communications Corp.
10.23* Asset Purchase Agreement dated February 18, 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, and George H. Buck, Jr., d/b/a WHSC Radio
10.24* Asset Purchase Agreement dated February 12, 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, and Pamplico Broadcasting L.P.
10.25* Asset Purchase Agreement dated October 8, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, Connor FM Broadcasting Co., Connor Broadcasting Corp., J. Parker
Connor and Susan C. Connor
10.26* Stock Purchase Agreement dated December 17, 1997 among Cumulus Holdings, Inc., Tommy R.
Vascocu, Elizabeth L. Young, Michael L. Owens, Alan Owens, Robert Podolsky, Larry Daniels,
Sonja Erskine, and Jeffrey D. Erskine
10.27* Stock Purchase Agreement dated February 17, 1998 among Cumulus Holdings, Inc. and John M.
Borders, Don L. Turner, Jerry Goos and Kan-D Land, Inc.
10.28* Asset Purchase Agreement dated December 15, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, Clearly Superior Radio, L.L.C., 3-D Communications Corporation and
Dennis F. Doelitzsch
10.29* Asset Purchase Agreement dated February 12, 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and Lyle R. Evans d/b/a Brillion Radio Company
10.30* Asset Purchase Agreement dated January 14, 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and Savannah Communications, L.P.
10.31* Asset Purchase Agreement dated December 23, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and Lewis Broadcasting Corporation
10.32* Asset Purchase Agreement dated February 12, 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, Jon A. LeDuc and American Communications Company, Inc.
10.33* Asset Purchase Agreement dated January, 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, Lesnick Communications, Inc. and Mrs. Betty Carey
10.34* Asset Purchase Agreement dated October 29, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, Big Country Broadcasting, Inc., and Tye Broadcasting, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
NO. DESCRIPTION NUMBER
- --------- --------------------------------------------------------------------------------------------- -------------
<S> <C> <C>
10.35* Asset Purchase Agreement dated October 29, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and Arbor Radio, L.P.
10.36* Asset Purchase Agreement dated March 5, 1997 between Wilks Broadcast Acquisitions, Inc. and
Cumulus Media, LLC
10.37* Asset Purchase Agreement dated August 15, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and M & M Partners
10.38* Stock Purchase Agreement dated October 16, 1997 between Cumulus Holdings, Inc. and Philip T.
Kelly
10.39* Stock Purchase Agreement dated November 7, 1997 between Cumulus Holdings, Inc. and James
Maurer
10.40* Asset Purchase Agreement dated October 29, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, Carolina Broadcasting, Inc., and Georgetown Radio, Inc.
10.41* Asset Purchase Agreement dated October 9, 1997 among Seacoast Radio Company, LLC, Cumulus
Broadcasting, Inc. and Cumulus Licensing Corporation
10.42* Asset Purchase Agreement dated October 9, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation
10.43* Asset Purchase Agreement dated June 26, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation, Venice Michel and Venice Broadcasting Corporation
10.44* Agreement of Sale dated September 4, 1997 among Cumulus Broadcasting, Inc., Cumulus Licensing
Corporation and Medical College of Georgia Foundation
10.45* Program Service and Time Brokerage Agreement dated August 18, 1997 between Cumulus
Broadcasting, Inc. and Tally Radio, LLC
10.46* Asset Purchase Agreement dated August 18, 1997 among Tally Radio, LLC and Cumulus
Broadcasting, Inc. and Cumulus Licensing Corporation
10.47* Asset Purchase Agreement dated August 18, 1997 among HVS Partners and Cumulus Broadcasting,
Inc. and Cumulus Licensing Corporation
10.48* Asset Purchase Agreement dated August 25, 1997 among HVS Partners and Cumulus Broadcasting,
Inc. and Cumulus Licensing Corporation
10.49* Letter Agreement dated January 16, 1998 between Benchmark Radio Acquisition Fund IV Limited
Partnership, Cumulus Broadcasting, Inc. and Cumulus Licensing Corp.
10.50* WZNY Agreement of Sale dated September 4, 1997 among George G. Weiss and Cumulus
Broadcasting, Inc. and Cumulus Licensing Corporation
10.51* Asset Purchase Agreement dated May 1, 1997 between HVS Partners and Cumulus Media, LLC
10.52* Asset Purchase Agreement dated April 30, 1997 among Hara Broadcasting, Inc. and DLM
Communications, Inc. and Cumulus Media, LLC
10.53* Asset Purchase Agreement dated June 24, 1997 among 62nd Street Broadcasting of Toledo,
L.L.C., 62nd Street Broadcasting of Toledo License, L.L.C., 62nd Street Broadcasting,
L.L.C., Cumulus Broadcasting, Inc. and Cumulus Licensing Corporation
10.54* Local Marketing Agreement dated February 15, 1998 among Cumulus Broadcasting, Inc., Pacific
Broadcasting of Beaumont, Inc., and Beaumont Skyware Inc.
10.55* Local Marketing Agreement dated December 31, 1997 between Cumulus Broadcasting, Inc. and
Sovereign Communications Corporation and Madison Radio Group Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
NO. DESCRIPTION NUMBER
- --------- --------------------------------------------------------------------------------------------- -------------
<S> <C> <C>
10.56** Indenture dated , 1998, between the Registrant and , as
Trustee.
10.57** Exchange Debenture Indenture dated , 1998, between the Registrant and ,
as Trustee.
10.58** Certificate of Designation with respect to Series A Cumulative Exchangeable Redeemable
Preferred Stock Due 2009
10.59* Asset Purchase Agreement dated March 23, 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and Esprit Communications Corporation.
10.60* Purchase Agreement dated November 20, 1996 between IQ Radio, Inc. and Taylor Country
Broadcasting, Inc.
10.61* Assignment and Assumption Agreement dated January 20, 1998 among Taylor Country Broadcasting,
Inc., Cumulus licensing Corp. and Cumulus Broadcasting, Inc.
10.62* Asset Purchase Agreement dated January 2, 1997 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and Westwind Broadcasting Inc.
10.63* Asset Purchase Agreement dated March 16, 1998 among Cumulus Broadcasting, Inc., Cumulus
Licensing Corporation and P and T Broadcasting, Inc.
10.64* Asset Purchase Agreement dated March 1998 among Cumulus Broadcasting, Inc., Cumulus Licensing
Corporation and Crystal Radio Group, Inc.
10.65* Asset Purchase Agreement dated March 1998 among Cumulus Broadcasting, Inc., Cumulus Licensing
Corporation and Ocmulgee Broadcasting Co., Inc.
10.66* Local Marketing Agreement dated March 16, 1998 between Cumulus Broadcasting, Inc. and Phoenix
Broadcast Partners, Inc.
10.67* Asset Purchase Agreement dated February 1997 between Cumulus Media, LLC and Value Radio
Corporation (WVBO-FM/WOSH-AM/WOGB-FM)
10.68* Asset Purchase Agreement dated February 1997 between Cumulus Media, LLC and Value Radio
Corporation (WUSW-FM/WNAM-AM)
12.1* Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend
Requirements
21.1** Subsidiaries of the Company
23.1* Consent of Price Waterhouse LLP
23.2* Consent of Coopers & Lybrand L.L.P.
23.3* Consent of Coopers & Lybrand L.L.P.
23.4* Consent of Johnson, Miller & Co.
23.5* Consent of McGladrey & Pullen, LLP
23.6* Consent of Plante & Moran, LLP
23.7** Consent of Paul, Hastings, Janofsky & Walker LLP (included in Exhibit 5.1)
24.1* Powers of Attorney, included on page II-6
27.1*** Financial Data Schedule
99.1* Affidavit to dispense with consent of certain directors
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
*** All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
LOCAL PROGRAMMING AND MARKETING AGREEMENT
dated as of
December 17, 1997
by and among
CUMULUS BROADCASTING, INC.
and
NEW FRONTIER COMMUNICATIONS, INC.
<PAGE>
TABLE OF CONTENTS
Recitals.......................................................................1
Agreement......................................................................1
1. Term/Termination Options..........................................1
(a) Term........................................................1
(b) Option Upon Termination of Agreement for Sale of Station....2
(c) Effect of Termination on Advertising and other Contracts....2
2. Fees..............................................................2
(a) Monthly Fee.................................................2
3. Programs..........................................................2
(a) Operation of Station........................................2
(b) Programming Standards.......................................3
(c) Ancillary Broadcast Rights..................................3
(d) Programming and Operations Standards........................3
(e) Call Signs..................................................3
4. Facilities and Equipment..........................................4
(a) Facilities..................................................4
(b) Maintenance.................................................4
(c) Transmitter Sites...........................................4
(d) Interruption of Normal Operations...........................4
5. Costs of Operating Station........................................5
(a) General.....................................................5
(b) Employees...................................................5
(c) Insurance for Transmitter Sites.............................6
(d) Insurance for Studios.......................................6
(e) Music Licenses..............................................7
6. Advertising and Programming Revenues..............................7
7. Accounts Receivable and Accounts Payable..........................7
(a) General.....................................................7
(b) Carryover Accounts..........................................7
8. Operation of Station..............................................7
9. Station Identification............................................8
10. Handling of Mail..................................................8
11. Payola............................................................8
12. Compliance with Law...............................................8
13. Licensee's Representations........................................9
(a) Qualification...............................................9
(b) Authorizations..............................................9
(c) Filings.....................................................9
(d) Compliance With FCC Requirements............................9
-i-
<PAGE>
(e) Content of the Programming..................................9
14. Programmer's Representations......................................9
(a) Qualification..............................................10
(b) Content of the Programming.................................10
15. Events of Default: Cure Periods and Remedies.....................10
(a) Events of Default..........................................10
(i) Non-Payment....................................10
(ii) Breach of Covenants............................10
(iii) Breach of Representation or Warranty...........10
(iv) Bankruptcy, etc................................10
(b) Cure Periods...............................................10
(c) Remedies...................................................11
(d) Specific Performance.......................................11
16. No Brokers.......................................................11
17. General..........................................................11
(a) Notices....................................................11
(b) Modification and Waiver....................................12
(c) Construction...............................................12
(d) Headings...................................................13
(e) No Assignment..............................................13
(f) Counterpart Signature......................................13
(g) Entire Agreement...........................................13
(h) No Partnership or Joint Venture Created....................13
(i) Severability...............................................13
(j) Force Majeure..............................................13
(k) Other Agreements...........................................13
-ii-
<PAGE>
LOCAL PROGRAMMING AND MARKETING AGREEMENT
This Local Programming and Marketing Agreement is entered into as of the
17th day of December, 1997, by and among Cumulus Broadcasting, Inc., a Nevada
corporation ("Programmer"), and New Frontier Communications, Inc.(the
"Licensee").
Recitals
Licensee holds the FCC broadcast license and auxiliary licenses for radio
stations KBAT-FM (licensed to Midland, Texas); KMND-AM (licensed to Midland,
Texas); KODM-FM (licensed to Odessa, Texas); KNFM-FM (licensed to Midland,
Texas); and KGEE-FM (licensed to Monahans, Texas) (collectively the "Stations").
All of the stockholders of Licensee (the "Sellers") and Cumulus Holdings,
Inc., an affiliate of Programmer ("Buyer") have entered into a Stock Purchase
Agreement as of December 17, 1997 (the "Sale Agreement"), pursuant to which
Buyer will purchase from the Sellers, upon receipt of consent of the FCC, all of
the capital stock of the Licensee (the "Sale").
The Stations' transmitter facilities are at locations described in Section
4(j) of the Disclosure Schedule of the Sale Agreement (the "Transmitter Sites").
The Stations' studios are at locations described in Section 4(j) of the
Disclosure Schedule of the Sale Agreement (the "Studios").
Licensee has broadcast time on the Stations available for sale. Programmer
desires to purchase time on the Stations for the broadcast of Programmer's
programming and the sale of advertising time for inclusion in said programming.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
Agreement
1. Term/Termination Options
(a) Term. The term of this Agreement (the "Term") will begin at 12:01
a.m. on January 1, 1998, and expire at 11:59 p.m. on the earliest of
(i) December 31, 1998, or (ii) the closing of the Sale, unless
earlier terminated in accordance with this Section 1 or Sections
4(d) or 16, below. Each party will fulfill all its obligations
hereunder through the date of termination or expiration. After
termination or expiration, neither party will have any further
obligations hereunder except as provided in this Section 1.
-1-
<PAGE>
(b) Option Upon Termination of Agreement for Sale of Stations. If at any
time either (i) Sellers shall terminate the Sale Agreement, or (ii)
Buyer shall terminate the Sale Agreement, in each case in compliance
with the terms of the Sale Agreement, then either party may
terminate this Agreement, upon at least 10 days' advance written
notice to the other party.
(c) Effect of Termination on Advertising and other Contracts. On the
termination date, Programmer will provide to Licensee a written
schedule of all advertising commitments for the Stations then in
effect. Licensee shall reasonably cooperate with Programmer to honor
all such advertising commitments then outstanding, in which event
Licensee shall receive as compensation for the broadcasting of such
programming that which otherwise would have been paid to Programmer;
provided, however, as to fees received by Licensee for advertising
broadcasts by Programmer prior to the Termination Date, Licensee
agrees to pay to Programmer 100 percent (100%) of all advertising
revenue received by Licensee with respect thereto within 120 days
using procedures comparable to those specified in Section 7 below.
Programmer will remain liable for all other contracts entered into
and other liabilities incurred by Programmer in the course of its
performance under this Agreement, if any, and Licensee shall not
assume any liability therefor.
2. Fees.
Monthly Fee. Programmer will pay Licensee for the broadcast of the
programs hereunder a fee each month as described in more detail in Appendix A to
this Agreement (the "Monthly Fee"). The Monthly Fee and operating expenses as
described in Appendix A will be payable ten days prior to the first day of each
calendar month during the Term, to New Frontier Communications, Inc., P.O. Box
12070, Odessa, Texas 79768, or to such other address as Licensee may designate
in writing. The failure of Licensee to demand or insist upon prompt payment of
the Monthly Fee will not constitute a waiver of its right to do so.
3. Programs.
(a) Operation of Stations. Throughout the Term, Licensee will make the
Stations and time on the Stations available to Programmer for up to
166 hours per week, Sunday through Saturday, except for downtime
occasioned by routine maintenance. Programmer will provide
entertainment programming of its selection complete with commercial
matter, news, public service announcements and other suitable
programming (the "Programming"). Subject to the limitations set
forth herein, all time on the Stations not reserved to Licensee
pursuant to this Section 3(a) will be available for use by
Programmer and no other party, and Licensee will broadcast the
Programming on the Stations at all such times. Licensee may reserve
up to two (2) hours per week on the Stations for the broadcast of
Licensee's own regularly scheduled public-interest programming;
provided, however, that Licensee will not
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reserve time for such regularly scheduled programming between the
hours of 5:00 a.m. -12:00 midnight, Monday through Friday, 8:00 a.m.
- 12:00 midnight, Saturday or 9:00 a.m. - 12:00 midnight, Sunday.
(b) Programming Standards. The Programming will be in conformity with
generally recognized industry standards and in accordance with the
Communications Act of 1934, as amended (the "Act") and the rules,
regulations and policies of the Federal Communications Commission
(the "Commission") and with those specific standards set forth in
Appendix B to this Agreement. Programmer will make the Programming
available to Licensee during a sufficient number of hours to enable
the Stations to meet the minimum hours of operation required under
the Commission's rules. All programming material will comply with
all applicable federal, state and local laws, rules, and
regulations. Licensee acknowledges that the right hereby granted to
Licensee to broadcast the Programming on the Stations is
non-exclusive and that ownership of the Programming and all parts
thereof and the right to authorize their use in any media whatsoever
is and shall remain vested in Programmer.
(c) Ancillary Broadcast Rights. Programmer shall have the right to use,
or permit third parties to use, the Stations' subcarriers, and will
be entitled to all revenues derived from any such subcarrier
transmissions during the term of this Agreement.
(d) Rejection or Preemption of Programming. Licensee may reject any
program that Licensee reasonably believes to be unsatisfactory,
unsuitable or contrary to the public interest, or may substitute a
program which, in the Licensee's opinion, is of greater local or
national importance. Licensee will give Programmer reasonable notice
of its intention to reject or preempt any program, and, in the event
of rejection or preemption, Programmer will receive a pro rata
reduction in the Monthly Fee for the period of time so preempted,
calculated to the nearest minute.
(e) Call Signs. Licensee will retain all rights to the call letters
KBAT, KMND, KODM, KNFM, and KGEE or any other call letters which may
be assigned by the FCC for use by the Stations, and will ensure that
proper station identification announcements are made with such call
letters in accordance with FCC rules and regulations. Licensee will
not, without Programmer's consent, apply for any change in the call
letters assigned to the Stations. Programmer shall include in the
Programming an announcement in a form satisfactory to Licensee at
the beginning of each hour of such programs to identify KBAT, KMND,
KODM, KNFM, and KGEE or such other call letters used by Licensee for
the Stations, as well as any other announcements required by the
rules and regulations of the FCC. Programmer is specifically
authorized to use the call letters KBAT, KMND, KODM, KNFM, and KGEE,
or other call letters used by Licensee for the Stations, in its
Programs and in any promotional material, in any media, used in
connection with the Programming.
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4. Facilities and Equipment.
(a) Facilities. Licensee will permit Programmer to use all equipment and
motor vehicles now located at the Studios or the Transmitter Sites,
a schedule of which is attached as Schedule __ to the Sale Agreement
(the "Licensee Equipment"), but exclusively for the operation of the
Stations. Licensee will at all times retain title to the Licensee
Equipment. Programmer will originate its programming from the
Studios and will transmit programming to the Studios via a mode of
transmission it selects that will ensure technical and quality
standards comparable to the Station's broadcasts prior to the Term.
The Studios will constitute the "main studios" of the Stations.
Licensee will have access to the Studios at all times.
(b) Maintenance. Any regular maintenance work affecting the operation of
the Stations at maximum facilities will be scheduled with the
approval of Programmer, which will not be unreasonably withheld,
upon at least forty-eight (48) hours' prior notice to Programmer.
Programmer will perform and bear the cost of all routine maintenance
of equipment at the Studios. Programmer will bear the cost of
extraordinary maintenance to and replacement of Licensee Equipment
located at the Studios, up to a cost of $5,000 per occurrence and
$25,000 in the aggregate. Licensee will bear the cost of
extraordinary maintenance and replacement of Licensee Equipment
beyond those amounts.
(c) Transmitter Sites. Licensee will maintain the Transmitter Sites and
all equipment located at the Transmitter Sites at its own expense.
Licensee will perform routine maintenance work at the Transmitter
Sites, as needed, in accordance with the customary practices of the
Licensee and at times scheduled to minimize disruption to the
broadcasts of the Stations. The Transmitter Sites will be operated,
in all material respects, in accordance with all applicable laws and
regulations (including the requirements of the Act and the rules,
regulations, policies and procedures of the Commission promulgated
thereunder). The transmitting facilities of the Stations are capable
of transmitting at the Stations' maximum authorized effective
radiated power, with an antenna center of radiation at its full
authorized height above ground and above average terrain. Licensee
will maintain the operating power of the Stations at their maximum
licensed level and shall operate and maintain in good working
condition the Stations' transmission facilities and broadcasting
equipment. Licensee will not apply to the Commission for any
reduction in the Station's maximum authorized facilities without the
prior written approval of Programmer.
(d) Interruption of Normal Operations. If the Stations suffer any loss
or damage of any nature at the Transmitter Sites which is not caused
by the acts or omissions of Programmer and which results in the
interruption of service or the inability of the Stations to operate
with its maximum authorized facilities and licensed effective
radiated power, Licensee will immediately notify Programmer and
promptly undertake such repairs as are necessary to restore
full-time operation of the Stations
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with its maximum authorized facilities and licensed effective
radiated power thereon as quickly as is reasonably possible under
the circumstances. The first $5,000 of such expense shall be the
responsibility of Programmer, and the amount in excess of $5,000
shall be the responsibility of Licensee. Except in the case of
events not under control of Licensee (such as acts of God or weather
conditions) which do not materially impair the earnings potential of
the Stations, if one or more of the Stations is inoperable or is
operated at 90% or less of its licensed effective radiated power as
a consequence of such loss or damage, then Programmer will be
entitled to a Pro rata reduction in the proportionate Monthly Fee
for that Station for each day in which there occurs such a service
interruption in excess of four (4) consecutive hours. Licensee will
promptly begin to repair and will complete the repairs necessary to
restore the inoperable Station(s) to full time operations with its
maximum licensed facilities within ten (10) days from the occurrence
of the loss or damage; provided, however, that this period will be
extended for a reasonable period of time, not to exceed an
additional ten (10) days, if Licensee has taken and is continuing to
take all appropriate actions to repair the loss or damage as
promptly as possible in the circumstances. If such repairs are not
completed within the allotted period, Programmer may give notice to
Licensee of Programmer's intention to terminate this Agreement, in
which event this Agreement will terminate on the date of such
notice, any other provision of this Agreement notwithstanding.
5. Costs of Operating Stations.
(a) General. Licensee will retain ultimate control over the personnel,
finances, programming and operation of the Stations. Except as
otherwise expressly set forth in this Agreement, all costs of
producing and delivering the Programming to the Transmitter Sites
for broadcast on the Stations will be borne by Programmer including,
without limitation, all personnel, equipment costs, maintenance,
taxes of all kinds (including real and personal property and
income), utilities, all payments in the nature of rent due under the
Transmitter Leases, remaining payments due on motor vehicles and all
expenses related to the construction, maintenance and operation of
the Studios. Programmer will be responsible for all liabilities,
debts and obligations of Programmer based upon the purchase of air
time including, without limitation, barter agreements and unaired
advertisements, but not for Licensee's federal, state and local
income tax liabilities.
(b) Employees. Programmer will employ and be responsible for the
salaries, commissions, taxes, insurance and all other related costs
for all personnel involved in the production and marketing of the
Programming and the origination and/or delivery of the Programming
from the Studios or any remote location to the Transmitter Sites
(including air personalities, engineering personnel, salespersons,
traffic personnel, board operators and other programming staff
members). Upon notice to the Licensee, and at mutually agreeable
times, the Licensee will permit Programmer to meet with its
employees prior to or after the Effective Date.
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Programmer will employ all of Licensee's employees as of the
Effective Date, at their then current rate of pay. Licensee will not
take any action to preclude or discourage any of the Licensee's
employees from accepting any offer of employment extended by
Programmer. Licensee will be responsible for all payroll, vacation,
severance, and other employee-related liabilities prior to their
employment by Programmer. Licensee will be responsible for the
personnel necessary for the fulfillment of Licensee's regulatory
requirements and the technical transmission of Programmer's
programs. Specifically, Licensee will employ a General Manager who
will report to Licensee and direct the performance of Licensee's
obligations hereunder, and will employ at least one full time
employee per studio location to assist the General Manager in
performing Licensee's obligations hereunder, including maintaining
the Stations' transmission facilities. Licensee's employees will
have no employment, consulting, or other material relationship to
Programmer. Programmer will provide suitable office space for
Licensee's personnel at the Studios at no charge, and to the extent
feasible the space assigned to Licensee's employees shall be
physically separate from the space assigned to Programmer's
employees. Whenever in the Studios or at the Transmitter Sites,
Programmer's personnel will be subject to the reasonable supervision
and the direction of Licensee's General Manager and/or Engineer.
Programmer will be responsible for the payment of any publicity or
promotional expenses incurred by Programmer and for all telephone
calls associated with program production and listener response. Upon
termination of this Agreement upon an event other than the closing
of the Sale, the Stations' employees may be rehired by Licensee.
(c) Insurance for Transmitter Sites. Licensee will maintain in full
force and effect throughout the term of this Agreement insurance
with responsible and reputable insurance companies or associations
covering such risks to the Transmitter Sites and the Equipment
located thereon (including fire and other risks insured against by
extended coverage, public liability insurance, insurance for claims
against personal injury or death or property damage and such other
insurance as may be required by law) and in such amounts and on such
terms as is conventionally carried by broadcasters operating radio
stations with facilities comparable to those of the Stations. Any
insurance proceeds received by Licensee in respect of damaged
property will be used promptly to repair or replace such property so
that the operation of the Stations conforms with this Agreement.
(d) Insurance for Studios. Licensee will maintain in full force and
effect throughout the term of this Agreement insurance with
responsible and reputable insurance companies or associations
covering such risks to the Studios and all equipment located thereon
(including fire and other risks insured against by extended
coverage, public liability insurance, insurance for claims against
personal injury or death or property damage and such other insurance
as may be required by law) and in such amounts and on such terms as
is conventionally carried by broadcasters operating radio stations
with facilities comparable to those of the Stations. Any insurance
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proceeds received by Licensee in respect of damaged property will be
used promptly to repair or replace such property so that the
operation of the Stations conforms with this Agreement.
(e) Music Licenses. During the Term, Licensee will obtain and maintain
in full force and effect in its own name all music licenses ("Music
Licenses") that are currently operative with respect to the Stations
and that will be required by the licensor of those Music Licenses
("Licensor"). All Music Licenses fees due from Licensee will be paid
by Licensee from advances by Programmer.
6. Advertising and Programming Revenues. Programmer may sell advertising for
broadcast on the Stations as part of Programmer's programming, and all
proceeds generated as a result of the sale of such advertisements shall be
the property of Programmer and neither Licensee nor any of Licensee's
creditors have or shall have an interest in such proceeds.
7. Accounts Receivable and Accounts Payable.
(a) General. As of the Effective Date, Licensee will warrant the amount
of accounts receivable and Accounts Payable, and Programmer will
employ commercially reasonable efforts (but without responsibility
to institute legal or collection proceedings) to collect such
accounts receivable during the 120-day period following the
Effective Date of this Agreement. As of April 30, 1998, any
uncollected accounts receivable will be returned to the Sellers for
further collection. The purchase price shall be adjusted as
described in the Sale Agreement, to reflect the difference between
the receivables collected and the Sellers' payables satisfied by
Buyer during the period between the Effective Date and April 30,
1998, and such amount will be deducted by Buyer from the Retainage
Amount as defined in the Sale Agreement. In the event that the Sale
Agreement is consummated before April 30, 1998, the Closing Date
shall be used for this purpose in lieu of April 30, 1998.
(b) Carryover Accounts. Programmer will assume the obligation to provide
advertising time on the Stations in consideration of Licensee's
trade accounts in existence as of the date of this Agreement on a
time available basis during the first twelve (12) months of the
Term, in an amount not to exceed Ten Thousand Dollars ($10,000) per
station worth of advertising time, or a cumulative total of Fifty
Thousand Dollars ($50,000) (taking into account both trade payables
and trade receivables). Programmer will perform all of Licensee's
obligations under existing long-term contracts for the sale of
advertising time on the Stations that are to be performed on or
after the first day of the Term and will be entitled to all the
proceeds of accounts receivable pertaining to such performance.
8. Operation of Stations. Notwithstanding anything to the contrary in this
Agreement, Licensee will have full authority and power over the operation
of the Stations during the term of this Agreement. Licensee will be
responsible for the payment of the salaries and other
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compensation (including payroll taxes, etc.) of the Stations' General
Manager, Engineer, and any other personnel employed by Licensee, all of
whom will report and be accountable to the Licensee. The Station's General
Manager will direct the day-to-day operation of the Stations and will
exercise sole control over the Studios and the Transmitter Sites. Licensee
will retain control over the policies, programming and operations of the
Stations, and the right to take any other actions necessary for compliance
with federal, state and local laws, the Act and the rules, regulations and
policies of the Commission (including the prohibition on unauthorized
transfers of control) and the rules, regulations and policies of other
federal government entities, including the Federal Trade Commission and
the United States Department of Justice. Licensee will at all times be
solely responsible for meeting all of the Commission's requirements with
respect to public service programming, for maintaining the Station's logs
and political and public inspection files, and for the preparation of
issues/programs lists. Licensee will also retain the right to break into
Programmer's programming in case of an emergency. Programmer will, upon
request by Licensee, provide Licensee with information with respect to
such of the Programming as is responsive to public needs and interests so
as to assist Licensee in the preparation of required programming reports
and will provide upon request such other information necessary to enable
Licensee to prepare other records and reports required by the Commission
or other local, state or federal government entities. Programmer will
cooperate with Licensee to ensure the Station's compliance with the
Commission's rules, regulations and statutes, including the political
broadcast rules requiring equal opportunities, reasonable access and
lowest unit charge.
9. Station Identification. Licensee will be responsible for the proper
broadcast of station identification announcements. Pursuant to Section
3(e), Programmer will coordinate such announcements with Licensee so that
they are aired in accordance with the Commission's rules.
10. Handling of Mail. Except as required to comply with Commission rules and
policies, including those regarding the maintenance of the public records
file and the political file (which will at times remain the responsibility
of the Licensee), Licensee will not be required to receive or handle mail
in connection with Programmer's programs broadcast hereunder. Programmer
agrees that the mailing address of the Stations shall not be changed
without the prior written permission of Licensee.
11. Payola. Programmer agrees that it will not accept any consideration,
compensation or gift or gratuity of any kind whatsoever, regardless of its
value or form, including, but not limited to, a commission, discount,
bonus, material, supplies or other merchandise, services or labor
(collectively "Consideration"), whether or not pursuant to written
contracts or agreements between Programmer and merchants or advertisers,
unless the payer is identified in the program for which Consideration was
provided as having paid for or furnished such Consideration, in accordance
with the Act and FCC requirements. Programmer agrees to annually, or more
frequently at Licensee's reasonable request, execute and provide Licensee
with a Payola Affidavit, substantially in the form attached hereto as
Exhibit A.
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12. Compliance with Law. Each party will materially comply with all laws,
rules, regulations and policies applicable to the conduct of the Stations'
business, and each party acknowledges that the other party has not urged,
counseled or advised the use of any unfair business practice.
13. Licensee's Representations, Warranties and Covenants. Licensee makes the
following further representations, warrants and covenants:
(a) Qualification. Licensee is legally qualified, empowered and able to
enter into this Agreement. This Agreement has been approved by all
necessary action of the Licensee and constitutes the valid and
binding obligation of Licensee, enforceable in accordance with its
terms. The execution, delivery and performance hereof will not
constitute a breach or violation of any agreement, contract or other
obligation to which either party is subject or by which it is bound.
(b) Authorizations. Licensee holds, and throughout the Term will
continue to hold, all licenses and other permits and authorizations
necessary for the operation of the Stations as presently conducted,
including licenses, permits and authorizations issued by the
Commission ("FCC Authorizations").
(c) Filings. All reports and applications required to be filed with the
Commission (including ownership reports and renewal applications) or
any other government entity, department or body in respect of the
Stations have been, and in the future will be, filed in a timely
manner and are and will be true and complete in all material
respects and will accurately present the information contained and
required thereby. All such reports and documents, to the extent
required to be kept in the public inspection files of the Stations,
are and will be kept in such files.
(d) Compliance With FCC Requirements. The Stations will be operated in
material conformity with the FCC Authorizations, the Communications
Act and the rules and regulations of the Commission. The Licensee
will take all steps necessary or appropriate to ensure that the FCC
Authorizations will at all times remain in full force and effect.
(e) Content of the Programming. The content of Licensee's programming
will not violate any rights of others. Licensee will hold
Programmer, the Stations and Programmer's employees, harmless from
any and all damages, liabilities, costs and expenses, including
reasonable attorneys' fees, arising from any claims of third parties
(excluding third parties claiming through Programmer) that allege
negligence or intentional tortious acts of Licensee, its employees
and/or its representatives, or that relate to the content of
Licensee's programming, including without limitation, claims
alleging libel, slander, unfair competition or trade practices,
infringement of trademarks, tradenames or program titles, violation
of rights of privacy and
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infringement of copyrights and proprietary rights. Licensee's
obligation to hold Programmer harmless against the liabilities
specified above will survive any termination of this Agreement until
the expiration of all applicable statutes of limitation.
14. Programmer's Representations, Warranties and Covenants. Programmer makes
the following further representations, warrants and covenants:
(a) Qualification. Programmer is legally qualified, empowered and able
to enter into this Agreement. This Agreement has been approved by
all necessary action of the Board of Directors of Programmer and
constitutes the valid and binding obligation of Programmer,
enforceable in accordance with its terms. The execution, delivery
and performance hereof will not constitute a breach or violation of
any agreement, contract or other obligation to which either party is
subject or by which it is bound.
(b) Content of the Programming. The content of the Programming will not
violate any rights of others. The Programmer will hold Licensee, the
Stations and Licensee's employees, harmless from any and all
damages, liabilities, costs and expenses, including reasonable
attorneys' fees, arising from any claims of third parties (excluding
third parties claiming through Licensee) that allege negligence or
intentional tortious acts of Programmer, its employees and/or its
representatives, or that relate to the content of the Programming,
including without limitation, claims alleging libel, slander, unfair
competition or trade practices, infringement of trademarks,
tradenames or program titles, violation of rights of privacy and
infringement of copyrights and proprietary rights. Programmer's
obligation to hold Licensee harmless against the liabilities
specified above will survive any termination of this Agreement until
the expiration of all applicable statutes of limitation.
15. Events of Default: Cure Periods and Remedies.
(a) Events of Default. The following will, after the expiration of the
applicable cure periods, constitute Events of Default:
(i) Non-Payment. Programmer's failure to pay the Monthly Fee (A) by
the 10th day preceding any month during the Term;
(ii) Breach of Covenants. If either party hereto shall fail in any
material way to observe or perform any covenant, condition or agreement
contained herein;
(iii) Breach of Representation or Warranty. If any material
representation or warranty herein made by either party in any certificate
or document furnished by either party to the other pursuant to the
provisions hereof, shall prove to have been false or misleading in any
material respect as of the time made or furnished; or
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(iv) Bankruptcy, etc. If either party (i) shall make a general
assignment for the benefit of creditors, (ii) shall file or have 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 or discharged within sixty (60) days
thereof.
(b) Cure Periods. Except in the case of a default under the foregoing
subsection (a)(iv), as to which no cure period will be applicable,
an Event of Default will not be deemed to have occurred until twenty
(20) business days after the nondefaulting party has provided the
defaulting party with written notice specifying the event or events
that if not cured would constitute an Event of Default. This period
may be extended by the non-defaulting party for a reasonable period
of time, if the defaulting party is acting in good faith to cure the
default and such delay will not have a materially adverse affect
upon the other party.
(c) Remedies. Upon the occurrence of an Event of Default, the
non-defaulting party may terminate this Agreement, provided that it
is not also in default hereunder, in addition to any other remedies
available to the non-defaulting party at law or equity, or under
paragraph (d), below.
(d) Specific Performance. Without limiting or waiving in any respect any
rights or remedies of any party given under this Agreement, or now
or hereafter existing at law or in equity or by statute, either
party shall be entitled to specific performance of the obligations
to be performed by the other in accordance with the provisions of
this Agreement.
16. No Brokers. The parties represent to each other that no brokers or finders
have been engaged in connection with the transaction described in this
Agreement, and the parties agree to indemnify and hold each other harmless
against any claim from any broker or finder based upon any agreement,
arrangement, or understanding alleged to have been made by Licensee or by
Programmer, as the case may be.
17. General.
(a) Notices. All necessary notices, demands and requests permitted or
required under this Agreement will be in writing and will be deemed
given, if personally delivered, on the date of personal delivery,
or, if mailed, four (4) days after being mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Licensee:
New Frontier Communications, Inc.
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P.O. Box 12070
Odessa, Texas 79768
Attn.: Tommy R. Vascocu
(915) 550-5499
with a copy to:
Wiley, Rein & Fielding
1776 K Street, NW
Washington, D.C 20006
Attn.: Nathaniel F. Emmons
Fax: (202) 429-7049
If to Programmer:
Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, Illinois 60611
Attn: Richard Bonick
Fax No.: (312) 867-0091
with copies to:
Cumulus Broadcasting, Inc.
c/o QUAESTUS Management Corporation
330 E. Kilbourn Avenue
Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax No: (414) 283-4500
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula, Esq.
Fax No: (219) 239-1900
or to such other address as any such person may designate in writing.
(b) Modification and Waiver. No modification of any provision of this
Agreement will in any event be effective unless the same will be in
writing and signed by a duly authorized officer of the party to be
charged therewith, and then such modification will be effective only
in the specific instance and for the purpose for which given.
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(c) Construction. This Agreement will be construed in accordance with
the laws of the State of Texas excluding the choice of law rules
utilized in that jurisdiction, and the obligations of the parties
hereto are subject to all federal, state and local laws and
regulations now or hereafter in force and to the rules, regulations
and policies of the Commission and all other government entities or
authorities presently or hereafter to be constituted.
(d) Headings. The headings contained in this Agreement are included for
convenience only and no such heading will in any way alter the
meaning of any provision.
(e) No Assignment. No right or obligation under this Agreement may be
assigned by either party without the other party's consent, which
may be withheld for any reason.
(f) Counterpart Signature. This Agreement may be signed in one or more
counterparts, each of which will be deemed a duplicate original,
binding on the parties hereto notwithstanding that the parties are
not signatory to the original or the same counterpart. This
Agreement will be effective as of the date first above written.
(g) Entire Agreement. This Agreement embodies the entire agreement
between the parties and there are no other agreements,
representations, warranties or understandings, oral or written,
between them with respect to the subject matter hereof.
(h) No Partnership or Joint Venture Created. Nothing in this Agreement
will be construed to make Licensee and Programmer partners or joint
venturers or to afford any rights to any third party other than as
expressly provided herein. Neither Licensee nor Programmer will have
any authority to act as an agent for, or to enter into any contracts
on behalf of or that will be binding upon the other party.
(i) Severability. In the event any provision contained in this Agreement
is held to be invalid, illegal or unenforceable, such holding will
not affect any other provision hereof and this Agreement will be
construed as if such invalid, illegal or unenforceable provision had
not been contained herein.
(j) Force Majeure. Any failure or impairment of Licensee's facilities or
any delay or interruption in the broadcast of programs, or
Licensee's failure at any time to furnish facilities, in whole or in
part, for broadcast, due to causes beyond the control of Licensee,
will not constitute a breach of this Agreement and Licensee will not
be liable to Programmer, except to the extent provided in Sections
4(d) and 5(c) above.
(k) Other Agreements. During the term of this Agreement, Licensee will
not enter into any other time brokerage, program provision, local
management or similar agreement, regarding the Stations, with any
third party.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
CUMULUS BROADCASTING, INC.
By:___________________________________
Its:___________________________________
"Programmer"
NEW FRONTIER COMMUNICATIONS, INC.
By:___________________________________
Its:___________________________________
"Licensee"
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement, during the Term, Programmer shall pay Licensee a fee according
to the following schedule.
Month Fee per Month
----- -------------
January -- March 1998 $73,000
April -- June 1998 $75,084
July -- December 1998 $81,334
During the term, Programmer shall also pay as part of the LMA fee an
amount representing the reimbursement of Licensee for the Station Expenses
(defined below). The "Station Expenses" as used herein means the reasonable and
prudent expense actually incurred by Licensee in operating the Stations in
compliance with the terms of this agreement and consistent with past practice
(except for changes resulting from the transactions contemplated by this
Agreement), including without limitation, those expenses set forth below, and
shall be paid by Programmer to Licensee in advance.
Estimated Monthly Expenses:
Employees:
Tommy R. Vascocu, General Manager $10,800
Susan Slaton, Business Manager 3,000
Tommy Jenkins, Engineer 2,500
Payroll Taxes 1,500
Health Insurance 1,125
Life Insurance 350
Engineering:
Utilities $5,600
Maintenance and Repairs 2,000
Tower Rent 4,100
Music License Fees:
Ascap, BMI, Sesac $7,500
(3% of station net revenue to be paid monthly
and adjusted to actual expense in arrears)
Property Taxes 2,400
Property Insurance 2,800
-------
Total Expenses $43,675
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APPENDIX B
Programmer 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:
I. Religious Programming. The subject of religion and references to
particular faiths, tenants, and customs shall be treated with respect at all
times. Programs shall not be used as a medium for attack on any faith,
denomination, or sect or upon any individual or organization.
II. Controversial Issues. Any discussion of controversial issues or public
importance shall be reasonably balanced with the presentation of contrasting
viewpoints in the course of overall programming; no attacks on the honesty,
integrity, or like personal qualities of any person or group of persons shall be
made during the discussion of controversial issues of public importance; and
during the course of political campaigns, programs are not to be used as a forum
for editorializing about individual candidates. If such events occur, Licensee
may require that responsive programming be aired.
III. No Plugola or Payola. The 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.
IV. No Lotteries. Announcements giving any information about lotteries or
games prohibited by federal or state law or regulation are prohibited.
V. Election Procedures. At least ninety (90) days before the start of any
primary or regular election campaign, Programmer will clear with Licensee's
General Manager the rate Programmer will charge for the time to be sold to
candidates for public office and/or their supporters to make certain that the
rate charged conforms to all applicable laws and station policy.
VI. Spot Commercial Limitations. With respect to any given segment of air
time hereunder, the amount of spot commercial matter shall not exceed 20 minutes
during any sixty minute segment. Programmer will provide, for attachment to the
Station logs, a list of all commercial announcements carried during its
programming.
VII. Required Announcements. Programmer shall broadcast (a) an
announcement in a form satisfactory to Licensee at the beginning of each hour to
identify Stations KBAT-FM, KMND-AM, KODM-FM, KNFM-FM, and KGEE-FM (b) an
announcement at the beginning and end of each program, and hourly, as
appropriate, to indicate that program time has been purchased by Programmer, and
(c) any other announcement that may be required by law, regulation, or station
policy.
VIII. Credit Terms Advertising. Pursuant to rules of the Federal Trade
Commission, any
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advertising of credit terms shall be made over the Station in accordance with
all applicable federal and state laws.
IX. Commercial Recordkeeping. Programmer shall not receive any
consideration in money, goods, service, or otherwise, directly or indirectly
(including to relatives) from any person or company for the presentation of any
programming over the Stations without reporting the same in advance to and
receiving the prior written consent of Licensee's General Manager. No commercial
messages ("plugs") or undo references shall be made in programming presented
over the Station to any business venture, profitmaking activity, or other
interest (other than noncommercial announcements for bona fide charities, church
activities, or other public service activities) in which Programmer (or anyone
else) is directly or indirectly interested without the same having been approved
in advance by Licensee's General Manager and such broadcast being announced and
logged and sponsored.
X. No Illegal Announcements. No announcements or promotion prohibited by
federal or state law or regulation of any lottery or game shall be made over the
Station. Any game, contest or promotion relating to or to be presented over the
Station must be fully stated and explained in advance to Licensee, which
reserves the right in its sole direction to reject any game, contest or
promotion.
XI. Licensee Discretion Paramount. In accordance with the Licensee's
responsibility under the Communications Act of 1934, as amended, and the rules
and regulations of the Federal Communications Commission, Licensee reserves the
right to reject or terminate any advertising proposed to be presented or being
presented over the station which is in conflict with Station policy or which in
the reasonable judgment of Licensee or its General Manager/Chief Engineer would
not serve the public interest.
XII. Programming in Which Programmer Has a Financial Interest. Broker
shall advise the General Manager of the Station with respect to any programming
(including commercial(s) concerning goods or services in which Programmer has a
material financial interest. Any announcements for such goods and services shall
clearly identify Programmer's financial interest.
XIII. Programming Prohibitions. Programmer shall not broadcast any of the
following programs or announcements:
A. False Claims. False or unwarranted claims for any product or
service.
B. Unfair Imitation. Infringements of another advertiser's rights
through plagiarism or unfair imitation of either program idea or copy, or
any other unfair competition.
C. Commercial Disparagement. Any disparagement of competitors or
competitive goods.
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D. Profanity. Any programs or announcements that are slanderous,
obscene, profane, vulgar, repulsive or offensive, either in theme or in
treatment.
E. Price Disclosure. Any price mentions except as permitted by
Programmer's policies current at the time.
F. Unauthenticated Testimonials. Any testimonials which cannot be
authenticated.
G. Descriptions of Bodily Functions. Any continuity which describes
in a repellent manner internal bodily functions or symptomatic results or
internal disturbance, and no reference to matters which are not considered
acceptable topics in social groups.
H. Conflict Advertising. Any advertising matter or announcement
which may, in the reasonable opinion of Licensee, be injurious or
prejudicial to the interests of the public, the Stations, or honest
advertising and reputable business in general.
I. Fraudulent or Misleading Advertisement. Any advertisement matter,
announcement, or claim which Programmer knows to be fraudulent,
misleading, or untrue.
Programmer may waive any of the foregoing regulations in specific
instances if, in its reasonable opinion, good broadcasting in the public
interest will be served thereby.
In any case where questions of policy or interpretation arise, Programmer
shall submit the same to Licensee for decision before making any commitments in
connection therewith.
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LOCAL PROGRAMMING AND MARKETING AGREEMENT
dated as of
January 1, 1998
by and among
CUMULUS BROADCASTING, INC.
and
WESTWIND BROADCASTING, INC.
<PAGE>
TABLE OF CONTENTS
Recitals.......................................................................1
Agreement......................................................................1
1. Term/Termination Options..........................................1
(a) Term........................................................1
(b) Option Upon Termination of Agreement for Sale of Station....2
(c) Effect of Termination on Advertising and other Contracts....2
2. Fees..............................................................2
(a) Monthly Fee.................................................2
3. Programs..........................................................2
(a) Operation of Station........................................2
(b) Programming Standards.......................................3
(c) Ancillary Broadcast Rights..................................3
(d) Programming and Operations Standards........................3
(e) Call Signs..................................................3
4. Facilities and Equipment..........................................4
(a) Facilities..................................................4
(b) Maintenance.................................................4
(c) Transmitter Site............................................4
(d) Interruption of Normal Operations...........................4
5. Costs of Operating Station........................................5
(a) General.....................................................5
(b) Employees...................................................5
(c) Insurance for Transmitter Site..............................6
(d) Insurance for New Studio and Programmer's Studio............6
(e) Music Licenses..............................................7
6. Advertising and Programming Revenues..............................7
7. Accounts Receivable and Accounts Payable..........................7
(a) General.....................................................7
(b) Carryover Accounts..........................................8
8. Operation of Station..............................................8
9. Station Identification............................................8
10. Special Events....................................................9
11. Handling of Mail..................................................9
12. Payola............................................................9
13. Compliance with Law...............................................9
14. Licensee's Representations........................................9
(a) Qualification...............................................9
(b) Authorizations..............................................9
(c) Filings....................................................10
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(d) Compliance With FCC Requirements...........................10
(e) Content of the Programming.................................10
15. Programmer's Representations.....................................10
(a) Qualification..............................................10
(b) Content of the Programming.................................11
16. Events of Default: Cure Periods and Remedies.....................11
(a) Events of Default..........................................11
(i) Non-Payment....................................11
(ii) Breach of Covenants............................11
(iii) Breach of Representation or Warranty...........11
(iv) Bankruptcy, etc................................11
(b) Cure Periods...............................................11
(c) Remedies...................................................12
(d) Specific Performance.......................................12
17. No Brokers.......................................................12
18. General..........................................................12
(a) Notices....................................................12
(b) Modification and Waiver....................................13
(c) Construction...............................................13
(d) Headings...................................................14
(e) No Assignment..............................................14
(f) Counterpart Signature......................................14
(g) Entire Agreement...........................................14
(h) No Partnership or Joint Venture Created....................14
(i) Severability...............................................14
(j) Force Majeure..............................................14
(k) Other Agreements...........................................14
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LOCAL PROGRAMMING AND MARKETING AGREEMENT
This Local Programming and Marketing Agreement is entered into as of the
1st day of January, 1998, by and among Cumulus Broadcasting, Inc., a Nevada
corporation ("Programmer"), and Westwind Broadcasting, Inc., a Texas corporation
("Licensee").
Recitals
Licensee holds the FCC broadcast license and auxiliary licenses for radio
stations KPUR-FM, licensed to operate in Canyon, Texas, and KPUR-AM, licensed to
operate in Amarillo, Texas (the "Stations").
Licensee and Programmer have entered into an Asset Purchase Agreement as
of January 1, 1998 (the "Sale Agreement"), pursuant to which Programmer will
purchase from Licensee, upon receipt of consent of the FCC, Licensee's assets
used or useful in the operation of the Stations (the "Sale").
The Stations' transmitter facilities are at locations described in the
Sale Agreement (the "Transmitter Sites"), pursuant to leases described in
Section 2(j) of the Disclosure Schedule of the Sale Agreement (the "Transmitter
Leases").
The Stations' studio is at a location described in the Sale Agreement,
pursuant to a lease described in Section 2(j) of the Disclosure Schedule of the
Asset Purchase Agreement (the "Studio Lease").
Licensee has broadcast time on the Stations available for sale. Programmer
desires to purchase time on the Stations for the broadcast of Programmer's
programming and the sale of advertising time for inclusion in said programming.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
Agreement
1. Term/Termination Options
(a) Term. The term of this Agreement (the "Term") will begin at 12:01
a.m. on January 1, 1998, and expire at 11:59 p.m. on the earliest of
(i) December 31, 1998, or (ii) the closing of the Sale, unless
earlier terminated in accordance with this Section 1 or Sections
4(d) or 16, below. Each party will fulfill all its obligations
hereunder through the date of termination or expiration. After
termination or expiration,
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neither party will have any further obligations hereunder except as
provided in this Section 1.
(b) Option Upon Termination of Agreement for Sale of Stations. If at any
time either (i) Licensee shall terminate the Sale Agreement, or (ii)
Programmer shall terminate the Sale Agreement, in each case in
compliance with the terms of the Sale Agreement, then either party
may terminate this Agreement, upon at least 10 days' advance written
notice to the other party.
(c) Effect of Termination on Advertising and other Contracts. On the
termination date, Programmer will provide to Licensee a written
schedule of all advertising commitments for the Stations then in
effect. Licensee shall reasonably cooperate with Programmer to honor
all such advertising commitments then outstanding, in which event
Licensee shall receive as compensation for the broadcasting of such
programming that which otherwise would have been paid to Programmer;
provided, however, as to fees received by Licensee for advertising
broadcasts by Programmer prior to the Termination Date, Licensee
agrees to pay to Programmer 100 percent (100%) of all advertising
revenue received by Licensee with respect thereto within 120 days
using procedures comparable to those specified in Section 7 below.
Programmer will remain liable for all other contracts entered into
and other liabilities incurred by Programmer in the course of its
performance under this Agreement, if any, and Licensee shall not
assume any liability therefor.
2. Fees.
Monthly Fee. Programmer will pay Licensee for the broadcast of the
programs hereunder a fee each month as described in more detail in Appendix A to
this Agreement (the "Monthly Fee"). The Monthly Fee will be payable on the first
day of each calendar month during the Term, to C.K. Adams, Westwind
Broadcasting, Inc., 801 South Rusk Street, Amarillo, Texas, or to such other
address as Licensee may designate in writing. The failure of Licensee to demand
or insist upon prompt payment of the Monthly Fee will not constitute a waiver of
its right to do so.
3. Programs.
(a) Operation of Stations. Throughout the Term, Licensee will make the
Stations and time on the Stations available to Programmer for up to
166 hours per week, Sunday through Saturday, except for downtime
occasioned by routine maintenance. Programmer will provide
entertainment programming of its selection complete with commercial
matter, news, public service announcements and other suitable
programming (the "Programming"). Subject to the limitations set
forth herein, all time on the Stations not reserved to Licensee
pursuant to this Section 3(a) will be available for use by
Programmer and no other party, and Licensee will broadcast the
Programming on the Stations at all such times. Licensee may reserve
up to two (2) hours per week on the Stations for the broadcast of
Licensee's own regularly
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scheduled public-interest programming; provided, however, that
Licensee will not reserve time for such regularly scheduled
programming between the hours of 5:00 a.m. -12:00 midnight, Monday
through Friday, 8:00 a.m. - 12:00 midnight, Saturday or 9:00 a.m. -
12:00 midnight, Sunday.
(b) Programming Standards. The Programming will be in conformity with
generally recognized industry standards and in accordance with the
Communications Act of 1934, as amended (the "Act") and the rules,
regulations and policies of the Federal Communications Commission
(the "Commission") and with those specific standards set forth in
Appendix B to this Agreement. Programmer will make the Programming
available to Licensee during a sufficient number of hours to enable
the Stations to meet the minimum hours of operation required under
the Commission's rules. All advertising messages and promotional
material or announcements will comply with all applicable federal,
state and local laws, rules, and regulations. Licensee acknowledges
that the right hereby granted to Licensee to broadcast the
Programming on the Stations is non-exclusive and that ownership of
the Programming and all parts thereof and the right to authorize
their use in any media whatsoever is and shall remain vested in
Programmer.
(c) Ancillary Broadcast Rights. Programmer shall have the right to use,
or permit third parties to use, the Stations' subcarriers, and will
be entitled to all revenues derived from any such subcarrier
transmissions during the term of this Agreement.
(d) Programming and Operations Standards. Licensee may preempt any
program that Licensee reasonably believes to be unsuitable or
contrary to the public interest. Licensee will give Programmer
reasonable notice of its intention to preempt any program, and, in
the event of suspension or cancellation, Programmer will receive a
pro rata reduction in the Monthly Fee for the period of time so
preempted, calculated to the nearest minute.
(e) Call Signs. Licensee will retain all rights to the call letters
KPUR-FM and KPUR- AM or any other call letters which may be assigned
by the FCC for use by the Stations, and will ensure that proper
station identification announcements are made with such call letters
in accordance with FCC rules and regulations. Licensee will not,
without Programmer's consent, apply for any change in the call
letters assigned to the Stations. Licensee will promptly, upon
Programmer's request and at Programmer's expense, take all steps
necessary to change the Stations' call letters to conform with the
Programming, and such call letters will be consistent with
applicable FCC rules and regulations. Programmer shall include in
the Programming an announcement in a form satisfactory to Licensee
at the beginning of each hour of such programs to identify KPUR or
such other call letters used by Licensee for the Stations, as well
as any other announcements required by the rules and regulations of
the FCC. Programmer is specifically authorized to use the call
letters KPUR, or other call letters used by Licensee for the
Stations, in its Programs
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and in any promotional material, in any media, used in connection
with the Programming.
4. Facilities and Equipment.
(a) Facilities. Licensee will permit Programmer to use all equipment and
motor vehicles now located at the Studio or the Transmitter Sites, a
schedule of which is attached to the Sale Agreement (the "Licensee
Equipment"), but exclusively for the operation of the Stations.
Licensee will at all times retain title to the Licensee Equipment.
Programmer will originate its programming from the Studio and will
transmit programming to the Studio via a mode of transmission it
selects that will ensure technical and quality standards comparable
to the Station's broadcasts prior to the Term. The Studio will
constitute the "main studio" of the Stations. Licensee will have
access to the Studio at all times.
(b) Maintenance. Any regular maintenance work affecting the operation of
the Stations at maximum facilities will be scheduled with the
approval of Programmer, which will not be unreasonably withheld,
upon at least forty-eight (48) hours' prior notice to Programmer.
Programmer will perform and bear the cost of all routine maintenance
of equipment at the Studio. Licensee will perform and bear the cost
of extraordinary maintenance to and replacement of Licensee
Equipment located at the Studio.
(c) Transmitter Sites. Licensee will maintain the Transmitter Sites and
all equipment located at the Transmitter Sites at its own expense.
Licensee will perform routine maintenance work at the Transmitter
Sites, as needed, on Mondays between midnight and 4:00 a.m. The
Transmitter Sites will be operated, in all material respects, in
accordance with all applicable laws and regulations (including the
requirements of the Act and the rules, regulations, policies and
procedures of the Commission promulgated thereunder). The
transmitting facilities of the Stations are capable of transmitting
at the Stations' maximum authorized effective radiated power, with
an antenna center of radiation at its full authorized height above
ground and above average terrain. Licensee will maintain the
operating power of the Stations at their maximum licensed level and
shall operate and maintain in good working condition the Stations'
transmission facilities and broadcasting equipment. Licensee will
not apply to the Commission for any reduction in the Station's
maximum authorized facilities without the prior written approval of
Programmer.
(d) Interruption of Normal Operations. If the Stations suffers any loss
or damage of any nature at the Transmitter Sites which is not caused
by the acts or omissions of Programmer and which results in the
interruption of service or the inability of the Stations to operate
with its maximum authorized facilities and licensed effective
radiated power, Licensee will immediately notify Programmer and
promptly undertake such repairs, at Licensee's expense, as are
necessary to restore full-time
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<PAGE>
operation of the Stations with its maximum authorized facilities and
licensed effective radiated power thereon as quickly as is
reasonably possible under the circumstances. Except in the case of
events not under control of Licensee (such as acts of God or weather
conditions) which do not materially impair the earnings potential of
the Stations, if one or more of the Stations is inoperable or is
operated at 90% or less of its licensed effective radiated power as
a consequence of such loss or damage, then Programmer will be
entitled to a Pro rata reduction in the proportionate Monthly Fee
for that Station for each day in which there occurs such a service
interruption in excess of four (4) consecutive hours. Licensee will
promptly begin to repair and will complete the repairs necessary to
restore the inoperable Station(s) to full time operations with its
maximum licensed facilities within ten (10) days from the occurrence
of the loss or damage; provided, however, that this period will be
extended for a reasonable period of time, not to exceed an
additional ten (10) days, if Licensee has taken and is continuing to
take all appropriate actions to repair the loss or damage as
promptly as possible in the circumstances. If such repairs are not
completed within the allotted period, Programmer may give notice to
Licensee of Programmer's intention to terminate this Agreement, in
which event this Agreement will terminate on the date of such
notice, any other provision of this Agreement notwithstanding.
5. Costs of Operating Stations.
(a) General. Licensee will retain ultimate control over the personnel,
finances, programming and operation of the Stations. Except as
otherwise expressly set forth in this Agreement, all costs of
producing and delivering the Programming to the Transmitter Sites
for broadcast on the Stations will be borne by Programmer including,
without limitation, all personnel, equipment costs, maintenance,
music license fees, taxes of all kinds (including real and personal
property and income), utilities, all payments in the nature of rent
due under the Transmitter Leases, and all expenses related to the
maintenance and operation of the Studio. Programmer will be
responsible for all liabilities, debts and obligations of Programmer
based upon the purchase of air time including, without limitation,
barter agreements and unaired advertisements, but not for Licensee's
federal, state and local income tax liabilities.
(b) Employees. Programmer will employ and be responsible for the
salaries, commissions, taxes, insurance and all other related costs
for all personnel involved in the production and marketing of the
Programming and the origination and/or delivery of the Programming
from the Studio or any remote location to the Transmitter Sites
(including air personalities, engineering personnel, salespersons,
traffic personnel, board operators and other programming staff
members). Upon notice to the Licensee, and at mutually agreeable
times, the Licensee will permit Programmer to meet with its
employees prior to or after the Effective Date. Programmer may, at
its option and upon its terms and conditions, extend offers of
employment to all or any of Licensee's employees as of the Effective
Date.
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Licensee will not take any action to preclude or discourage any of
the Licensee's employees from accepting any offer of employment
extended by Programmer. Licensee will be responsible for all
payroll, vacation, severance, and other employee-related liabilities
prior to their employment by Programmer. Licensee will be
responsible for the personnel necessary for the fulfillment of
Licensee's regulatory requirements and the technical transmission of
Programmer's programs. Specifically, Licensee will employ a General
Manager who will report to Licensee and direct the performance of
Licensee's obligations hereunder, and will employ at least one full
time employee per studio location to assist the General Manager in
performing Licensee's obligations hereunder, including maintaining
the Stations' transmission facilities. Licensee's employees will
have no employment, consulting, or other material relationship to
Programmer. Programmer will provide suitable office space for
Licensee's personnel at the Studio at no charge, and to the extent
feasible the space assigned to Licensee's employees shall be
physically separate from the space assigned to Programmer's
employees. Whenever in the Studio or at the Transmitter Sites,
Programmer's personnel will be subject to the reasonable supervision
and the direction of Licensee's General Manager and/or Engineer.
Programmer will be responsible for the payment of any publicity or
promotional expenses incurred by Programmer and for all telephone
calls associated with program production and listener response. Upon
termination of this Agreement, the Stations' employees may be
re-hired by Licensee.
(c) Insurance for Transmitter Sites. Licensee will maintain in full
force and effect throughout the term of this Agreement insurance
with responsible and reputable insurance companies or associations
covering such risks to the Transmitter Sites and the Equipment
located thereon (including fire and other risks insured against by
extended coverage, public liability insurance, insurance for claims
against personal injury or death or property damage and such other
insurance as may be required by law) and in such amounts and on such
terms as is conventionally carried by broadcasters operating radio
stations with facilities comparable to those of the Stations. Any
insurance proceeds received by Licensee in respect of damaged
property will be used promptly to repair or replace such property so
that the operation of the Stations conforms with this Agreement.
(d) Insurance for Studio. Licensee will maintain in full force and
effect throughout the term of this Agreement insurance with
responsible and reputable insurance companies or associations
covering such risks to the Studio and studio building and all
equipment located thereon (including fire and other risks insured
against by extended coverage, public liability insurance, insurance
for claims against personal injury or death or property damage and
such other insurance as may be required by law) and in such amounts
and on such terms as is conventionally carried by broadcasters
operating radio stations with facilities comparable to those of the
Stations. Any insurance proceeds received by Licensee in respect of
damaged
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property will be used promptly to repair or replace such property so
that the operation of the Stations conforms with this Agreement.
(e) Music Licenses. During the Term, Licensee will obtain and maintain
in full force and effect in its own name all music licenses ("Music
Licenses") that are currently operative with respect to the Stations
and that will be required by the licenser of those Music Licenses
("Licensor"). All Music Licenses fees due from Licensee will be paid
by Licensee from advances by Programmer.
6. Advertising and Programming Revenues. Programmer may sell advertising for
broadcast on the Stations as part of Programmer's programming, and all
proceeds generated as a result of the sale of such advertisements shall be
the property of Programmer and neither Licensee nor any of Licensee's
creditors have or shall have an interest in such proceeds.
7. Accounts Receivable and Accounts Payable.
(a) General. All accounts receivable and accounts payable pertaining to
the operation of the Stations, insofar as they pertain to the period
prior to the first day of the Term, will be property of Licensee.
Programmer agrees to use commercially reasonable efforts (but
without responsibility to institute legal or collection proceedings)
to collect such accounts receivable during the 120-day period
following the effective date of this Agreement, and will remit all
payments received on such accounts to the Licensee no later than
April 30, 1998. Insofar as any particular account payable or
receivable shall pertain to the operation of the Stations both
during the Term and prior thereto, the parties will prorate amounts
payable or receivable, as the case may be, as soon as reasonably
practical following the signing of this Agreement, and amounts
received shall be applied first to satisfy Licensee's obligations.
Otherwise, payments by advertisers shall be credited first to their
respective accounts receivable with Licensee pertaining to the
period prior to the first day of the Term. In addition, to the
extent that Licensee satisfies with cash payments accounts payable
for operating expenses related to the Stations (and excluding any
expenses which benefit Westwind Broadcasting Inc. but do not benefit
the Stations on an ongoing basis, such as legal fees to complete
this transaction) following the effective date of this Agreement,
and provides Programmer with documentation of such accounts payable
and cash payments, Programmer shall reimburse Licensee for such
expenses no later than the 10th day of the month following that in
which the Licensee makes the cash payments, and such amounts shall
be deducted from the accounts receivable owed to Programmer. In all
other respects, to the extent not inconsistent with this Agreement,
the procedures for collection of accounts receivable specified in
the Sale Agreement shall apply.
(b) Carryover Accounts. Programmer will assume the obligation to provide
advertising time on the Stations in consideration of Licensee's
trade accounts in existence as of the date of this Agreement on a
time available basis during the first twelve (12)
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months of the Term, in an amount not to exceed $10,000 worth of
advertising time. Programmer will perform all of Licensee's
obligations under existing long-term contracts for the sale of
advertising time on the Stations that are to be performed on or
after the first day of the Term and will be entitled to all the
proceeds of accounts receivable pertaining to such performance.
8. Operation of Stations. Notwithstanding anything to the contrary in this
Agreement, Licensee will have full authority and power over the operation
of the Stations during the term of this Agreement. Licensee will be
responsible for the payment of the salaries and other compensation
(including payroll taxes, etc.) of the Station's General Manager,
Engineer, and any other personnel employed by Licensee, all of whom will
report and be accountable to the Licensee. The Station's General Manager
will direct the day-to-day operation of the Stations through the exercise
of its sole control over the New Studio and the Transmitter Sites.
Licensee will retain control over the policies, programming and operations
of the Stations, the right to preempt any programs or advertisements not
in the public interest or in order to broadcast a program deemed by
Licensee to be of greater national, regional or local importance (subject
to payment credit in accordance with Section 3(d) hereof), and the right
to take any other actions necessary for compliance with federal, state and
local laws, the Act and the rules, regulations and policies of the
Commission (including the prohibition on unauthorized transfers of
control) and the rules, regulations and policies of other federal
government entities, including the Federal Trade Commission and the United
States Department of Justice. Licensee will at all times be solely
responsible for meeting all of the Commission's requirements with respect
to public service programming, for maintaining the Station's logs and
political and public inspection files, and for the preparation of
issues/programs lists. Licensee will also retain the right to break into
Programmer's programming in case of an emergency. Programmer will, upon
request by Licensee, provide Licensee with information with respect to
such of the Programming as is responsive to public needs and interests so
as to assist Licensee in the preparation of required programming reports
and will provide upon request such other information necessary to enable
Licensee to prepare other records and reports required by the Commission
or other local, state or federal government entities. Programmer will
cooperate with Licensee to ensure the Station's compliance with the
Commission's rules, regulations and statutes, including the political
broadcast rules requiring equal opportunities, reasonable access and
lowest unit charge.
9. Station Identification. Licensee will be responsible for the proper
broadcast of station identification announcements. Pursuant to Section
3(e), Programmer will coordinate such announcements with Licensee so that
they are aired in accordance with the Commission's rules.
10. Special Events. Licensee reserves the right, in its good faith discretion,
to preempt or interrupt the broadcasts of the programs referred to herein,
or any part thereof, for broadcast of special programs of greater
national, regional, or local importance. In all such cases, Licensee will
use its best efforts to give Programmer reasonable notice of its intention
to
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preempt or interrupt Programmer's programs, and, in the event of such
preemption or interruption, Programmer will receive a payment credit for
the programs preempted or interrupted pursuant to the provisions of
Section 3(d) hereof.
11. Handling of Mail. Except as required to comply with Commission rules and
policies, including those regarding the maintenance of the public records
file and the political file (which will at times remain the responsibility
of the Licensee), Licensee will not be required to receive or handle mail
in connection with Programmer's programs broadcast hereunder. Programmer
agrees that the mailing address of the Stations shall not be changed
without the prior written permission of Licensee.
12. Payola. Programmer agrees that it will not accept any consideration,
compensation or gift or gratuity of any kind whatsoever, regardless of its
value or form, including, but not limited to, a commission, discount,
bonus, material, supplies or other merchandise, services or labor
(collectively "Consideration"), whether or not pursuant to written
contracts or agreements between Programmer and merchants or advertisers,
unless the payer is identified in the program for which Consideration was
provided as having paid for or furnished such Consideration, in accordance
with the Act and FCC requirements. Programmer agrees to annually, or more
frequently at Licensee's reasonable request, execute and provide Licensee
with a Payola Affidavit, substantially in the form attached hereto as
Exhibit A.
13. Compliance with Law. Each party will comply with all laws, rules,
regulations and policies applicable to the conduct of the Stations's
business, and each party acknowledges that the other party has not urged,
counseled or advised the use of any unfair business practice.
14. Licensee's Representations, Warranties and Covenants. Licensee makes the
following further representations, warrants and covenants:
(a) Qualification. Licensee is legally qualified, empowered and able to
enter into this Agreement. This Agreement has been approved by all
necessary action of the Licensee and constitutes the valid and
binding obligation of Licensee, enforceable in accordance with its
terms. The execution, delivery and performance hereof will not
constitute a breach or violation of any agreement, contract or other
obligation to which either party is subject or by which it is bound.
(b) Authorizations. Licensee holds, and throughout the Term will
continue to hold, all licenses and other permits and authorizations
necessary for the operation of the Stations as presently conducted,
including licenses, permits and authorizations issued by the
Commission ("FCC Authorizations").
(c) Filings. All reports and applications required to be filed with the
Commission (including ownership reports and renewal applications) or
any other government entity, department or body in respect of the
Stations have been, and in the future will be, filed in a timely
manner and are and will be true and complete and accurately
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present the information contained and required thereby. All such
reports and documents, to the extent required to be kept in the
public inspection files of the Stations, are and will be kept in
such files.
(d) Compliance With FCC Requirements. The Stations will be operated in
conformity with the FCC Authorizations, the Communications Act and
the rules and regulations of the Commission. The Licensee will take
all steps necessary or appropriate to ensure that the FCC
Authorizations will at all times remain in full force and effect.
Without limiting the foregoing, Licensee will prosecute the pending
renewal application of the Stations to a favorable conclusion, i.e.,
the grant of the application for renewal of the FCC Authorizations.
In the event of an unfavorable decision by the FCC (including any
administrative law judge and the FCC's review board) or any court,
Licensee will take all steps necessary or appropriate to protect its
rights and to obtain a favorable decision through agency review
and/or subsequent judicial review by the United States Court of
Appeals for the District of Columbia Circuit. Licensee will not be
obligated to seek a writ of certiorari from the United States
Supreme Court.
(e) Content of the Programming. The content of Licensee's programming
will not violate any rights of others. Licensee will hold
Programmer, the Stations and Programmer's employees, harmless from
any and all damages, liabilities, costs and expenses, including
reasonable attorneys' fees, arising from any claims of third parties
(excluding third parties claiming through Programmer) that allege
negligence or intentional tortious acts of Licensee, its employees
and/or its representatives, or that relate to the content of
Licensee's programming, including without limitation, claims
alleging libel, slander, unfair competition or trade practices,
infringement of trademarks, tradenames or program titles, violation
of rights of privacy and infringement of copyrights and proprietary
rights. Licensee's obligation to hold Programmer harmless against
the liabilities specified above will survive any termination of this
Agreement until the expiration of all applicable statutes of
limitation.
15. Programmer's Representations, Warranties and Covenants. Programmer makes
the following further representations, warrants and covenants:
(a) Qualification. Programmer is legally qualified, empowered and able
to enter into this Agreement. This Agreement has been approved by
all necessary action of the Board of Directors of Programmer and
constitutes the valid and binding obligation of Programmer,
enforceable in accordance with its terms. The execution, delivery
and performance hereof will not constitute a breach or violation of
any agreement, contract or other obligation to which either party is
subject or by which it is bound.
(b) Content of the Programming. The content of the Programming will not
violate any rights of others. The Programmer will hold Licensee, the
Stations and Licensee's
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employees, harmless from any and all damages, liabilities, costs and
expenses, including reasonable attorneys' fees, arising from any
claims of third parties (excluding third parties claiming through
Licensee) that allege negligence or intentional tortious acts of
Programmer, its employees and/or its representatives, or that relate
to the content of the Programming, including without limitation,
claims alleging libel, slander, unfair competition or trade
practices, infringement of trademarks, tradenames or program titles,
violation of rights of privacy and infringement of copyrights and
proprietary rights. Programmer's obligation to hold Licensee
harmless against the liabilities specified above will survive any
termination of this Agreement until the expiration of all applicable
statutes of limitation.
16. Events of Default: Cure Periods and Remedies.
(a) Events of Default. The following will, after the expiration of the
applicable cure periods, constitute Events of Default:
(i) Non-Payment. Programmer's failure to pay the Monthly Fee by the
10th day of any month during the Term;
(ii) Breach of Covenants. If either party hereto shall fail in any
material way to observe or perform any covenant, condition or agreement
contained herein;
(iii) Breach of Representation or Warranty. If any material
representation or warranty herein made by either party in any certificate
or document furnished by either party to the other pursuant to the
provisions hereof, shall prove to have been false or misleading in any
material respect as of the time made or furnished; or
(iv) Bankruptcy, etc. If either party (i) shall make a general
assignment for the benefit of creditors, (ii) shall file or have 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 or discharged within sixty (60) days
thereof.
(b) Cure Periods. Except in the case of a default under the foregoing
subsection (a)(iv), as to which no cure period will be applicable,
an Event of Default will not be deemed to have occurred until twenty
(20) business days after the nondefaulting party has provided the
defaulting party with written notice specifying the event or events
that if not cured would constitute an Event of Default. This period
may be extended by the non-defaulting party for a reasonable period
of time, if the defaulting party is acting in good faith to cure the
default and such delay will not have a materially adverse affect
upon the other party.
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(c) Remedies. Upon the occurrence of an Event of Default, the
non-defaulting party may terminate this Agreement, provided that it
is not also in default hereunder, in addition to any other remedies
available to the non-defaulting party at law or equity, or under
paragraph (d), below. In the event of a default by Programmer of
this Agreement, the Licensee shall have the option, in Licensee's
sole discretion, either to terminate this Agreement but to continue
the Sale Agreement in full force and effect, or to terminate both
Agreements; provided, however, that such a termination of the Sale
Agreement by Seller shall not be deemed to be a termination as a
result of a default or breach by Buyer under the terms and
conditions of the Sale Agreement.
(d) Specific Performance. Without limiting or waiving in any respect any
rights or remedies of any party given under this Agreement, or now
or hereafter existing at law or in equity or by statute, either
party shall be entitled to specific performance of the obligations
to be performed by the other in accordance with the provisions of
this Agreement.
17. No Brokers. The parties represent to each other that no brokers or finders
have been engaged in connection with the transaction described in this
Agreement, and the parties agree to indemnify and hold each other harmless
against any claim from any broker or finder based upon any agreement,
arrangement, or understanding alleged to have been made by Licensee or by
Programmer, as the case may be.
18. General.
(a) Notices. All necessary notices, demands and requests permitted or
required under this Agreement will be in writing and will be deemed
given, if personally delivered, on the date of personal delivery,
or, if mailed, four (4) days after being mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Licensee:
Westwind Broadcasting Inc.
801 South Park Street
Amarillo, Texas 79106
Attn: C.K. Adams, President
with a copy to:
Sanders, Baker, and Jesko
Box 2667
Amarillo, Texas 79105
Attn: Robert R. Sanders, Esq.
fax: (806) 353-7591
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If to Programmer:
Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, Illinois 60611
Attn: Richard Bonick
Fax No.: (312) 867-0091
with copies to:
Cumulus Broadcasting, Inc.
c/o QUAESTUS Management Corporation
330 E. Kilbourn Avenue
Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax No: (414) 283-4500
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula, Esq.
Fax No: (219) 239-1900
or to such other address as any such person may designate in writing.
(b) Modification and Waiver. No modification of any provision of this
Agreement will in any event be effective unless the same will be in
writing and signed by a duly authorized officer of the party to be
charged therewith, and then such modification will be effective only
in the specific instance and for the purpose for which given.
(c) Construction. This Agreement will be construed in accordance with
the laws of the State of Texas excluding the choice of law rules
utilized in that jurisdiction, and the obligations of the parties
hereto are subject to all federal, state and local laws and
regulations now or hereafter in force and to the rules, regulations
and policies of the Commission and all other government entities or
authorities presently or hereafter to be constituted.
(d) Headings. The headings contained in this Agreement are included for
convenience only and no such heading will in any way alter the
meaning of any provision.
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(e) No Assignment. No right or obligation under this Agreement may be
assigned by either party without the other party's consent, which
may be withheld for any reason.
(f) Counterpart Signature. This Agreement may be signed in one or more
counterparts, each of which will be deemed a duplicate original,
binding on the parties hereto notwithstanding that the parties are
not signatory to the original or the same counterpart. This
Agreement will be effective as of the date first above written.
(g) Entire Agreement. This Agreement embodies the entire agreement
between the parties and there are no other agreements,
representations, warranties or understandings, oral or written,
between them with respect to the subject matter hereof.
(h) No Partnership or Joint Venture Created. Nothing in this Agreement
will be construed to make Licensee and Programmer partners or joint
venturers or to afford any rights to any third party other than as
expressly provided herein. Neither Licensee nor Programmer will have
any authority to act as an agent for, or to enter into any contracts
on behalf of or that will be binding upon the other party.
(i) Severability. In the event any provision contained in this Agreement
is held to be invalid, illegal or unenforceable, such holding will
not affect any other provision hereof and this Agreement will be
construed as if such invalid, illegal or unenforceable provision had
not been contained herein.
(j) Force Majeure. Any failure or impairment of Licensee's facilities or
any delay or interruption in the broadcast of programs, or
Licensee's failure at any time to furnish facilities, in whole or in
part, for broadcast, due to causes beyond the control of Licensee,
will not constitute a breach of this Agreement and Licensee will not
be liable to Programmer, except to the extent provided in Sections
4(d) and 5(c) above.
(k) Other Agreements. During the term of this Agreement, Licensee will
not enter into any other time brokerage, program provision, local
management or similar agreement, regarding the Stations, with any
third party.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
CUMULUS BROADCASTING, INC.
By:___________________________________
Its:___________________________________
"Programmer"
WESTWIND BROADCASTING INC.
By:_______________________________________
Its:________________________________________
"Licensee"
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement, during the Term, Programmer shall pay Licensee a fee which shall
consist of the reimbursement to Licensee, monthly in advance on an estimated
basis, the Station Expenses (defined below). Within ten (10) days of the end of
each month, Licensee shall submit to Programmer a written reconciliation of
actual expenses for the prior month versus projected expenses as described
below. Programmer and Licensee shall agree to mutually acceptable methods for
adjusting future amounts owed by Programmer to reflect such reconciliation. The
term "Station Expenses" as used herein means the reasonable and prudent expense
actually incurred by Licensee in operating the Stations in compliance with the
terms of this agreement and consistent with past practice (except for changes
resulting from the transactions contemplated by this Agreement), including
without limitation, those expenses set forth below.
Monthly Expenses:
Employees
Engineering
Eng. Maintenance and Repair
Insurance
Utilities
Music Lic. Fees
Rent
Ad Valorem Taxes
Employee Med Insurance
Tower Rent
Telephone
Total
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APPENDIX B
Programmer 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:
I. Religious Programming. The subject of religion and references to
particular faiths, tenants, and customs shall be treated with respect at all
times. Programs shall not be used as a medium for attack on any faith,
denomination, or sect or upon any individual or organization.
II. Controversial Issues. Any discussion of controversial issues or public
importance shall be reasonably balanced with the presentation of contrasting
viewpoints in the course of overall programming; no attacks on the honesty,
integrity, or like personal qualities of any person or group of persons shall be
made during the discussion of controversial issues of public importance; and
during the course of political campaigns, programs are not to be used as a forum
for editorializing about individual candidates. If such events occur, Licensee
may require that responsive programming be aired.
III. No Plugola or Payola. The 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.
IV. No Lotteries. Announcements giving any information about lotteries or
games prohibited by federal or state law or regulation are prohibited.
V. Election Procedures. At least ninety (90) days before the start of any
primary or regular election campaign, Programmer will clear with Licensee's
General Manager the rate Programmer will charge for the time to be sold to
candidates for public office and/or their supporters to make certain that the
rate charged conforms to all applicable laws and station policy.
VI. Spot Commercial Limitations. With respect to any given segment of air
time hereunder, the amount of spot commercial matter shall not exceed 20 minutes
during any sixty minute segment. Programmer will provide, for attachment to the
Station logs, a list of all commercial announcements carried during its
programming.
VII. Required Announcements. Broker shall broadcast (a) an announcement in
a form satisfactory to Licensee at the beginning of each hour to identify
Stations KLUR-FM, KQXC-FM, and KYYI-FM, (b) an announcement at the beginning and
end of each program, and hourly, as appropriate, to indicate that program time
has been purchased by Programmer, and (c) any other announcement that may be
required by law, regulation, or station policy.
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<PAGE>
VIII. Credit Terms Advertising. Pursuant to rules of the Federal Trade
Commission, any advertising of credit terms shall be made over the Station in
accordance with all applicable federal an state laws, including regulations Z
and M.
IX. Commercial Recordkeeping. Programmer shall not receive any
consideration in money, goods, service, or otherwise, directly or indirectly
(including to relatives) from any person or company for the presentation of any
programming over the Stations without reporting the same in advance to and
receiving the prior written consent of Licensee's General Manager. No commercial
messages ("plugs") or undo references shall be made in programming presented
over the Station to any business venture, profitmaking activity, or other
interest (other than noncommercial announcements for bona fide charities, church
activities, or other public service activities) in which Programmer (or anyone
else) is directly or indirectly interested without the same having been approved
in advance by Licensee's General Manager and such broadcast being announced and
logged and sponsored.
X. No Illegal Announcements. No announcements or promotion prohibited by
federal or state law or regulation of any lottery or game shall be made over the
Station. Any game, contest or promotion relating to or to be presented over the
Station must be fully stated and explained in advance to Licensee, which
reserves the right in its sole direction to rejecct any game, contest or
promotion.
XI. Licensee Discretion Paramount. In accordance with the Licensee's
responsibility under the Communications Act of 1934, as amended, and the rules
and regulations of the Federal Communictions Commission, Licensee reserves the
right to reject or terminate any advertising proposed to be presented or being
presented over the station which is in conflict with Station policy or which in
the reasonable judgment of Licensee or its General Manager/Chief Engineer would
not serve the public interest.
XII. Programming in Which Programmer Has a Financial Interest. Broker
shall advise the General Manager of the Station with respect to any programming
(including commercial(s) concerning goods or services in which Programmner has a
material financial interest. Any announcements for such goods and services shall
clearly identify Programmer's financial interest.
XIII. Programming Prohibitions. Programmer shall not broadcast any of the
following programs or announcements:
A. False Claims. False or unwarranted claims for any product or
service.
B. Unfair Imitation. Infringements of another advertiser's rights
through plagiarism or unfair imitation of either program idea or copy, or
any other unfair competition.
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C. Commercial Disparagement. Any disparagement of competitors or
competitive goods.
D. Profanity. Any programs or announcements that are slanderous,
obscene, profane, vulgar, repulsive or offensive, either in theme or in
treatment.
E. Price Disclosure. Any price mentions exceppt as permitted by
Programmer's policies current at the time.
F. Unauthenticated Testimonials. Any testimonials which cannot be
authenticated.
G. Descriptions of Bodily Functions. Any continuity which describes
in a repellent manner internal bodily functions or symptomatic results or
internal disturbance, and no reference to matters which are not considered
acceptable topics in social groups.
H. Conflict Advertising. Any advertising matter or announcement
which may, in the reasonable opinion of Licensee, be injurious or
prejudicial to the interests of the public, the Stations, or honest
advertising and reputable business in general.
I. Fraudulent or Misleading Advertisement. Any advertisement matter,
announcement, or claim which Programmer knows to be fraudulent,
misleading, or untrue.
Programmer may waive any of the foregoing regulations in specific
instances if, in its reasonable opinion, good broadcasting in the public
interest will be served thereby.
In any case where questions of policy or interpretataion arise, Programmer
shall submit the same to Licensee for decision before making any commitments in
connection therewith.
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LOCAL MARKETING AGREEMENT
This Local Marketing Agreement (the "Agreement") is made as of February
10, 1998, effective for all purposes on the Effective Date (as defined below),
between Cumulus Broadcasting, Inc., a Nevada corporation ("Programmer"), and
Wiskes/Abaris Communications KQIZ Partnership, an Illinois limited partnership
(the "Licensee").
Recitals
A. Licensee holds the license to operate radio broadcast station KQIZ-FM
(the "Station") pursuant to authorizations issued by the Federal Communications
Commission (the "FCC").
B. Licensee and Programmer entered into an Asset Purchase Agreement
effective December 5, 1997, as amended (the "Purchase Agreement") , which
provides for the acquisition by Programmer of substantially all of the assets
used in connection with the operation of the Station, on the terms and subject
to the conditions set forth therein.
C. Pending closing pursuant to the Purchase Agreement, Programmer desires
to purchase from Licensee and Licensee desires to sell to Programmer certain
airtime on the Station, all in accordance with the Communications Act of 1934,
as amended, and the rules, regulations, and policies of the FCC (the "FCC
Requirements").
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations, warranties and agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement agree as
follows:
1. Effective Date and Term.
1.1 Effective Date. This Agreement shall become effective for all purposes
on February 15, 1998.
1.2 Term. The term of this Agreement (the "Term") shall begin on the
Effective Date and shall continue until December 31, 2001, unless earlier
terminated in accordance with the provisions set forth in this Agreement.
2. Purchase of Airtime. Programmer hereby purchases from Licensee all
airtime on the Station during the Term, other than airtime between 7:00 a.m.,
local time and 8:00 a.m., local time on Saturdays, on the terms specified herein
(such purchased airtime period is referred to herein as the "Broadcasting
Period"). During the Broadcasting Period, Licensee shall broadcast on the
Station programming supplied by Programmer (collectively, the "Program" or
"Programs"). Programmer will ensure that the Programs meet technical and quality
standards equal to those of
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programming broadcast by commercial radio stations generally in the United
States. If Licensee in the reasonable exercise of its discretion finds that any
Program(s) does not meet these standards, then it shall advise Programmer in
writing of the specific technical deficiencies. If such technical deficiencies
have not been corrected within ten (10) days after receipt of notice, then
Licensee shall have no obligation to broadcast such Program(s) until such time
as the technical deficiencies are corrected. Programmer shall not substantially
alter the format of the Station during the Term.
3. Licensee's and Programmer's Obligations. In consideration for the
payments made and to be made by Programmer hereunder, Licensee shall make
available to Programmer, beginning on the Effective Date, all of the Station's
airtime during the Broadcasting Period and shall cause to be broadcast on the
Station the Programs pursuant to Section 2 hereof. As of the Effective Date,
Programmer hereby accepts delivery and possession of the tangible assets
identified in Section 2(h) of the Disclosure Schedule to the Purchase Agreement,
and the leases and other agreements to be assigned as of Closing, as having
satisfied the delivery of such property in the condition required under the
Purchase Agreement; provided, however, that in the event of termination of the
Purchase Agreement, all such property shall be returned to Licensee upon the
termination of this Agreement in its current condition, ordinary wear and tear
excepted. Throughout the Term, unless otherwise mutually agreed by the parties,
Programmer shall maintain Station's transmission facilities, including the
maintenance of the operating power of the Station at no less than its current
level, and shall operate and maintain in good working conditoin the aforesaid
property, including but not limited to the Station's transmission facilities and
broadcasting equipment, provided that the Licensee shall retain ultimate control
over the operation of the Station as required under the FCC's rules and
regulations. Throughout the Term, Licensee shall also, with respect to the
Station:
(a) employ a General Manager (Larry Swikard) who will report to
Licensee and direct the performance of Licensee's obligations hereunder
and who shall have no employment, consulting, or other material
relationship to Programmer;
(b) employ at least employee (Danley West) to assist the General
Manager in performing Licensee's obligations hereunder and who shall have
no employment, consulting or other material relationship with Programmer;
(c) retain ultimate control over the personnel, finances,
programming and operation of the Station;
(d) maintain a main studio consistent with the FCC Requirements at
which the General Manager and the other full time employee(s) of the
Station will be available during normal business hours consistent with
their current duties and hours (Programmer will provide Licensee's
employees with office space and telephone consistent with current Licensee
practices);
(e) comply with the FCC Requirements with respect to the
ascertainment of community problems, needs and interests; broadcast
programming responsive thereto; and
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timely prepare and place in the Station's public inspection files
appropriate documentation thereof;
(f) comply with all other FCC Requirements which may be applicable
to the operation of the Station.
4. Consideration. In consideration of the airtime made available to
Programmer pursuant to this Agreement, Programmer shall pay Licensee as set
forth in Appendix A attached hereto.
5. Operation, Ownership and Control of the Stations.
5.1 Control Vested in Licensee. Notwithstanding anything to the contrary
in this Agreement, as long as Licensee remains the FCC licensee of the Stations,
Licensee will have full authority, power and control over the operation of the
Station and over all persons employed by it. Licensee will bear the
responsibility for the Station's compliance with, and shall cause the Station to
comply with, all applicable laws, including the FCC Requirements. Nothing
contained herein shall prevent or hinder Licensee from: (a) rejecting or
refusing Programs that Licensee believes in good faith to be unsuitable or
contrary to the public interest; (b) substituting programs which Licensee
believes in good faith to be of greater local or national importance or which
are designed to address the problems, needs and interests of the local
community: (c) preempting any Program in the event of a local, territorial or
national emergency; (d) refusing to broadcast any Program that does not meet the
FCC Requirements; or (e) deleting any commercial announcements that do not
comply with the FCC Requirements or the requirements of the Federal Trade
Commission, or any state, local or federal law.
5.2 Notice of Complaints. Programmer will immediately serve Licensee with
notice and a copy of any letters of complaint that Programmer receives
concerning any Program for Licensee's review and inclusion in its public
inspection files. Licensee will immediately serve Programmer with notice and a
copy of any letters of complaint that it receives concerning any Program.
5.3 Programmer Access to the Station's Studios. During the Term, Licensee
shall make available to Programmer for no additional consideration the areas in
the Station's studios as may be reasonably necessary or appropriate for
Programmer to exercise its rights and perform its obligations under this
Agreement. Programmer shall, to the extent commercially feasible, use Licensee's
current studios and other facilities to exercise its rights and perform its
obligations under this Agreement.
5.4 Employees. Programmer shall employ and be responsible for the
salaries, taxes, insurance, and related costs for all Station personnel
(excluding those employees described in Sections 3(a) and 3(b) above, which
employees are covered in Appendix A) and all personnel used in the production of
the programs supplied to the Station hereunder, and all other costs incurred by
Programmer for the production of such programs. Licensee shall pay all
compensation owed to its employees up to and including the Effective Date.
Programmer shall, after the Effective Date,
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employ those of Licensee's employees as Programmer may elect on terms and
conditions determined by Programmer in Programmer's sole discretion, other than
those employees employed by Licensee in the operation of the Station after the
Effective Date, who shall remain in Licensee's sole employ and control. Upon
termination of this Agreement, Licensee shall be free to re-employ Programmer's
employees on such terms and conditions as may be determined by Licensee.
5.5 Mutual Cooperation. Programmer and Licensee agree to cooperate
reasonably with each other as necessary to fulfill their rights and obligations
hereunder.
6. Program Rights and Music Licenses. During the Term, Licensee shall make
available to Programmer for its use, on the dates and at the times specified by
Programmer, all of Licensee's rights to programs under any program rights
agreements of the Stations (together with the music licenses described below,
the "Program Rights Agreements"). Licensee shall use its best efforts to secure
all consents, if any, from third parties that are necessary to permit Programmer
to use the programs under Program Rights Agreements. Licensee shall maintain all
necessary performing rights licenses to musical compositions included in any
Program, subject to reimbursement by Programmer for the cost thereof under
Section 4 and Appendix A of this Agreement.
7. Programs to Serve the Public Interest. Licensee acknowledges that it is
familiar with the type of programming Programmer intends to provide and has
determined that the broadcast of such programming on the Station would serve the
public interest and is otherwise suitable. Programmer shall cooperate with
Licensee to ensure that the Programs include material that is responsive to
community problems, needs, and interests.
8. Programming Standards. Programmer shall use its best efforts to ensure
that the Programs conform to all FCC Requirements applicable to broadcast radio
stations.
9. Expenses, Revenues and Accounts Receivable.
9.1 Expenses. The Station's cash expenses arising or relating to the
period before the Effective Date shall be the responsibility of Licensee, and
Programmer shall not be obligated to reimburse Licensee for any expenses
allocable to such period. During the Term, Programmer will reimburse Licensee
for its expenses incurred in accordance with Section 4 hereof. Programmer shall
be solely responsible for all expenses with respect to the operation of the
Station, other than reimbursed expenses covered in Appendix A, including but not
limited to those attributable to the origination and/or delivery of the Programs
by Programmer to Licensee.
9.2 Cash Accounts Receivable, Advertising and Programming Revenues.
(a) Promptly after the Effective Date, Licensee shall furnish to
Programmer a list of the Accounts Receivable that arose out of the operations of
the Stations as of the close of business on the day preceding the Effective Date
but are due and payable thereafter. For a period of 120 days
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after the Effective Date, Programmer, as Licensee's agent, shall, without
compensation, collect the accounts receivable for Licensee. Immediately after
the end of each month of the Term (not later than the fifth day of the
subsequent month), Programmer shall remit to Licensee the amount collected by
Programmer during that month with respect to the Accounts Receivable and
Programmer shall provide Licensee with a report setting forth the Accounts
Receivable collected by Programmer that month. Programmer shall furnish Licensee
with such records and other information as Licensee may reasonably require to
verify the amounts collected by Programmer with respect to the Accounts
Receivable. Upon five days' prior written notice from Licensee, Programmer shall
terminate all collection efforts on behalf of Licensee with respect to the
Accounts Receivable specified in the notice and those Accounts Receivable shall
no longer be considered Accounts Receivable for purposes of this section 9.2.
Programmer shall set all commercial advertising during the Broadcasting Period
for its own account and shall be entitled to collect all Accounts Receivable
arising thereunder. At the end of the 120-day collection period, the Programmer
will turn back to the Licensee all of the accounts receivable of the Station as
of the Closing Date owing to the Licensee which have not yet been collected. The
Programmer will thereafter have no further responsibility with respect to the
collection of such receivables, which shall remain the exclusive property of the
Licensee from that point, and Licensee shall be free to take all commercially
reasonable measures to collect such receivables.
(b) For the purpose of determining amounts collected by Programmer with
respect to the Accounts Receivable, (i) in the absence of a bona fide dispute
between an account debtor and Licensee, all payments by an account debtor shall
first be applied to Accounts Receivable due from the account debtor, and (ii)
any amount received by Programmer which is from an account debtor to Licensee
who claims to have a bona fide dispute with Licensee shall be deemed to have
been received with respect to the accounts receivable due Programmer to the
extent of such dispute.
(c) Programmer shall not be required to retain a collection agency, bring
any suit, or take any other action out of the ordinary course of business to
collect any of the Accounts Receivable. Programmer shall not compromise, settle
or adjust the amount of any of the Accounts Receivable without the written
consent of Licensee.
(d) Programmer's obligation to collect and remit Accounts Receivable
hereunder shall continue, at the option of Licensee, in the event of termination
of this Agreement pursuant to Section 11.5 hereof.
9.3 Political Time. Licensee shall, with respect to the Station, oversee
and take ultimate responsibility with respect to the provision of equal
opportunities, lowest unit charge, and reasonable access to political
candidates, and compliance with the political broadcasting provisions of the FCC
Requirements. Programmer shall cooperate with Licensee in complying with such
provisions, and shall supply promptly to Licensee such information reasonably
requested by Licensee for such purposes. Licensee, in consultation with
Programmer, will develop a statement which discloses its political broadcasting
rates and policies to political candidates, and Programmer will follow those
respective policies in the sale of political programming and advertising for the
Station. Programmer
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shall provide any rebates due to political advertisers and release advertising
availabilities to Licensee during the Broadcasting Period sufficient to permit
Licensee to comply with political broadcasting provisions of the FCC
Requirements. Revenues received by Licensee as a result of any such release of
advertising time shall be for the account of Programmer.
10. Call Letters and Frequency. During the Term, Licensee (i) shall retain
all rights (except as provided in the following sentence) to the Station's call
letters and trade names, (ii) shall not change the call letters, and (iii) shall
not seek FCC consent to a modification of facilities which would specify a
frequency change or have a material adverse effect upon the presently authorized
coverage of the Station. Programmer shall include in the Programs for the
Station an announcement in a form reasonably satisfactory to the Licensee in
accordance with the FCC Requirements to identify such Station, as well as any
other announcements required by the FCC Requirements.
11. Events of Default and Termination.
11.1 Programmer's Events of Default. The occurrence and continuation of
any of the following will be deemed an Event of Default by Programmer under this
Agreement:
(a) Programmer fails to make LMA Payments;
(b) Programmer fails to observe or perform any other material
covenant, condition or agreement contained in this Agreement; or
(c) Programmer breaches or violates any material representation or
warranty made by it under this Agreement.
11.2 Licensee's Events of Default. The occurrence and continuation of any
of the following will be deemed an Event of Default by Licensee under this
Agreement:
(a) Licensee fails to observe or perform any material covenant,
condition or agreement contained in this Agreement; or
(b) Licensee breaches or violates any material representation or
warranty made by it under this Agreement.
11.3 Cure Period. The defaulting party shall have thirty (30) days from
the date on which Programmer has provided Licensee or Licensee has provided
Programmer, as the case may be, with written notice specifying the Event(s) of
Default to cure any such Event(s) of Default. If the Event of Default cannot be
cured by the defaulting party within such time period but commercially
reasonably efforts are being made to effect a cure or otherwise secure or
protect the interests of the non-defaulting party (in which case, if successful,
the Event of Default shall be deemed cured), then the defaulting party shall
have an additional period not to exceed thirty (30) days to effect a cure or a
deemed cure; provided, however, in connection with a default under Section
11.1(a) above or any
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other default for failure to pay any sums due the other party, the thirty-day
cure shall be reduced to five days and there shall be no additional thirty-day
period to effect a cure.
11.4 Termination for Uncured Event of Default. If an Event of Default by
Programmer has not been cured or deemed cured within the period set forth in
Section 11.3 above, then Licensee may terminate this Agreement, effective
immediately upon written notice to Programmer, and pursue all remedies available
at law or in equity for breach of this Agreement. If an Event of Default by
Licensee has not been cured or deemed cured within the periods set forth in
Section 11.3 above, then Programmer may terminate this Agreement, effective
immediately upon written notice to Licensee, and pursue all remedies available
at law or in equity for breach of this Agreement.
11.5 Termination Upon Consummation of the Purchase Agreement. This
Agreement shall terminate immediately upon the Closing Date (as defined in the
Purchase Agreement).
11.6 Termination by Licensee To Satisfy the FCC Requirements. If Licensee
is required by the FCC to terminate this Agreement by an FCC order which has
become a Final Order (as that term is defined in the Purchase Agreement),
Licensee shall, or, if the FCC orders that this Agreement be terminated before
its order becomes a Final Order and this Agreement cannot be revised to comply
with applicable FCC Requirements as contemplated by Section 20 hereof, Licensee
may, upon at least sixty (60) days' written notice to Programmer (or such
shorter period as may be required by the FCC) terminate this Agreement.
11.7 [Intentionally Omitted]
12. Certain Representations, Warranties and Covenants.
12.1 Mutual Representations Concerning This Agreement. Licensee represents
and warrants as follows: (a) Licensee is a limitd partnership organized under
the laws of the state of Illinois and qualified to do business in Texas, (b)
Licensee has the power and authority to enter into and perform this Agreement;
and (c) the execution, delivery and performance of this Agreement by Licensee
does not conflict with any other agreement to which Licensee is a party.
Programmer represents and warrants as follows: (a) Programmer is a
corporation duly organized, validly existing and in good standing under the laws
of Nevada; (b) Programmer has the requisite corporate power and authority to
enter into and perform this Agreement; (c) the execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate action of Programmer; and (d) the execution, delivery and performance
of this Agreement by Programmer does not conflict with any other agreement to
which Programmer is a party.
12.2 Program Rights and Barter Agreements. Licensee represents and
warrants that (i) it is current in all payment obligations and is not otherwise
in default under the Program Rights Agreements and (ii) there are no Barter
Agreements as defined in the Asset Purchase Agreement
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which extend beyond the Effective Date and which exceed in the aggregate Twenty
Thousand Dollars ($20,000). Programmer agrees to assume the obligations under
such Barter Agreements as provided in the Purchase Agreement.
12.3 Compliance with FCC Requirements. Programmer represents, warrants and
covenants that its execution and performance of this Agreement is, and will
remain, in compliance with the FCC Requirements, including without limitation,
47 C.F.R. ss. 73.3555.
13. Modification and Waiver; Remedies Cumulative. No modification or
waiver of any provision of this Agreement will be effective unless in writing
and signed by all parties. No failure or delay on the part of Programmer or
Licensee in exercising any right or power under this Agreement will operate as a
waiver of such right or power, nor will any single or partial exercise of any
such rights or power or the exercise of any other right or power operate as a
waiver. Except as otherwise provided in this Agreement, the rights and remedies
provided in this Agreement are cumulative and are not exclusive of any rights or
remedies which a party may otherwise have.
14. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns.
Notwithstanding the foregoing, no party may assign its rights or obligations
under this Agreement without the prior written consent of the other party;
provided, however, that Programmer may assign and delegate its rights and
obligations under this Agreement to a party that controls, or is controlled by,
or is under common control with, Programmer, and who is qualified under any
applicable FCC Requirement, upon notice to, but without the prior written
consent of Licensee.
15. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Illinois without regard to any conflicts-of-law
rules that might apply the laws of another jurisdiction or jurisdictions.
16. Notices. Notices required to be provided by this Agreement shall be
given in the manner provided and to the persons specified in the Purchase
Agreement.
17. Entire Agreement. This Agreement embodies the entire understanding
among the parties with respect to the subject matter hereof, and supersedes any
prior or contemporaneous written or oral agreement between the parties regarding
such subject matter.
18. Relationship of Parties. Programmer and Licensee are not, and shall
not be deemed to be, agents, partners, or representatives of each other.
19. Force Majeure. The failure of a party hereto to comply with its
obligations under this Agreement due to acts of God, strikes or threats thereof
or force majeure or due to causes beyond such party's control will not
constitute an Event of Default under Section 11 of this Agreement and no party
will be liable to the others therefore. Programmer and Licensee each agree to
exercise its commercially reasonable efforts to remedy any such conditions
affecting its own
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facilities as soon as practicable.
20. Subject to Laws; Invalidity. The obligations of the parties under this
Agreement are subject to the FCC Requirements and all other applicable laws. The
parties acknowledge that this Agreement is intended to comply with FCC
Requirements. However, in the event that the FCC determines that the continued
performance of this Agreement is in violation of the FCC Requirements, each
party will use its commercially reasonable efforts to comply with the FCC
Requirements or will in good faith contest or seek to reverse any such action or
agree on the terms of a revision to this Agreement, in each case, on a time
schedule sufficient to meet the FCC Requirements and so long as the fundamental
nature of the business arrangement between the parties evidenced by this
Agreement is maintained. If any provision of this Agreement is otherwise held to
be illegal, invalid, or unenforceable under present or future laws, then such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such provision had never comprised a part thereof, and the
remaining provisions shall remain in full force and effect, in each case so long
as the fundamental nature of the business arrangement between programmer and
Licensee has been maintained.
21. Reciprocal Indemnity.
21.1 Indemnification by Programmer. Programmer shall indemnify, defend,
and hold harmless Licensee from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement, libel,
slander, defamation or invasion of privacy, arising out of: (a) Programmer's
broadcasts of the Programs; (b) any misrepresentation or breach of any warranty
of Programmer; or (c) any breach of any covenant, agreement, or obligation of
Programmer. If Programmer is required to indemnify Licensee as a result of
programs broadcast hereunder which are supplied by a third party pursuant to a
contract with Licensee, it is agreed that Programmer shall be subrogated to any
rights which Licensee may have against such third party, including the right to
indemnification by such third party.
21.2 Indemnification by Licensee. Licensee shall indemnify, defend, and
hold harmless Programmer from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement, libel,
slander, defamation or invasion of privacy, arising out of: (a) Licensee's
broadcast of programs on its own behalf, other than Programs; (b) any
misrepresentation or breach of any warranty of Licensee; or (c) any breach of
any covenant, agreement, or obligation of Licensee. If Licensee is required to
indemnify Programmer as a result of programs broadcast hereunder which are
supplied by a third party pursuant to a contract with Licensee, it is agreed
that Licensee shall be subrogated to any rights which Programmer may have
against such third party, including the right to indemnification by such third
party.
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22. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
23. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
24. Survival. All representations, warranties, covenants and agreements
made by any party in this Agreement or pursuant hereto shall survive execution
and delivery of this Agreement.
25. Waiver. The provisions of the Purchase Agreement are hereby waived by
Programmer or deemed satisfied hereby:
(a) All Seller's operating requirements in Section 4 of the
Purchase Agreement with respect to the Station and Acquired
Assets to the extent undertaken by Programmer hereunder; and
(b) Sections 2(f)(i), 4(e) (subsequent to the Effective Date), and
4(m) (to the extent loss, damage, or destruction of assets is
the result of actions by Programmer).
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******
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective duly authorized officers as of the date first written above.
PROGRAMMER: CUMULUS BROADCASTING, INC.
By:_____________________________
Richard Weening
Chairman
LICENSEE: WISKES/ABARIS COMMUNICATIONS KQIZ
PARTNERSHIP
By:_____________________________
Printed Name:___________________
Title:__________________________
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement, during the Term, Programmer shall reimburse Licensee monthly in
advance on the first day of each month (pro rated to date of termination) the
Station Expenses (defined below) for which Licensee has submitted to Programmer
a written reimbursement request supported by appropriate documentation of
expenses. The term "Station Expenses" as used herein means the reasonable and
prudent expense actually incurred by Licensee in operating the Station in
compliance with the terms of this Agreement (including without limitation
Sections 3 and 6) and consistent with past practice (except for changes
resulting from the transactions contemplated by this Agreement), including
without limitation, those expenses set forth below.
In addition, (1) Programmer shall pay Licensee a monthly LMA fee (payable
monthly in advance on the first day of each month during the Term) (pro rated to
the date of termination) equal to Fifteen Thousand Dollars ($15,000.00), which
amount shall be increased by five percent (5%) on each twelve-month anniversary
of the Effective Date during the Term; and (2) a one-time reimbursement for
invoiced attorneys' fees related to the preparation of this Agreement, not to
exceed Two Thousand Dollars ($2,000) .
Monthly Station expenses shall include the following:
Employees
Larry Swikard, General Manager $
Danley West
Payroll Taxes (Fica, Futa, State taxes)
Health Insurance
Life Insurance
Workers Compensation Insurance
Engineering:
Utilities $
Maintenance and Repairs
Music License Fees:
Ascap, BMI, Sesac
Property Insurance and taxes
Station and Tower Rent ________
Total Expenses $
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TIME BROKERAGE AGREEMENT
dated as of
December 15, 1997
by and among
CUMULUS BROADCASTING, INC.
and
CLEARLY SUPERIOR RADIO, L.L.C.
<PAGE>
TABLE OF CONTENTS
Recitals.......................................................................1
Agreement......................................................................1
1. Term/Termination Options...........................................1
(a) Term.........................................................1
(b) Option Upon Termination of Agreement for Sale of Station.....2
(c) Effect of Termination on Advertising and other Contracts.....2
2. Fees...............................................................2
(a) Monthly Fee..................................................2
3. Programs...........................................................2
(a) Operation of Station.........................................2
(b) Programming Standards........................................3
(c) Ancillary Broadcast Rights...................................3
(d) Programming and Operations Standards.........................3
(e) Call Signs...................................................3
4. Facilities and Equipment...........................................4
(a) Facilities...................................................4
(b) Maintenance..................................................4
(c) Transmitter Site.............................................4
(d) Interruption of Normal Operations............................4
5. Costs of Operating Station.........................................5
(a) General......................................................5
(b) Employees....................................................5
(c) Insurance for Transmitter Site...............................6
(d) Insurance for New Studio and Programmer's Studio.............6
(e) Music Licenses...............................................7
6. Advertising and Programming Revenues...............................7
7. Accounts Receivable and Accounts Payable...........................7
(a) General......................................................7
(b) Carryover Accounts...........................................8
8. Operation of Station...............................................8
9. Station Identification.............................................8
10. Special Events.....................................................9
11. Handling of Mail...................................................9
12. Payola.............................................................9
13. Compliance with Law................................................9
14. Licensee's Representations.........................................9
(a) Qualification................................................9
(b) Authorizations...............................................9
(c) Filings.....................................................10
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(d) Compliance With FCC Requirements............................10
(e) Content of the Programming..................................10
15. Programmer's Representations......................................10
(a) Qualification...............................................10
(b) Content of the Programming..................................11
16. Events of Default: Cure Periods and Remedies......................11
(a) Events of Default...........................................11
(i) Non-Payment.....................................11
(ii) Breach of Covenants.............................11
(iii) Breach of Representation or Warranty............11
(iv) Bankruptcy, etc.................................11
(b) Cure Periods................................................11
(c) Remedies....................................................12
(d) Specific Performance........................................12
17. No Brokers........................................................12
18. General...........................................................12
(a) Notices.....................................................12
(b) Modification and Waiver.....................................13
(c) Construction................................................13
(d) Headings....................................................14
(e) No Assignment...............................................14
(f) Counterpart Signature.......................................14
(g) Entire Agreement............................................14
(h) No Partnership or Joint Venture Created.....................14
(i) Severability................................................14
(j) Force Majeure...............................................14
(k) Other Agreements............................................14
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TIME BROKERAGE AGREEMENT
This Time Brokerage Agreement is entered into as of the 15th day of
December, 1997, by and among Cumulus Broadcasting, Inc., a Nevada corporation
("Programmer"), and Clearly Superior Radio, L.L.C. (the "Licensee").
Recitals
Licensee holds the FCC broadcast license and auxiliary licenses for radio
stations WDDD-FM (Marion, Illinois), WDDD-AM (Johnston City, Illinois), WFRX-AM
(West Frankfort, Illinois), WTAO-FM (Murphysboro, Illinois), WVZA-FM (Herrin,
Illinois), WQUL-FM (West Frankfort, Illinois), and application for a station on
AM-1690 (Johnston City, Illinois) (collectively the"Stations").
Licensee and Programmer have entered into an Asset Purchase Agreement
dated as of December 15, 1997 (the "Sale Agreement"), pursuant to which
Programmer will purchase from Licensee, upon receipt of consent of the FCC,
Licensee's assets used or useful in the operation of the Stations (the "Sale").
The Stations' transmitter facilities are at locations described in Section
4(j) of the Disclosure Schedule of the Sale Agreement (the "Transmitter Sites").
The Stations' studios are at locations described in Section 4(j) of the
Disclosure Schedule of the Sale Agreement (the "Studio").
Licensee has broadcast time on the Stations available for sale. Programmer
desires to purchase time on the Stations for the broadcast of Programmer's
programming and the sale of advertising time for inclusion in said programming.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
Agreement
1. Term/Termination Options
(a) Term. The term of this Agreement (the "Term") will begin at 12:01
a.m. on January 1, 1998, and expire at 11:59 p.m. on the earliest of
(i) December 31, 1998, or (ii) the closing of the Sale, unless
earlier terminated in accordance with this Section 1 or Sections
4(d) or 16, below. Each party will fulfill all its obligations
hereunder through the date of termination or expiration. After
termination or expiration,
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neither party will have any further obligations hereunder except as
provided in this Section 1.
(b) Option Upon Termination of Agreement for Sale of Stations. If at any
time either (i) Licensee shall terminate the Sale Agreement, or (ii)
Programmer shall terminate the Sale Agreement, in each case in
compliance with the terms of the Sale Agreement, then either party
may terminate this Agreement, upon at least 10 days' advance written
notice to the other party.
(c) Effect of Termination on Advertising and other Contracts. On the
termination date, Programmer will provide to Licensee a written
schedule of all advertising commitments for the Stations then in
effect. Licensee shall reasonably cooperate with Programmer to honor
all such advertising commitments then outstanding, in which event
Licensee shall receive as compensation for the broadcasting of such
programming that which otherwise would have been paid to Programmer;
provided, however, as to fees received by Licensee for advertising
broadcasts by Programmer prior to the Termination Date, Licensee
agrees to pay to Programmer 100 percent (100%) of all advertising
revenue received by Licensee with respect thereto within 120 days
using procedures comparable to those specified in Section 7 below.
Programmer will remain liable for all other contracts entered into
and other liabilities incurred by Programmer in the course of its
performance under this Agreement, if any, and Licensee shall not
assume any liability therefor.
(d) Amendment of Terms in the Event of Delay. If at June 1, 1998, the
closing of the Sale has not occurred, Programmer and Licensee agree
in good faith to review this Agreement at that time and to adjust or
revise the terms as may be in the mutual interest of the parties.
2. Fees.
Monthly Fee. Programmer will pay Licensee for the broadcast of the
programs hereunder a fee each month as described in more detail in Appendix A to
this Agreement (the "Monthly Fee"). The Monthly Fee will be payable on the first
day of each calendar month during the Term, to Clearly Superior Radio, L.L.C.,
1822 North Court Street, One Broadcast Center, Marion, Illinois 62959, or to
such other address as Licensee may designate in writing. The failure of Licensee
to demand or insist upon prompt payment of the Monthly Fee will not constitute a
waiver of its right to do so.
3. Programs.
(a) Operation of Stations. Throughout the Term, Licensee will make the
Stations and time on the Stations available to Programmer for up to
166 hours per week, Sunday through Saturday, except for downtime
occasioned by routine maintenance. Programmer will provide
entertainment programming of its selection complete with
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commercial matter, news, public service announcements and other
suitable programming (the "Programming"). Subject to the limitations
set forth herein, all time on the Stations not reserved to Licensee
pursuant to this Section 3(a) will be available for use by
Programmer and no other party, and Licensee will broadcast the
Programming on the Stations at all such times. Licensee may reserve
up to two (2) hours per week on the Stations for the broadcast of
Licensee's own regularly scheduled public-interest programming;
provided, however, that Licensee will not reserve time for such
regularly scheduled programming between the hours of 5:00 a.m.
-12:00 midnight, Monday through Friday, 8:00 a.m. - 12:00 midnight,
Saturday or 9:00 a.m. - 12:00 midnight, Sunday.
(b) Programming Standards. The Programming will be in conformity with
generally recognized industry standards and in accordance with the
Communications Act of 1934, as amended (the "Act") and the rules,
regulations and policies of the Federal Communications Commission
(the "Commission") and with those specific standards set forth in
Appendix B to this Agreement. Programmer will make the Programming
available to Licensee during a sufficient number of hours to enable
the Stations to meet the minimum hours of operation required under
the Commission's rules. All advertising messages and promotional
material or announcements will comply with all applicable federal,
state and local laws, rules, and regulations. Licensee acknowledges
that the right hereby granted to Licensee to broadcast the
Programming on the Stations is non-exclusive and that ownership of
the Programming and all parts thereof and the right to authorize
their use in any media whatsoever is and shall remain vested in
Programmer.
(c) Ancillary Broadcast Rights. Programmer shall have the right to use,
or permit third parties to use, the Stations' subcarriers, and will
be entitled to all revenues derived from any such subcarrier
transmissions during the term of this Agreement.
(d) Programming and Operations Standards. Licensee may preempt any
program that Licensee reasonably believes to be unsuitable or
contrary to the public interest. Licensee will give Programmer
reasonable notice of its intention to preempt any program, and, in
the event of suspension or cancellation, Programmer will receive a
pro rata reduction in the Monthly Fee for the period of time so
preempted, calculated to the nearest minute.
(e) Call Signs. Licensee will retain all rights to the call letters
WDDD, WFRX, WTAO, WVZA, and WQUL or any other call letters which may
be assigned by the FCC for use by the Stations, and will ensure that
proper station identification announcements are made with such call
letters in accordance with FCC rules and regulations. Licensee will
not, without Programmer's consent, apply for any change in the call
letters assigned to the Stations. Licensee will promptly, upon
Programmer's request and at Programmer's expense, take all steps
necessary to change the Stations' call letters to conform with the
Programming, and such call letters will be consistent
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with applicable FCC rules and regulations. Programmer shall include
in the Programming an announcement in a form satisfactory to
Licensee at the beginning of each hour of such programs to identify
WDDD, WFRX, WTAO, WVZA, and WQUL or such other call letters used by
Licensee for the Stations, as well as any other announcements
required by the rules and regulations of the FCC. Programmer is
specifically authorized to use the call letters WDDD, WFRX, WTAO,
WVZA, and WQUL, or other call letters used by Licensee for the
Stations, in its Programs and in any promotional material, in any
media, used in connection with the Programming.
4. Facilities and Equipment.
(a) Facilities. Licensee will permit Programmer to use all equipment and
motor vehicles now located at the Studio or the Transmitter Sites, a
schedule of which is attached as Schedule __ to the Sale Agreement
(the "Licensee Equipment"), but exclusively for the operation of the
Stations. Licensee will at all times retain title to the Licensee
Equipment. Programmer will originate its programming from the Studio
and will transmit programming to the Studio via a mode of
transmission it selects that will ensure technical and quality
standards comparable to the Station's broadcasts prior to the Term.
The Studio will constitute the "main studio" of the Stations.
Licensee will have access to the Studio at all times.
(b) Maintenance. Any regular maintenance work affecting the operation of
the Stations at maximum facilities will be scheduled with the
approval of Programmer, which will not be unreasonably withheld,
upon at least forty-eight (48) hours' prior notice to Programmer.
Programmer will perform and bear the cost of all routine maintenance
of equipment at the Studio. Licensee will bear the cost of
extraordinary maintenance to and replacement of Licensee Equipment
located at the Studio.
(c) Transmitter Sites. Licensee will maintain the Transmitter Sites and
all equipment located at the Transmitter Sites at its own expense.
Licensee will perform routine maintenance work at the Transmitter
Sites, as needed, on Mondays between midnight and 4:00 a.m. The
Transmitter Sites will be operated, in all material respects, in
accordance with all applicable laws and regulations (including the
requirements of the Act and the rules, regulations, policies and
procedures of the Commission promulgated thereunder). The
transmitting facilities of the Stations are capable of transmitting
at the Stations' maximum authorized effective radiated power, with
an antenna center of radiation at its full authorized height above
ground and above average terrain. Licensee will maintain the
operating power of the Stations at their maximum licensed level and
shall operate and maintain in good working condition the Stations'
transmission facilities and broadcasting equipment. Licensee will
not apply to the Commission for any reduction in the Station's
maximum authorized facilities without the prior written approval of
Programmer.
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(d) Interruption of Normal Operations. If the Stations suffers any loss
or damage of any nature at the Transmitter Sites which is not caused
by the acts or omissions of Programmer and which results in the
interruption of service or the inability of the Stations to operate
with its maximum authorized facilities and licensed effective
radiated power, Licensee will immediately notify Programmer and
promptly undertake such repairs, at Licensee's expense, as are
necessary to restore full-time operation of the Stations with its
maximum authorized facilities and licensed effective radiated power
thereon as quickly as is reasonably possible under the
circumstances. Except in the case of events not under control of
Licensee (such as acts of God or weather conditions) which do not
materially impair the earnings potential of the Stations, if one or
more of the Stations is inoperable or is operated at 90% or less of
its licensed effective radiated power as a consequence of such loss
or damage, then Programmer will be entitled to a Pro rata reduction
in the proportionate Monthly Fee for that Station for each day in
which there occurs such a service interruption in excess of four (4)
consecutive hours. Licensee will promptly begin to repair and will
complete the repairs necessary to restore the inoperable Station(s)
to full time operations with its maximum licensed facilities within
ten (10) days from the occurrence of the loss or damage; provided,
however, that this period will be extended for a reasonable period
of time, not to exceed an additional ten (10) days, if Licensee has
taken and is continuing to take all appropriate actions to repair
the loss or damage as promptly as possible in the circumstances. If
such repairs are not completed within the allotted period,
Programmer may give notice to Licensee of Programmer's intention to
terminate this Agreement, in which event this Agreement will
terminate on the date of such notice, any other provision of this
Agreement notwithstanding.
5. Costs of Operating Stations.
(a) General. Licensee will retain ultimate control over the personnel,
finances, programming and operation of the Stations. Except as
otherwise expressly set forth in this Agreement, all costs of
producing and delivering the Programming to the Transmitter Sites
for broadcast on the Stations will be borne by Programmer including,
without limitation, all personnel, equipment costs, maintenance,
music license fees, taxes of all kinds (including real and personal
property and income), utilities, all payments in the nature of rent
due under the Transmitter Leases, remaining payments due on motor
vehicles and all expenses related to the construction, maintenance
and operation of the Studio. Programmer will be responsible for all
liabilities, debts and obligations of Programmer based upon the
purchase of air time including, without limitation, barter
agreements and unaired advertisements, but not for Licensee's
federal, state and local income tax liabilities.
(b) Employees. Programmer will employ and be responsible for the
salaries, commissions, taxes, insurance and all other related costs
for all personnel involved
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in the production and marketing of the Programming and the
origination and/or delivery of the Programming from the Studio or
any remote location to the Transmitter Sites (including air
personalities, engineering personnel, salespersons, traffic
personnel, board operators and other programming staff members).
Upon notice to the Licensee, and at mutually agreeable times, the
Licensee will permit Programmer to meet with its employees prior to
or after the Effective Date. Programmer may, at its option and upon
its terms and conditions, extend offers of employment to all or any
of Licensee's employees as of the Effective Date. Licensee will not
take any action to preclude or discourage any of the Licensee's
employees from accepting any offer of employment extended by
Programmer. Licensee will be responsible for all payroll, vacation,
severance, and other employee-related liabilities prior to their
employment by Programmer. Licensee will be responsible for the
personnel necessary for the fulfillment of Licensee's regulatory
requirements and the technical transmission of Programmer's
programs. Specifically, Licensee will employ a General Manager who
will report to Licensee and direct the performance of Licensee's
obligations hereunder, and will employ at least one full time
employee per studio location to assist the General Manager in
performing Licensee's obligations hereunder, including maintaining
the Stations' transmission facilities. Licensee's employees will
have no employment, consulting, or other material relationship to
Programmer (except that Dutch Doelitzsch may provide certain
consulting or engineering services to Programmer). Programmer will
provide suitable office space for Licensee's personnel at the Studio
at no charge, and to the extent feasible the space assigned to
Licensee's employees shall be physically separate from the space
assigned to Programmer's employees. Whenever in the Studio or at the
Transmitter Sites, Programmer's personnel will be subject to the
reasonable supervision and the direction of Licensee's General
Manager and/or Engineer. Programmer will be responsible for the
payment of any publicity or promotional expenses incurred by
Programmer and for all telephone calls associated with program
production and listener response. Upon termination of this Agreement
upon an event other than the closing of the Sale, the Stations'
employees may be re-hired by Licensee.
(c) Insurance for Transmitter Sites. Licensee will maintain in full
force and effect throughout the term of this Agreement insurance
with responsible and reputable insurance companies or associations
covering such risks to the Transmitter Sites and the Equipment
located thereon (including fire and other risks insured against by
extended coverage, public liability insurance, insurance for claims
against personal injury or death or property damage and such other
insurance as may be required by law) and in such amounts and on such
terms as is conventionally carried by broadcasters operating radio
stations with facilities comparable to those of the Stations. Any
insurance proceeds received by Licensee in respect of damaged
property will be used promptly to repair or replace such property so
that the operation of the Stations conforms with this Agreement.
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(d) Insurance for Studio. Programmer will maintain in full force and
effect throughout the term of this Agreement insurance with
responsible and reputable insurance companies or associations
covering such risks to the Studio and all equipment located thereon
(including fire and other risks insured against by extended
coverage, public liability insurance, insurance for claims against
personal injury or death or property damage and such other insurance
as may be required by law) and in such amounts and on such terms as
is conventionally carried by broadcasters operating radio stations
with facilities comparable to those of the Stations. Any insurance
proceeds received by Programmer in respect of damaged property will
be used promptly to repair or replace such property so that the
operation of the Stations conforms with this Agreement.
(e) Music Licenses. During the Term, Licensee will obtain and maintain
in full force and effect in its own name all music licenses ("Music
Licenses") that are currently operative with respect to the Stations
and that will be required by the licenser of those Music Licenses
("Licensor"). All Music Licenses fees due from Licensee will be paid
by Licensee from advances by Programmer.
6. Advertising and Programming Revenues. Programmer may sell advertising for
broadcast on the Stations as part of Programmer's programming, and all
proceeds generated as a result of the sale of such advertisements shall be
the property of Programmer and neither Licensee nor any of Licensee's
creditors have or shall have an interest in such proceeds.
7. Accounts Receivable and Accounts Payable.
(a) General. As of the Effective Date of this Agreement, the Licensee
will turn over to the Programmer, for collection only, the accounts
receivable of the Sellers owing to the Licensee as of the close of
business on the day before the Effective Date. A schedule of such
accounts receivable will be delivered by the Licensee to the
Programmer on the Closing Date or as soon thereafter as possible.
The Programmer agrees to use commercially reasonable efforts in the
ordinary course of business (but without responsibility to institute
legal or collection proceedings) to collect such accounts receivable
during the 120-day period following the Closing Date. At the end of
each consecutive 30-day period beginning with the Effective Date,
Programmer will remit to Licensee 25%, 50%, 75%, and 100%,
respectively of the collections. As of 120 days following the
Effective Date, any uncollected accounts receivable will be returned
to the Seller for further collection. Insofar as any particular
account payable or receivable shall pertain to the operation of the
Stations both during the Term and prior thereto, the parties will
prorate amounts payable or receivable, as the case may be, as soon
as reasonably practical following the signing of this Agreement, and
amounts received shall be applied first to satisfy Licensee's
obligations. The Programmer shall have the sole right to collect
such accounts receivable during such one hundred twenty (120) day
period. At the end of the 120-day period following the Closing
Date, the Programmer will turn back to the
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Licensee all of the accounts receivable of the Programmer as of the
Closing Date owing to the Licensee which have not yet been
collected, and the Programmer will thereafter have no further
responsibility with respect to the collection of such receivables.
(b) Carryover Accounts. Programmer will assume the obligation to provide
advertising time on the Stations in consideration of Licensee's
trade accounts in existence as of the date of this Agreement on a
time available basis during the first twelve (12) months of the
Term, in an amount not to exceed $5,000 worth of advertising time.
Programmer will perform all of Licensee's obligations under existing
long-term contracts for the sale of advertising time on the Stations
that are to be performed on or after the first day of the Term and
will be entitled to all the proceeds of accounts receivable
pertaining to such performance.
8. Operation of Stations. Notwithstanding anything to the contrary in this
Agreement, Licensee will have full authority and power over the operation
of the Stations during the term of this Agreement. Licensee will be
responsible for the payment of the salaries and other compensation
(including payroll taxes, etc.) of the Station's General Manager,
Engineer, and any other personnel employed by Licensee, all of whom will
report and be accountable to the Licensee. The Station's General Manager
will direct the day-to-day operation of the Stations through the exercise
of its sole control over the New Studio and the Transmitter Sites.
Licensee will retain control over the policies, programming and operations
of the Stations, the right to preempt any programs or advertisements not
in the public interest or in order to broadcast a program deemed by
Licensee to be of greater national, regional or local importance (subject
to payment credit in accordance with Section 3(d) hereof), and the right
to take any other actions necessary for compliance with federal, state and
local laws, the Act and the rules, regulations and policies of the
Commission (including the prohibition on unauthorized transfers of
control) and the rules, regulations and policies of other federal
government entities, including the Federal Trade Commission and the United
States Department of Justice. Licensee will at all times be solely
responsible for meeting all of the Commission's requirements with respect
to public service programming, for maintaining the Station's logs and
political and public inspection files, and for the preparation of
issues/programs lists. Licensee will also retain the right to break into
Programmer's programming in case of an emergency. Programmer will, upon
request by Licensee, provide Licensee with information with respect to
such of the Programming as is responsive to public needs and interests so
as to assist Licensee in the preparation of required programming reports
and will provide upon request such other information necessary to enable
Licensee to prepare other records and reports required by the Commission
or other local, state or federal government entities. Programmer will
cooperate with Licensee to ensure the Station's compliance with the
Commission's rules, regulations and statutes, including the political
broadcast rules requiring equal opportunities, reasonable access and
lowest unit charge.
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9. Station Identification. Licensee will be responsible for the proper
broadcast of station identification announcements. Pursuant to Section
3(e), Programmer will coordinate such announcements with Licensee so that
they are aired in accordance with the Commission's rules.
10. Special Events. Licensee reserves the right, in its good faith discretion,
to preempt or interrupt the broadcasts of the programs referred to herein,
or any part thereof, for broadcast of special programs of greater
national, regional, or local importance. In all such cases, Licensee will
use its best efforts to give Programmer reasonable notice of its intention
to preempt or interrupt Programmer's programs, and, in the event of such
preemption or interruption, Programmer will receive a payment credit for
the programs preempted or interrupted pursuant to the provisions of
Section 3(d) hereof.
11. Handling of Mail. Except as required to comply with Commission rules and
policies, including those regarding the maintenance of the public records
file and the political file (which will at times remain the responsibility
of the Licensee), Licensee will not be required to receive or handle mail
in connection with Programmer's programs broadcast hereunder. Programmer
agrees that the mailing address of the Stations shall not be changed
without the prior written permission of Licensee.
12. Payola. Programmer agrees that it will not accept any consideration,
compensation or gift or gratuity of any kind whatsoever, regardless of its
value or form, including, but not limited to, a commission, discount,
bonus, material, supplies or other merchandise, services or labor
(collectively "Consideration"), whether or not pursuant to written
contracts or agreements between Programmer and merchants or advertisers,
unless the payer is identified in the program for which Consideration was
provided as having paid for or furnished such Consideration, in accordance
with the Act and FCC requirements. Programmer agrees to annually, or more
frequently at Licensee's reasonable request, execute and provide Licensee
with a Payola Affidavit, substantially in the form attached hereto as
Exhibit A.
13. Compliance with Law. Each party will comply with all laws, rules,
regulations and policies applicable to the conduct of the Stations's
business, and each party acknowledges that the other party has not urged,
counseled or advised the use of any unfair business practice.
14. Licensee's Representations, Warranties and Covenants. Licensee makes the
following further representations, warrants and covenants:
(a) Qualification. Licensee is legally qualified, empowered and able to
enter into this Agreement. This Agreement has been approved by all
necessary action of the Licensee and constitutes the valid and
binding obligation of Licensee, enforceable in accordance with its
terms. The execution, delivery and performance hereof will not
constitute a breach or violation of any agreement, contract or other
obligation to which either party is subject or by which it is bound.
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(b) Authorizations. Licensee holds, and throughout the Term will
continue to hold, all licenses and other permits and authorizations
necessary for the operation of the Stations as presently conducted,
including licenses, permits and authorizations issued by the
Commission ("FCC Authorizations").
(c) Filings. All reports and applications required to be filed with the
Commission (including ownership reports and renewal applications) or
any other government entity, department or body in respect of the
Stations have been, and in the future will be, filed in a timely
manner and are and will be true and complete and accurately present
the information contained and required thereby. All such reports and
documents, to the extent required to be kept in the public
inspection files of the Stations, are and will be kept in such
files.
(d) Compliance With FCC Requirements. The Stations will be operated in
conformity with the FCC Authorizations, the Communications Act and
the rules and regulations of the Commission. The Licensee will take
all steps necessary or appropriate to ensure that the FCC
Authorizations will at all times remain in full force and effect.
(e) Content of the Programming. The content of Licensee's programming
will not violate any rights of others. Licensee will hold
Programmer, the Stations and Programmer's employees, harmless from
any and all damages, liabilities, costs and expenses, including
reasonable attorneys' fees, arising from any claims of third parties
(excluding third parties claiming through Programmer) that allege
negligence or intentional tortious acts of Licensee, its employees
and/or its representatives, or that relate to the content of
Licensee's programming, including without limitation, claims
alleging libel, slander, unfair competition or trade practices,
infringement of trademarks, tradenames or program titles, violation
of rights of privacy and infringement of copyrights and proprietary
rights. Licensee's obligation to hold Programmer harmless against
the liabilities specified above will survive any termination of this
Agreement until the expiration of all applicable statutes of
limitation.
15. Programmer's Representations, Warranties and Covenants. Programmer makes
the following further representations, warrants and covenants:
(a) Qualification. Programmer is legally qualified, empowered and able
to enter into this Agreement. This Agreement has been approved by
all necessary action of the Board of Directors of Programmer and
constitutes the valid and binding obligation of Programmer,
enforceable in accordance with its terms. The execution, delivery
and performance hereof will not constitute a breach or violation of
any agreement, contract or other obligation to which either party is
subject or by which it is bound.
(b) Content of the Programming. The content of the Programming will not
violate any rights of others. The Programmer will hold Licensee, the
Stations and Licensee's
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employees, harmless from any and all damages, liabilities, costs and
expenses, including reasonable attorneys' fees, arising from any
claims of third parties (excluding third parties claiming through
Licensee) that allege negligence or intentional tortious acts of
Programmer, its employees and/or its representatives, or that relate
to the content of the Programming, including without limitation,
claims alleging libel, slander, unfair competition or trade
practices, infringement of trademarks, tradenames or program titles,
violation of rights of privacy and infringement of copyrights and
proprietary rights. Programmer's obligation to hold Licensee
harmless against the liabilities specified above will survive any
termination of this Agreement until the expiration of all applicable
statutes of limitation.
16. Events of Default: Cure Periods and Remedies.
(a) Events of Default. The following will, after the expiration of the
applicable cure periods, constitute Events of Default:
(i) Non-Payment. Programmer's failure to pay the Monthly Fee (A) by
the 10th day of any month during the Term;
(ii) Breach of Covenants. If either party hereto shall fail in any
material way to observe or perform any covenant, condition or agreement
contained herein;
(iii) Breach of Representation or Warranty. If any material
representation or warranty herein made by either party in any certificate
or document furnished by either party to the other pursuant to the
provisions hereof, shall prove to have been false or misleading in any
material respect as of the time made or furnished; or
(iv) Bankruptcy, etc. If either party (i) shall make a general
assignment for the benefit of creditors, (ii) shall file or have 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 or discharged within sixty (60) days
thereof.
(b) Cure Periods. Except in the case of a default under the foregoing
subsection (a)(iv), as to which no cure period will be applicable,
an Event of Default will not be deemed to have occurred until twenty
(20) business days after the nondefaulting party has provided the
defaulting party with written notice specifying the event or events
that if not cured would constitute an Event of Default. This period
may be extended by the non-defaulting party for a reasonable period
of time, if the defaulting party is acting in good faith to cure the
default and such delay will not have a materially adverse affect
upon the other party.
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(c) Remedies. Upon the occurrence of an Event of Default, the
non-defaulting party may terminate this Agreement, provided that it
is not also in default hereunder, in addition to any other remedies
available to the non-defaulting party at law or equity, or under
paragraph (d), below.
(d) Specific Performance. Without limiting or waiving in any respect any
rights or remedies of any party given under this Agreement, or now
or hereafter existing at law or in equity or by statute, either
party shall be entitled to specific performance of the obligations
to be performed by the other in accordance with the provisions of
this Agreement.
17. No Brokers. The parties represent to each other that no brokers or finders
have been engaged in connection with the transaction described in this
Agreement, and the parties agree to indemnify and hold each other harmless
against any claim from any broker or finder based upon any agreement,
arrangement, or understanding alleged to have been made by Licensee or by
Programmer, as the case may be.
18. General.
(a) Notices. All necessary notices, demands and requests permitted or
required under this Agreement will be in writing and will be deemed
given, if personally delivered, on the date of personal delivery,
or, if mailed, four (4) days after being mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Licensee:
Clearly Superior Radio, L.L.C.
1822 North Court Street
One Broadcast Center
Marion, Illinois 62959
Attn: Dennis F. Doelitzsch
with a copy to:
Winters, Brewster, Crosby & Patchett
111 West Main Street
P.O. Box 700
Marion, Illinois 62959
Attn: John Brewster, Esquire
If to Programmer:
Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
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Chicago, Illinois 60611
Attn: Richard Bonick
Fax No.: (312) 867-0091
with copies to:
Cumulus Broadcasting, Inc.
c/o QUAESTUS Management Corporation
330 E. Kilbourn Avenue
Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax No: (414) 283-4500
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula, Esq.
Fax No: (219) 239-1900
or to such other address as any such person may designate in writing.
(b) Modification and Waiver. No modification of any provision of this
Agreement will in any event be effective unless the same will be in
writing and signed by a duly authorized officer of the party to be
charged therewith, and then such modification will be effective only
in the specific instance and for the purpose for which given.
(c) Construction. This Agreement will be construed in accordance with
the laws of the State of Illinois excluding the choice of law rules
utilized in that jurisdiction, and the obligations of the parties
hereto are subject to all federal, state and local laws and
regulations now or hereafter in force and to the rules, regulations
and policies of the Commission and all other government entities or
authorities presently or hereafter to be constituted.
(d) Headings. The headings contained in this Agreement are included for
convenience only and no such heading will in any way alter the
meaning of any provision.
(e) No Assignment. No right or obligation under this Agreement may be
assigned by either party without the other party's consent, which
may be withheld for any reason.
(f) Counterpart Signature. This Agreement may be signed in one or more
counterparts, each of which will be deemed a duplicate original,
binding on the parties hereto
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notwithstanding that the parties are not signatory to the original
or the same counterpart. This Agreement will be effective as of the
date first above written.
(g) Entire Agreement. This Agreement embodies the entire agreement
between the parties and there are no other agreements,
representations, warranties or understandings, oral or written,
between them with respect to the subject matter hereof.
(h) No Partnership or Joint Venture Created. Nothing in this Agreement
will be construed to make Licensee and Programmer partners or joint
venturers or to afford any rights to any third party other than as
expressly provided herein. Neither Licensee nor Programmer will have
any authority to act as an agent for, or to enter into any contracts
on behalf of or that will be binding upon the other party.
(i) Severability. In the event any provision contained in this Agreement
is held to be invalid, illegal or unenforceable, such holding will
not affect any other provision hereof and this Agreement will be
construed as if such invalid, illegal or unenforceable provision had
not been contained herein.
(j) Force Majeure. Any failure or impairment of Licensee's facilities or
any delay or interruption in the broadcast of programs, or
Licensee's failure at any time to furnish facilities, in whole or in
part, for broadcast, due to causes beyond the control of Licensee,
will not constitute a breach of this Agreement and Licensee will not
be liable to Programmer, except to the extent provided in Sections
4(d) and 5(c) above.
(k) Other Agreements. During the term of this Agreement, Licensee will
not enter into any other time brokerage, program provision, local
management or similar agreement, regarding the Stations, with any
third party.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
CUMULUS BROADCASTING, INC.
By:___________________________________
Its:___________________________________
"Programmer"
CLEARLY SUPERIOR RADIO, L.L.C.
By:___________________________________
Its:___________________________________
"Licensee"
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement, during the Term, Programmer shall pay Licensee a monthly fee
equal to (i) Forty Thousand Dollars ($40,000), plus (ii) fifty (50) percent of
the previous month's broadcast cash flow, defined as total sales, less barter,
less commissions actually paid, less One Hundred Thirty-Five Thousand Dollars
($135,000).
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APPENDIX B
Programmer 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:
I. Religious Programming. The subject of religion and references to
particular faiths, tenants, and customs shall be treated with respect at all
times. Programs shall not be used as a medium for attack on any faith,
denomination, or sect or upon any individual or organization.
II. Controversial Issues. Any discussion of controversial issues or public
importance shall be reasonably balanced with the presentation of contrasting
viewpoints in the course of overall programming; no attacks on the honesty,
integrity, or like personal qualities of any person or group of persons shall be
made during the discussion of controversial issues of public importance; and
during the course of political campaigns, programs are not to be used as a forum
for editorializing about individual candidates. If such events occur, Licensee
may require that responsive programming be aired.
III. No Plugola or Payola. The 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.
IV. No Lotteries. Announcements giving any information about lotteries or
games prohibited by federal or state law or regulation are prohibited.
V. Election Procedures. At least ninety (90) days before the start of any
primary or regular election campaign, Programmer will clear with Licensee's
General Manager the rate Programmer will charge for the time to be sold to
candidates for public office and/or their supporters to make certain that the
rate charged conforms to all applicable laws and station policy.
VI. Spot Commercial Limitations. With respect to any given segment of air
time hereunder, the amount of spot commercial matter shall not exceed 20 minutes
during any sixty minute segment. Programmer will provide, for attachment to the
Station logs, a list of all commercial announcements carried during its
programming.
VII. Required Announcements. Broker shall broadcast (a) an announcement in
a form satisfactory to Licensee at the beginning of each hour to identify
Stations WDDD, WFRX, WTAO, WVZA, and WQUL, (b) an announcement at the beginning
and end of each program, and hourly, as appropriate, to indicate that program
time has been purchased by Programmer, and (c) any other announcement that may
be required by law, regulation, or station policy.
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VIII. Credit Terms Advertising. Pursuant to rules of the Federal Trade
Commission, any advertising of credit terms shall be made over the Station in
accordance with all applicable federal and state laws, including regulations Z
and M.
IX. Commercial Recordkeeping. Programmer shall not receive any
consideration in money, goods, service, or otherwise, directly or indirectly
(including to relatives) from any person or company for the presentation of any
programming over the Stations without reporting the same in advance to and
receiving the prior written consent of Licensee's General Manager. No commercial
messages ("plugs") or undo references shall be made in programming presented
over the Station to any business venture, profitmaking activity, or other
interest (other than noncommercial announcements for bona fide charities, church
activities, or other public service activities) in which Programmer (or anyone
else) is directly or indirectly interested without the same having been approved
in advance by Licensee's General Manager and such broadcast being announced and
logged and sponsored.
X. No Illegal Announcements. No announcements or promotion prohibited by
federal or state law or regulation of any lottery or game shall be made over the
Station. Any game, contest or promotion relating to or to be presented over the
Station must be fully stated and explained in advance to Licensee, which
reserves the right in its sole direction to reject any game, contest or
promotion.
XI. Licensee Discretion Paramount. In accordance with the Licensee's
responsibility under the Communications Act of 1934, as amended, and the rules
and regulations of the Federal Communications Commission, Licensee reserves the
right to reject or terminate any advertising proposed to be presented or being
presented over the station which is in conflict with Station policy or which in
the reasonable judgment of Licensee or its General Manager/Chief Engineer would
not serve the public interest.
XII. Programming in Which Programmer Has a Financial Interest. Broker
shall advise the General Manager of the Station with respect to any programming
(including commercial(s) concerning goods or services in which Programmer has a
material financial interest. Any announcements for such goods and services shall
clearly identify Programmer's financial interest.
XIII. Programming Prohibitions. Programmer shall not broadcast any of the
following programs or announcements:
A. False Claims. False or unwarranted claims for any product or
service.
B. Unfair Imitation. Infringements of another advertiser's rights
through plagiarism or unfair imitation of either program idea or copy, or
any other unfair competition.
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C. Commercial Disparagement. Any disparagement of competitors or
competitive goods.
D. Profanity. Any programs or announcements that are slanderous,
obscene, profane, vulgar, repulsive or offensive, either in theme or in
treatment.
E. Price Disclosure. Any price mentions except as permitted by
Programmer's policies current at the time.
F. Unauthenticated Testimonials. Any testimonials which cannot be
authenticated.
G. Descriptions of Bodily Functions. Any continuity which describes
in a repellent manner internal bodily functions or symptomatic results or
internal disturbance, and no reference to matters which are not considered
acceptable topics in social groups.
H. Conflict Advertising. Any advertising matter or announcement
which may, in the reasonable opinion of Licensee, be injurious or
prejudicial to the interests of the public, the Stations, or honest
advertising and reputable business in general.
I. Fraudulent or Misleading Advertisement. Any advertisement matter,
announcement, or claim which Programmer knows to be fraudulent,
misleading, or untrue.
Programmer may waive any of the foregoing regulations in specific
instances if, in its reasonable opinion, good broadcasting in the public
interest will be served thereby.
In any case where questions of policy or interpretation arise, Programmer
shall submit the same to Licensee for decision before making any commitments in
connection therewith.
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LOCAL MARKETING AGREEMENT
This Local Marketing Agreement (the "Agreement") is made as of February
16, 1998, effective for all purposes on the Effective Date (as defined below),
between Cumulus Broadcasting, Inc. ("Programmer") and Lyle Evans d/b/a/ Brillion
Radio Company ("Licensee").
Recitals
A. Licensee owns and operates radio broadcast station WEZR-FM (the
"Station") pursuant to licenses issued by the Federal Communications Commission
(the "FCC").
B. Licensee and Programmer have contemporaneously entered into an Asset
Purchase Agreement (the "Purchase Agreement") which will provide for the
acquisition by Programmer of substantially all of the assets used or useful in
connection with the operation of the Station, on the terms and subject to the
conditions set forth therein.
C. Pending execution of the Purchase Agreement and closing thereunder,
Programmer desires to purchase from Licensee and Licensee desires to sell to
Programmer certain airtime on the Stations, all in accordance with the
Communications Act of 1934, as amended, and the rules, regulations, and policies
of the FCC (the "FCC Requirements").
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations, warranties and agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement agree as
follows:
1. Effective Date and Term.
1.1 Effective Date. This Agreement shall become effective for all purposes
at 12:01 a.m. on February 16, 1998.
1.2 Term. The term of this Agreement (the "Term") shall begin on the
Effective Date and shall continue until December 31, 1998, unless earlier
terminated in accordance with the provisions set forth in this Agreement.
2. Purchase of Airtime. Programmer hereby purchases from Licensee all
airtime on the Station during the Term, other than airtime between 7:00 a.m. to
8:00 a.m., local time on Sundays, on the terms specified herein (such purchased
airtime period is referred to herein as the "Broadcasting Period"). During the
Broadcasting Period, Licensee shall broadcast on the Station programming
supplied by Programmer (collectively, the "Program" or "Programs"). Programmer
will ensure that the Programs meet technical and quality standards equal to
those of programming broadcast by commercial radio stations generally in the
United States. If Licensee in the reasonable
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exercise of its discretion finds that any Program(s) does not meet these
standards, then it shall advise Programmer in writing of the specific technical
deficiencies. If such technical deficiencies have not been corrected within ten
(10) days after receipt of notice, then Licensee shall have no obligation to
broadcast such Program(s) until such time as the technical deficiencies are
corrected.
3. Licensee's Broadcasting Obligations. In consideration for the payments
made and to be made by Programmer hereunder, Licensee shall make available to
Programmer, beginning on the Effective Date, all of the Station's airtime during
the Broadcasting Period and shall cause to be broadcast on the Station the
Programs pursuant to Section 2 hereof. Throughout the Term, unless otherwise
mutually agreed by the parties, Licensee shall maintain the operating power of
the Station at its maximum licensed level and shall operate and maintain in good
working condition the Station's transmission facilities and broadcasting
equipment, excluding improvements and additions made by Programmer. Throughout
the Term, Licensee shall also, with respect to the Station:
(a) employ a General Manager who will report to Licensee and direct
the performance of Licensee's obligations hereunder and who shall have no
employment, consulting, or other material relationship to Programmer;
(b) employ at least one full time employee to assist the General
Manager in performing Licensee's obligations hereunder, including
maintaining the Station's transmission facilities, and who shall have no
employment, consulting or other material relationship with Programmer;
(c) retain ultimate control over the personnel, finances,
programming and operation of the Station;
(d) maintain a main studio consistent with the FCC Requirements at
which the General Manager and the other full time employee(s) of the
Station will be available during normal business hours;
(e) comply with the FCC Requirements with respect to the
ascertainment of community problems, needs and interests; broadcast
programming responsive thereto; and timely prepare and place in the
Station's public inspection files appropriate documentation thereof;
(f) comply with all other FCC Requirements which may be applicable
to the operation of the Station.
4. Consideration. In consideration of the airtime made available to
Programmer pursuant to this Agreement, Programmer shall pay Licensee as set
forth in Appendix A attached hereto.
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5. Operation, Ownership and Control of the Stations.
5.1 Control Vested in Licensee. Notwithstanding anything to the contrary
in this Agreement, as long as Licensee remains the FCC licensee of the Stations,
Licensee will have full authority, power and control over the operation of the
Station and over all persons employed by it. Licensee will bear the
responsibility for the Station's compliance with, and shall cause the Station to
comply with, all applicable laws, including the FCC Requirements. Nothing
contained herein shall prevent or hinder Licensee from: (a) rejecting or
refusing Programs that Licensee believes in good faith to be unsuitable or
contrary to the public interest; (b) substituting programs which Licensee
believes in good faith to be of greater local or national importance or which
are designed to address the problems, needs and interests of the local
community: (c) preempting any Program in the event of a local, territorial or
national emergency; (d) refusing to broadcast any Program that does not meet the
FCC Requirements; or (e) deleting any commercial announcements that do not
comply with the FCC Requirements or the requirements of the Federal Trade
Commission, or any state, local or federal law.
5.2 Notice of Complaints. Programmer will immediately serve Licensee with
notice and a copy of any letters of complaint that Programmer receives
concerning any Program for Licensee's review and inclusion in its public
inspection files. Licensee will immediately serve Programmer with notice and a
copy of any letters of complaint that it receives concerning any Program.
5.3 Programmer Access to the Station's Studios. During the Term, Licensee
shall make available to Programmer for no additional consideration the areas in
the Station's studios as may be reasonably necessary or appropriate for
Programmer to exercise its rights and perform its obligations under this
Agreement. Programmer shall, to the extent commercially feasible, use Licensee's
current studios and other facilities to exercise its rights and perform its
obligations under this Agreement.
5.4 Employees. Programmer shall employ and be responsible for the
salaries, taxes, insurance, and related costs for all personnel used in the
production of the programs supplied to the Station hereunder, and all other
costs incurred by Programmer for the production of such programs. Licensee shall
pay all compensation owed to its employees up to and including the Effective
Date. Programmer may, after the Effective Date, employ those of Licensee's
employees as Programmer may elect on terms and conditions determined by
Programmer in Programmer's sole discretion, other than those employees employed
by Licensee in the operation of the Station after the Effective Date, who shall
remain in Licensee's sole employ and control. Upon termination of this
Agreement, Licensee shall be free to re-employ Programmer's employees on such
terms and conditions as may be determined by Licensee.
5.5 Mutual Cooperation. Programmer and Licensee agree to cooperate
reasonably with each other as necessary to fulfill their rights and obligations
hereunder.
6. Program Rights and Music Licenses. During the Term, Licensee shall make
available to Programmer for its use, on the dates and at the times specified by
Programmer, all of
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Licensee's rights to programs under any program rights agreements of the
Stations (together with the music licenses described below, the "Program Rights
Agreements"). Licensee shall use its best efforts to secure all consents, if
any, from third parties that are necessary to permit Programmer to use the
programs under Program Rights Agreements. Licensee shall maintain all necessary
performing rights licenses to musical compositions included in any Program,
subject to reimbursement by Programmer for the cost thereof under Section 4 and
Appendix A of this Agreement.
7. Programs to Serve the Public Interest. Licensee acknowledges that it is
familiar with the type of programming Programmer intends to provide and has
determined that the broadcast of such programming on the Station would serve the
public interest and is otherwise suitable. Programmer shall cooperate with
Licensee to ensure that the Programs include material that is responsive to
community problems, needs, and interests.
8. Programming Standards. Programmer shall use its best efforts to ensure
that the Programs conform to all FCC Requirements applicable to broadcast radio
stations.
9. Expenses, Revenues and Accounts Receivable.
9.1 Expenses. The Station's cash expenses arising or relating to the
period before the Effective Date shall be the responsibility of Licensee, and
Programmer shall not be obligated to reimburse Licensee for any expenses
allocable to such period. During the Term, Programmer will reimburse Licensee
for its expenses incurred in accordance with Section 3 hereof. Programmer shall
be solely responsible for all expenses attributable to the origination and/or
delivery of the Programs by Programmer to Licensee.
9.2 Cash Accounts Receivable, Advertising and Programming Revenues.
(a) Promptly after the Effective Date, Licensee shall furnish to
Programmer a list of the Accounts Receivable that arose out of the operations of
the Stations as of the close of business on the day preceding the Effective Date
but are due and payable thereafter. For a period of 120 days after the Effective
Date, Programmer, as Licensee's agent, shall, without compensation, collect the
accounts receivable for Licensee (including accounts receivable for airtime
reserved by Licensee under Section 2 above). At the end of each month during the
120-day period, Programmer shall remit to Licensee the amount collected by
Programmer during that month with respect to the Accounts Receivable and
Programmer shall provide Licensee with a report setting for the Accounts
Receivable collected by Programmer that month. Programmer shall furnish Licensee
with such records and other information as Licensee may reasonably require to
verify the amounts collected by Programmer with respect to the Accounts
Receivable. Upon five days' prior written notice from Licensee, Programmer shall
terminate all collection efforts on behalf of Licensee with respect to the
Accounts Receivable specified in the notice and those Accounts Receivable shall
no longer be considered Accounts Receivable for purposes of this section 9.2.
Programmer shall set all commercial advertising during the Broadcasting Period
for its own account and shall be entitled to
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collect all Accounts Receivable arising thereunder.
(b) For the purpose of determining amounts collected by Programmer with
respect to the Accounts Receivable, (i) in the absence of a bona fide dispute
between an account debtor and Licensee, all payments by an account debtor shall
first be applied to Accounts Receivable due from the account debtor, and (ii)
any amount received by Programmer which is from an account debtor to Licensee
who claims to have a bona fide dispute with Licensee shall be deemed to have
been received with respect to the accounts receivable due Programmer to the
extent of such dispute.
(c) Programmer shall not be required to retain a collection agency, bring
any suit, or take any other action out of the ordinary course of business to
collect any of the Accounts Receivable. Programmer shall not compromise, settle
or adjust the amount of any of the Accounts Receivable without the written
consent of Licensee.
(d) Programmer's obligation to collect and remit Accounts Receivable
hereunder shall continue, at the option of Licensee, in the event of termination
of this Agreement pursuant to Section 11.5 hereof.
9.3 Political Time. Licensee shall, with respect to the Station, oversee
and take ultimate responsibility with respect to the provision of equal
opportunities, lowest unit charge, and reasonable access to political
candidates, and compliance with the political broadcasting provisions of the FCC
Requirements. Programmer shall cooperate with Licensee in complying with such
provisions, and shall supply promptly to Licensee such information reasonably
requested by Licensee for such purposes. Licensee, in consultation with
Programmer, will develop a statement which discloses its political broadcasting
rates and policies to political candidates, and Programmer will follow those
respective policies in the sale of political programming an advertising for the
Station. Programmer shall provide any rebates due to political advertisers and
release advertising availabilities to Licensee during the Broadcasting Period
sufficient to permit Licensee to comply with political broadcasting provisions
of the FCC Requirements. Revenues received by Licensee as a result of any such
release of advertising time shall be for the account of Programmer.
10. Call Letters and Frequency. During the Term, Licensee (i) shall retain
all rights (except as provided in the following sentence) to the Station's call
letters and trade names, (ii) shall not change the call letters, and (iii) shall
not seek FCC consent to a modification of facilities which would specify a
frequency change or have a material adverse effect upon the presently authorized
coverage of the Station. Programmer shall include in the Programs for the
Station an announcement in a form reasonably satisfactory to the Licensee in
accordance with the FCC Requirements to identify such Station, as well as any
other announcements required by the FCC Requirements.
11. Events of Default and Termination.
11.1 Programmer's Events of Default. The occurrence and continuation of
any of the following will be deemed an Event of Default by Programmer under this
Agreement:
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(a) Programmer fails to make LMA Payments;
(b) Programmer fails to observe or perform any other material
covenant, condition or agreement contained in this Agreement; or
(c) Programmer breaches or violates any material representation or
warranty made by it under this Agreement.
11.2 Licensee's Events of Default. The occurrence and continuation of any
of the following will be deemed an Event of Default by Licensee under this
Agreement:
(a) Licensee fails to observe or perform any material covenant,
condition or agreement contained in this Agreement; or
(b) Licensee breaches or violates any material representation or
warranty made by it under this Agreement.
11.3 Cure Period. The defaulting party shall have ten (10) days from the
date on which Programmer has provided Licensee or Licensee has provided
Programmer, as the case may be, with written notice specifying the Event(s) of
Default to cure any such Event(s) of Default. If the Event of Default cannot be
cured by the defaulting party within such time period but commercially
reasonably efforts are being made to effect a cure or otherwise secure or
protect the interests of the non-defaulting party (in which case, if successful,
the Event of Default shall be deemed cured), then the defaulting party shall
have an additional period not to exceed ten (10) days to effect a cure or a
deemed cure; provided, however, that such additional ten (10) day period shall
not be available in the case of a default under Section 11.1(a) above.
11.4 Termination for Uncured Event of Default. If an Event of Default by
Programmer has not been cured or deemed cured within the period set forth in
Section 11.3 above, then Licensee may terminate this Agreement, effective
immediately upon written notice to Programmer, and pursue all remedies available
at law or in equity for breach of this Agreement. If an Event of Default by
Licensee has not been cured or deemed cured within the periods set forth in
Section 11.3 above, then Programmer may terminate this Agreement, effective
immediately upon written notice to Licensee, and pursue all remedies available
at law or in equity for breach of this Agreement.
11.5 Termination Upon Failure or Consummation of the Purchase Agreement.
Notwithstanding any other provision hereof, this Agreement shall terminate with
no further action by Licensee or Programmer upon the termination of the Purchase
Agreement in accordance with the terms thereof, or upon the Closing Date (as
defined in the Purchase Agreement).
11.6 Termination by Licensee To Satisfy the FCC Requirements. If Licensee
is required by the FCC to terminate this Agreement by an FCC order which has
become a Final Order as that term is defined in the Purchase Agreement),
Licensee shall, or, if the FCC orders that this Agreement
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be terminated before its order becomes a Final Order and this Agreement cannot
be revised to comply with applicable FCC Requirements as contemplated by Section
20 hereof, Licensee may, upon at least thirty (30) days' written notice to
Programmer (or such shorter period as may be required by the FCC) terminate this
Agreement.
11.7 Termination by Programmer. Programmer may unilaterally terminate this
Agreement during the term upon one hundred twenty (120) days' written notice to
Licensee.
12. Certain Representations, Warranties and Covenants.
12.1 Mutual Representations Concerning This Agreement. Licensee represents
and warrants as follows: (a) Licensee is an individual citizen of the State of
Wisconsin, (b) Licensee has the power and authority to enter into and perform
this Agreement; and (c) the execution, delivery and performance of this
Agreement by Licensee does not conflict with any other agreement to which
Licensee is a party.
Programmer represents and warrants as follows: (a) Programmer is a
corporation duly organized, validly existing and in good standing under the laws
of Nevada; (b) Programmer has the requisite corporate power and authority to
enter into and perform this Agreement; (c) the execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate action of Programmer; and (d) the execution, delivery and performance
of this Agreement by Programmer does not conflict with any other agreement to
which Programmer is a party.
12.2 Budget Information; Reimbursement Requests. Licensee represents,
warrants and covenants that all budgets submitted to Programmer pursuant to
Appendix A, and all reimbursement requests now and hereafter made of Programmer,
shall relate only to financial obligations arising out of the Station's
operations during the Term and shall not include any financial obligations
arising out of breach of any representation or warranty or violation of any
covenant of Licensee under this Agreement or Purchase Agreement.
12.3 Program Rights and Barter Agreements. Licensee represents and
warrants that, except as disclosed in the Disclosure Schedule to the Purchase
Agreement, (i) it is current in all payment obligations and is not otherwise in
default under the Program Rights Agreements and (ii) there are no trade-outs,
time-sales, barter or other similar obligations with respect to the Stations
which extend beyond the Effective Date, other than obligations not to exceed in
the aggregate Ten Thousand Dollars ($10,000).
12.4 Compliance with FCC Requirements. Programmer represents, warrants and
covenants that its execution and performance of this Agreement is, and will
remain, in compliance with the FCC Requirements, including without limitation,
47 C.F.R. ss. 73.3555.
13. Modification and Waiver; Remedies Cumulative. No modification or
waiver of any provision of this Agreement will be effective unless in writing
and signed by all parties. No failure
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or delay on the part of Programmer or Licensee in exercising any right or power
under this Agreement will operate as a waiver of such right or power, nor will
any single or partial exercise of any such rights or power or the exercise of
any other right or power operate as a waiver. Except as otherwise provided in
this Agreement, the rights and remedies provided in this Agreement are
cumulative and are not exclusive of any rights or remedies which a party may
otherwise have.
14. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns.
Notwithstanding the foregoing, no party may assign its rights or obligations
under this Agreement without the prior written consent of the other party;
provided, however, that Programmer may assign and delegate its rights and
obligations under this Agreement to a party that controls, or is controlled by,
or is under common control with, Programmer, and who is qualified under any
applicable FCC Requirement, upon notice to, but without the prior written
consent of Licensee.
15. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Wisconsin without regard to any conflicts-of-law
rules that might apply the laws of another jurisdiction or jurisdictions.
16. Notices. Notices required to be provided by this Agreement shall be
given in the manner provided and to the persons specified in the Purchase
Agreement.
17. Entire Agreement. This Agreement embodies the entire understanding
among the parties with respect to the subject matter hereof, and supersedes any
prior or contemporaneous written or oral agreement between the parties regarding
such subject matter.
18. Relationship of Parties. Programmer and Licensee are not, and shall
not be deemed to be, agents, partners, or representatives of each other.
19. Force Majeure. The failure of a party hereto to comply with its
obligations under this Agreement due to acts of God, strikes or threats thereof
or force majeure or due to causes beyond such party's control will not
constitute an Event of Default under Section 11 of this Agreement and no party
will be liable to the others therefore. Programmer and Licensee each agree to
exercise its commercially reasonable efforts to remedy any such conditions
affecting its own facilities as soon as practicable.
20. Subject to Laws; Invalidity. The obligations of the parties under this
Agreement are subject to the FCC Requirements and all other applicable laws. The
parties acknowledge that this Agreement is intended to comply with FCC
Requirements. However, in the event that the FCC determines that the continued
performance of this Agreement is in violation of the FCC Requirements, each
party will use its commercially reasonable efforts to comply with the FCC
Requirements or will in good faith contest or seek to reverse any such action or
agree on the terms of a revision to this Agreement, in each case, on a time
schedule sufficient to meet the FCC Requirements and so long as the fundamental
nature of the business arrangement between the parties
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evidenced by this Agreement is maintained. If any provision of this Agreement is
otherwise held to be illegal, invalid, or unenforceable under present or future
laws, then such provision shall be fully severable, this Agreement shall be
construed and enforced as if such provision had never comprised a part thereof,
and the remaining provisions shall remain in full force and effect, in each case
so long as the fundamental nature of the business arrangement between programmer
and Licensee has been maintained.
21. Reciprocal Indemnity.
21.1 Indemnification by Programmer.Programmer shall indemnify, defend, and
hold harmless Licensee from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement (except as
may result from a breach of the warranty in Section 6 hereof by Licensee),
libel, slander, defamation or invasion of privacy, arising out of: (a)
Programmer's broadcasts of the Programs; (b) any misrepresentation or breach of
any warranty of Programmer; or (c) any breach of any covenant, agreement, or
obligation of Programmer. If Programmer is required to indemnify Licensee as a
result of programs broadcast hereunder which are supplied by a third party
pursuant to a contract with Licensee, it is agree that Programmer shall be
subrogated to any rights which Licensee may have against such third party,
including the right to indemnification by such third party.
21.2 Indemnification by Licensee. Licensee shall indemnify, defend, and
hold harmless Licensee from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement (except as
may result from a breach of the warranty in Section 6 hereof by Licensee),
libel, slander, defamation or invasion of privacy, arising out of: (a)
Licensee's broadcast of programs on its own behalf, other than Programs; (b) any
misrepresentation or breach of any warranty of Licensee; or (c) any breach of
any covenant, agreement, or obligation of Licensee. If Programmer is required to
indemnify Licensee as a result of programs broadcast hereunder which are
supplied by a third party pursuant to a contract with Licensee, it is agreed
that Programmer shall be subrogated to any rights which Licensee may have
against such third party, including the right to indemnification by such third
party.
22. Covenant Not to Compete. For a period of two (2) years from the
Effective Date, Licensee will not apply for, own or operate a commercial FM
radio station to be licensed to a community within seventy-five (75) miles of
the Station's transmitter, other than the pending applications listed on
Appendix B; provided, however that Licensee shall be permitted to provide
consulting services in such geographic area if, with respect to a new station,
Licensee first offers such services to Programmer and Programmer declines to
retain Licensee for such purposes.
23. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the
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construction hereof.
24. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
25. Survival. All representations, warranties, covenants and agreements
made by any party in this Agreement or pursuant hereto shall survive execution
and delivery of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective duly authorized officers as of the date first written above.
PROGRAMMER: CUMULUS BROADCASTING, INC.
By:_________________________
Printed Name:_______________
Title:______________________
LICENSEE: LYLE EVANS d/b/a/ BRILLION RADIO COMPANY
By:_________________________
Printed Name:_______________
Title:______________________
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement, during the Term, Programmer shall reimburse Licensee on a
monthly basis, in advance, the Station Expenses (defined below) for the upcoming
month for which Licensee has submitted to Programmer a written reimbursement
request supported by appropriate documentation of expenses. The term "Station
Expenses" as used herein means the reasonable and prudent expense actually
incurred by Licensee in operating the Stations in compliance with the terms of
this Agreement (including without limitation Sections 3 and 6) and consistent
with past practice (except for changes resulting from the transactions
contemplated by this Agreement), including without limitation, those expenses
set forth on Attachment 1 hereto. Estimated expenses shall be reconciled with
actual expenses on a regular basis on a schedule to be agreed by Programmer and
Licensee.
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PROGRAM SERVICE AND TIME BROKERAGE AGREEMENT
This Program Service and Time Brokerage Agreement ("Agreement") entered
into as of the 31st day of October, 1997 by and between Cumulus Broadcasting,
Inc., a Nevada Corporation, ("Programmer"), and Tallahassee Broadcasting
Company, a Florida corporation ("Licensee"), licensee of Radio Station
WGLF-FM, Tallahassee, Florida (the "Station").
WHEREAS, Licensee holds licenses from the Federal Communications
Commission ("FCC") authorizing it to operate the Station;
WHEREAS, the studio of the Station is located at 1310 Paul Russell Road,
Tallahassee, Florida ("Studio") and the transmitter facilities of the Station
are located in Jefferson County, 2.9 kilometers SSE of Lloyd, Florida and
approximately 17 miles east of Tallahassee, Florida ("Transmitter");
WHEREAS, Licensee has available for sale broadcast time on the Station;
WHEREAS, Programmer desires to purchase time on Licensee's Station for the
broadcast of programming on the Station and to sell advertising time for
inclusion in that programming; and
WHEREAS, Licensee and Programmer have concurrently entered into an Option
Agreement (the "Option Agreement"), pursuant to which (a) Licensee has granted
Programmer and its affiliate Cumulus Licensing Corp. ("Licensing Company") an
option to purchase substantially all of the assets of Licensee used or useful in
the operation of the Station, and (b) Programmer and its affiliate Licensing
Company have granted Licensee an option to require Programmer and Licensing
Company to purchase such assets, pursuant to an Asset Purchase Agreement (the
"Asset Purchase Agreement") attached as Exhibit A to the Option Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties have agreed as follows:
1. TIME SALE. Subject to the provisions of this Agreement, Licensee agrees
to make the Station's Studio and Transmitter broadcasting facilities, and all
other equipment used or useful in the operation of the Station, available to
Programmer for broadcast of Programmer's programs on the Station and the
Station's subcarriers. The Station time made available to Programmer is
described in Exhibit A hereto.
2. PAYMENT. Programmer hereby agrees to pay Licensee compensation for the
broadcast of Programmer's programming in the amounts and at the times set forth
in Exhibit B hereto.
3. TERM. The initial term of this Agreement shall be for a period
beginning November
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1, 1997 (the "Effective Date") and ending on the earlier of (i) the date of
closing of the transactions contemplated by the Asset Purchase Agreement, or
(ii) the date on which the Asset Purchase Agreement is terminated (or such other
termination date as may be mutually agreed by the parties under Section 2 of the
Option Agreement).
4. PROGRAMS. Programmer shall furnish programming material for broadcast
by Licensee twenty-four (24) hours a day, seven (7) days a week, except for the
time reserved for Licensee's programming as set forth in Exhibit B hereto, and
except for downtime occasioned by routine maintenance. Programmer shall furnish
the artistic personnel and materials for its programming. Programmer represents
and warrants that all of the programming, advertising and promotional material
it broadcasts on the Station shall be in accordance with the rules, regulations
and policies of the Commission and the Communications Act of 1934, as amended
(the "Act"). All rights (including without limitation copyrights) to the use and
ownership of the programs shall be and remain vested in Programmer at all times.
5. ACCOUNTS RECEIVABLE AND EXISTING ADVERTISING COMMITMENTS. All accounts
receivable and accounts payable pertaining to the operation of the Stations,
insofar as they pertain to the period prior to the first day of the Term, will
be property of Licensee. Programmer agrees to use commercially reasonable
efforts (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the effective date of this Agreement, and will remit all payments
received on such accounts to the Licensee no later than 120 days following the
effective date of this Agreement. Insofar as any particular account payable or
receivable shall pertain to the operation of the Stations both during the Term
and prior thereto, the parties will prorate amounts payable or receivable, as
the case may be, as soon as reasonably practical following the signing of this
Agreement, and amounts received on such accounts receivable during such 120-day
period shall be applied first to Licensee's receivables and credited to
Licensee. Any accounts which remain uncollected after 120 days shall be returned
to Licensee for collection, and Programmer shall be relieved of any additional
responsibilities with respect to such accounts, and Licensee may use such
commercially reasonable efforts to collect its accounts as it may deem to be in
its best interests. In addition, to the extent that Licensee satisfies with cash
after the effective date of this Agreement, accounts payable incurred before the
Effective Date, and provides Programmer with documentation of such accounts
payable and cash payments, Programmer shall reimburse Licensee for such expenses
no later than the 10th day of the month following that in which the Licensee
makes the cash payments, and such amounts shall be deducted from the balance due
Licensee for its accounts receivable collected by Programmer. All accounts
receivable created after the Effective Date of this Agreement shall be and
remain the sole property of Programmer. Programmer shall be responsible for the
collection of such accounts receivable created after the Effective Date and
shall retain ownership of such accounts upon termination of this Agreement. All
prior existing advertising contracts signed by Licensee prior to the Effective
Date of this Agreement for commercial time to be aired during time periods to be
used by Programmer are identified on Exhibit 4 hereto and shall be performed by
Programmer for the benefit of Programmer, subject to any commissions payable to
sales personnel on collections.
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6. STATION'S FACILITIES.
(a) Licensee Responsibility. Licensee shall be responsible for the
Station's compliance with all applicable provisions of the Act, the rules,
regulations and policies of the FCC and all other applicable laws. Licensee
represents that it holds all permits and authorizations necessary for the
operation of the Station including all FCC permits and authorizations. Licensee
will continue to hold such permits and authorizations throughout the life of
this Agreement and to maintain them in full force and effect.
(b) Broadcast Output. Licensee represents that the Station's
facilities and equipment comply with all applicable laws and regulations and
that, to its knowledge, it is not in material violation of any statute,
ordinance, rule, order or decree of any federal, state or local governmental
agency, court or authority having jurisdiction over the Licensee which would
have an adverse effect on its ability to perform this Agreement. During the term
hereof, Licensee agrees to maintain the Transmitter and other transmission
facilities and the broadcast output in compliance with the FCC's rules and
regulations to allow broadcasting at the maximum authorized power twenty-four
(24) hours a day, seven (7) days a week, except for downtime occasioned by
routine maintenance, if necessary, not to exceed two (2) hours on Sundays
between 12:00 midnight and 6:00 a.m. To the extent practicable, any maintenance
work affecting the operation of the Station at full power shall be scheduled
upon at least forty-eight (48) hours prior notice with the approval of
Programmer, which shall not be unreasonably withheld.
7. HANDLING OF MAIL AND COMPLAINTS. Programmer shall promptly forward to
Licensee any mail which it may receive from any agency of government or any
correspondence from members of the public relating to the Station or to any of
Programmer's programming broadcast on the Station. Licensee shall advise
Programmer of any public or FCC complaint or inquiry concerning the programs
provided by Programmer.
8. PROGRAMMING AND OPERATIONS STANDARDS. Programmer recognizes that the
Licensee has full authority and a duty to control the operation of the Station.
The parties agree that Licensee's authority includes, but it is not limited to,
the right to reject or refuse such portions of Programmer's programming which
Licensee reasonably believes to be contrary to the public interest. Licensee
shall have no obligation to Programmer for the exercise of its rights under this
paragraph. Whenever on the Station's premises, Programmer and its employees and
agents shall be subject to the supervision and direction of Licensee's General
Manager and/or designated personnel.
9. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES. Programmer shall employ and
be responsible for the salaries, commissions, taxes, insurance and all other
related costs for all of its employees, agents, contractors and personnel.
Employees of Programmer shall serve, however, as duty operators of the Station,
under the supervision and direction of the Licensee's General Manager and/or
other designated personnel of Licensee, during all hours the Station is in
operation. Licensee shall be responsible for (a) retaining a contract engineer
to maintain the Station's
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broadcast and transmission equipment, (b) appointment of a Chief Operator, and
(c) compliance with the FCC's main studio staffing requirements (including,
without limitation, the Station's General Manager). Licensee shall be
responsible for the salary, taxes, insurance and related costs for its General
Manager and Chief Operator.
10. ADVERTISING AND PROGRAMMING REVENUES.
(a) Programming Revenues. Programmer shall retain all revenues from
the sale of advertising time on the programming it broadcasts on the Station.
Programmer will provide, make available to and shall sell time to political
candidates from the time it purchases from Licensee in strict compliance with
the Act, the rules, regulations and policies and the Commission.
(b) Revenue Reports. Throughout the term hereof, Programmer shall
provide to Licensee by the fifteenth day of each month a report of Gross
Revenues (as defined in the Asset Purchase Agreement) of the Station during the
preceding month.
11. OPERATION OF STATION.
(a) Full Authority and Power. Licensee shall have full authority and
power over the operation of the Station during the term of this Agreement.
Licensee and its designated personnel shall have complete access to the
Station's studios at all times. Licensee's General Manager shall direct the
day-to-day operation of the Station and report to and be accountable solely to
Licensee. Licensee's Chief Operator shall oversee and direct the engineering and
technical operation of the Station. Licensee shall retain the right to interrupt
and discontinue Programmer's programming at any time if Licensee determines the
programming is not in the public interest or violates this Agreement, or in case
of an emergency or EAS system activation, or for the purpose of providing
programming which Licensee in its sole discretion determines to be of greater
national, regional or local importance. Programmer will properly prepare and
provide Licensee such information, records and reports belonging to Programmer's
programming, sales or employment practices at the Station in sufficient detail
as is necessary to enable Licensee to comply with all the rules and policies of
the FCC or any other governmental agency.
(b) Political Time. Licensee shall oversee and take ultimate
responsibility with respect to the provision of equal opportunities, lowest unit
charge, and reasonable access to political candidates, and compliance with the
political broadcast rules of the FCC. Programmer shall cooperate with Licensee
as Licensee complies with its political broadcast responsibilities, and shall
supply such information promptly to Licensee as may be necessary to comply with
the political time record keeping and lowest unit charge requirements of federal
law. To the extent that Licensee believes necessary, in Licensee's sole
discretion, Programmer shall release advertising availabilities to Licensee
during the term of this Agreement to permit Licensee to comply with the
political broadcast rules of the FCC and the Communications Laws; provided
however, that revenues received by Licensee as a result of any such release of
advertising time shall promptly be remitted to Programmer.
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(c) Facilities. During the term of this Agreement Licensee shall
make available to Programmer, for no additional consideration, areas in the
Station's physical studios and offices as are reasonably necessary for
Programmer to exercise its rights and perform its obligations under this
Agreement.
12. CALL SIGNS AND STATION IDENTIFICATION. Licensee will retain all rights
to the call letters "WGLF-FM" or any other call letters that may be assigned by
the FCC for use by the Station, and shall be responsible for ensuring the proper
broadcast of Station identification announcements in accordance with the FCC
rules and regulations. Programmer is specifically authorized to use the call
letters "WGLF-FM" or any other call letters used by Licensee for the Station,
and will provide appropriate station identification announcements which, in
Licensee's sole discretion, comply with FCC requirements.
13. PAYOLA/PLUGOLA. Programmer agrees that neither it nor its employees
will accept any consideration, compensation or gift of any kind whatsoever,
regardless of its value or form, including, but not limited to, a commission,
discount, bonus, supplies or other merchandise (collectively "Consideration"),
unless the payer is identified in the program for which Consideration was
provided as having paid for or furnished such Consideration, in accordance with
the Act. Programmer agrees to execute and provide Licensee with Payola
Affidavits, substantially in the form of Exhibit D, and to notify Licensee
promptly of any violations of Sections 317 and 508 of the Communications Act of
1934, as amended, of which Programmer learns.
14. COMPLIANCE WITH LAW. Programmer agrees that, throughout the term of
this Agreement, Programmer will comply with all laws, regulations and policies
including, but not limited to, the FCC's technical, political broadcasting,
obscenity and indecency regulations, lottery regulations, sponsorship
identification rules, sale practices regulations and all FCC rules applicable to
programming agreements of this kind. Programmer acknowledges that Licensee has
not urged, advised or agreed in any way to the use of any unfair business
practices.
15. INDEMNIFICATION.
(a) Programmer's Indemnification. Programmer shall indemnify and
hold Licensee harmless for any material loss, damage, penalty or injury of any
kind sustained by Licensee resulting from Programmer's breach of this Agreement,
from any programming material broadcast by Programmer on the Station, from the
sale of or attempt by Programmer to sell advertising or program time on the
Station, and from any material act or omission of any kind by Programmer.
Programmer shall carry liability insurance (including coverage for libel and
slander) in a minimum liability limit of $1,000,000, with a maximum retention of
$10,000, in which Licensee is named as an additional insured.
(b) Licensee's Indemnification. Licensee shall indemnify and hold
Programmer harmless for any material loss, damage or injury sustained by
Programmer resulting from breach of this Agreement, from the broadcast of
Licensee's programming, from the sale of or attempt by
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Licensee to sell advertising or program time on the Station (except the instant
sale provided for in this Agreement to Programmer), and from any material act or
omission of any kind whatsoever by Licensee.
(c) Survival. Any claim for indemnification must be asserted in
writing delivered to the other party. The representations and obligations of
both parties shall survive any termination of this Agreement and shall continue
until the expiration of all applicable statutes of limitations as to the parties
hereto and to claims of third parties.
16. TERMINATION AND REMEDIES UPON DEFAULT.
(a) Termination. In addition to other remedies available at law or
equity, this Agreement may be terminated by either party by written notice to
the other if the party seeking to terminate is not then in material default or
breach thereof, upon the occurrence of any of the following:
(i) This Agreement is declared invalid or illegal in whole or
in material part upon a final order of the FCC or any administrative agency or
court of competent jurisdiction.
(ii) The other party is in material breach of its obligations
hereunder and has failed to cure such breach within twenty (20) days of receipt
of written notice from the nonbreaching party.
(iii) The mutual consent of both parties.
(iv) The other party shall make a general assignment for the
benefit of creditors, files or has filed against a petition for bankruptcy,
reorganization or appointment of a receiver or a trustee for the property or
assets of such party under any federal or state insolvency law, which filing by
or against such party has not been dismissed within thirty (30) days thereof.
Upon termination of this Agreement according to the provisions of this
paragraph, the monthly payment pursuant to Paragraph 2 above shall be prorated.
Licensee shall cooperate reasonably with the Programmer to the extent permitted
to enable Programmer to fulfill prior to the date of termination of this
Agreement advertising or other programming contracts then outstanding, provided
however, to the extent such contracts are fulfilled by Licensee after the date
of termination of this Agreement, Licensee shall receive as compensation that
which otherwise would have been paid to Programmer pursuant to such contracts.
(b) Programmer's Additional Remedies for Licensee's Technical
Operation Deficiencies. In addition to Programmer's right to terminate for
reasons set forth in Paragraph (a) above, if the Station suffers any damage to
its transmission facilities which results in the inability of the Station to
operate with its presently authorized facilities and Licensee has not restored
full-time operation of the Station with its presently authorized facilities
within seven (7) days of any such
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occurrence, (i) Programmer may give notice to Licensee of Programmer's
termination of this Agreement in which event this Agreement shall terminate upon
giving of such notice, any other provision of this Agreement notwithstanding,
and (ii) any payment due Licensee pursuant to Paragraph 2 above shall be
prorated for such period of time within which full-time operation of the Station
has not been restored.
17. CERTIFICATION. Pursuant to Section 73.3555(a)(3)(ii) of the FCC's
Rules, the following certifications are made: Tallahassee Broadcasting Company
certifies that it shall maintain ultimate control over the Station's facilities,
including specifically control over Station finances, personnel and programming.
Programmer certifies that implementation of this Agreement complies with Section
202 of the Telecommunications Act of 1996.
18. NOTICES. All necessary notices, demands, requests permitted or
required under this Agreement shall be in writing and shall be deemed given four
(4) days after being mailed by certified mail, return receipt requested,
addressed as follows:
If to Licensee:
Tallahassee Broadcasting Company
3370 Capitol Circle N.E., Suite 1
Tallahassee, FL 32308
Attn: Mr. Bruce Timm
Copy to:
Cathi C. Wilkinson, Esq.
Pennington, Moore, Wilkinson & Dunbar, P.A.
215 South Monroe Street, 2nd Floor
Tallahassee, FL 32301
and
Law Offices of Donald E. Ward
1201 Pennsylvania Ave., N.W., Fifth Floor
Washington, DC 20004
(Neither of which copies shall constitute notice to Licensee)
If to Programmer:
Cumulus Broadcasting, Inc.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste 250
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Milwaukee, WI 53202
Attn: Terrence J. Leahy
Copy to:
Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
and
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
(Neither of which copies shall constitute notice to Programmer)
19. MODIFICATION AND WAIVER. No modification of any provision of this
Agreement shall in any event be effective unless it is in writing and executed
by both parties hereto, and such modification shall be effective only in the
specific instance as for the purpose for which given. No waiver of any default,
misrepresentation, or breach of any condition or covenant hereof, whether or not
intentional, shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of the same or any other condition or covenant
hereof, or affect in any way such prior or subsequent occurrence.
20. CONSTRUCTION. This Agreement shall be construed in accordance with the
laws of Florida, and the obligations of the parties hereto are subject to all
federal, state and local laws and regulations now or hereafter in force and to
the rules, regulations and policies of the FCC and all other governmental
entities or authorities.
21. NO PARTNERSHIP OR JOINT VENTURE CREATED. Nothing in this Agreement
shall be construed or interpreted to make Licensee and Programmer partners or
joint venturers, or to make one an agent or representative of the other.
22. EXCLUSIVITY. During the term of this Agreement, Licensee will not (i)
solicit, initiate, or encourage the submission of any proposal or offer from any
person relating to any (A) liquidation, dissolution, or recapitalization, (B)
merger or consolidation, (C) acquisition or purchase of the Station or any the
assets subject to the Asset Purchase Agreement, or (D) similar transaction or
business combination involving any of Licensee or the Station; or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
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foregoing.
23. COUNTERPARTS. This agreement may be executed in one more counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
* * * * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
PROGRAMMER:
CUMULUS BROADCASTING, INC.
By: _____________________________
Richard Weening, its Chairman
LICENSEE:
TALLAHASSEE BROADCASTING COMPANY
By: ____________________________
Bruce B. Timm, its President
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EXHIBIT A
PROGRAMMING
Subject to all other provisions of this Agreement, Programmer will have
the exclusive right to broadcast on the Station and the Station's subcarriers up
to twenty-four (24) hours of programming each day during the term of this
Agreement, provided however, Licensee reserves three (3) hours of Station time
for its own use on Sunday morning, between 7:00 a.m. and 11:00 am. Licensee
shall have the sole right and responsibility to decide the scheduling of such
Sunday hours but shall consult with Programmer as to that schedule.
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EXHIBIT B
COMPENSATION PAYMENT SCHEDULE
Programmer shall pay to Licensee monthly the sum of (1) Five Thousand and
00/100 Dollars ($5,000.00) plus applicable sales tax (which payment shall be
made monthly in advance), and (2) up to Seven Thousand and 00/100 Dolllars
($7,000.00) in reimbursement of Licensee's reasonable out-of-pocket operating
expenses for the Station, as documented by Licensee to Programmer at least
monthly (which payment shall be made within ten (10) days after Licensee's
submission to Programmer of documentation of such expenses).
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EXHIBIT C
EXISTING ADVERTISING CONTRACTS
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EXHIBIT D
PAYOLA AFFIDAVIT
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LOCAL MARKETING AGREEMENT
dated as of
January 14, 1998
by and among
CUMULUS BROADCASTING, INC.
and
SAVANNAH COMMUNICATIONS, L.P.
<PAGE>
TABLE OF CONTENTS
Recitals.......................................................................1
Agreement......................................................................1
1. Term/Termination Options..........................................1
(a) Term........................................................1
(b) Option Upon Termination of Agreement for Sale of Station....2
(c) Effect of Termination on Advertising and other Contracts....2
2. Fees..............................................................2
(a) Monthly Fee.................................................2
3. Programs..........................................................2
(a) Operation of Station........................................2
(b) Programming Standards.......................................3
(c) Ancillary Broadcast Rights..................................3
(d) Programming and Operations Standards........................3
(e) Call Signs..................................................3
4. Facilities and Equipment..........................................4
(a) Facilities..................................................4
(b) Maintenance.................................................4
(c) Transmitter Site............................................4
(d) Interruption of Normal Operations...........................4
5. Costs of Operating Station........................................5
(a) General.....................................................5
(b) Employees...................................................5
(c) Insurance for Transmitter Site..............................6
(d) Insurance for New Studio and Programmer's Studio............6
(e) Music Licenses..............................................7
6. Advertising and Programming Revenues..............................7
7. Accounts Receivable and Accounts Payable..........................7
(a) General.....................................................7
(b) Carryover Accounts..........................................8
8. Operation of Station..............................................8
9. Station Identification............................................8
10. Special Events....................................................9
11. Handling of Mail..................................................9
12. Payola............................................................9
13. Compliance with Law...............................................9
14. Licensee's Representations........................................9
(a) Qualification...............................................9
(b) Authorizations..............................................9
(c) Filings....................................................10
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(d) Compliance With FCC Requirements...........................10
(e) Content of the Programming.................................10
15. Programmer's Representations.....................................10
(a) Qualification..............................................10
(b) Content of the Programming.................................11
16. Events of Default: Cure Periods and Remedies.....................11
(a) Events of Default..........................................11
(i) Non-Payment....................................11
(ii) Breach of Covenants............................11
(iii) Breach of Representation or Warranty...........11
(iv) Bankruptcy, etc................................11
(b) Cure Periods...............................................11
(c) Remedies...................................................12
(d) Specific Performance.......................................12
17. No Brokers.......................................................12
18. General..........................................................12
(a) Notices....................................................12
(b) Modification and Waiver....................................13
(c) Construction...............................................13
(d) Headings...................................................14
(e) No Assignment..............................................14
(f) Counterpart Signature......................................14
(g) Entire Agreement...........................................14
(h) No Partnership or Joint Venture Created....................14
(i) Severability...............................................14
(j) Force Majeure..............................................14
(k) Other Agreements...........................................14
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LOCAL MARKETING AGREEMENT
This Local Marketing Agreement is entered into as of the 14th day of
January, 1998, by and among Cumulus Broadcasting, Inc., a Nevada corporation
("Programmer"), and Savannah Communications, L.P., a Delaware limited
partnership (the "Licensee").
Recitals
Licensee holds the FCC broadcast license and auxiliary licenses for radio
stations WIXV-FM, licensed to Savannah, Georgia; WIXV-FM (licensed to Savannah,
Georgia), WSGF-FM (licensed to Springfield, Georgia) and WBMQ-AM (licensed to
Savannah, Georgia) (individually a "Station" and collectively the "Stations").
Licensee and Programmer have entered into an Asset Purchase Agreement
dated as of January 14, 1998 (the "Sale Agreement"), pursuant to which
Programmer will purchase from Licensee, upon receipt of consent of the FCC,
Licensee's assets used or useful in the operation of the Stations (the "Sale").
The Stations' transmitter facilities are at locations described in Section
2(i) of the Disclosure Schedule of the Sale Agreement (the "Transmitter Sites").
The Stations' studio is at a location described in Section 2(i) of the
Disclosure Schedule of the Sale Agreement (the "Studio").
Licensee has broadcast time on the Stations available for sale. Programmer
desires to purchase time on the Stations for the broadcast of Programmer's
programming and the sale of advertising time for inclusion in said programming.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
Agreement
1. Term/Termination Options
(a) Term. The term of this Agreement (the "Term") will begin at 12:01
a.m. on January 15, 1998, and expire at 11:59 p.m. on the earliest
of (i) December 31, 1998, or (ii) the closing of the Sale, unless
earlier terminated in accordance with this Section 1 or Sections
4(d) or 16, below. Each party will fulfill all its obligations
hereunder through the date of termination or expiration. After
termination or expiration, neither party will have any further
obligations hereunder except as provided in this Section 1.
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(b) Option Upon Termination of Agreement for Sale of Stations. If at any
time either (i) Licensee shall terminate the Sale Agreement, or (ii)
Programmer shall terminate the Sale Agreement, in each case in
compliance with the terms of the Sale Agreement, then either party
may terminate this Agreement, upon at least 10 days' advance written
notice to the other party.
(c) Effect of Termination on Advertising and other Contracts. On the
termination date, Programmer will provide to Licensee a written
schedule of all advertising commitments for the Stations then in
effect. Licensee shall reasonably cooperate with Programmer to honor
all such advertising commitments then outstanding, in which event
Licensee shall receive as compensation for the broadcasting of such
programming that which otherwise would have been paid to Programmer;
provided, however, as to fees received by Licensee for advertising
broadcasts by Programmer prior to the Termination Date, Licensee
agrees to pay to Programmer 100 percent (100%) of all advertising
revenue received by Licensee with respect thereto within 120 days
using procedures comparable to those specified in Section 7 below.
Programmer will remain liable for all other contracts entered into
and other liabilities incurred by Programmer in the course of its
performance under this Agreement, if any, and Licensee shall not
assume any liability therefor.
2. Fees.
Monthly Fee. Programmer will pay Licensee for the broadcast of the
programs hereunder a fee each month as described in more detail in Appendix A to
this Agreement (the "Monthly Fee"). The Monthly Fee will be payable on the first
day of each calendar month during the Term, to Licensee at the address set forth
in this Agreement, or to such other address as Licensee may designate in
writing. The failure of Licensee to demand or insist upon prompt payment of the
Monthly Fee will not constitute a waiver of its right to do so.
3. Programs.
(a) Operation of Stations. Throughout the Term, Licensee will make the
Stations and time on the Stations available to Programmer for at
least 166 hours per week, Sunday through Saturday, except for
downtime occasioned by routine maintenance. Programmer will provide
entertainment programming of its selection complete with commercial
matter, news, public service announcements, public interest
programming, and other suitable programming (the "Programming").
Subject to the limitations set forth herein, such time on each
Station will be available for use by Programmer and no other party,
and Programmer will broadcast the Programming on the Stations at all
such times.
(b) Programming Standards. The Programming will be in conformity with
generally recognized industry standards and in accordance with the
Communications Act of
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1934, as amended (the "Act") and the rules, regulations and policies
of the Federal Communications Commission (the "Commission") and with
those specific standards set forth in Appendix B to this Agreement.
Programmer will make the Programming available to Licensee during a
sufficient number of hours to enable each Station to meet the
minimum hours of operation required under the Commission's rules.
All advertising messages and promotional material or announcements
will comply with all applicable federal, state and local laws,
rules, and regulations. Licensee acknowledges that the right hereby
granted to Licensee to broadcast the Programming on each Station is
non-exclusive and that ownership of the Programming and all parts
thereof and the right to authorize their use in any media whatsoever
are and shall remain vested in Programmer.
(c) Ancillary Broadcast Rights. Programmer shall have the right to use,
or permit third parties to use, each Station's subcarriers, and will
be entitled to all revenues derived from any such subcarrier
transmissions during the term of this Agreement.
(d) Programming and Operations Standards. Licensee may preempt any
program that Licensee reasonably believes to be unsuitable or
contrary to the public interest. Licensee will give Programmer
reasonable notice of its intention to preempt any program, and, in
the event of suspension or cancellation, Programmer will receive a
pro rata reduction in the Monthly Fee for the period of time so
preempted, calculated to the nearest minute.
(e) Call Signs. Licensee will retain all rights to the call letters
WIXV, WBMQ, and WSGF, respectively, or any other call letters which
may be assigned by the FCC for use by the respective Stations, and
will ensure that proper station identification announcements are
made with such call letters in accordance with FCC rules and
regulations. Licensee will not, without Programmer's consent, apply
for any change in the call letters assigned to the Stations.
Licensee will promptly, upon Programmer's request and at
Programmer's expense, take all steps necessary to change the
Stations' call letters to conform with the Programming, and such
call letters will be consistent with applicable FCC rules and
regulations. Programmer shall include in the Programming an
announcement in a form satisfactory to Licensee at the beginning of
each hour of such programs to identify WIXV, WBMQ, and WSGF,
respectively, or such other call letters used by Licensee for the
respective Stations, as well as any other announcements required by
the rules and regulations of the FCC. Programmer is specifically
authorized to use the call letters WIXV, WBMQ, and WSGF,
respectively, or other call letters used by Licensee for the
respective Stations, in its Programs and in any promotional
material, in any media, used in connection with the Programming.
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4. Facilities and Equipment.
(a) Facilities. Licensee will permit Programmer to use all equipment and
motor vehicles now located at the Studio or the Transmitter Sites, a
schedule of which is attached as Section 2(h) of the Disclosure
Schedule to the Sale Agreement (the "Licensee Equipment"), but
exclusively for the operation of the Stations. Licensee will at all
times retain title to the Licensee Equipment. Programmer will
originate its programming from the Studio and will transmit
programming to the Studio via a mode of transmission it selects that
will ensure technical and quality standards comparable to each
Station's broadcasts prior to the Term. The Studio will constitute
the "main studio" of the Stations. Licensee will have access to the
Studio at all times.
(b) Maintenance. Any regular maintenance work affecting the operation of
the Stations will be scheduled with the approval of Programmer,
which will not be unreasonably withheld, upon at least forty-eight
(48) hours' prior notice to Programmer. Programmer will perform and
bear the cost of all routine maintenance of equipment at the Studio.
Licensee will bear the cost of extraordinary maintenance to and
replacement of Licensee Equipment located at the Studio, except to
the extent such replacement or maintenance is required as a direct
result of actions by Programmer..
(c) Transmitter Sites. Licensee will maintain the Transmitter Sites and
all equipment located at the Transmitter Sites at its own expense.
Licensee will perform routine maintenance work at the Transmitter
Sites, as needed, on Mondays between midnight and 4:00 a.m., or at
such other time that may be mutually agreed by Programmer and
Licensee. The Transmitter Site will be operated, in all material
respects, in accordance with all applicable laws and regulations
(including the requirements of the Act and the rules, regulations,
policies and procedures of the Commission promulgated thereunder).
The transmitting facilities of each of the Stations are capable of
transmitting at such Station's maximum authorized effective radiated
power, with an antenna center of radiation at its full authorized
height above ground and above average terrain. Licensee will
maintain the operating power of its Stations at their maximum
licensed level and shall operate and maintain in good working
condition each Station's transmission facilities and broadcasting
equipment. Licensee will not apply to the Commission for any
reduction in any Station's maximum authorized facilities without the
prior written approval of Programmer.
(d) Interruption of Normal Operations. If the Stations suffer any loss
or damage of any nature at the Transmitter Sites which is not caused
by the acts or omissions of Programmer and which results in the
interruption of service or the inability of such Station to operate
with its maximum authorized facilities and licensed effective
radiated power, Licensee will immediately notify Programmer and
promptly undertake such repairs, at Licensee's expense, as are
necessary to restore full-time
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operation of such Station with its maximum authorized facilities and
licensed effective radiated power thereon as quickly as is
reasonably possible under the circumstances. Except in the case of
events not under control of Licensee (such as acts of God or weather
conditions) which do not materially impair the earnings potential of
the Stations, if a Station is inoperable or is operated at 90% or
less of its licensed effective radiated power as a consequence of
such loss or damage at any time in the case of WIXV-FM and WSGF-FM
or during the period from 6:00 a.m. to 12:00 a.m. in the case of
WBMQ-AM, then Programmer will be entitled to a Pro rata reduction in
the proportionate Monthly Fee for each day in which there occurs
such a service interruption in excess of four (4) consecutive hours.
Licensee will promptly begin to repair and will complete the repairs
necessary to restore the inoperable Station to full time operations
with its maximum licensed facilities within fifteen (15) days from
the occurrence of the loss or damage; provided, however, that this
period will be extended for a reasonable period of time, not to
exceed an additional fifteen (15) days, if Licensee has taken and is
continuing to take all appropriate actions to repair the loss or
damage as promptly as possible in the circumstances. If such repairs
are not completed within the allotted period, Programmer may give
notice to Licensee of Programmer's intention to terminate this
Agreement, in which event this Agreement will terminate on the date
of such notice, any other provision of this Agreement
notwithstanding.
5. Costs of Operating Stations.
(a) General. Licensee will retain ultimate control over the personnel,
finances, programming and operation of the Stations. Except as
otherwise expressly set forth in this Agreement, all costs of
producing and delivering the Programming to the Transmitter Sites
for broadcast on the Stations will be borne by Programmer including,
without limitation, all personnel, equipment costs, maintenance,
music license fees, taxes of all kinds (including real and personal
property and income), utilities, remaining payments due on motor
vehicles and all expenses related to the construction, maintenance
and operation of the Studio. Programmer will be responsible for all
liabilities, debts and obligations of Programmer based upon the
purchase of air time including, without limitation, barter
agreements and unaired advertisements, but not for Licensee's
federal, state and local income tax liabilities.
(b) Employees. Programmer will employ and be responsible for the
salaries, commissions, taxes, insurance and all other related costs
for all personnel involved in the production and marketing of the
Programming and the origination and/or delivery of the Programming
from the Studio or any remote location to the Transmitter Site
(including air personalities, engineering personnel, salespersons,
traffic personnel, board operators and other programming staff
members). Upon notice to the Licensee, and at mutually agreeable
times, the Licensee will permit Programmer to meet with its
employees prior to or after the Effective Date. Programmer may, at
its option and upon its terms and conditions, extend offers of
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employment to all or any of Licensee's employees as of the Effective
Date. Licensee will not take any action to preclude or discourage
any of the Licensee's employees from accepting any offer of
employment extended by Programmer. Licensee will be responsible for
all payroll, vacation, severance, and other employee-related
liabilities prior to their employment by Programmer. Licensee will
be responsible for the personnel necessary for the fulfillment of
Licensee's regulatory requirements and the technical transmission of
Programmer's programs. Specifically, Licensee will employ a General
Manager who will report to Licensee and direct the performance of
Licensee's obligations hereunder, and will employ at least one full
time employee (or part-time equivalent thereto) per studio location
to assist the General Manager in performing Licensee's obligations
hereunder, including maintaining the Stations' transmission
facilities. Licensee's employees will have no employment,
consulting, or other material relationship to Programmer. Programmer
will provide suitable office space for Licensee's personnel at the
Studio at no charge, and to the extent feasible the space assigned
to Licensee's employees shall be physically separate from the space
assigned to Programmer's employees. Whenever in the Studio or at the
Transmitter Sites, Programmer's personnel will be subject to the
reasonable supervision and the direction of Licensee's General
Manager and/or Engineer. Programmer will be responsible for the
payment of any publicity or promotional expenses incurred by
Programmer and for all telephone calls associated with program
production and listener response. Upon termination of this Agreement
upon an event other than the closing of the Sale, the Stations'
employees may be re-hired by Licensee. Programmer will be
responsible for all payroll, vacation, severance, and other
employee-related liabilities during their employment with
Programmer.
(c) Insurance for Transmitter Sites. Licensee will maintain in full
force and effect throughout the term of this Agreement insurance
with responsible and reputable insurance companies or associations
covering such risks to the Transmitter Site and the Equipment
located thereon (including fire and other risks insured against by
extended coverage, public liability insurance, insurance for claims
against personal injury or death or property damage and such other
insurance as may be required by law) and in such amounts and on such
terms as is conventionally carried by broadcasters operating radio
stations with facilities comparable to those of the Stations. Any
insurance proceeds received by Licensee in respect of damaged
property will be used promptly to repair or replace such property so
that the operation of the Stations conforms with this Agreement.
(d) Insurance for Studio. Programmer will maintain in full force and
effect throughout the term of this Agreement insurance with
responsible and reputable insurance companies or associations
covering such risks to the Studio and all equipment located thereon
(including fire and other risks insured against by extended
coverage, public liability insurance, insurance for claims against
personal injury or death or property damage and such other insurance
as may be required by law) and in such
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amounts and on such terms as is conventionally carried by
broadcasters operating radio stations with facilities comparable to
those of the Stations. Any insurance proceeds received by Programmer
in respect of damaged property will be used promptly to repair or
replace such property so that the operation of the Stations conforms
with this Agreement.
(e) Music Licenses. During the Term, Licensee will obtain and maintain
in full force and effect in its own name all music licenses ("Music
Licenses") that are currently operative with respect to the Stations
and that will be required by the licenser of those Music Licenses
("Licensor"). All Music Licenses fees due from Licensee will be paid
directly by Licensee.
6. Advertising and Programming Revenues. Programmer may sell advertising for
broadcast on the Stations as part of Programmer's programming, and all
proceeds generated as a result of the sale of such advertisements shall be
the property of Programmer and neither Licensee nor any of Licensee's
creditors have or shall have an interest in such proceeds.
7. Accounts Receivable and Accounts Payable.
(a) General. As of the Effective Date of this Agreement, Programmer will
employ commercially reasonable efforts (but without responsibility
to institute legal or collection proceedings) to collect accounts
receivable owed to Licensee as of the Effective Date during the
120-day period following the Effective Date and will remit all
payments received on such amounts monthly during this 120-day period
together with an accounting of all payments received within such
period. As of 120 days following the Effective Date, any uncollected
accounts receivable will be returned to the Seller for further
collection. Insofar as any particular account payable or receivable
shall pertain to the operation of the Stations both during the Term
and prior thereto, the parties will prorate amounts payable or
receivable, as the case may be, as soon as reasonably practical
following the signing of this Agreement, and amounts received shall
be applied first to satisfy Licensee's obligations. In addition, to
the extent that Licensee satisfies with cash payments accounts
payable for operating expenses related to the Stations following the
Effective Date of this Agreement, and provides Programmer with
documentation of such accounts payable and cash payments, Programmer
shall reimburse Licensee for such expenses no later than the 10th
day of the month following that in which the Licensee makes the cash
payments, and such amounts shall be deducted from the accounts
receivable owed to Programmer.
(b) Carryover Accounts. Programmer will assume the obligation to provide
advertising time on the Stations in consideration of Licensee's
trade accounts in existence as of the date of this Agreement on a
time available basis during the first twelve (12) months of the
Term, in an amount not to exceed $10,000 worth of advertising time.
Programmer will perform all of Licensee's obligations under existing
long-term
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contracts for the sale of advertising time on the Stations that are
to be performed on or after the first day of the Term and will be
entitled to all the proceeds of accounts receivable pertaining to
such performance.
8. Operation of Stations. Notwithstanding anything to the contrary in this
Agreement, Licensee will have full authority and power over the operation
of the Stations during the term of this Agreement. Licensee will be
responsible for the payment of the salaries and other compensation
(including payroll taxes, etc.) of the Stations' General Manager and any
other personnel employed by Licensee, all of whom will report and be
accountable to the Licensee. The Stations' General Manager will direct the
day-to-day operation of the Stations through the exercise of its sole
control over the Studio and the Transmitter Sites. Licensee will retain
control over the policies, programming and operations of the Stations, the
right to preempt any programs or advertisements not in the public interest
or in order to broadcast a program deemed by Licensee to be of greater
national, regional or local importance (subject to payment credit in
accordance with Section 3(d) hereof), and the right to take any other
actions necessary for compliance with federal, state and local laws, the
Act and the rules, regulations and policies of the Commission (including
the prohibition on unauthorized transfers of control) and the rules,
regulations and policies of other federal government entities, including
the Federal Trade Commission and the United States Department of Justice.
Licensee will at all times be solely responsible for meeting all of the
Commission's requirements with respect to public service programming, for
maintaining the Stations' logs and political and public inspection files,
and for the preparation of issues/programs lists. Licensee will also
retain the right to break into Programmer's programming in case of an
emergency. Programmer will provide Licensee with information with respect
to such of the Programming as is responsive to public needs and interests
so as to assist Licensee in the preparation of required programming
reports and will provide upon request such other information necessary to
enable Licensee to prepare other records and reports required by the
Commission or other local, state or federal government entities.
Programmer will cooperate with Licensee to ensure the Stations' compliance
with the Commission's rules, regulations and statutes, including the
political broadcast rules requiring equal opportunities, reasonable access
and lowest unit charge.
9. Station Identification. Licensee will be responsible for the proper
broadcast of station identification announcements. Pursuant to Section
3(e), Programmer will coordinate such announcements with Licensee so that
they are aired in accordance with the Commission's rules.
10. Special Events. Licensee reserves the right, in its good faith discretion,
to preempt or interrupt the broadcasts of the programs referred to herein,
or any part thereof, for broadcast of special programs of greater
national, regional, or local importance. In all such cases, Licensee will
use its best efforts to give Programmer reasonable notice of its intention
to preempt or interrupt Programmer's programs, and, in the event of such
preemption or interruption, Programmer will receive a payment credit for
the programs preempted or interrupted pursuant to the provisions of
Section 3(d) hereof.
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11. Handling of Mail. Except as required to comply with Commission rules and
policies, including those regarding the maintenance of the public records
file and the political file (which will at times remain the responsibility
of the Licensee), Licensee will not be required to receive or handle mail
in connection with Programmer's programs broadcast hereunder. Programmer
agrees that the mailing address of the Stations shall not be changed
without the prior written permission of Licensee.
12. Payola. Programmer agrees that it will not accept any consideration,
compensation or gift or gratuity of any kind whatsoever, regardless of its
value or form, including, but not limited to, a commission, discount,
bonus, material, supplies or other merchandise, services or labor
(collectively "Consideration"), whether or not pursuant to written
contracts or agreements between Programmer and merchants or advertisers,
unless the payer is identified in the program for which Consideration was
provided as having paid for or furnished such Consideration, in accordance
with the Act and FCC requirements. Programmer agrees to annually, or more
frequently at Licensee's reasonable request, execute and provide Licensee
with a Payola Affidavit, substantially in the form attached hereto as
Exhibit A.
13. Compliance with Law. Each party will comply with all laws, rules,
regulations and policies applicable to the conduct of the Stations'
business, and each party acknowledges that the other party has not urged,
counseled or advised the use of any unfair business practice.
14. Licensee's Representations, Warranties and Covenants. Licensee makes the
following further representations, warrants and covenants:
(a) Qualification. Licensee is legally qualified, empowered and able to
enter into this Agreement. This Agreement has been approved by all
necessary action of the Licensee and constitutes the valid and
binding obligation of Licensee, enforceable in accordance with its
terms. The execution, delivery and performance hereof will not
constitute a breach or violation of any agreement, contract or other
obligation to which either party is subject or by which it is bound.
(b) Authorizations. Licensee holds, and throughout the Term will
continue to hold, all licenses and other permits and authorizations
necessary for the operation of the Stations as presently conducted,
including licenses, permits and authorizations issued by the
Commission ("FCC Authorizations").
(c) Filings. All reports and applications required to be filed with the
Commission (including ownership reports and renewal applications) or
any other government entity, department or body in respect of the
Stations have been, and in the future will be, filed in a timely
manner and are and will be true and complete and accurately present
the information contained and required thereby. All such reports and
documents, to the extent required to be kept in the public
inspection files of the Stations, are and will be kept in such
files.
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(d) Compliance With FCC Requirements. The Stations will be operated in
conformity with the FCC Authorizations, the Communications Act and
the rules and regulations of the Commission. The Licensee will take
all steps necessary or appropriate to ensure that the FCC
Authorizations will at all times remain in full force and effect.
(e) Content of the Programming. The content of Licensee's programming
will not violate any rights of others. Licensee will hold
Programmer, the Stations, and Programmer's employees, harmless from
any and all damages, liabilities, costs and expenses, including
reasonable attorneys' fees, arising from any claims of third parties
(excluding third parties claiming through Programmer) that allege
negligence or intentional tortious acts of Licensee, its employees
and/or its representatives, or that relate to the content of
Licensee's programming, including without limitation, claims
alleging libel, slander, unfair competition or trade practices,
infringement of trademarks, tradenames or program titles, violation
of rights of privacy and infringement of copyrights and proprietary
rights. Licensee's obligation to hold Programmer harmless against
the liabilities specified above will survive any termination of this
Agreement until the expiration of all applicable statutes of
limitation.
15. Programmer's Representations, Warranties and Covenants. Programmer makes
the following further representations, warrants and covenants:
(a) Qualification. Programmer is legally qualified, empowered and able
to enter into this Agreement. This Agreement has been approved by
all necessary action of the Board of Directors of Programmer and
constitutes the valid and binding obligation of Programmer,
enforceable in accordance with its terms. The execution, delivery
and performance hereof will not constitute a breach or violation of
any agreement, contract or other obligation to which either party is
subject or by which it is bound.
(b) Content of the Programming. The content of the Programming will not
violate any rights of others. The Programmer will hold Licensee, the
Stations, and Licensee's employees, harmless from any and all
damages, liabilities, costs and expenses, including reasonable
attorneys' fees, arising from any claims of third parties (excluding
third parties claiming through Licensee) that allege negligence or
intentional tortious acts of Programmer, its employees and/or its
representatives, or that relate to the content of the Programming,
including without limitation, claims alleging libel, slander, unfair
competition or trade practices, infringement of trademarks,
tradenames or program titles, violation of rights of privacy and
infringement of copyrights and proprietary rights. Programmer's
obligation to hold Licensee harmless against the liabilities
specified above will survive any termination of this Agreement until
the expiration of all applicable statutes of limitation.
16. Events of Default: Cure Periods and Remedies.
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(a) Events of Default. The following will, after the expiration of the
applicable cure periods, constitute Events of Default:
(i) Non-Payment. Programmer's failure to pay the Monthly Fee (A) by
the 10th day of any month during the Term;
(ii) Breach of Covenants. If either party hereto shall fail in any
material way to observe or perform any covenant, condition or agreement
contained herein;
(iii) Breach of Representation or Warranty. If any material
representation or warranty herein made by either party in any certificate
or document furnished by either party to the other pursuant to the
provisions hereof, shall prove to have been false or misleading in any
material respect as of the time made or furnished; or
(iv) Bankruptcy, etc. If either party (i) shall make a general
assignment for the benefit of creditors, (ii) shall file or have 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 or discharged within sixty (60) days
thereof.
(b) Cure Periods. Except in the case of a default under the foregoing
subsection (a)(iv), as to which no cure period will be applicable,
an Event of Default will not be deemed to have occurred until twenty
(20) business days after the nondefaulting party has provided the
defaulting party with written notice specifying the event or events
that if not cured would constitute an Event of Default. This period
may be extended by the non-defaulting party for a reasonable period
of time, if the defaulting party is acting in good faith to cure the
default and such delay will not have a materially adverse affect
upon the other party.
(c) Remedies. Upon the occurrence of an Event of Default, the
non-defaulting party may terminate this Agreement, provided that it
is not also in default hereunder, in addition to any other remedies
available to the non-defaulting party at law or equity, or under
paragraph (d), below.
(d) Specific Performance. Without limiting or waiving in any respect any
rights or remedies of any party given under this Agreement, or now
or hereafter existing at law or in equity or by statute, either
party shall be entitled to specific performance of the obligations
to be performed by the other in accordance with the provisions of
this Agreement.
17. No Brokers. The parties represent to each other that no brokers or finders
have been engaged in connection with the transaction described in this
Agreement, and the parties
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agree to indemnify and hold each other harmless against any claim from any
broker or finder based upon any agreement, arrangement, or understanding
alleged to have been made by Licensee or by Programmer, as the case may
be.
18. General.
(a) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered
to be given and received in all respects when hand delivered, when
delivered via prepaid express or courier delivery service, when sent
by facsimile transmission actually received by the receiving
equipment or three (3) days after deposited in the United States
mail, certified mail, postage prepaid, return receipt requested, in
each case addressed to the intended recipient as set forth below (or
such other receipient as a Party may indicate in writing):
If to the Licensee:
Mr. Richard Verne
c/o Point Communications, Inc.
P.O. Box 1094
Montauk, New York 11954
Copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attn: Melvin Epstein
Fax: (212) 806-6006
(which copy shall not constitute notice to Licensee)
If to the Programmer:
Cumulus Broadcasting, Inc.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
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875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including telex,
ordinary mail, or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been
duly given unless and until it actually is received by the party for
whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other party notice in
the manner herein set forth.
(b) Modification and Waiver. No modification of any provision of this
Agreement will in any event be effective unless the same will be in
writing and signed by a duly authorized officer of the party to be
charged therewith, and then such modification will be effective only
in the specific instance and for the purpose for which given.
(c) Construction. This Agreement will be construed in accordance with
the laws of the State of Georgia excluding the choice of law rules
utilized in that jurisdiction, and the obligations of the parties
hereto are subject to all federal, state and local laws and
regulations now or hereafter in force and to the rules, regulations
and policies of the Commission and all other government entities or
authorities presently or hereafter to be constituted.
(d) Headings. The headings contained in this Agreement are included for
convenience only and no such heading will in any way alter the
meaning of any provision.
(e) No Assignment. No right or obligation under this Agreement may be
assigned by either party without the other party's consent, which
may be withheld for any reason.
(f) Counterpart Signature. This Agreement may be signed in one or more
counterparts, each of which will be deemed a duplicate original,
binding on the parties hereto notwithstanding that the parties are
not signatory to the original or the same counterpart. This
Agreement will be effective as of the date first above written.
(g) Entire Agreement. This Agreement embodies the entire agreement
between the parties and there are no other agreements,
representations, warranties or understandings, oral or written,
between them with respect to the subject matter hereof.
(h) No Partnership or Joint Venture Created. Nothing in this Agreement
will be construed to make Licensee and Programmer partners or joint
venturers or to afford
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any rights to any third party other than as expressly provided
herein. Neither Licensee nor Programmer will have any authority to
act as an agent for, or to enter into any contracts on behalf of or
that will be binding upon the other party.
(i) Severability. In the event any provision contained in this Agreement
is held to be invalid, illegal or unenforceable, such holding will
not affect any other provision hereof and this Agreement will be
construed as if such invalid, illegal or unenforceable provision had
not been contained herein.
(j) Force Majeure. Any failure or impairment of Licensee's facilities or
any delay or interruption in the broadcast of programs, or
Licensee's failure at any time to furnish facilities, in whole or in
part, for broadcast, due to causes beyond the control of Licensee,
will not constitute a breach of this Agreement and Licensee will not
be liable to Programmer, except to the extent provided in Sections
4(d) and 5(c) above.
(k) Other Agreements. During the term of this Agreement, Licensee will
not enter into any other time brokerage, program provision, local
management or similar agreement, regarding the Stations, with any
third party.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
CUMULUS BROADCASTING, INC.
By:___________________________________
Its:___________________________________
"Programmer"
SAVANNAH COMMUNICATIONS, L.P.
By:___________________________________
Its:___________________________________
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"Licensee"
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement, during the Term, Programmer shall pay as the LMA fee an amount
representing the reimbursement of Licensee for the Station Expenses (defined
below). The "Station Expenses" as used herein means the reasonable and prudent
expense actually incurred by Licensee in operating the Station in compliance
with the terms of this agreement and consistent with past practice (except for
changes resulting from the transactions contemplated by this Agreement of the
Sale Agreement), including without limitation, those expenses set forth below,
and shall be paid by Programmer to Licensee in arrears.
Monthly Expenses: Amount:
----------------- -------
Employees $4,148
Engineering 2,000
Eng. Maintenance and Repair 1,075
Utilities 4,250
Music Lic. Fees 4,571
Rent 200
Ad Valorem Taxes 100
Employee Med Insurance 1,076
Real Estate Taxes 2,020
Tower Rent 4,112
Telephone 3,095
Insurance 2,950
------
Total 29,597
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APPENDIX B
Programmer 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:
I. Religious Programming. The subject of religion and references to
particular faiths, tenets, and customs shall be treated with respect at all
times. Programs shall not be used as a medium for attack on any faith,
denomination, or sect or upon any individual or organization.
II. Controversial Issues. Any discussion of controversial issues or public
importance shall be reasonably balanced with the presentation of contrasting
viewpoints in the course of overall programming; no attacks on the honesty,
integrity, or like personal qualities of any person or group of persons shall be
made during the discussion of controversial issues of public importance; and
during the course of political campaigns, programs are not to be used as a forum
for editorializing about individual candidates. If such events occur, Licensee
may require that responsive programming be aired.
III. No Plugola or Payola. The 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.
IV. No Lotteries. Announcements giving any information about lotteries or
games prohibited by federal or state law or regulation are prohibited.
V. Election Procedures. At least ninety (90) days before the start of any
primary or regular election campaign, Programmer will clear with Licensee's
General Manager the rate Programmer will charge for the time to be sold to
candidates for public office and/or their supporters to make certain that the
rate charged conforms to all applicable laws and station policy and the
candidate disclosure schedule to be used during the election period.
VI. Required Announcements. Programmer shall broadcast (a) an announcement
in a form satisfactory to Licensee at the beginning of each hour to identify
Station WIXV, WSGF, and WBMQ, respectively, (b) an announcement at the beginning
and end of each program, and hourly, as appropriate, to indicate that program
time has been purchased by Programmer, and (c) any other announcement that may
be required by law, regulation, or station policy.
VII. Credit Terms Advertising. Pursuant to rules of the Federal Trade
Commission, any advertising of credit terms shall be made over the Station in
accordance with all applicable federal an state laws, including regulations Z
and M.
VIII. Commercial Recordkeeping. Programmer shall not receive any
consideration in money, goods, service, or otherwise, directly or indirectly
(including to relatives) from any person or company for the presentation of any
programming over a Station without reporting the same in
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advance to and receiving the prior written consent of Licensee's General
Manager. No commercial messages ("plugs") or undo references shall be made in
programming presented over a Station to any business venture, profitmaking
activity, or other interest (other than noncommercial announcements for bona
fide charities, church activities, or other public service activities) in which
Programmer (or anyone else) is directly or indirectly interested without the
same having been approved in advance by Licensee's General Manager and such
broadcast being announced and logged and sponsored.
IX. No Illegal Announcements. No announcements or promotion prohibited by
federal or state law or regulation of any lottery or game 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 Licensee, which
reserves the right in its sole direction to reject any game, contest or
promotion.
X. Licensee Discretion Paramount. In accordance with the Licensee's
responsibility under the Communications Act of 1934, as amended, and the rules
and regulations of the Federal Communications Commission, Licensee reserves the
right to reject or terminate any advertising proposed to be presented or being
presented over the Stations which is in conflict with Station policy or which in
the reasonable judgment of Licensee or its General Manager/Chief Engineer would
not serve the public interest.
XI. Programming in Which Programmer Has a Financial Interest. Programmer
shall advise the General Manager of the Stations with respect to any programming
(including commercial(s) concerning goods or services in which Programmer has a
material financial interest. Any announcements for such goods and services shall
clearly identify Programmer's financial interest.
XII. Programming Prohibitions. Programmer shall not broadcast any of the
following programs or announcements:
A. False Claims. False or unwarranted claims for any product or
service.
B. Unfair Imitation. Infringements of another advertiser's rights
through plagiarism or unfair imitation of either program idea or copy, or
any other unfair competition.
C. Commercial Disparagement. Any disparagement of competitors or
competitive goods.
D. Profanity. Any programs or announcements that are slanderous,
obscene, profane, vulgar, repulsive or offensive, either in theme or in
treatment.
E. Price Disclosure. Any price mentions except as permitted by
Programmer's policies current at the time.
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F. Unauthenticated Testimonials. Any testimonials which cannot be
authenticated.
G. Descriptions of Bodily Functions. Any continuity which describes
in a repellent manner internal bodily functions or symptomatic results or
internal disturbance, and no reference to matters which are not considered
acceptable topics in social groups.
H. Conflict Advertising. Any advertising matter or announcement
which may, in the reasonable opinion of Licensee, be injurious or
prejudicial to the interests of the public, the Stations, or honest
advertising and reputable business in general.
I. Fraudulent or Misleading Advertisement. Any advertisement matter,
announcement, or claim which Programmer knows to be fraudulent,
misleading, or untrue.
Programmer may waive any of the foregoing regulations in specific
instances if, in its reasonable opinion, good broadcasting in the public
interest will be served thereby.
In any case where questions of policy or interpretation arise, Programmer
shall submit the same to Licensee for decision before making any commitments in
connection therewith.
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LOCAL PROGRAMMING AND MARKETING AGREEMENT
dated as of
December 23, 1997
by and between
CUMULUS BROADCASTING, INC.
and
LEWIS BROADCASTING CORPORATION
<PAGE>
TABLE OF CONTENTS
Recitals.......................................................................1
Agreement......................................................................1
1. Term/Termination Options..........................................1
(a) Term........................................................1
(b) Option Upon Termination of Agreement for Sale of Station....2
(c) Effect of Termination on Advertising and other Contracts....2
2. Fees..............................................................2
(a) Monthly Fee.................................................2
3. Programs..........................................................2
(a) Operation of Station........................................2
(b) Programming Standards.......................................3
(c) Ancillary Broadcast Rights..................................3
(d) Programming and Operations Standards........................3
(e) Call Signs..................................................3
4. Facilities and Equipment..........................................4
(a) Facilities..................................................4
(b) Maintenance.................................................4
(c) Transmitter Site............................................4
(d) Interruption of Normal Operations...........................4
5. Costs of Operating Station........................................5
(a) General.....................................................5
(b) Employees...................................................5
(c) Insurance for Transmitter Site..............................6
(d) Insurance for New Studio and Programmer's Studio............6
(e) Music Licenses..............................................7
6. Advertising and Programming Revenues..............................7
7. Accounts Receivable and Accounts Payable..........................7
(a) General.....................................................7
(b) Carryover Accounts..........................................8
8. Operation of Station..............................................8
9. Station Identification............................................8
10. Special Events....................................................9
11. Handling of Mail..................................................9
12. Payola............................................................9
13. Compliance with Law...............................................9
14. Licensee's Representations........................................9
(a) Qualification...............................................9
(b) Authorizations..............................................9
(c) Filings....................................................10
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(d) Compliance With FCC Requirements...........................10
(e) Content of the Programming.................................10
15. Programmer's Representations.....................................10
(a) Qualification..............................................10
(b) Content of the Programming.................................11
16. Events of Default: Cure Periods and Remedies.....................11
(a) Events of Default..........................................11
(i) Non-Payment....................................11
(ii) Breach of Covenants............................11
(iii) Breach of Representation or Warranty...........11
(iv) Bankruptcy, etc................................11
(b) Cure Periods...............................................11
(c) Remedies...................................................12
(d) Specific Performance.......................................12
17. No Brokers.......................................................12
18. General..........................................................12
(a) Notices....................................................12
(b) Modification and Waiver....................................13
(c) Construction...............................................13
(d) Headings...................................................14
(e) No Assignment..............................................14
(f) Counterpart Signature......................................14
(g) Entire Agreement...........................................14
(h) No Partnership or Joint Venture Created....................14
(i) Severability...............................................14
(j) Force Majeure..............................................14
(k) Other Agreements...........................................14
Appendix A: LMA Payments
Appendix B: Programming Standards
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LOCAL PROGRAMMING AND MARKETING AGREEMENT
This Local Programming and Marketing Agreement is entered into as of the
__th day of December, 1997, by and among Cumulus Broadcasting, Inc., a Nevada
corporation ("Programmer"), and Lewis Broadcasting Corporation (the "Licensee").
Recitals
Licensee holds the FCC broadcast license and auxiliary licenses for radio
station WJCL-FM (licensed to Savannah, Georgia).
Licensee and Programmer have entered into an Asset Purchase Agreement as
of December ___, 1997 (the "Sale Agreement"), pursuant to which Programmer will
purchase from Licensee, upon receipt of consent of the FCC, Licensee's assets
used or useful in the operation of the Station (the "Sale").
The Station's transmitter facilities are at locations described in Section
2(j) of the Disclosure Schedule of the Sale Agreement (the "Transmitter Sites").
The Station's studio is at a location described in Section 2(j) of the
Disclosure Schedule of the Sale Agreement (the "Studio").
Licensee has broadcast time on the Station available for sale. Programmer
desires to purchase time on the Station for the broadcast of Programmer's
programming and the sale of advertising time for inclusion in said programming.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
Agreement
1. Term/Termination Options
(a) Term. The term of this Agreement (the "Term") will begin at 12:01
a.m. on January 1, 1998, and expire at 11:59 p.m. on the earliest of
(i) December 31, 1998, or (ii) the closing of the Sale, unless
earlier terminated in accordance with this Section 1 or Sections
4(d) or 16, below. Each party will fulfill all its obligations
hereunder through the date of termination or expiration. After
termination or expiration, neither party will have any further
obligations hereunder except as provided in this Section 1.
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(b) Option Upon Termination of Agreement for Sale of Station. If at any
time either (i) Licensee shall terminate the Sale Agreement, or (ii)
Programmer shall terminate the Sale Agreement, in each case in
compliance with the terms of the Sale Agreement, then either party
may terminate this Agreement, upon at least 10 days' advance written
notice to the other party.
(c) Effect of Termination on Advertising and other Contracts. On the
termination date, Programmer will provide to Licensee a written
schedule of all advertising commitments for the Station then in
effect. Licensee shall reasonably cooperate with Programmer to honor
all such advertising commitments then outstanding, in which event
Licensee shall receive as compensation for the broadcasting of such
programming that which otherwise would have been paid to Programmer;
provided, however, as to fees received by Licensee for advertising
broadcasts by Programmer prior to the Termination Date, Licensee
agrees to pay to Programmer 100 percent (100%) of all advertising
revenue received by Licensee with respect thereto (after deduction
and payment of applicable sales commissions) within 120 days using
procedures comparable to those specified in Section 7 below.
Programmer will remain liable for all other contracts entered into
and other liabilities incurred by Programmer in the course of its
performance under this Agreement, if any, and Licensee shall not
assume any liability therefor.
2. Fees.
Monthly Fee. Programmer will pay Licensee for the broadcast of the
programs hereunder a fee each month as described in more detail in Appendix A to
this Agreement (the "Monthly Fee"). The Monthly Fee will be payable on the first
day of each calendar month during the Term, to Lewis Broadcasting Corporation,
___________, or to such other address as Licensee may designate in writing. The
failure of Licensee to demand or insist upon prompt payment of the Monthly Fee
will not constitute a waiver of its right to do so.
3. Programs.
(a) Operation of Station. Throughout the Term, Licensee will make the
Station and time on the Station available to Programmer for up to
166 hours per week, Sunday through Saturday, except for downtime
occasioned by routine maintenance. Programmer will provide
entertainment programming of its selection consistent with the
current format of the Station, complete with commercial matter,
news, public service announcements and other suitable programming
(the "Programming"). Subject to the limitations set forth herein,
all time on the Station not reserved to Licensee pursuant to this
Section 3(a) will be available for use by Programmer and no other
party, and Licensee will broadcast the Programming on the Station at
all such times. Licensee may reserve up to two (2) hours per week on
the Station for the broadcast of Licensee's own regularly scheduled
public-interest programming; provided, however, that Licensee will
not reserve time for such regularly scheduled
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programming between the hours of 5:00 a.m. - 12:00 midnight, Monday
through Friday, 8:00 a.m. - 12:00 midnight, Saturday or 9:00 a.m. -
12:00 midnight, Sunday.
(b) Programming Standards. The Programming will be in conformity with
generally recognized industry standards and in accordance with the
Communications Act of 1934, as amended (the "Act") and the rules,
regulations and policies of the Federal Communications Commission
(the "Commission") and with those specific standards set forth in
Appendix B to this Agreement. Programmer will make the Programming
available to Licensee during a sufficient number of hours to enable
the Station to meet the minimum hours of operation required under
the Commission's rules. All advertising messages and promotional
material or announcements will comply with all applicable federal,
state and local laws, rules, and regulations. Licensee acknowledges
that the right hereby granted to Licensee to broadcast the
Programming on the Station is non-exclusive and that ownership of
the Programming and all parts thereof and the right to authorize
their use in any media whatsoever is and shall remain vested in
Programmer.
(c) Ancillary Broadcast Rights. Programmer shall have the right to use,
or permit third parties to use, the Station's subcarriers, and will
be entitled to all revenues derived from any such subcarrier
transmissions during the term of this Agreement; provided, however,
that Licensee may continue its current lease of the subcarrier to
Georgia Music and Sound Co. and shall retain all such lease payments
without reduction of the LMA fee paid by Programmer.
(d) Programming and Operations Standards. Licensee may preempt any
program that Licensee reasonably believes to be unsuitable or
contrary to the public interest. Licensee will give Programmer
reasonable notice of its intention to preempt any program, and, in
the event of suspension or cancellation, Programmer will receive a
pro rata reduction in the Monthly Fee for the period of time so
preempted, calculated to the nearest minute.
(e) Call Signs. Licensee will retain all rights to the call letters
WJCL, and will ensure that proper station identification
announcements are made with such call letters in accordance with FCC
rules and regulations. Programmer shall include in the Programming
an announcement in a form satisfactory to Licensee at the beginning
of each hour of such programs to identify WJCL or such other call
letters used by Licensee for the Station, as well as any other
announcements required by the rules and regulations of the FCC.
Programmer is specifically authorized to use the call letters WJCL
in its Programs and in any promotional material, in any media, used
in connection with the Programming.
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4. Facilities and Equipment.
(a) Facilities. Licensee will permit Programmer to use all equipment and
motor vehicles now located at the Studio or the Transmitter Site, a
schedule of which is attached as Schedule __ to the Sale Agreement
(the "Licensee Equipment"), but exclusively for the operation of the
Station. Licensee will at all times retain title to the Licensee
Equipment. Programmer will originate its programming from the Studio
and will transmit programming to the Studio via a mode of
transmission it selects that will ensure technical and quality
standards comparable to the Station's broadcasts prior to the Term.
The Studio will constitute the "main studio" of the Station.
Licensee will have access to the Studio at all times.
(b) Maintenance. Any regular maintenance work affecting the operation of
the Station at maximum facilities will be scheduled with the
approval of Programmer, which will not be unreasonably withheld,
upon at least forty-eight (48) hours' prior notice to Programmer.
Programmer will perform and bear the cost of all routine maintenance
of equipment at the Studio. Licensee will bear the cost of
extraordinary maintenance to and replacement of Licensee Equipment
located at the Studio.
(c) Transmitter Sites. Licensee will maintain the Transmitter Site and
all equipment located at the Transmitter Site at its own expense.
Licensee will perform routine maintenance work at the Transmitter
Site, as needed, on Mondays between midnight and 4:00 a.m. The
Transmitter Site will be operated, in all material respects, in
accordance with all applicable laws and regulations (including the
requirements of the Act and the rules, regulations, policies and
procedures of the Commission promulgated thereunder). The
transmitting facilities of the Station are capable of transmitting
at the Station's maximum authorized effective radiated power, with
an antenna center of radiation at its full authorized height above
ground and above average terrain. Licensee will maintain the
operating power of the Station at its maximum licensed level and
shall operate and maintain in good working condition the Station's
transmission facilities and broadcasting equipment. Licensee will
not apply to the Commission for any reduction in the Station's
maximum authorized facilities without the prior written approval of
Programmer.
(d) Interruption of Normal Operations. If the Station suffers any loss
or damage of any nature at the Transmitter Site which is not caused
by the acts or omissions of Programmer and which results in the
interruption of service or the inability of the Station to operate
with its maximum authorized facilities and licensed effective
radiated power, Licensee will immediately notify Programmer and
promptly undertake such repairs, at Licensee's expense, as are
necessary to restore full-time operation of the Station with its
maximum authorized facilities and licensed effective radiated power
thereon as quickly as is reasonably possible under the
circumstances. Except in the case of events not under control of
Licensee (such as
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acts of God or weather conditions) which do not materially impair
the earnings potential of the Station, if the Station is inoperable
or is operated at 90% or less of its licensed effective radiated
power as a consequence of such loss or damage, then Programmer will
be entitled to a Pro rata reduction in the proportionate Monthly Fee
for each day in which there occurs such a service interruption in
excess of four (4) consecutive hours. Licensee will promptly begin
to repair and will complete the repairs necessary to restore the
inoperable Station to full time operations with its maximum licensed
facilities within ten (10) days from the occurrence of the loss or
damage; provided, however, that this period will be extended for a
reasonable period of time, not to exceed an additional ten (10)
days, if Licensee has taken and is continuing to take all
appropriate actions to repair the loss or damage as promptly as
possible in the circumstances. If such repairs are not completed
within the allotted period, Programmer may give notice to Licensee
of Programmer's intention to terminate this Agreement, in which
event this Agreement will terminate on the date of such notice, any
other provision of this Agreement notwithstanding.
5. Costs of Operating Station.
(a) General. Licensee will retain ultimate control over the personnel,
finances, programming and operation of the Station. Except as
otherwise expressly set forth in this Agreement, all costs of
producing and delivering the Programming to the Transmitter Site for
broadcast on the Station will be borne by Programmer including,
without limitation, all personnel, equipment costs, maintenance,
music license fees, taxes of all kinds (including real and personal
property and income), utilities, all payments in the nature of rent
due under the Transmitter Lease, remaining payments due on motor
vehicles and all expenses related to the construction, maintenance
and operation of the Studio. Programmer will be responsible for all
liabilities, debts and obligations of Programmer based upon the
purchase of air time including, without limitation, barter
agreements and unaired advertisements, but not for Licensee's
federal, state and local income tax liabilities.
(b) Employees. Programmer will employ and be responsible for the
salaries, commissions, taxes, insurance and all other related costs
for all personnel involved in the production and marketing of the
Programming and the origination and/or delivery of the Programming
from the Studio or any remote location to the Transmitter Site
(including air personalities, engineering personnel, salespersons,
traffic personnel, board operators and other programming staff
members). Upon notice to the Licensee, and at mutually agreeable
times, the Licensee will permit Programmer to meet with its
employees prior to or after the Effective Date. Programmer may, at
its option and upon its terms and conditions, extend offers of
employment to all or any of Licensee's employees as of the Effective
Date. Licensee will not take any action to preclude or discourage
any of the Licensee's employees from accepting any offer of
employment extended by Programmer. Licensee will be responsible for
all payroll, vacation, severance, and other
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employee-related liabilities prior to their employment by
Programmer. Licensee will be responsible for the personnel necessary
for the fulfillment of Licensee's regulatory requirements and the
technical transmission of Programmer's programs. Specifically,
Licensee will employ a General Manager who will report to Licensee
and direct the performance of Licensee's obligations hereunder, and
will employ at least one full time employee per studio location to
assist the General Manager in performing Licensee's obligations
hereunder, including maintaining the Station's transmission
facilities. Licensee's employees will have no employment,
consulting, or other material relationship to Programmer. Programmer
will provide suitable office space for Licensee's personnel at the
Studio at no charge, and to the extent feasible the space assigned
to Licensee's employees shall be physically separate from the space
assigned to Programmer's employees. Programmer may, at its option,
obtain a lease of Licensee's computer capacity for traffic,
acccounting, and other services on terms to be mutually agreed.
Whenever in the Studio or at the Transmitter Site, Programmer's
personnel will be subject to the reasonable supervision and the
direction of Licensee's General Manager and/or Engineer. Programmer
will be responsible for the payment of any publicity or promotional
expenses incurred by Programmer and for all telephone calls
associated with program production and listener response. Upon
termination of this Agreement upon an event other than the closing
of the Sale, the Station's employees may be rehired by Licensee.
(c) Insurance for Transmitter Sites. Licensee will maintain in full
force and effect throughout the term of this Agreement insurance
with responsible and reputable insurance companies or associations
covering such risks to the Transmitter Site and the Equipment
located thereon (including fire and other risks insured against by
extended coverage, public liability insurance, insurance for claims
against personal injury or death or property damage and such other
insurance as may be required by law) and in such amounts and on such
terms as is conventionally carried by broadcasters operating radio
stations with facilities comparable to those of the Station. Any
insurance proceeds received by Licensee in respect of damaged
property will be used promptly to repair or replace such property so
that the operation of the Station conforms with this Agreement.
(d) Insurance for Studio. Programmer will maintain in full force and
effect throughout the term of this Agreement insurance with
responsible and reputable insurance companies or associations
covering such risks to the Studio and all equipment located thereon
(including fire and other risks insured against by extended
coverage, public liability insurance, insurance for claims against
personal injury or death or property damage and such other insurance
as may be required by law) and in such amounts and on such terms as
is conventionally carried by broadcasters operating radio stations
with facilities comparable to those of the Station. Any insurance
proceeds received by Programmer in respect of damaged property will
be used
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promptly to repair or replace such property so that the operation of
the Station conforms with this Agreement.
(e) Music Licenses. During the Term, Licensee will obtain and maintain
in full force and effect in its own name all music licenses ("Music
Licenses") that are currently operative with respect to the Station
and that will be required by the licensor of those Music Licenses
("Licensor"). All Music License fees due from Licensee will be paid
by Licensee from advances by Programmer.
6. Advertising and Programming Revenues. Programmer may sell advertising for
broadcast on the Station as part of Programmer's programming, and all
proceeds generated as a result of the sale of such advertisements shall be
the property of Programmer and neither Licensee nor any of Licensee's
creditors have or shall have an interest in such proceeds.
7. Accounts Receivable.
(a) General. Licensee shall collect its own accounts receivable for
revenues earned prior to the Term. Programmer shall own and collect
accounts receivable for revenues earned during the term. Licensee
and Programmer shall reasonably cooperate in collecting accounts
receivable from accounts shared by Licensee and Programmer. Funds
received from common accounts which do not specifically designate
the invoices to which they relate shall first be applied to the
older accounts.
(b) Carryover Accounts. Programmer will assume the obligation to provide
advertising time on the Station in consideration of Licensee's trade
accounts in existence as of the date of this Agreement on a time
available basis during the first twelve (12) months of the Term, in
an amount not to exceed Fifteen Thousand Dollars ($15,000) worth of
advertising time. Programmer will perform all of Licensee's
obligations under existing long-term contracts for the sale of
advertising time on the Station that are to be performed on or after
the first day of the Term and will be entitled to all the proceeds
of accounts receivable pertaining to such performance.
8. Operation of Station. Notwithstanding anything to the contrary in this
Agreement, Licensee will have full authority and power over the operation
of the Station during the term of this Agreement. Licensee will be
responsible for the payment of the salaries and other compensation
(including payroll taxes, etc.) of the Station's General Manager,
Engineer, and any other personnel employed by Licensee, all of whom will
report and be accountable to the Licensee. The Station's General Manager
will direct the day-to-day operation of the Station through the exercise
of its sole control over the Studio and the Transmitter Site. Licensee
will retain control over the policies, programming and operations of the
Station, the right to preempt any programs or advertisements not in the
public interest or in order to broadcast a program deemed by Licensee to
be of greater national, regional or local importance (subject to payment
credit in accordance with Section 3(d) hereof), and the right
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to take any other actions necessary for compliance with federal, state and
local laws, the Act and the rules, regulations and policies of the
Commission (including the prohibition on unauthorized transfers of
control) and the rules, regulations and policies of other federal
government entities, including the Federal Trade Commission and the United
States Department of Justice. Licensee will at all times be solely
responsible for meeting all of the Commission's requirements with respect
to public service programming, for maintaining the Station's logs and
political and public inspection files, and for the preparation of
issues/programs lists. Licensee will also retain the right to break into
Programmer's programming in case of an emergency. Programmer will, upon
request by Licensee, provide Licensee with information with respect to
such of the Programming as is responsive to public needs and interests so
as to assist Licensee in the preparation of required programming reports
and will provide upon request such other information necessary to enable
Licensee to prepare other records and reports required by the Commission
or other local, state or federal government entities. Programmer will
cooperate with Licensee to ensure the Station's compliance with the
Commission's rules, regulations and statutes, including the political
broadcast rules requiring equal opportunities, reasonable access and
lowest unit charge.
9. Station Identification. Licensee will be responsible for the proper
broadcast of station identification announcements. Pursuant to Section
3(e), Programmer will coordinate such announcements with Licensee so that
they are aired in accordance with the Commission's rules.
10. Special Events. Licensee reserves the right, in its good faith discretion,
to preempt or interrupt the broadcasts of the programs referred to herein,
or any part thereof, for broadcast of special programs of greater
national, regional, or local importance. In all such cases, Licensee will
use its best efforts to give Programmer reasonable notice of its intention
to preempt or interrupt Programmer's programs, and, in the event of such
preemption or interruption, Programmer will receive a payment credit for
the programs preempted or interrupted pursuant to the provisions of
Section 3(d) hereof.
11. Handling of Mail. Except as required to comply with Commission rules and
policies, including those regarding the maintenance of the public records
file and the political file (which will at times remain the responsibility
of the Licensee), Licensee will not be required to receive or handle mail
in connection with Programmer's programs broadcast hereunder. Programmer
agrees that the mailing address of the Station shall not be changed
without the prior written permission of Licensee.
12. Payola. Programmer agrees that it will not accept any consideration,
compensation or gift or gratuity of any kind whatsoever, regardless of its
value or form, including, but not limited to, a commission, discount,
bonus, material, supplies or other merchandise, services or labor
(collectively "Consideration"), whether or not pursuant to written
contracts or agreements between Programmer and merchants or advertisers,
unless the payer is identified in the program for which Consideration was
provided as having paid for or furnished such
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Consideration, in accordance with the Act and FCC requirements. Programmer
agrees monthly, or more frequently at Licensee's reasonable request, to
execute and provide Licensee with a Payola Affidavit, substantially in the
form attached hereto as Exhibit A.
13. Compliance with Law. Each party will comply with all laws, rules,
regulations and policies applicable to the conduct of the Station's
business, and each party acknowledges that the other party has not urged,
counseled or advised the use of any unfair business practice.
14. Licensee's Representations, Warranties and Covenants. Licensee makes the
following further representations, warrants and covenants:
(a) Qualification. Licensee is legally qualified, empowered and able to
enter into this Agreement. This Agreement has been approved by all
necessary action of the Licensee and constitutes the valid and
binding obligation of Licensee, enforceable in accordance with its
terms. The execution, delivery and performance hereof will not
constitute a breach or violation of any agreement, contract or other
obligation to which either party is subject or by which it is bound.
(b) Authorizations. Licensee holds, and throughout the Term will
continue to hold, all licenses and other permits and authorizations
necessary for the operation of the Station as presently conducted,
including licenses, permits and authorizations issued by the
Commission ("FCC Authorizations").
(c) Filings. All reports and applications required to be filed with the
Commission (including ownership reports and renewal applications) or
any other government entity, department or body in respect of the
Station have been, and in the future will be, filed in a timely
manner and are and will be true and complete and accurately present
the information contained and required thereby. All such reports and
documents, to the extent required to be kept in the public
inspection files of the Station, are and will be kept in such files.
(d) Compliance With FCC Requirements. The Station will be operated in
conformity with the FCC Authorizations, the Communications Act and
the rules and regulations of the Commission. The Licensee will take
all steps necessary or appropriate to ensure that the FCC
Authorizations will at all times remain in full force and effect.
Without limiting the foregoing, Licensee will prosecute the pending
renewal application of the Station to a favorable conclusion, i.e.,
the grant of the application for renewal of the FCC Authorizations.
In the event of an unfavorable decision by the FCC (including any
administrative law judge and the FCC's review board) or any court,
Licensee will take all steps necessary or appropriate to protect its
rights and to obtain a favorable decision through agency review
and/or subsequent judicial review by the United States Court of
Appeals for the District of Columbia Circuit. Licensee will not be
obligated to seek a writ of certiorari from the United States
Supreme Court.
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(e) Content of the Programming. The content of Licensee's programming
will not violate any rights of others. Licensee will hold
Programmer, the Station and Programmer's employees, harmless from
any and all damages, liabilities, costs and expenses, including
reasonable attorneys' fees, arising from any claims of third parties
(excluding third parties claiming through Programmer) that allege
negligence or intentional tortious acts of Licensee, its employees
and/or its representatives, or that relate to the content of
Licensee's programming, including without limitation, claims
alleging libel, slander, unfair competition or trade practices,
infringement of trademarks, tradenames or program titles, violation
of rights of privacy and infringement of copyrights and proprietary
rights. Licensee's obligation to hold Programmer harmless against
the liabilities specified above will survive any termination of this
Agreement until the expiration of all applicable statutes of
limitation.
15. Programmer's Representations, Warranties and Covenants. Programmer makes
the following further representations, warrants and covenants:
(a) Qualification. Programmer is legally qualified, empowered and able
to enter into this Agreement. This Agreement has been approved by
all necessary action of the Board of Directors of Programmer and
constitutes the valid and binding obligation of Programmer,
enforceable in accordance with its terms. The execution, delivery
and performance hereof will not constitute a breach or violation of
any agreement, contract or other obligation to which either party is
subject or by which it is bound.
(b) Content of the Programming. The content of the Programming will not
violate any rights of others. The Programmer will hold Licensee, the
Station and Licensee's employees, harmless from any and all damages,
liabilities, costs and expenses, including reasonable attorneys'
fees, arising from any claims of third parties (excluding third
parties claiming through Licensee) that allege negligence or
intentional tortious acts of Programmer, its employees and/or its
representatives, or that relate to the content of the Programming,
including without limitation, claims alleging libel, slander, unfair
competition or trade practices, infringement of trademarks,
tradenames or program titles, violation of rights of privacy and
infringement of copyrights and proprietary rights. Programmer's
obligation to hold Licensee harmless against the liabilities
specified above will survive any termination of this Agreement until
the expiration of all applicable statutes of limitation.
16. Events of Default: Cure Periods and Remedies.
(a) Events of Default. The following will, after the expiration of the
applicable cure periods, constitute Events of Default:
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(i) Non-Payment. Programmer's failure to pay the Monthly Fee (A) by
the 10th day of any month during the Term;
(ii) Breach of Covenants. If either party hereto shall fail in any
material way to observe or perform any covenant, condition or agreement
contained herein;
(iii) Breach of Representation or Warranty. If any material
representation or warranty herein made by either party in any certificate
or document furnished by either party to the other pursuant to the
provisions hereof, shall prove to have been false or misleading in any
material respect as of the time made or furnished; or
(iv) Bankruptcy, etc. If either party (i) shall make a general
assignment for the benefit of creditors, (ii) shall file or have 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 or discharged within sixty (60) days
thereof.
(b) Cure Periods. Except in the case of a default under the foregoing
subsection (a)(iv), as to which no cure period will be applicable,
an Event of Default will not be deemed to have occurred until twenty
(20) business days after the nondefaulting party has provided the
defaulting party with written notice specifying the event or events
that if not cured would constitute an Event of Default. This period
may be extended by the non-defaulting party for a reasonable period
of time, if the defaulting party is acting in good faith to cure the
default and such delay will not have a materially adverse affect
upon the other party.
(c) Remedies. Upon the occurrence of an Event of Default, the
non-defaulting party may terminate this Agreement, provided that it
is not also in default hereunder, in addition to any other remedies
available to the non-defaulting party at law or equity, or under
paragraph (d), below.
(d) Specific Performance. Without limiting or waiving in any respect any
rights or remedies of any party given under this Agreement, or now
or hereafter existing at law or in equity or by statute, either
party shall be entitled to specific performance of the obligations
to be performed by the other in accordance with the provisions of
this Agreement.
17. No Brokers. The parties represent to each other that, with the exception
of NationsBanc, whose fees shall be the exclusive responsibility of
Licensee, no brokers or finders have been engaged in connection with the
transaction described in this Agreement, and the parties agree to
indemnify and hold each other harmless against any claim from any broker
or finder based upon any agreement, arrangement, or understanding alleged
to have been made by Licensee or by Programmer, as the case may be.
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18. General.
(a) Notices. All necessary notices, demands and requests permitted or
required under this Agreement will be in writing and will be deemed
given, if personally delivered, on the date of personal delivery,
or, if mailed, four (4) days after being mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Licensee:
Lewis Broadcasting Corporation
9505 Abercorn Street
Savannah, Georgia 31406
Attn: J.C. Lewis, Jr., President
Fax: (912) 927-2885
Copy to:
Hunter, Lewis & Brannon, LLP
P.O. Box 9745 (31412)
123 W. Oglethorpe Avenue
Savannah, Georgia 31401
Attn.: J. Curtis Lewis, III
Fax: (912) 232-0512
(which copy shall not constitute notice to Seller)
If to the Programmer:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
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Attn: Richard J. Bonick
Fax: (312) 867-0098
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula, Esq.
Fax No: (219) 239-1900
or to such other address as any such person may designate in
writing.
(b) Modification and Waiver. No modification of any provision of this
Agreement will in any event be effective unless the same will be in
writing and signed by a duly authorized officer of the party to be
charged therewith, and then such modification will be effective only
in the specific instance and for the purpose for which given.
(c) Construction. This Agreement will be construed in accordance with
the laws of the State of Georgia excluding the choice of law rules
utilized in that jurisdiction, and the obligations of the parties
hereto are subject to all federal, state and local laws and
regulations now or hereafter in force and to the rules, regulations
and policies of the Commission and all other government entities or
authorities presently or hereafter to be constituted.
(d) Headings. The headings contained in this Agreement are included for
convenience only and no such heading will in any way alter the
meaning of any provision.
(e) No Assignment. No right or obligation under this Agreement may be
assigned by either party without the other party's consent, which
may be withheld for any reason.
(f) Counterpart Signature. This Agreement may be signed in one or more
counterparts, each of which will be deemed a duplicate original,
binding on the parties hereto notwithstanding that the parties are
not signatory to the original or the same counterpart. This
Agreement will be effective as of the date first above written.
(g) Entire Agreement. This Agreement embodies the entire agreement
between the parties and there are no other agreements,
representations, warranties or understandings, oral or written,
between them with respect to the subject matter hereof.
(h) No Partnership or Joint Venture Created. Nothing in this Agreement
will be construed to make Licensee and Programmer partners or joint
venturers or to afford any rights to any third party other than as
expressly provided herein. Neither
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Licensee nor Programmer will have any authority to act as an agent
for, or to enter into any contracts on behalf of or that will be
binding upon the other party.
(i) Severability. In the event any provision contained in this Agreement
is held to be invalid, illegal or unenforceable, such holding will
not affect any other provision hereof and this Agreement will be
construed as if such invalid, illegal or unenforceable provision had
not been contained herein.
(j) Force Majeure. Any failure or impairment of Licensee's facilities or
any delay or interruption in the broadcast of programs, or
Licensee's failure at any time to furnish facilities, in whole or in
part, for broadcast, due to causes beyond the control of Licensee,
will not constitute a breach of this Agreement and Licensee will not
be liable to Programmer, except to the extent provided in Sections
4(d) and 5(c) above.
(k) Other Agreements. During the term of this Agreement, Licensee will
not enter into any other time brokerage, program provision, local
management or similar agreement, regarding the Station, with any
third party.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
CUMULUS BROADCASTING, INC.
By:___________________________________
Its:___________________________________
"Programmer"
LEWIS BROADCASTING CORPORATION
By:___________________________________
Its:___________________________________
"Licensee"
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement, during the Term, Programmer shall pay Licensee as the LMA fee an
amount representing the reimbursement of Licensee for the Station Expenses
(defined below). The "Station Expenses" as used herein means the reasonable and
prudent expense actually incurred by Licensee in operating the Station in
compliance with the terms of this agreement and consistent with past practice
(except for changes resulting from the transactions contemplated by this
Agreement), including without limitation, those expenses set forth below, and
shall be paid by Programmer to Licensee in arrears.
Monthly Expenses:
Accounting and Computer Services
Employees (including General Manager and Chief Engineer)
Engineering
Eng. Maintenance and Repair
Utilities
Music Lic. Fees
Rent for FM antenna lease
Employee Med Insurance
Insurance Premiums
Tower Rent
Telephone
Total
In addition, effective April 15, Programmer shall pay Licensee an
additional LMA fee consisting of Thirty-Five Thousand Dollars ($35,000) per
month, payable in advance.
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APPENDIX B
PROGRAMMING STANDARDS
Programmer 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:
I. Religious Programming. The subject of religion and references to
particular faiths, tenants, and customs shall be treated with respect at all
times. Programs shall not be used as a medium for attack on any faith,
denomination, or sect or upon any individual or organization.
II. Controversial Issues. Any discussion of controversial issues or public
importance shall be reasonably balanced with the presentation of contrasting
viewpoints in the course of overall programming; no attacks on the honesty,
integrity, or like personal qualities of any person or group of persons shall be
made during the discussion of controversial issues of public importance; and
during the course of political campaigns, programs are not to be used as a forum
for editorializing about individual candidates. If such events occur, Licensee
may require that responsive programming be aired.
III. No Plugola or Payola. The 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.
IV. No Lotteries. Announcements giving any information about lotteries or
games prohibited by federal or state law or regulation are prohibited.
V. Election Procedures. At least ninety (90) days before the start of any
primary or regular election campaign, Programmer will clear with Licensee's
General Manager the rate Programmer will charge for the time to be sold to
candidates for public office and/or their supporters to make certain that the
rate charged conforms to all applicable laws and station policy.
VI. Spot Commercial Limitations. With respect to any given segment of air
time hereunder, the amount of spot commercial matter shall not exceed 20 minutes
during any sixty minute segment. Programmer will provide, for attachment to the
Station logs, a list of all commercial announcements carried during its
programming.
VII. Required Announcements. Programmer shall broadcast (a) an
announcement in a form satisfactory to Licensee at the beginning of each hour to
identify Station WJCL, (b) an announcement at the beginning and end of each
program, and hourly, as appropriate, to indicate that program time has been
purchased by Programmer, and (c) any other announcement that may be required by
law, regulation, or station policy.
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VIII. Credit Terms Advertising. Pursuant to rules of the Federal Trade
Commission, any advertising of credit terms shall be made over the Station in
accordance with all applicable federal an state laws, including regulations Z
and M.
IX. Commercial Recordkeeping. Programmer shall not receive any
consideration in money, goods, service, or otherwise, directly or indirectly
(including to relatives) from any person or company for the presentation of any
programming over the Station without reporting the same in advance to and
receiving the prior written consent of Licensee's General Manager. No commercial
messages ("plugs") or undo references shall be made in programming presented
over the Station to any business venture, profitmaking activity, or other
interest (other than noncommercial announcements for bona fide charities, church
activities, or other public service activities) in which Programmer (or anyone
else) is directly or indirectly interested without the same having been approved
in advance by Licensee's General Manager and such broadcast being announced and
logged and sponsored.
X. No Illegal Announcements. No announcements or promotion prohibited by
federal or state law or regulation of any lottery or game shall be made over the
Station. Any game, contest or promotion relating to or to be presented over the
Station must be fully stated and explained in advance to Licensee, which
reserves the right in its sole direction to rejecct any game, contest or
promotion.
XI. Licensee Discretion Paramount. In accordance with the Licensee's
responsibility under the Communications Act of 1934, as amended, and the rules
and regulations of the Federal Communictions Commission, Licensee reserves the
right to reject or terminate any advertising proposed to be presented or being
presented over the station which is in conflict with Station policy or which in
the reasonable judgment of Licensee or its General Manager/Chief Engineer would
not serve the public interest.
XII. Programming in Which Programmer Has a Financial Interest. Broker
shall advise the General Manager of the Station with respect to any programming
(including commercial(s) concerning goods or services in which Programmner has a
material financial interest. Any announcements for such goods and services shall
clearly identify Programmer's financial interest.
XIII. Programming Prohibitions. Programmer shall not broadcast any of the
following programs or announcements:
A. False Claims. False or unwarranted claims for any product or
service.
B. Unfair Imitation. Infringements of another advertiser's rights
through plagiarism or unfair imitation of either program idea or copy, or
any other unfair competition.
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C. Commercial Disparagement. Any disparagement of competitors or
competitive goods.
D. Profanity. Any programs or announcements that are slanderous,
obscene, profane, vulgar, repulsive or offensive, either in theme or in
treatment.
E. Price Disclosure. Any price mentions exceppt as permitted by
Programmer's policies current at the time.
F. Unauthenticated Testimonials. Any testimonials which cannot be
authenticated.
G. Descriptions of Bodily Functions. Any continuity which describes
in a repellent manner internal bodily functions or symptomatic results or
internal disturbance, and no reference to matters which are not considered
acceptable topics in social groups.
H. Conflict Advertising. Any advertising matter or announcement
which may, in the reasonable opinion of Licensee, be injurious or
prejudicial to the interests of the public, the Station, or honest
advertising and reputable business in general.
I. Fraudulent or Misleading Advertisement. Any advertisement matter,
announcement, or claim which Programmer knows to be fraudulent,
misleading, or untrue.
In any case where questions of policy or interpretataion arise, Programmer
shall submit the same to Licensee for decision before making any commitments in
connection therewith.
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LOCAL MARKETING AGREEMENT
This Local Marketing Agreement (the "Agreement") is made as of February
16, 1998, effective for all purposes on the Effective Date (as defined below),
between Cumulus Broadcasting, Inc. ("Programmer") and Jon A. LeDuc ("Licensee").
Recitals
A. Licensee owns and operates radio broadcast station WJLW-FM (the
"Station") pursuant to licenses issued by the Federal Communications Commission
(the "FCC").
B. Licensee and Programmer have contemporaneously entered into an Asset
Purchase Agreement (the "Purchase Agreement") which will provide for the
acquisition by Programmer of substantially all of the assets used or useful in
connection with the operation of the Station, on the terms and subject to the
conditions set forth therein.
C. Pending execution of the Purchase Agreement and closing thereunder,
Programmer desires to purchase from Licensee and Licensee desires to sell to
Programmer certain airtime on the Stations, all in accordance with the
Communications Act of 1934, as amended, and the rules, regulations, and policies
of the FCC (the "FCC Requirements").
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations, warranties and agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement agree as
follows:
1. Effective Date and Term.
1.1 Effective Date. This Agreement shall become effective for all purposes
at 12:01 a.m. on February 16, 1998.
1.2 Term. The term of this Agreement (the "Term") shall begin on the
Effective Date and shall continue until December 31, 1998, unless earlier
terminated in accordance with the provisions set forth in this Agreement.
2. Purchase of Airtime. Programmer hereby purchases from Licensee all
airtime on the Station during the Term, other than airtime between 9:00 a.m. to
9:30 a.m., local time on Sundays, on the terms specified herein (such purchased
airtime period is referred to herein as the "Broadcasting Period"). During the
Broadcasting Period, Licensee shall broadcast on the Station programming
supplied by Programmer (collectively, the "Program" or "Programs"). Programmer
will ensure that the Programs meet technical and quality standards equal to
those of programming broadcast by commercial radio stations generally in the
United States. If Licensee in the reasonable
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exercise of its discretion finds that any Program(s) does not meet these
standards, then it shall advise Programmer in writing of the specific technical
deficiencies. If such technical deficiencies have not been corrected within ten
(10) days after receipt of notice, then Licensee shall have no obligation to
broadcast such Program(s) until such time as the technical deficiencies are
corrected.
3. Licensee's Broadcasting Obligations. In consideration for the payments
made and to be made by Programmer hereunder, Licensee shall make available to
Programmer, beginning on the Effective Date, all of the Station's airtime during
the Broadcasting Period and shall cause to be broadcast on the Station the
Programs pursuant to Section 2 hereof. Throughout the Term, unless otherwise
mutually agreed by the parties, Licensee shall maintain the operating power of
the Station at its maximum licensed level and shall operate and maintain in good
working condition the Station's transmission facilities and broadcasting
equipment, excluding improvements and additions made by Programmer. Throughout
the Term, Licensee shall also, with respect to the Station:
(a) employ a General Manager who will report to Licensee and direct
the performance of Licensee's obligations hereunder and who shall have no
employment, consulting, or other material relationship to Programmer;
(b) employ at least one full time employee to assist the General
Manager in performing Licensee's obligations hereunder, including
maintaining the Station's transmission facilities, and who shall have no
employment, consulting or other material relationship with Programmer;
(c) retain ultimate control over the personnel, finances,
programming and operation of the Station;
(d) maintain a main studio consistent with the FCC Requirements at
which the General Manager and the other full time employee(s) of the
Station will be available during normal business hours;
(e) comply with the FCC Requirements with respect to the
ascertainment of community problems, needs and interests; broadcast
programming responsive thereto; and timely prepare and place in the
Station's public inspection files appropriate documentation thereof;
(f) comply with all other FCC Requirements which may be applicable
to the operation of the Station.
4. Consideration. In consideration of the airtime made available to
Programmer pursuant to this Agreement, Programmer shall pay Licensee as set
forth in Appendix A attached hereto.
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5. Operation, Ownership and Control of the Stations.
5.1 Control Vested in Licensee. Notwithstanding anything to the contrary
in this Agreement, as long as Licensee remains the FCC licensee of the Stations,
Licensee will have full authority, power and control over the operation of the
Station and over all persons employed by it. Licensee will bear the
responsibility for the Station's compliance with, and shall cause the Station to
comply with, all applicable laws, including the FCC Requirements. Nothing
contained herein shall prevent or hinder Licensee from: (a) rejecting or
refusing Programs that Licensee believes in good faith to be unsuitable or
contrary to the public interest; (b) substituting programs which Licensee
believes in good faith to be of greater local or national importance or which
are designed to address the problems, needs and interests of the local
community: (c) preempting any Program in the event of a local, territorial or
national emergency; (d) refusing to broadcast any Program that does not meet the
FCC Requirements; or (e) deleting any commercial announcements that do not
comply with the FCC Requirements or the requirements of the Federal Trade
Commission, or any state, local or federal law.
5.2 Notice of Complaints. Programmer will immediately serve Licensee with
notice and a copy of any letters of complaint that Programmer receives
concerning any Program for Licensee's review and inclusion in its public
inspection files. Licensee will immediately serve Programmer with notice and a
copy of any letters of complaint that it receives concerning any Program.
5.3 Programmer Access to the Station's Studios. During the Term, Licensee
shall make available to Programmer for no additional consideration the areas in
the Station's studios as may be reasonably necessary or appropriate for
Programmer to exercise its rights and perform its obligations under this
Agreement. Programmer shall, to the extent commercially feasible, use Licensee's
current studios and other facilities to exercise its rights and perform its
obligations under this Agreement.
5.4 Employees. Programmer shall employ and be responsible for the
salaries, taxes, insurance, and related costs for all personnel used in the
production of the programs supplied to the Station hereunder, and all other
costs incurred by Programmer for the production of such programs. Licensee shall
pay all compensation owed to its employees up to and including the Effective
Date. Programmer may, after the Effective Date, employ those of Licensee's
employees as Programmer may elect on terms and conditions determined by
Programmer in Programmer's sole discretion, other than those employees employed
by Licensee in the operation of the Station after the Effective Date, who shall
remain in Licensee's sole employ and control. Upon termination of this
Agreement, Licensee shall be free to re-employ Programmer's employees on such
terms and conditions as may be determined by Licensee.
5.5 Mutual Cooperation. Programmer and Licensee agree to cooperate
reasonably with each other as necessary to fulfill their rights and obligations
hereunder.
6. Program Rights and Music Licenses. During the Term, Licensee shall make
available to Programmer for its use, on the dates and at the times specified by
Programmer, all of
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Licensee's rights to programs under any program rights agreements of the
Stations (together with the music licenses described below, the "Program Rights
Agreements"). Licensee shall use its best efforts to secure all consents, if
any, from third parties that are necessary to permit Programmer to use the
programs under Program Rights Agreements. Licensee shall maintain all necessary
performing rights licenses to musical compositions included in any Program,
subject to reimbursement by Programmer for the cost thereof under Section 4 and
Appendix A of this Agreement.
7. Programs to Serve the Public Interest. Licensee acknowledges that it is
familiar with the type of programming Programmer intends to provide and has
determined that the broadcast of such programming on the Station would serve the
public interest and is otherwise suitable. Programmer shall cooperate with
Licensee to ensure that the Programs include material that is responsive to
community problems, needs, and interests.
8. Programming Standards. Programmer shall use its best efforts to ensure
that the Programs conform to all FCC Requirements applicable to broadcast radio
stations.
9. Expenses, Revenues and Accounts Receivable.
9.1 Expenses. The Station's cash expenses arising or relating to the
period before the Effective Date shall be the responsibility of Licensee, and
Programmer shall not be obligated to reimburse Licensee for any expenses
allocable to such period. During the Term, Programmer will reimburse Licensee
for its expenses incurred in accordance with Section 3 hereof. Programmer shall
be solely responsible for all expenses attributable to the origination and/or
delivery of the Programs by Programmer to Licensee.
9.2 Cash Accounts Receivable, Advertising and Programming Revenues.
(a) Promptly after the Effective Date, Licensee shall furnish to
Programmer a list of the Accounts Receivable that arose out of the operations of
the Stations as of the close of business on the day preceding the Effective Date
but are due and payable thereafter. For a period of 120 days after the Effective
Date, Programmer, as Licensee's agent, shall, without compensation, collect the
accounts receivable for Licensee (including accounts receivable for airtime
reserved by Licensee under Section 2 above). At the end of each month during the
120-day period, Programmer shall remit to Licensee the amount collected by
Programmer during that month with respect to the Accounts Receivable and
Programmer shall provide Licensee with a report setting for the Accounts
Receivable collected by Programmer that month. Programmer shall furnish Licensee
with such records and other information as Licensee may reasonably require to
verify the amounts collected by Programmer with respect to the Accounts
Receivable. Upon five days' prior written notice from Licensee, Programmer shall
terminate all collection efforts on behalf of Licensee with respect to the
Accounts Receivable specified in the notice and those Accounts Receivable shall
no longer be considered Accounts Receivable for purposes of this section 9.2.
Programmer shall set all commercial advertising during the Broadcasting Period
for its own account and shall be entitled to
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collect all Accounts Receivable arising thereunder.
(b) For the purpose of determining amounts collected by Programmer with
respect to the Accounts Receivable, (i) in the absence of a bona fide dispute
between an account debtor and Licensee, all payments by an account debtor shall
first be applied to Accounts Receivable due from the account debtor, and (ii)
any amount received by Programmer which is from an account debtor to Licensee
who claims to have a bona fide dispute with Licensee shall be deemed to have
been received with respect to the accounts receivable due Programmer to the
extent of such dispute.
(c) Programmer shall not be required to retain a collection agency, bring
any suit, or take any other action out of the ordinary course of business to
collect any of the Accounts Receivable. Programmer shall not compromise, settle
or adjust the amount of any of the Accounts Receivable without the written
consent of Licensee.
(d) Programmer's obligation to collect and remit Accounts Receivable
hereunder shall continue, at the option of Licensee, in the event of termination
of this Agreement pursuant to Section 11.5 hereof.
9.3 Political Time. Licensee shall, with respect to the Station, oversee
and take ultimate responsibility with respect to the provision of equal
opportunities, lowest unit charge, and reasonable access to political
candidates, and compliance with the political broadcasting provisions of the FCC
Requirements. Programmer shall cooperate with Licensee in complying with such
provisions, and shall supply promptly to Licensee such information reasonably
requested by Licensee for such purposes. Licensee, in consultation with
Programmer, will develop a statement which discloses its political broadcasting
rates and policies to political candidates, and Programmer will follow those
respective policies in the sale of political programming an advertising for the
Station. Programmer shall provide any rebates due to political advertisers and
release advertising availabilities to Licensee during the Broadcasting Period
sufficient to permit Licensee to comply with political broadcasting provisions
of the FCC Requirements. Revenues received by Licensee as a result of any such
release of advertising time shall be for the account of Programmer.
10. Call Letters and Frequency. During the Term, Licensee (i) shall retain
all rights (except as provided in the following sentence) to the Station's call
letters and trade names, (ii) shall not change the call letters, and (iii) shall
not seek FCC consent to a modification of facilities which would specify a
frequency change or have a material adverse effect upon the presently authorized
coverage of the Station. Programmer shall include in the Programs for the
Station an announcement in a form reasonably satisfactory to the Licensee in
accordance with the FCC Requirements to identify such Station, as well as any
other announcements required by the FCC Requirements.
11. Events of Default and Termination.
11.1 Programmer's Events of Default. The occurrence and continuation of
any of the following will be deemed an Event of Default by Programmer under this
Agreement:
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(a) Programmer fails to make LMA Payments;
(b) Programmer fails to observe or perform any other material
covenant, condition or agreement contained in this Agreement; or
(c) Programmer breaches or violates any material representation or
warranty made by it under this Agreement.
11.2 Licensee's Events of Default. The occurrence and continuation of any
of the following will be deemed an Event of Default by Licensee under this
Agreement:
(a) Licensee fails to observe or perform any material covenant,
condition or agreement contained in this Agreement; or
(b) Licensee breaches or violates any material representation or
warranty made by it under this Agreement.
11.3 Cure Period. The defaulting party shall have ten (10) days from the
date on which Programmer has provided Licensee or Licensee has provided
Programmer, as the case may be, with written notice specifying the Event(s) of
Default to cure any such Event(s) of Default. If the Event of Default cannot be
cured by the defaulting party within such time period but commercially
reasonably efforts are being made to effect a cure or otherwise secure or
protect the interests of the non-defaulting party (in which case, if successful,
the Event of Default shall be deemed cured), then the defaulting party shall
have an additional period not to exceed ten (10) days to effect a cure or a
deemed cure; provided, however, that such additional ten (10) day period shall
not be available in the case of a default under Section 11.1(a) above.
11.4 Termination for Uncured Event of Default. If an Event of Default by
Programmer has not been cured or deemed cured within the period set forth in
Section 11.3 above, then Licensee may terminate this Agreement, effective
immediately upon written notice to Programmer, and pursue all remedies available
at law or in equity for breach of this Agreement. If an Event of Default by
Licensee has not been cured or deemed cured within the periods set forth in
Section 11.3 above, then Programmer may terminate this Agreement, effective
immediately upon written notice to Licensee, and pursue all remedies available
at law or in equity for breach of this Agreement.
11.5 Termination Upon Failure or Consummation of the Purchase Agreement.
Notwithstanding any other provision hereof, this Agreement shall terminate with
no further action by Licensee or Programmer upon the termination of the Purchase
Agreement in accordance with the terms thereof, or upon the Closing Date (as
defined in the Purchase Agreement).
11.6 Termination by Licensee To Satisfy the FCC Requirements. If Licensee
is required by the FCC to terminate this Agreement by an FCC order which has
become a Final Order as that term is defined in the Purchase Agreement),
Licensee shall, or, if the FCC orders that this Agreement
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be terminated before its order becomes a Final Order and this Agreement cannot
be revised to comply with applicable FCC Requirements as contemplated by Section
20 hereof, Licensee may, upon at least thirty (30) days' written notice to
Programmer (or such shorter period as may be required by the FCC) terminate this
Agreement.
11.7 Termination by Programmer. Programmer may unilaterally terminate this
Agreement during the term upon one hundred twenty (120) days' written notice to
Licensee.
12. Certain Representations, Warranties and Covenants.
12.1 Mutual Representations Concerning This Agreement. Licensee represents
and warrants as follows: (a) Licensee is an individual citizen of the State of
Wisconsin, (b) Licensee has the power and authority to enter into and perform
this Agreement; and (c) the execution, delivery and performance of this
Agreement by Licensee does not conflict with any other agreement to which
Licensee is a party.
Programmer represents and warrants as follows: (a) Programmer is a
corporation duly organized, validly existing and in good standing under the laws
of Nevada; (b) Programmer has the requisite corporate power and authority to
enter into and perform this Agreement; (c) the execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate action of Programmer; and (d) the execution, delivery and performance
of this Agreement by Programmer does not conflict with any other agreement to
which Programmer is a party.
12.2 Budget Information; Reimbursement Requests. Licensee represents,
warrants and covenants that all budgets submitted to Programmer pursuant to
Appendix A, and all reimbursement requests now and hereafter made of Programmer,
shall relate only to financial obligations arising out of the Station's
operations during the Term and shall not include any financial obligations
arising out of breach of any representation or warranty or violation of any
covenant of Licensee under this Agreement or Purchase Agreement.
12.3 Program Rights and Barter Agreements. Licensee represents and
warrants that, except as disclosed in the Disclosure Schedule to the Purchase
Agreement, (i) it is current in all payment obligations and is not otherwise in
default under the Program Rights Agreements and (ii) there are no trade-outs,
time-sales, barter or other similar obligations with respect to the Stations
which extend beyond the Effective Date, other than obligations not to exceed in
the aggregate Ten Thousand Dollars ($10,000).
12.4 Compliance with FCC Requirements. Programmer represents, warrants and
covenants that its execution and performance of this Agreement is, and will
remain, in compliance with the FCC Requirements, including without limitation,
47 C.F.R. ss. 73.3555.
13. Modification and Waiver; Remedies Cumulative. No modification or
waiver of any provision of this Agreement will be effective unless in writing
and signed by all parties. No failure
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or delay on the part of Programmer or Licensee in exercising any right or power
under this Agreement will operate as a waiver of such right or power, nor will
any single or partial exercise of any such rights or power or the exercise of
any other right or power operate as a waiver. Except as otherwise provided in
this Agreement, the rights and remedies provided in this Agreement are
cumulative and are not exclusive of any rights or remedies which a party may
otherwise have.
14. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns.
Notwithstanding the foregoing, no party may assign its rights or obligations
under this Agreement without the prior written consent of the other party;
provided, however, that Programmer may assign and delegate its rights and
obligations under this Agreement to a party that controls, or is controlled by,
or is under common control with, Programmer, and who is qualified under any
applicable FCC Requirement, upon notice to, but without the prior written
consent of Licensee.
15. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Wisconsin without regard to any conflicts-of-law
rules that might apply the laws of another jurisdiction or jurisdictions.
16. Notices. Notices required to be provided by this Agreement shall be
given in the manner provided and to the persons specified in the Purchase
Agreement.
17. Entire Agreement. This Agreement embodies the entire understanding
among the parties with respect to the subject matter hereof, and supersedes any
prior or contemporaneous written or oral agreement between the parties regarding
such subject matter.
18. Relationship of Parties. Programmer and Licensee are not, and shall
not be deemed to be, agents, partners, or representatives of each other.
19. Force Majeure. The failure of a party hereto to comply with its
obligations under this Agreement due to acts of God, strikes or threats thereof
or force majeure or due to causes beyond such party's control will not
constitute an Event of Default under Section 11 of this Agreement and no party
will be liable to the others therefore. Programmer and Licensee each agree to
exercise its commercially reasonable efforts to remedy any such conditions
affecting its own facilities as soon as practicable.
20. Subject to Laws; Invalidity. The obligations of the parties under this
Agreement are subject to the FCC Requirements and all other applicable laws. The
parties acknowledge that this Agreement is intended to comply with FCC
Requirements. However, in the event that the FCC determines that the continued
performance of this Agreement is in violation of the FCC Requirements, each
party will use its commercially reasonable efforts to comply with the FCC
Requirements or will in good faith contest or seek to reverse any such action or
agree on the terms of a revision to this Agreement, in each case, on a time
schedule sufficient to meet the FCC Requirements and so long as the fundamental
nature of the business arrangement between the parties
8
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evidenced by this Agreement is maintained. If any provision of this Agreement is
otherwise held to be illegal, invalid, or unenforceable under present or future
laws, then such provision shall be fully severable, this Agreement shall be
construed and enforced as if such provision had never comprised a part thereof,
and the remaining provisions shall remain in full force and effect, in each case
so long as the fundamental nature of the business arrangement between programmer
and Licensee has been maintained.
21. Reciprocal Indemnity.
21.1 Indemnification by Programmer.Programmer shall indemnify, defend, and
hold harmless Licensee from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement (except as
may result from a breach of the warranty in Section 6 hereof by Licensee),
libel, slander, defamation or invasion of privacy, arising out of: (a)
Programmer's broadcasts of the Programs; (b) any misrepresentation or breach of
any warranty of Programmer; or (c) any breach of any covenant, agreement, or
obligation of Programmer. If Programmer is required to indemnify Licensee as a
result of programs broadcast hereunder which are supplied by a third party
pursuant to a contract with Licensee, it is agree that Programmer shall be
subrogated to any rights which Licensee may have against such third party,
including the right to indemnification by such third party.
21.2 Indemnification by Licensee. Licensee shall indemnify, defend, and
hold harmless Licensee from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement (except as
may result from a breach of the warranty in Section 6 hereof by Licensee),
libel, slander, defamation or invasion of privacy, arising out of: (a)
Licensee's broadcast of programs on its own behalf, other than Programs; (b) any
misrepresentation or breach of any warranty of Licensee; or (c) any breach of
any covenant, agreement, or obligation of Licensee. If Programmer is required to
indemnify Licensee as a result of programs broadcast hereunder which are
supplied by a third party pursuant to a contract with Licensee, it is agreed
that Programmer shall be subrogated to any rights which Licensee may have
against such third party, including the right to indemnification by such third
party.
22. Covenant Not to Compete. For a period of two (2) years from the
Effective Date, other than with respect to the pending applications listed in
Appendix B to this Agreement, Licensee will not apply for, own or operate a
commercial FM radio station to be licensed to a community within Brown County,
Wisconsin; provided, however, that Licensee shall be permitted to provide
consulting services in such geographic area.
23. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
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24. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
25. Survival. All representations, warranties, covenants and agreements
made by any party in this Agreement or pursuant hereto shall survive execution
and delivery of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective duly authorized officers as of the date first written above.
PROGRAMMER: CUMULUS BROADCASTING, INC.
By:____________________________
Printed Name:__________________
Title:_________________________
LICENSEE: JON A. LEDUC
_______________________________
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement, during the Term, Programmer shall reimburse Licensee on a
monthly basis, in advance, the Station Expenses (defined below) for the upcoming
month for which Licensee has submitted to Programmer a written reimbursement
request supported by appropriate documentation of expenses. The term "Station
Expenses" as used herein means the reasonable and prudent expense actually
incurred by Licensee in operating the Stations in compliance with the terms of
this Agreement (including without limitation Sections 3 and 6) and consistent
with past practice (except for changes resulting from the transactions
contemplated by this Agreement), including without limitation, those expenses
set forth on Attachment 1 hereto. Estimated expenses shall be reconciled with
actual expenses on a regular basis on a schedule to be agreed by Programmer and
Licensee.
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PROGRAM SERVICES
AND TIME BROKERAGE AGREEMENT
This Program Services and Time Brokerage Agreement (the "Agreement"),
dated as of February 12, 1998, is entered into by and between Pamplico
Broadcasting, L.P., a South Carolina limited partnership ("Licensee") and
Cumulus Broadcasting, Inc., a Nevada corporation (the "Programmer").
WHEREAS, Pamplico Broadcasting, L.P. is the licensee of radio stations
WMXT-FM, Pamplico, South Carolina, and WBZF-FM, Marion, South Carolina (the
"Stations"), pursuant to authorizations issued by the Federal Communications
Commission (the "FCC");
WHEREAS, Programmer and Licensee have entered into that certain Asset
Purchase Agreement, dated February __, 1998, which provides for the purchase of
the Stations by Programmer and pursuant to which Licensee and Programmer have,
or shortly will have, filed an application seeking consent of the FCC to the
assignment of the Stations to Programmer; and
WHEREAS, the Programmer desires to avail itself of Stations' broadcast
time for the presentation of programming service, including the sale of program
and advertising time, in accordance with rules, regulations, and policies of the
FCC; and
WHEREAS, Licensee desires to accept such programs produced by Programmer
that conform to the rules, regulations, and policies of the FCC and this
Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, the parties, intending to be legally bound, agree as follows:
1. Purchase of Air Time and Broadcast of Programming. Licensee agrees to
make the broadcasting transmission facilities of the Stations available to the
Programmer for the broadcast of Programmer's programs, advertising and
promotional material on the Stations for up to 24 hours a day, seven days a week
(the "Programming"), except provided, however, that Licensee specifically
reserves thirty (30) minutes of broadcast time every Sunday between 6:00 a.m. to
10:00 a.m. for the broadcast of its own
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programming. The studio facilities and the transmitting equipment of Licensee
relating to the Stations shall be made available to the Programmer for its use
during the term of this Agreement.
2. Consideration. The terms and conditions of payment to Licensee for the
broadcast of the Programming during the term of this Agreement shall be as set
forth in Attachment 1.
3. Term. This Agreement shall commence on March 15, 1998. Unless earlier
terminated as provided by this Agreement, the term of this Agreement shall end
on the earlier of (i) the date on which the FCC approved application for
assignment of the Stations from Licensee to Programmer is consummated; or (ii)
the date the Asset Purchase Agreement is terminated pursuant to Section 9(a)(iv)
thereof. In the event of a material change or clarification in FCC rules,
policies or precedent that would cause this Agreement to be be in violation
thereof and such change is not the subject of an appeal or further
administrative review, the parties will use their respective best efforts and
negotiate in good faith to modify this Agreement to comply with the change or
clarification in FCC rules, policies, or precedent so as to continue this
Agreement in substantially the same form without material economic detriment to
either party.
4. The Programming. Programmer shall furnish the Programming and artistic
personnel to Licensee for up to 24 hours a day, seven days a week, except as
provided elsewhere in this Agreement. Licensee acknowledges that it is familiar
with the nature of the Programming to be produced by Programmer and has
determined that the broadcasting of the Programming on the Stations will serve
the public interest. During the time periods when Programmer is transmitting
Programming to the Stations, Programmer agrees to monitor and control the
Stations' transmitters, to ensure compliance with FCC rules and the terms of the
Stations' authorizations and, during
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such time periods, Programmer agrees to also conduct such tests of the Emergency
Alert System as may be required to comply with FCC rules.
5. Interruption of Normal Operations. If the Stations suffer loss or
damage of any nature to its transmission facilities which results in the
interruption of service, Programmer shall immediately notify Licensee, and shall
undertake such repairs as reasonably necessary to restore the full-time
operation of the Stations as quickly as reasonably practicable. In the
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event that either of the Stations is off the air as a result of any Licensee
equipment failure not caused by any action or inaction by Programmer, and
Programmer, thus, is unable to provide the Programming contracted for hereunder,
Programmer shall be entitled to a pro rata credit against the monthly amount due
to Licensee for the period the station remains off the air.
6. Force Majeure. Any failure or impairment of facilities or any delay or
interruption in broadcasting programming, or failure at any time to furnish
facilities, in whole or in part, for broadcasting, due to acts of God, strikes
or threats thereof or force majeure or due to causes beyond the control of
Licensee, shall not constitute a breach of this Agreement and Licensee will not
be liable to Programmer, except to the extent of allowing in each such case the
pro rata reduction of payment due as specified in Attachment 1 and calculated as
indicated in Section 14.
7. Handling of Mail and Complaints. Programmer shall provide to Licensee
the original or a copy of any complaints or correspondence from any agency of
government or members of the public which it receives relating to either Station
or any programming on the either Station to enable Licensee to comply with FCC
rules and policies, including those regarding the maintenance of the public
inspection file which shall at all times remain the responsibility of Licensee.
8. Programming and Operation Standards. Programmer warrants that all
Programming supplied by Programmer shall meet in all material respects all
requirements of the Communications Act of 1934, as amended (the "Act"), and all
applicable rules, regulations and policies of the FCC, all applicable federal,
state and local regulations, and the Programming Policy Statement of the
Stations ("Programming Standards") as set forth in Attachment 2. If, in the
judgment of Licensee or the Stations' General Managers, any portion of the
Programming presented by Programmer does not meet
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such Programming Standards, Licensee may suspend or cancel any such portion of
the Programming.
9. Rejection of Programming. In the event that Licensee rejects
Programming from Programmer pursuant to the terms of this Agreement, then
Programmer shall be entitled to a rebate or credit equal to the pro rata portion
of the consideration paid or payable pursuant to Attachment 1 that corresponds
to the amount of time preempted. Licensee shall use its best efforts to give
Programmer reasonable prior notice of its objection to Programmer's proposed
programs, including the basis for such objection, and a reasonable opportunity
to substitute acceptable Programming.
10. Responsibility for Employees and Related Expenses.
(a) Programmer Employees. Programmer shall furnish or cause to be
furnished the personnel and material for the production of the Programming to be
provided by this Agreement. Programmer shall employ and be responsible for
salaries, taxes, insurance and related costs for all personnel used in the
production and airing of its Programming (including but not limited to sales
people, traffic personnel, programming staff, and on-air personnel).
(b) Licensee Employees. Licensee will provide and have
responsibility for the Stations personnel necessary in order to comply with FCC
rules and policies and with Station requirements as determined by Licensee
(which personnel shall be the Stations' General Manager and Receptionist), and
will be responsible for the salaries, taxes, insurance and related costs for all
such Licensee personnel. All Licensee employees shall report to and be
accountable solely to Licensee
(c) Facilities. Programmer shall arrange, at its sole expense, to
acquire, install, operate, and maintain all program origination and relay
facilities (including, but not limited to, program production equipment, studio
equipment, remote transmitter control equipment, and studio-transmitter-link
equipment) that may be necessary or
<PAGE>
-6-
appropriate in connection with Programmer's presentation of Programming for
broadcast by the Stations. Licensee shall make its transmitter, transmitter
building, and tower reasonably available to Programmer, at no additional charge,
for placement of any equipment Programmer reasonably deems necessary to allow it
to broadcast Programmer's Programming on the Stations. Nothing herein shall be
construed to divest Licensee of ownership of and control over the Stations'
transmitting facilities at all times during which this Agreement shall be in
effect. All such program origination and relay facilities acquired, installed,
operated and maintained by Programmer shall comply in all respects with the
pertinent rules, regulations and policies of the FCC and with the standards of
good engineering practice and shall be and remain the sole property of
Programmer. In the event that any FCC authorizations shall be required by either
Licensee or Programmer in order to enable Programmer to originate and relay
programs to the Stations' transmitting facilities for broadcast by the Stations,
Programmer shall be solely responsible for obtaining and maintaining such
authorizations, at Programmer's sole expense. In the event that Programmer, with
Licensee's consent, relocates the main studio to a location in compliance with
FCC requirements, Programmer shall provide to Licensee at no charge reasonable
office space for Licensee's employees.
11. Advertising and Programming Revenues. During the Programming it
delivers to the Stations, Programmer shall have full authority to sell for its
own account commercial spot advertising and block programming time on the
Stations and, except for revenues from advertising or program time sold by
Licensee for hours of operation reserved by Licensee, to retain all revenues
from the sale of such advertising and programming. The parties agree that
Programmer shall have complete discretion to deal as it deems appropriate with
all advertising and programming accounts relating to Programming and time sold
by it; provided, however, subject to the ultimate responsibility and control of
Licensee, Programmer will provide, make available to and
<PAGE>
-7-
sell time to political candidates from the time it purchases from Licensee in
strict compliance with the Act, the rules, regulations and policies of the FCC
and any other applicable federal, state or local law.
Programmer shall retain any profits earned, and Programmer shall be
solely responsible for any losses incurred, as the result of the operations of
the Stations to the extent that such operations involve the broadcast by the
Stations of Programming that was presented for such broadcast by Programmer.
Programmer shall be responsible for obtaining and maintaining, at its sole cost,
all necessary licenses, authorizations and consents for the Stations'
performance of copyrighted works, to the extent that such works are included in
the Programming presented by Programmer and broadcast by the Stations.
12. Operation of the Stations.
(a) Verification of Licensee Control and Rights of Licensee.
Notwithstanding anything to the contrary in this Agreement, Licensee shall have
full authority and power over the operation of the Stations during the period of
this Agreement. Licensee's General Manager shall direct the day-to-day
operations of the Stations. Licensee shall retain control over the policies,
programming and operations of the Stations, including, without limitation, the
right to decide whether to accept or reject any Programming which Licensee deems
unsuitable or contrary to the public interest; the right to preempt any
Programming in order to broadcast a program deemed by Licensee to be of greater
national, regional, or local interest; and the right to take any other actions
necessary for compliance with the laws of the Untied States, the State of South
Carolina, the rules, regulations and polices of the FCC, and the rules,
regulations and policies of other federal governmental authorities, including
the Federal Trade Commission and the Department of Justice. Licensee reserves
the right to refuse to broadcast any program containing matter which is, or in
the reasonable opinion of
<PAGE>
-8-
Licensee may be, violative of any right of any third party or which may
constitute a "personal attack" (as that term is defined by the FCC). Licensee
agrees that it shall carry its own public service programming at such times as
it deems best in the public interest with consideration to the reasonable
programming needs of Programmer. With respect to the operation of the Stations,
Licensee shall at all times be ultimately responsible for meeting all of the
FCC's requirements with respect to the broadcast and nature of any public
service programming, for maintaining the political and public inspection files
and the Station log, and for the prepara tion of all programs/issues lists.
Licensee expressly acknowledges that its duty to maintain the Stations' public
inspection and political files is non-delegable and that Licensee retains
responsibility for maintenance of such files. Licensee verifies that it shall
maintain the ultimate control over the Stations' facilities, including
specifically control over the finances with respect to its operation of the
Stations, over Licensee's personnel operating the Stations, and over the
programming to be broadcast by the Stations. Licensee confirms that all reports
and applications required to be filed with the FCC (including ownership reports
and renewal applications) or any other governmental agency, department or body
in respect of the Stations have been, and will in the future be, filed and are
and will be true and complete to the best of Licensee's knowledge and will
accurately present the information contained therein and, to the extent required
to be kept in the public inspection file of the Stations, are and will be kept
in such file.
(b) Verification by Programmer and Obligations of Programmer.
Programmer will, during the term of this Agreement, provide local news, public
service announcements, and public affairs programming relevant to the Stations'
service area to assist Licensee in satisfying its obligations to respond to the
needs of its community. Programmer will also forward to Licensee within
twenty-four (24) hours of receipt by Programmer, any letter from a member of the
general public addressing the Stations'
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programming or documentation which comes into its custody which is required to
be included in the Stations' public file or which is reasonably requested by
Licensee. Programmer shall cooperate with Licensee to ensure compliance with the
station identifications requirements of the FCC's rules by furnishing within the
Programming on behalf of Licensee all Station Identification Announcements
required by such FCC rules. Programmer will properly prepare and promptly
provide to Licensee (a) all its contracts, agreements, and requests for time for
political programming or programming addressing controversial issues of public
importance; (b) records and reports of Programmer's employment and recruitment
practices and Programmer's program and advertisement rates; and (c) full
information with respect to Programmer's Programming, including public service
announcements with are responsive to issues of public concern in sufficient
detail to enable Licensee to timely prepare all appropriate or necessary records
and reports required by the FCC or its rules and policies concerning the
Stations' operations. Programmer will properly prepare and furnish to Licensee
all information, records and reports relating to Programmer's Programming, sale
or employment practices in sufficient detail to enable Licensee to comply with
all rules and policies of the FCC or any other government agency.
13. EAS Tests/Duty Operators. During all hours when Programmer's
Programming is being broadcast over the Stations, Programmer, with the
supervision of Licensee, shall monitor and receive test messages and alerts over
the Emergency Alert System. If an EAS test or alert is received during the hours
when Programmer is delivering its Programming for broadcast over the Stations,
Programmer shall, unless otherwise instructed by Licensee, cause the appropriate
EAS test or alert message to be transmitted over the Stations; and shall, at
Licensee's instructions, in the event of an actual activation of the Emergency
Alert System, cause all steps that the Stations are required to take in such an
event to be taken, and shall be responsible for assuring that
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the receipt and broadcast of all EAS tests and alerts are properly recorded in
the station log.
14. Station Promotion. Programmer shall not hold itself out as the owner
or licensee of the Stations.
15. Right to Use the Programming. The right to use the Programming
produced by Programmer and to authorize its use in any manner and in any media
whatsoever shall be at all times vested solely in Programmer except as
authorized by this Agreement.
16. Payola. Programmer agrees that neither it nor its agent, employees
consultants or personnel will accept any consideration, compensation, gift or
gratuity of any kind whatsoever, regardless of its value or form, including, but
not limited to, a commission, discount, bonus, materials, supplies or other
merchandise, services or labor, whether or not pursuant to written contracts or
agreement between Programmer and merchants or advertisers, unless the payer is
identified in the program as having paid for or furnished such consideration in
accordance with the Act and FCC requirements. Should either Station determine
that an announcement is required by Section 317 of the Act and related FCC
rules, Programmer will insert that announcement in the Programming. Programmer
will obtain from its employees responsible for the Programming appropriate
anti-payola/plugola affidavits in the form attached hereto as Attachment 3.
Commercial matter with obvious sponsorship identification will not require
disclosure beyond the sponsorship identification contained in the commercial
copy. Programmer will at all times comply and seek to have its employees comply
in all material respects with the requirements of Section 317 and 507 of the
Act, and the related rules and regulations of the FCC.
17. Compliance with Law. At all times during this Agreement, Programmer
will comply in all material respects with all laws, rules, regulations and
policies including but not limited to the FCC's technical, political
broadcasting, obscenity and indecency
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-11-
regulations, fair trade practice regulations, copyright and trademark
regulation, EEO and employment regualtions, lottery broadcast regulations,
sponsorship identification, and sale practice regulation, applicable to the
operations of the Stations.
18. Indemnification:
(a) Rights of Licensee. Programmer will indemnify and hold Licensee,
its officers, directors, partners and employees harmless from and against all
liability related or arising from to Programmer's Programming on the Stations or
related to or arising from Station operations during Programmer's Programming,
including, but not limited to, libel, slander, illegal competition or trade
practice, violation of rights of privacy, and infringement of copyrights or
other proprietary rights and violations of the Act or FCC rules resulting from
the broadcast of Programming furnished by Programmer, or complaints from Station
listeners regarding quantity, quality or delivery of merchandise ordered by such
listeners as the result of solicitations contained within the Programming, tax
liabilities arising from sales solicited on the Programming, any
misrepresentation or breach of warranty of Programmer under this Agreement, or
any breach of any warrant, agreement, or obligation of Programmer contained in
this Agreement. Such indemnification shall apply to any and all claims, damages,
liability, forfeitures, costs and expenses, including reasonable attorneys'
fees, arising from the production or broadcasting of any Programming supplied by
Programmer, including Programming obtained from program suppliers and shall
survive the termination of this Agreement.
(b) Rights of Programmer. Licensee shall indemnify, defend, and hold
harmless Programmer, its officers, directors and employees from and against any
and all claims, losses, costs, liabilities, damages, FCC forfeitures, and
expenses including counsel fees, of every kind, nature, and description arising
out of Licensee's broadcasts under this Agreement; any misrepresentation or
breach of warranty of Licensee contained in this
<PAGE>
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Agreement; and any breach of any covenant, agreement, or obligation of Licensee
contained in this Agreement.
(c) Procedure for Indemnification. The party seeking indemnification
under this Section ("Indemnitor") shall give the party from whom it seeks
indemnification ("Indemnitor") prompt notice, as provided herein, of the
assertion of such claim, provided, however, that the failure to give notice of a
claim within a reasonable time shall only relieve the Indemnitor of liability to
the extent it is materially prejudiced thereby. Promptly after receipt of
written notice, as provided herein, of a claim by a person or entity not a party
to this Agreement, the Indemnitor shall assume the defense of such claim;
provided, however, that (a) if the Indemnitor fails, within a reasonable time
after receipt of notice of such claim, to assume the defense thereof, the
Indemnitee shall have the right to undertake the defense, compromise, and
settlement of such claim on behalf of and for the account and risk of
Indemnitor, subject to the right of the Indemnitor (upon notifying the
Indemnitee of its election to do so) to assume the defense of such claim at any
time prior to the settlement, compromise, judgment, or other final determination
thereof; (b) if in the reasonable judgment of the Indemnitee, based upon the
advice of its counsel, a direct or indirect conflict of interest exists between
the Indemnitee and Indemnitor, the Indemnitee shall (upon notifying the
Indemnitor of its election to do so) have the right to undertake the defense,
compromise, and settlement of such claim on behalf of and for the account and
risk of Indemnitor (it being understood and agreed that the Indemnitor shall not
be entitled to assume the defense of such claim; (c) if the Indemnitee in its
sole discretion elects, it shall (upon notifying the Indemnitor of its election
to do so) be entitled to employ separate counsel and to participate in the
defense of such claim, but the fee and expenses of counsel so employed shall
(except as contemplated by clauses (a) and (b) above) be borne solely by
Indemnitee; (d) the Indemnitor shall not settle or compromise any claim or
consent to
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the entry of any judgment that does not include as an unconditional term thereof
the grant by the claimant or plaintiff to each Indemnitee of a release from any
and all liability in respect thereof; and (e) the Indemnitor shall not settle or
compromise any claim in any manner, or consent to the entry of any judgment,
that could reasonably be expected to have a material adverse effect on the
Indemnitee.
(d) Survival. Neither Licensee nor Programmer shall be entitle to
indemnification pursuant to this Section 18 unless such claim for
indemnification is asserted in writing delivered to the other party. The
representations and covenants of Licensee and Programmer and their obligation to
indemnify and hold each other harmless as set forth in this Agreement shall
survive any termination of this Agreement and shall continue until the
expiration of any applicable statutes of limitations as to the parties hereto
and to claims of third parties.
19. Insurance. Programmer will provide at its expense and will name
Licensee as an additional insured on any policy held by Programmer which insures
against a risk described in Section 18 and will within FIFTEEN (15) days
following the execution of this Agreement deliver to Licensee a certificate to
that effect.
20. Events of Default; Cure Periods and Remedies.
(a) Events of Default. The following shall constitute Events of
Default under this Agreement
(i) This Agreement is declared invalid or illegal in whole or
material part by an order or decree of the FCC or any other administrative or
judicial authority with jurisdiction;
(ii) The other party is in material breach of any
representations, covenant, condition or undertaking hereunder and has failed to
cure such breach within TEN (10) days of notice from the non-breaching party;
(iii) The mutual written consent of both parties;
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(iv) There has been a change in FCC rules, policies or case
law precedent that would cause this Agreement or any provision thereof to be in
violation thereof and such change is not the subject of an appeal or further
administrative or judicial review.
(v) If either party shall make a general assignment for the
benefit of creditors, files or has filed against it in a petition for
bankruptcy, for reorganization, 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 or discharged within sixty (60) days thereafter.
(b) Termination Upon Default. Upon the occurrence of an Event of
Default, the non-defaulting party may terminate this Agreement, provided that it
is not also in material default under this Agreement. If Programmer has
defaulted in the performance of its obligations, Licensee shall have available
to it all available remedies at law or equity. Upon termination of this
Agreement according to the provisions of this Section 20, the payments,
reimbursements and fees provided for hereunder shall be prorated to the
termination date of this Agreement. All amounts accrued or payable to Licensee
up to the termination which have not been paid, less any payment credits
outstanding in favor of Programmer, shall immediately become due and payable,
and Licensee shall be under no further obligation to make available to
Programmer any broadcast time or broadcast transmission facilities, provided
that Licensee agrees to cooperate reasonably with Programmer to discharge in
exchange for reasonable compensation any remaining obligations of Programmer in
the form of air time following the effective date of termination. If Licensee
has defaulted, Programmer shall have available all remedies at law or equity
including specific performance.
(c) Liabilities Upon Termination. Programmer shall be responsible
for all of its liabilities, debts and obligations accrued from the purchase of
broadcast time of the
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Stations, including without limitation, indemnifications pursuant to Section
8(a) hereof, and accounts payable. Programmer shall in addition be liable for
all damages available at law or equity for breach of the Agreement. Upon
termination, Programmer shall return to Licensee any equipment or property of
the Stations used by Programmer, its employees or agents, in substantially the
same condition as such equipment existed on the date of this Agreement, ordinary
wear and tear excepted, provided that Programmer shall have no liability to
Licensee for any property of Licensee which through ordinary use became obsolete
or unusable, and any equipment purchased by Programmer, whether or not in
replacement of any obsolete or unusable equipment of Licensee, shall remain the
property of Programmer. Licensee shall be liable for all remedies available to
Programmer at law or equity.
21. Options to Terminate.
(a) Programmer's Option to Terminate. (1) Programmer shall have the
right, at its option, to terminate this Agreement at any time if Licensee
preempts or substitutes
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other programming for that supplied by Programmer during ten percent or more of
the total hours of operation of the Stations in any seven consecutive days.
Programmer shall give Licensee fifteen (15) days notice of such termination.
(b) Licensee's Option to Terminate. Licensee shall have the right to
terminate this Agreement at any time if necessary and in the public interest in
order to fulfill its obligations as an FCC licensee if Programmer materially
violates FCC rules, regulations or policies.
22. [INTENTIONALLY LEFT BLANK]
23. Modification and Waiver. No modification or waiver of any provision of
this Agreement shall in any event be effected unless the same shall be in
writing signed by both parties, and then such waiver and consent shall be
effective only in the specific instance and for the purpose for which given.
24. No Waiver: Remedies Cumulative. No failure or delay on the part of
Licensee or Programmer in exercising any right or power under this Agreement
shall operate as a waiver thereof, nor shall 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, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the parties
to this Agreement are cumulative and are not exclusive of any right or remedies
which either may otherwise have.
25. Construction. This Agreement shall be construed in accordance with the
laws of the State of South Carolina. The obligations of the parties to this
Agreement are subject to all federal, state or local laws or regulations,
including those of the FCC, now or hereafter in force.
<PAGE>
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26. Headings. The headings contained in this Agreement are included for
convenience only and shall not in any way alter the meaning of any provision.
27. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective assigns provided, however,
neither Licensee's nor Programmer's interest may not be assigned to any entity
without the prior written approval of the other party.
28. Counterpart Signatures. This Agreement may be signed in one or more
counterparts, each of which shall be deemed a duplicate original and be binding
on the parties to this Agreement.
29. Notice. Any notice required hereunder shall be in writing and shall be
sufficiently given if delivered by facsimile or overnight delivery service or
sent by registered or certified mail, return receipt requested, or similar means
of communication addressed as follows:
If to Licensee: Pamplico Broadcasting, L.P.
2014 North Irby Street
Florence, SC 29506
Attention: Edward Seeger
Tel: 803-661-0888
Fax: 803-661-0888
With a copy to Fletcher Heald & Hildreth, PLC
1300 N. 17th Street, Suite 1100
Arlington, VA 22209
Attention: Frank R. Jazzo, Esquire
Tel: 703-812-0400
Fax: 703-812-0486
<PAGE>
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If to Programmer: Cumulus Broadcasting, Inc.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attention: Terrence J. Leahy
Tel: 414-283-4500
Fax: 414-283-4505
With a copy to: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue, Suite 3650
Chicago, Illinois 60611
Attention: Richard J. Bonick
Tel: 312-867-0091
Fax: 312-867-0098
30. Entire Agreement. This Agreement and Attachments 1, 2, and 3 embody
the entire agreement between the parties and there are no other agreements,
representations, warranties, or understandings, oral or written, between them
with respect to the subject matter hereof.
31. Severability. Except as otherwise provided in Section 3, in the event
that any provision contained in this Agreement is held to be invalid, illegal or
unenforceable it shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provisions had
not been contained herein.
32. FCC Compliance. Programmer and Licensee agree to modify this Agreement
to comply with any relevant FCC regulations or precedent, provided, however,
that if such modification is unacceptable to Licensee or Programmer either may
terminate this Agreement.
33. Compliance with Multiple Ownership Rules. Licensee and Programmer
warrants that to the best of each of their knowledge, this Agreement is not in
violation of the Commission's multiple ownership rules or any other related
rule.
34. No Partnership or Joint Venture. This Agreement is not intended to be
and shall not be construed as a Partnership or Joint Venture Agreement between
the parties.
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Except as otherwise specifically provided in this Agreement, no party to this
Agreement shall be authorized to act as agent of or otherwise represent any
other party to this Agreement.
35. Attorney's Fees. In any act or proceeding brought to enforce any
rights or obligations hereunder, the prevailing party shall be entitled to
receive reimbursement for its reasonable attorney's fees and related costs.
<PAGE>
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LICENSEE:
PAMPLICO BROADCASTING, L.P.
By_______________________________
General Partner
BROKER:
CUMULUS BROADCASTING, INC.
By:______________________________
Title:___________________________
<PAGE>
ATTACHMENT 1
CALCULATION AND PAYMENT OF LMA FEE
Programmer shall reimburse Licensee for all expenses incurred in the
operation of the Stations under this Agreement, including but not limited to
studio rent, tower rent, utilities, postage, salaries and other expenses for
Licensee's employees, and music licensing fees. In addition, Programmer shall
pay the debt service on the following Licensee loan in connection with the
Stations:
$15,000 per month due on the 5th day of each month under that
certain Promissory Note from Licensee to Nation's Bank.
Programmer shall gather all invoices for the foregoing expenses received
by the Stations and provide to Licensee a list of all expenses along with a
check (or wire transfer of immediately available funds) at lease three days
prior to the date on which such expenses are due.
Licensee will timely make all payments after receipt of invoices and funds
from Programmer.
In the event that Programmer fails to make the debt service payments or to
provide the necessary funds for payment of the operating expenses of the station
within 10 days of the date due, then Licensee shall have the right to make such
payment directly and Programmer shall be obligated to pay Licensee an amount
equal to the charge imposed on Licensee for such late payment.
On the execution date of this Agreement, Broker shall advance to License,
by wire transfer of immediately available funds, $50,000 against the fees due to
Licensee hereunder. In the event that the Closing under the Asset Purchase
Agreement ("APA") between Licensee and Broker is consummated before the fees
owed by Broker to Licensee hereunder reach $50,000, then an amount equal to
$50,000 less the fees accruing as provided above up to the Closing Date, as
defined in the APA, shall be credited against the Purchase Price, as such term
is defined in the APA, on the Closing Date.
<PAGE>
ATTACHMENT 2
PROGRAMMING POLICY STATEMENT
Programmer agrees to cooperate with Licensee in the broadcasting of
programs in a manner consistent with the standards of Licensee, as set forth
below:
1. Election Procedures. At least ninety (90) days before the start of any
primary or regular election campaign, Programmer will coordinate with Licensee's
General Manager the rate Programmer will charge for time to be sold to
candidates for public office and/or their supporters to make certain that the
rate charged conforms to all applicable laws and Station policy. Throughout a
campaign, Programmer will comply with all applicable laws and rules concerning
political candidacy broadcasts and will promptly notify Licensee's General
Manager of any disputes concerning either the treatment of or rate charged a
candidate or supporter.
2. Required Announcements. Programmer shall broadcast: (a) an announcement
in a form satisfactory to licensee at the beginning of each hour to identify the
Stations; (b) an announcement at the beginning and end of each program, and
hourly, as appropriate, to indicate that program time has been purchased by
Programmer; and (c) any other announcement that may be required by law,
regulation, or Stations policy.
3. Commercial Record keeping. Programmer shall maintain such records of
the receipt of, and provide such disclosure to Licensee of, any consideration
whether in money, goods, services, or otherwise, which is paid or promised to be
paid, either directly or indirectly, by a person or company for the presentation
of any programming over the Stations as are required by Sections 317 and 507 of
the Communications Act and the rules and regulations of the FCC.
4. No Illegal Announcements. No announcements or promotion prohibited by
federal or state law or regulation of any lottery, game or contest shall be made
over the Stations.
5. Licensee Discretion Paramount. In accordance with Licensee's
responsibility under the Communications Act of 1934, as amended, and the rules
and regulations of the FCC, Licensee reserves the right to reject or terminate
any advertising or other programming proposed to be presented or being presented
over the Stations which is in conflict with law, regulation, Station policy or
which in the reasonable judgment of Licensee or its General Manager not to serve
the public interest.
6. Indecency, Hoaxes. No programming violative of applicable laws and
rules concerning indecency or hoaxes will be broadcast over Stations.
7. Controversial Issues. Any broadcast over the Stations concerning
controversial issues of public importance shall comply with the then current FCC
rules and policies.
8. Commercials. Programmer will provide, for attachment to the Station
logs, a list of all commercial announcements carried during its programming.
Licensee may waive any of the foregoing regulations in specific instances
if, in its reasonable opinion, good broadcasting in the public interest will be
served thereby. In any case where questions of policy or interpretation arise,
Programmer shall notify Licensee before making any commitments to broadcast any
programming affected by such issues.
<PAGE>
ATTACHMENT 3
City of _______________________)
County of _____________________) ss
State of ______________________)
ANTI-PAYOLA/PLUGOLA AFFIDAVIT
_______________________, being first duly sworn, deposes and says as
follows:
A. I am ______________________________ for _______________________.
(Position)
B. I have acted in the above capacity since ____________.
C. No matter has been broadcast by Station __________________ for which
service, money or other valuable consideration has been directly or indirectly
paid, or promised to, or charged, or accepted, by me from any person, which
matter at the time so broadcast has not been announced or other indicated as
paid for or furnished by such person.
D. So far as I am aware, no matter has been broadcast by Station
_____________ for which service, money, or other valuable consideration has been
directly or indirectly paid, or promised to, or charged, or accepted by
Station(s) or by any independent contractor engaged by Station(s) in furnishing
programs, from any person, which matter at the time so broadcast has not been
announced or otherwise indicated as paid for or furnished by such person.
E. In the future, I will not pay, promise to pay, request, or receive any
service, money, or any other valuable consideration, direct or indirect, from a
third party, in exchange for the influencing or, or the attempt to influence,
the preparation or presentation of broadcast matter on Stations _______________.
F. Nothing contained herein is intended to or shall prohibit acceptance or
receipt of anything with the expressed knowledge and approval of my employer,
but
<PAGE>
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henceforth any such approval must be given in writing by someone expressly
authorized to give such approval.
G. I, my spouse and my immediate family do/do not have any present direct
or indirect ownership interest in (other than an investment in a corporation
whose stock is publicly held), serve as an officer or director of, whether with
or without compensation, or serve as an employee of, any person, firm or
corporation engaged in:
1. The production of radio programming;
2. The production, distribution (including wholesale and retail
sales outlets), manufacture or exploitation of video, programming, music, films,
tapes, recordings, or electrical transcriptions or any program material intended
for television broadcast use;
3. The exploitation, promotion, or management of persons rendering
artistic, production and/or other services in the entertainment field;
4. The ownership or operation of one or more radio or television
stations;
5. The wholesale or retail sale of video materials intended for
public purchase;
6. Advertising on Station______________, or any other station owned
by its licensee (excluding nominal stock holdings in publicly owned companies).
7. The facts and circumstances related to such interest are none/as
follows:
By: ____________________
Sworn and subscribed to before me
this _____ day of ___________, 199_.
____________________________________
Notary Public
My Commission Expires: ______________
<PAGE>
EXHIBIT B
LOCAL MARKETING AGREEMENT
This Local Marketing Agreement (this "Agreement") is entered into as of
January 16, 1998 (the "Effective Date") by and among Cumulus Broadcasting, Inc.,
a Nevada corporation ("Programmer"), and Benchmark Radio Acquisition Fund IV
Limited Partnership, a Maryland limited partnership, WOSC License Limited
Partnership, a Maryland limited partnership, and WWFG License Limited
Partnership, a Maryland limited partnership (collectively, "Licensee"), licensee
of Radio Stations WOSC-FM (Bethany Beach, Delaware) and WWFG-FM (Ocean City,
Maryland) (the "Stations").
RECITALS
A. Licensee holds licenses from the Federal Communications Commission
("FCC" or "Commission") authorizing it to operate the Stations. Licensee is
engaged in the business of radio broadcasting on the Stations, and has available
for sale broadcast time on the Stations. Programmer and Licensee are parties to
that certain letter agreement dated of even date herewith (the "Purchase
Agreement") which contemplates that Programmer and Licensee will enter into this
Agreement.
B. Programmer desires to purchase time on the Stations for the broadcast
of programming on the Stations and to sell all of the commercial advertising
time inventory of the Stations. Licensee desires to make available and sell such
commercial advertising time to Programmer. Accordingly, in consideration of the
mutual covenants herein contained, Programmer and Licensee are entering into
this Agreement.
AGREEMENT
1. Time Sale. Subject to the provisions of this Agreement, from and after
the Commencement Date set forth in Paragraph 3 below, Licensee agrees to make
the Stations' broadcasting transmission facilities (consisting of all of the
Assets described in the Purchase Agreement) available to Programmer for
broadcast of Programmer's programs on the Stations originating from Licensee's
studios. The risk of loss with respect to the broadcasting transmission
facilities consisting of all of the Assets described in the Purchase Agreement
will remain with Licensee. The Stations' time made available to Programmer is,
subject to all other provisions of this Agreement, up to twenty-four (24) hours
of programming each day during the term of this Agreement, except that Licensee
reserves two (2) hours per week of each Station's time for its own use at a
mutually agreeable time between 5:00 a.m. and 9:00 a.m. on Sunday mornings.
Programmer will use commercially reasonable efforts to provide programming which
fills the Stations' time made available hereunder.
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2. Payments. During each Month (as defined below) of the term of this
Agreement, (a) commencing on the Commencement Date set forth in Paragraph 3
below, Programmer agrees to reimburse Licensee for all reasonable, customary and
usual operating expenses of each Station, including, but not limited to, the
following verifiable, reasonable, customary and usual operating expenses of such
Station: (i) the compensation of the Licensee's employee serving as such
Station's general manager, and of the Licensee's employee or independent
contractor serving as such Station's engineer, not to exceed $4,200 per month in
the aggregate for both such persons per Station, (ii) the employee benefits and
payroll tax costs of such two persons not to exceed $475 per month in the
aggregate for both such persons per Station, (iii) the electricity costs for
such Station's transmitters, and (iv) the general property and casualty and
general liability insurance costs related to such Station, all of such expenses
being referred to as "Licensee's Operating Expenses" and such payment being
referred to as the "Operating Expense Payment" and such reimbursement to be made
in cash or by check within ten (10) business days after receipt by Programmer
from Licensee of a written account (each, a "Monthly Expense Report") of
Licensees Operating Expenses for such Month; and (b) pay Licensee in cash or by
check the amount of the greater of (i) fifty percent of the previous month's
Broadcast Cash Flow (as defined below) of the Stations and (ii) $10,000, payable
on the first business day of each month during the term of this Agreement (the
"LMA Fee Payment"). For purposes of this Agreement "Broadcast Cash Flow" means
the aggregate revenues, net of commissions, of the Stations minus the aggregate
operating expenses of the Stations, determined in accordance with generally
accepted accounting principles, consistently applied, excluding (a)
depreciation, amortization and other non-cash expenses, (b) interest expense,
(c) income taxes, (d) expenses associated with equity-based incentive and
compensation plans and equity interests in the Stations held by employees, (e)
prepaid expenses incurred in 1997 for services to be provided in 1998 or
afterwards, (f) management fees, (g) corporate overhead allocated to the
Stations, (h) revenue and expenses of trade deals, (i) gains and losses from
sales of fixed assets, (j) repairs and maintenance expenditures in excess of
$1,000 per expenditure, (k) expenses associated with discontinued programming,
(l) legal fees and other expenses (including any bonus payments or severance
expenses) incurred in connection with this Agreement or the Purchase Agreement
and the transactions contemplated thereby, (m) expenses associated with other
nonrecurring items, and (n) the LMA Fee Payment. Payment of all amounts due
under this Paragraph 2 for any partial Month of this Agreement shall be prorated
on a daily basis. Should this Agreement terminate upon the transfer of the
Stations to Programmer pursuant to the Purchase Agreement, the final Operating
Expense Payment and LMA Fee Payment will be made at the Closing, subject to any
adjustment required under Section 3 of the Purchase Agreement. For the purposes
of this Agreement, a "Month" means a calendar month. Licensee agrees to provide
Programmer such records, receipts, copies of contracts and other information and
documentation as Programmer may reasonably request in order to enable it to
verify Licensee's Monthly Expense Reports, and Programmer agrees to provide
Licensee such records, receipts, copies of contracts and other information and
documentation as Licensee may reasonably request in order to enable Licensee to
verify Broadcast Cash Flow calculations. In the event Programmer shall notify
Licensee in writing that it disputes a Month Expense Report or Licensee shall
notify Programmer in writing that it disputes a calculation of Broadcast Cash
Flow, which writing shall describe the reason for such dispute, the parties will
use commercially reasonable efforts to resolve such dispute. If the parties are
unable to resolve the dispute within 10 days, either party may cause the dispute
to be submitted to Ernst & Young which
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shall be directed to submit a final resolution within 15 days of submission. The
parties shall bear their own expenses in connection with resolving any such
dispute and shall bear equally any fees and expenses of Ernst & Young.
Programmer's obligation to reimburse any disputed Licensee's Operating Expenses
and disputed LMA Fee Payment amount shall be suspended pending resolution of any
such dispute, but such suspended amounts will bear 12% interest if ultimately
determined to be payable to Licensee.
3. Term. Subject to paragraph 17, the term of this Agreement shall
commence at 12:01 a.m., Eastern Time, on February 1, 1998 (the "Commencement
Date"), and shall continue until the first to occur of (a) the date of closing
of the sale of the assets of the Stations contemplated by the Purchase Agreement
(the "Closing"), or (b) the termination prior to the Closing of the Purchase
Agreement in accordance with its terms, subject to extension with the mutual
written consent of Programmer and Licensee.
4. Programs. Programmer shall furnish or cause to be furnished the
artistic personnel and materials for its programming. Programmer represents and
warrants that all of the programming, advertising and promotional material it
broadcasts on the Stations shall be in accordance with the rules, regulations,
policies and procedures of the Commission and the Communications Act of 1934, as
amended (the "Communications Act"), and the reasonable standards established by
Licensee. Programmer shall not change the format of a Station without the prior
written consent of Licensee.
5. Accounts Receivable.
(a) General. The parties agree that Programmer will use commercially
reasonable efforts (but without obligation to institute legal or collection
proceedings) to collect accounts receivable for performed advertising contracts
identified and valued as of the Commencement Date, which efforts shall continue
for one hundred twenty (120) days from the Commencement Date or until
termination of this Agreement, whichever comes first (the "Collection Period").
Such collections shall be distributed between Programmer and Licensee in the
manner described in Paragraph 5(b) below. Within three days following the
Commencement Date, Licensee will provide Programmer with a detailed list of such
accounts receivable. At the end of the Collection Period, Programmer shall turn
over any such accounts receivable that remain uncollected to Licensee. All
accounts receivable of Programmer created on or after the Commencement Date
shall be and remain the sole property of Programmer. Programmer shall be
responsible for the collection of Programmer's accounts receivable and shall
retain ownership of such accounts upon termination of this Agreement.
(b) Remittance. Within five business days after the end of the
Collection Period, Programmer shall remit to Licensee all of Licensee's accounts
receivable for performed advertising contracts identified and valued as of the
Commencement Date, and collected by Programmer during the Collection Period. All
amounts collected with respect to a particular customer shall be applied first
to the oldest receivable relating to that customer; provided, however, that if
the customer shall specify that its payment is to be applied to a specific
receivable or invoice of Licensee or
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Programmer, such collection shall be so applied and paid to such Licensee or
Programmer, as appropriate. Licensee and Programmer agree that they shall take
no actions to influence or require any customer to specify that such customer's
payments are to be applied to a specific receivable or invoice.
(c) Carryover Accounts. Programmer will assume the obligation to
provide advertising time on the Stations in consideration of Licensee's trade
accounts in existence as of the Commencement Date. Programmer will perform all
of Licensee's obligations under existing long-term contracts for the sale of
advertising time on the Stations and will be entitled to all the proceeds of
accounts receivable pertaining to performance after the Commencement Date.
6. Stations Facilities.
(a) Licensee Responsibility. During the term of this Agreement,
Programmer shall be responsible for those expenses of the Stations described in
Paragraph 9 below and shall reimburse the Licensee for those expenses described
in Paragraph 2 above. Licensee shall be responsible for, and pay in a timely
manner, all capital and other operating expenses associated with owning and
controlling the Stations during the term of this Agreement. Licensee shall be
responsible for the Stations' compliance with all applicable provisions of the
Communications Act, the rules, regulations, policies and procedures of the FCC,
and all other applicable laws. Licensee represents that it now holds all permits
and authorizations necessary for the operation of the Stations, including all
FCC permits and authorizations, and that all such permits and authorizations are
in full force and effect. Licensee will continue to hold such permits and
authorizations throughout the term of this Agreement. Licensee represents that
there is not now pending or, to Licensee's knowledge, threatened, any action by
the FCC or other party to revoke, cancel, suspend, refuse to renew or modify
adversely any of the licenses, permits or authorizations necessary to the
operation of the Stations, and no event has occurred that allows or, after
notice or lapse of time or both, would allow, the revocation or termination of
such licenses, permits or authorizations or the imposition of any restriction
thereon of such a nature that may limit the operation of the Stations as
presently conducted. Licensee has no reason to believe that any such license,
permit or authorization will not be renewed in its ordinary course. Licensee
shall make its transmitter, transmitter building and tower site available to
Programmer, at no additional charge, for the placement and use of broadcast
equipment Programmer reasonably deems necessary to fulfill its responsibilities
under this Agreement.
(b) Broadcast Output. Licensee represents that each Station's
facilities and equipment do and will comply and are and will be operated in
accordance with good engineering standards necessary to deliver a high-quality
technical signal at such Station's maximum power and coverage, comply with all
applicable laws and regulations (including the requirements of the
Communications Act, and the rules, regulations, policies and procedures of the
FCC) and broadcast to the full power and height authorized for it by the FCC.
Licensee is not in material violation of any statute, ordinance, rule,
regulation, order or decree of any federal, state, local or foreign governmental
agency, court or authority having jurisdiction over it or over any part of its
operations
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or assets, which material default or violation would have an adverse effect on
Licensee or its assets or on its ability to perform this Agreement. During the
term hereof, Licensee agrees to maintain the transmission facility and the
broadcast output in a high quality condition, with the same quality of output,
normal wear and tear excepted, to broadcast to the maximum power, coverage and
height as Licensee is presently authorized by the FCC and to make improvements
in the facility as may be reasonably necessary to maintain the transmission
facility and broadcast output at a high quality level and at maximum power and
coverage.
(c) Maintenance. Licensee shall maintain the ability to operate its
maximum authorized facilities at all times. Any maintenance work, other than
emergency repairs, which prevents the operation of either Station at full power
and maximum facilities, shall not be scheduled without giving at least
forty-eight (48) hours notice to Programmer, unless Programmer waives such
notice.
7. Handling of Mail and Complaints. Programmer shall promptly forward to
Licensee any mail which it may receive from any agency of government or any
correspondence from members of the public relating to the Stations or to any of
Programmer's programming broadcast on the Stations.
8. Programming and Operations Standards. Programmer recognizes that the
Licensee has full authority and a duty to control the operation of the Stations.
The parties agree that Licensee's authority includes, but is not limited to, the
right to reject or refuse such portions of Programmer's programming which
Licensee reasonably believes to be contrary to the public interest. Should
Licensee reject any of Programmer's programming pursuant to this paragraph, the
payments, reimbursements and fees provided for hereunder shall be prorated
accordingly.
9. Responsibility for Employees and Expenses.
(a) Employment by Programmer of Licensee's Employees. Effective on
the Commencement Date, Programmer will hire those current employees of the
Stations other than (i) those necessary for Licensee to perform its obligations
under all applicable FCC regulations and this Agreement, and (ii) those
designated by Programmer in a written notice given to Licensee prior to the
Commencement Date. Programmer shall employ such persons on such terms as it
shall deem appropriate. Programmer shall not assume any payment in connection
with any group medical, group insurance or pension plan of Licensee associated
with such employees, nor assume responsibility for any compensation, benefits or
other costs or liabilities of Licensee related to such employees and relating to
the period prior to the Commencement Date including any salaries, wages, sales
commissions, incentives, bonuses, accrued and unpaid vacation, holiday and sick
pay or obligations under Licensee's benefit plans, nor does Programmer assume
any employment contracts between Licensee and any such employees. If the Closing
under the Purchase Agreement is not consummated as contemplated therein, the
employment of such employees will be assigned back by Programmer to Licensee and
Licensee will accept such assignment, and such employees shall cease to
participate in Programmer's benefit plans described in Paragraph 9(b) below.
Licensee represents and warrants to Programmer that all of the Stations'
employees are at-will employees.
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(b) Employees. During the term of this Agreement, except for those
employees retained by Licensee as contemplated by Paragraph 9(a) above and
except as otherwise specifically provided in Paragraph 9(a) above, Programmer
shall employ and be responsible for the salaries, commissions, taxes, insurance,
vacation, sick leave and all other related costs, for the period from and after
the Commencement Date, of all employees referenced in Paragraph 9(a) above
assigned to Programmer by Licensee and hired by Programmer, together with any
other employees, agents, contractors and personnel of Programmer involved in the
production and broadcast of its programming, including air personalities,
salespersons, sales representatives, consultants, traffic personnel, board
operators and other programming staff members. During the term of this
Agreement, Programmer shall enroll all former employees of Licensee assigned to
Programmer by Licensee and hired by Programmer under Paragraph 9(a) above in
such group medical, group insurance and/or pension plans as Programmer
customarily enrolls its employees.
(c) Expenses. During the term of this Agreement, Licensee shall
maintain in full force and effect insurance with reputable insurers covering
such risks to the Assets described in the Purchase Agreement, and in such
amounts and on such items, as are customary for radio stations with facilities
comparable to the Stations. During the term of this Agreement, Programmer shall
pay directly on a current basis licensing fees required to be paid to ASCAP, BMI
and SESAC, and any other copyright or programming rights fees, in each case
attributable to programming broadcast on the Stations by Programmer during the
term of this Agreement. Upon execution of this Agreement, Programmer shall apply
promptly to ASCAP, BMI and SESAC for the necessary licenses and permits for
Programmer to provide programming in its own name over the Stations during the
term of this Agreement. Beginning on the Commencement Date, Programmer will pay
directly on a current basis to third parties on behalf of Licensee all other
fees and payments relating to the period of the term of this Agreement which are
due and payable by Licensee under Assumed Contracts for programming disclosed in
the Purchase Agreement (other than those included among the Excluded Assets as
defined therein) and will be entitled to the benefits under such Assumed
Contracts for programming.
10. Advertising and Programming Revenues. Programmer shall retain all
revenues from the sale of advertising time on the programming it broadcasts on
the Stations. Programmer will provide, make available to and shall sell time to
political candidates from the time it purchases from Licensee in strict
compliance with the Communications Act and the rules, regulations, policies and
procedures of the Commission.
11. Operation of Stations. Anything to the contrary in this Agreement
notwithstanding, Licensee shall have full authority and power over the operation
of the Stations during the term of this Agreement. Licensee shall be responsible
for all programming it furnishes for broadcast on the Stations and for the
payment of the salaries of all of its employees, all of whom shall report solely
to and be accountable solely to the Licensee. At a minimum, during the term of
this Agreement, the Licensee shall employ a General Manager for each Station who
shall direct the day-to-day operation of such Station, and an engineer for each
Station who shall oversee and direct the engineering and technical operation of
such Station. Licensee shall retain the right to interrupt and discontinue
Programmer's programming at any time if Licensee determines the programming is
not in the public
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interest or violates this Agreement, or in case of an emergency or EBS/EAS
system activation, or for the purpose of providing programming which Licensee in
its sole discretion determines to be of greater national, regional or local
importance, whereupon, the payments, reimbursements and fees provided for in
Paragraph 2 above shall be reduced by a percentage amount equal to the
percentage that the amount of Programmer's programming that is not carried bears
to the total programming time allowed Programmer, pursuant to Paragraph 1 above.
Programmer shall properly prepare and promptly provide to Licensee (a) all its
contracts, agreements and requests for time for political programming or
programming addressing controversial issues of public importance; (b) all
records, complaints and reports of every kind whatsoever which may be required
by the FCC to be maintained or filed with the FCC by each Station as a result of
Programmer's programming over such Station; and (c) full information with
respect to Programmer's programs and public service announcements which are
responsive to issues of public concern in sufficient detail to enable Licensee
to timely prepare all appropriate or necessary records and reports required by
the Commission and its rules and policies concerning such Station's operations.
Programmer will properly prepare and furnish to Licensee such information,
records and reports relating to Programmer's programming, sales or employment
practices at each Station in sufficient detail as is necessary to enable
Licensee to comply with all rules and policies of the FCC or any other
governmental agency.
12. Station Identification. Licensee will be responsible for ensuring the
proper broadcast of station identification announcements. However, Programmer
will provide appropriate station identification announcements which comply with
FCC requirements in a form acceptable to Licensee.
13. Right to Use the Programs. The right to use Programmer's programs and
to authorize their use in any manner and in any media whatsoever shall be, and
remain, vested in Programmer.
14. Payola/Plugola. Programmer agrees that neither it nor its agents,
employees, consultants or personnel will accept any consideration, compensation,
gift or gratuity of any kind whatsoever, regardless of its value or form,
including, but not limited to, a commission, discount, bonus, material, supplies
or other merchandise, services or labor (collectively "Consideration"), whether
or not pursuant to written contracts or agreements between Programmer and
merchants or advertisers, unless the payer 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 FCC requirements.
15. Compliance with Law. Programmer agrees that, throughout the term of
this Agreement, Programmer will comply in all material respects with all laws,
rules, regulation, policies and procedures including, but not limited to, the
FCC's technical, political broadcasting, obscenity and indecency regulation,
fair trade practice regulations, lottery broadcast regulations, sponsorship
identification rules and sales practice regulations, that are applicable to the
operations of the Stations, and all FCC rules applicable to programming
agreements of this kind. Programmer acknowledges
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that Licensee has not urged, advised or consented to or agreed in any way
whatsoever to the use of any unfair business practice.
16. Indemnification.
(a) Programmer's Indemnification. Programmer shall indemnify and
hold Licensee harmless for any material loss, damage or injury of any kind
sustained by Licensee resulting from Programmer's breach of this Agreement, from
any programming material broadcast by Programmer on each Station, from the sale
of or attempt by Programmer to sell advertising or program time on such Station
and from any material act or omission of any kind whatsoever by Programmer.
(b) Licensee's Indemnification. Licensee shall indemnify and hold
Programmer harmless for any material loss, damage or injury of any kind
sustained by Programmer resulting from Licensee's breach of this Agreement, from
the broadcast of programming on the Stations furnished by Licensee, from the
sale of or attempt by Licensee to sell advertising or program time on the
Stations, and from any material act or omission of any kind whatsoever by
Licensee.
(c) Survival. Neither Licensee nor Programmer shall be entitled to
indemnification pursuant to this Section 16 unless such claim for
indemnification is asserted in writing delivered to the other party. The
representations and covenants of Licensee and Programmer and their obligation to
indemnify and hold each other harmless as set forth in this Agreement shall
survive any termination, and shall continue for a period of two years after the
termination of this Agreement as to the parties hereto and to claims of third
parties.
17. Termination and Remedies Upon Default.
(a) Termination. In addition to other remedies available at law or
equity, this Agreement may be terminated as set forth below by either Licensee
or Programmer by written notice to the other if the party seeking to terminate
is not then in material default or breach thereof, upon the occurrence of any of
the following:
(i) Subject to Section 26, this Agreement is declared invalid
or illegal in whole or material part by an order or decree of the FCC or
any other administrative agency or court of competent jurisdiction,
including but not limited to U.S. Bankruptcy Court, and such order or
decree has become final and no longer subject to further administrative or
judicial review;
(ii) The other party is in material breach of its obligations
hereunder and has failed to cure such breach within thirty (30) days of
notice from the non-breaching party;
(iii) The mutual consent of both parties;
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(iv) By Programmer if the FCC license to operate either of the
Stations is revoked, terminated or modified in such a manner as to have a
material adverse impact on the operations, condition (financial or
otherwise) or prospects of such Station and such revocation, termination
or modification is not due to the fault of Programmer; or
(v) Subject to the provisions of Section 26, there has been a
change in FCC rules, policies or case law precedent that would cause this
Agreement or any provision thereof to be in violation thereof and such
change is not the subject of an appeal or further administrative review.
Upon termination of this Agreement according to the provisions of this Paragraph
17, the payments, reimbursements and fees provided for hereunder shall be
prorated to the effective date of termination. Licensee shall cooperate
reasonably with the Programmer to the extent permitted to enable Programmer to
fulfill advertising or other programming contracts then outstanding, in which
event Licensee shall receive as compensation for the carriage after the
termination date of such advertising or programming that which otherwise would
have been paid to Programmer hereunder.
(b) Programmer's Additional Remedies for Licensee's Technical
Operation Deficiencies. In addition to Programmer's right to terminate for
reasons set forth in Paragraph 17(a) above, if either Station suffers any damage
to its transmission facilities through no fault of Programmer which results in
the inability of such Station to operate with its presently authorized
facilities at maximum power and coverage and Licensee has not restored full-time
operation of such Station with its presently authorized facilities at maximum
power and coverage within fourteen (14) days of any such occurrence, Programmer
may give notice to Licensee of Programmer's termination of this Agreement in
which event this Agreement shall terminate upon the giving of such notice, any
other provision of this Agreement notwithstanding. For each day that either
Station is not operating its authorized facilities at maximum power and
coverage, the payments due with respect to such Station pursuant to Paragraph 2
above shall be reduced by a percentage amount equal to the percentage that the
amount of time of reduced power operation bears to the number of hours
Programmer may broadcast pursuant to Paragraph 1 above.
(c) Programmer's Additional Termination Rights. Anything herein to
the contrary notwithstanding and in addition to Programmer's termination rights
in Paragraphs 17(a) and (b) above, Programmer shall have the right to terminate
this Agreement upon the event that Licensee 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 Licensee under any federal or state insolvency law, which
if filed against Licensee, has not been dismissed within sixty (60) days
thereof.
(d) Licensee's Additional Termination Rights. Anything herein to the
contrary notwithstanding and in addition to Licensee's termination rights in
Paragraph 17(a) above, Licensee shall have the right to terminate this Agreement
upon the event that Programmer makes a general assignment for the benefit of
creditors, files or has filed against it a petition for bankruptcy,
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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 Programmer under any federal or state insolvency law,
which if filed against Programmer, has not been dismissed within sixty (60) days
therefor.
18. Force Majeure. Subject to paragraph 17(b), any failure or impairment
of facilities or any delay or interruption in broadcast programming, or failure
at any time to furnish facilities, in whole or in part, for broadcasting, due to
any Act of God, strikes or threats thereof or force majeure or due to any other
causes beyond the reasonable control of Licensee or Programmer shall not
constitute a breach of this Agreement, and neither Licensee nor Programmer, as
the case may be, will be liable to the other party hereto therefore, provided
such party uses reasonable diligence to correct such failure or impairment as
soon as is reasonably possible; provided, however, subject to paragraph 17(b),
that Programmer's failure to sell air time or deliver programming or commercial
matter on account of any of the foregoing circumstances shall not release
Programmer from its obligation to make the payments required in Paragraph 2
above during the term of this Agreement.
19. Notices. All notices, requests, consents, waivers and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been given (a) if transmitted by facsimile, upon
acknowledgment of receipt thereof in writing by facsimile or otherwise; (b) if
personally delivered, upon delivery or refusal of delivery; (c) if mailed by
registered or certified United States mail, return receipt requested, postage
prepaid, upon delivery or refusal of delivery; or (d) if sent by a nationally
recognized overnight delivery service, upon delivery or refusal of delivery. All
notices, consents, waivers or other communications required or permitted to be
given hereunder shall be addressed to the respective party to whom such notice,
consent, waiver or other communication relates at the following addresses:
if to Licensee:
Cumulus Broadcasting, Inc.
330 E. Kilbourn Avenue
Suite 250
Milwaukee, Wisconsin 53202
Attn: Richard Weening
Telecopy No.: (414) 283-4505
with a copy to:
Paul Hastings Janofsky & Walker LLP
1299 Pennsylvania Ave. NW, 10th Floor
Washington, DC 20004
Attn: David D. Burns
Telecopy No.: (202) 508-9700
if to Licensee:
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<PAGE>
Benchmark Radio Acquisition Fund IV Limited Partnership
600 Congress Avenue, Suite 1400
Austin, Texas 78701
Attn: William S. Banowsky, Jr.
Telecopy No: (512) 404-6850
with a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attn: Michael D. Wortley
Telecopy No: (214) 999-7732
20. Modification and Waiver. No modification or waiver of any provision of
this Agreement shall in any event be affected unless the same shall be in
writing and signed by the party adversely affected by the waiver or
modification, and then such waiver and consent shall be effective only in the
specific instance and for the purpose for which given.
21. Corporate Authority; Construction. The undersigned represent and
warrant that they have full authority to execute and deliver this Agreement on
behalf of the respective parties. This Agreement shall be construed in
accordance with the laws (other than the law of conflicts) of the State of
Maryland, and the obligations of the parties hereto are subject to all federal,
state and local laws and regulations now or hereafter in force and to the rules,
regulations, policies and procedures of the Commission and all other government
entities or authorities presently or hereafter to be constituted.
22. 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.
23. Counterpart Signatures. This agreement may be signed in counterpart
originals, which collectively shall have the same legal effect as if all
signatures had appeared on the same physical document. This Agreement may be
signed and exchanged by facsimile transmission, with the same legal effect as if
the signatures had appeared in original handwriting on the same physical
document.
24. No Partnership or Joint Venture Credited. Programmer is acting as an
independent contractor hereunder and nothing in this Agreement shall be
construed to make Licensee and Programmer partners or joint venturers or to make
Licensee or Programmer the agent of the other or to afford any rights to any
third party other than as expressly provided herein.
25. Assignment; Binding Agreement. Neither Programmer nor Licensee may
assign this Agreement without the prior approval of the other party which shall
not be unreasonably
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<PAGE>
withheld or delayed. The party shall communicate its position on any proposed
assignment within fourteen (14) days after receipt of written notice of the
proposed assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
26. Severability. In the event any term or provision of this Agreement is
declared to be invalid or illegal for any reason, this Agreement shall remain in
full force and effect and the same shall be interpreted as through such invalid
and illegal provision were not a part hereof. The remaining provisions shall be
construed to preserve the intent and purpose of this Agreement and the parties
shall negotiate in good faith to modify the provisions held to be invalid or
illegal to preserve each party's anticipated benefits thereunder.
27. Entire Agreement. This Agreement supersedes any prior agreements
between the parties, other than the Purchase Agreement and any other agreements
contemplated thereby, and contains all of the terms agreed upon with respect to
the subject matter hereof. This Agreement may not be altered or amended except
by an instrument in writing signed by the party against whom enforcement of any
such change is sought.
28. No Third Party Beneficiaries. This Agreement shall not confer any
benefit on or create any right or cause of action in favor of or on behalf of
any person other than the parties hereto and their respective successors and
assigns as permitted by Paragraph 25 above of this Agreement.
29. Certifications. Licensee hereby certifies that for the term of this
Agreement it shall maintain ultimate control over the Stations' facilities,
including control over the Stations' finances, personnel and programming, and
nothing herein shall be interpreted as depriving Licensee of the power or right
of such ultimate control. Programmer hereby certifies that this Agreement
complies with the provisions of Section 73.3555(a) of the Commission's rules and
regulations.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Effective Date.
PROGRAMMER:
CUMULUS BROADCASTING, INC.
By:______________________________________________
Richard Weening
Chairman
LICENSEE:
BENCHMARK RADIO ACQUISITION FUND IV
LIMITED PARTNERSHIP
By: BENCHMARK COMMUNICATIONS RADIO
LIMITED PARTNERSHIP,
Its General Partner
By: BENCHMARK COMMUNICATIONS
HOLDINGS, INC.,
Its General Partner
By:____________________________
William S. Banowsky, Jr.
Vice President
WOSC LICENSE LIMITED PARTNERSHIP
By: BENCHMARK RADIO ACQUISITION
FUND IV LIMITED PARTNERSHIP,
Its General Partner
By: BENCHMARK COMMUNICATIONS
RADIO LIMITED PARTNERSHIP,
Its General Partner
By: BENCHMARK COMMUNICATIONS
HOLDINGS, INC.,
Its General Partner
By:____________________________
William S. Banowsky, Jr.
<PAGE>
Vice President
WWFG LICENSE LIMITED PARTNERSHIP
By: BENCHMARK RADIO ACQUISITION
FUND IV LIMITED PARTNERSHIP,
Its General Partner
By: BENCHMARK COMMUNICATIONS
RADIO LIMITED PARTNERSHIP,
Its General Partner
By: BENCHMARK COMMUNICATIONS
HOLDINGS, INC.,
Its General Partner
By:____________________________
William S. Banowsky, Jr.
Vice President
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of December 1, 1997, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing"), and West
Jewell Management, Inc., a Colorado corporation (the "Seller"). Broadcasting and
Licensing are referred to collectively herein as the "Buyers." The Buyers and
the Seller are referred to collectively herein as the "Parties." Capitalized
terms used in this Agreement are defined in Section 8 hereof.
Subject to the prior approval of the Federal Communications Commission,
and subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
station KARX-FM, licensed to Claude, Texas (the "Station") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Licensing agrees to acquire from the Seller, and
the Seller agrees to transfer, convey, and deliver to Licensing, all of the FCC
Licenses listed in Section 2(l) of the Disclosure Schedule. In addition,
Broadcasting agrees to purchase from the Seller, and the Seller agrees to sell,
transfer, convey, and deliver to Broadcasting, all of the Acquired Assets other
than the FCC Licenses. Both such transactions shall take place at the Closing
for the consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities and the
Seller agrees to pay and discharge all Liabilities and obligations of the Seller
other than the Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the Purchase Price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
("Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Station in
Amarillo, Texas (or at such other location
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as the parties may mutually determine) commencing at 9:00 a.m. local time on the
date set by the Buyers not earlier than the fifth business day or later than the
tenth business day after the FCC approval of the Assignment Application becomes
a Final Order, by which date all other conditions to the obligations of the
Parties to consummate the transactions contemplated hereby will have been
satisfied or such other date as the Parties may mutually determine (the "Closing
Date").
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in Section 5(a) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including Lease and other Assumed Contract assignments
and Intellectual Property transfer documents), bills of sale and warranty deeds
in the forms attached hereto as Exhibits B-1 through B-2, (B) such affidavits,
transfer tax returns, memorandums of lease, and other additional documents as
may be required by the terms of the title insurance commitments described in
Section 4(o) hereof, as necessary to furnish title insurance as required by such
section or as may be necessary to convey title to the Real Estate to the Buyers
in the condition required herein or to provide public notice of existence of the
Leases, and (C) such other instruments of sale, transfer, conveyance, and
assignment as the Buyers and their counsel reasonably may request; (iv) the
Buyers will execute, acknowledge (if appropriate), and deliver to the Seller (A)
an assumption in the form attached hereto as Exhibit C and (B) such other
instruments of assumption as the Seller and its counsel reasonably may request;
and (v) the Buyers will deliver to the Seller the consideration specified in
Section l(c) above.
(f) Noncompetition Agreement. On the Closing Date, the Seller shall
execute, and shall cause shareholders Roger Anderson, Nancy Anderson, Stanley
Tafoya, and Jack Pelon to execute, a Noncompetition Agreement with the Buyer
including covenants not to compete with the Buyer in the markets served by the
Station in the form of Exhibit D attached hereto. A portion of the Purchase
Price equal to Ten Thousand Dollars ($10,000) shall be paid to the Seller by the
Buyers on the Closing Date as consideration for the agreements set forth in the
Postclosing Agreement.
(g) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit E.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have
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<PAGE>
any Subsidiaries. The Seller has the power and authority to own or lease its
properties and to carry on all business activities now conducted by it. The
shareholders of the Seller are Roger Anderson, Nancy Anderson, Stanley Tafoya,
and Jack Pelon.
(b) Authorization of Transaction. The Seller has full corporate power and
authority to execute and deliver this Agreement and all agreements and
instruments to be executed and delivered by such Party pursuant to this
Agreement (collectively, the "Ancillary Agreements") and to perform its
obligations hereunder and thereunder. Without limiting the generality of the
foregoing, the Board of Directors of the Seller has duly authorized the
execution, delivery, and performance of this Agreement and the Ancillary
Agreements by the Seller. This Agreement and the Ancillary Agreements constitute
the valid and legally binding obligation of the Seller, enforceable in
accordance with their respective terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the charter or bylaws of the Seller; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or (other than as disclosed in the Disclosure Schedule) require any
notice or third party consent under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other agreement,
arrangement to which the Seller is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Other than with respect to the Assignment
Application described in Section 4(b), the Seller does not need to give any
notice to, make any filing with, or obtain any Licenses, consent, or approval of
any court or government or governmental agency in order for the Parties to enter
into this agreement or the Ancillary Agreements or to consummate the
transactions contemplated by this Agreement or the Ancillary Agreements
(including the assignments and assumptions referred to in Section 1(e) above).
(d) Title to Acquired Assets. Other than the Security Interests set forth
on Section 2(d) of the Disclosure Schedule (which shall be released at or before
the Closing) the Seller has good and marketable title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets as of and for the fiscal years ended
December 31, 1995, and December 31, 1996, for the Seller; (ii) unaudited balance
sheet as of October 31, 1997; and (iii) unaudited profit and loss statements for
May through December 1995, January through December 1996, and January through
October 1997 for the Seller. The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, are correct and complete, fairly represent the financial
condition of the Seller on such dates and the results of
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operations for the periods designated therein, and are consistent with the books
and records of the Seller (which books and records are correct and complete).
(f) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(f) of the Disclosure Schedule, there has not been any
adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the Seller with
respect to the operation of the Station. Without limiting the generality of the
foregoing and with respect to the operation of the Station since that date:
(i) the Seller has not sold, leased, transferred, or assigned any of its
material assets, tangible or intangible;
(ii) other than this Agreement, the Seller has not entered into any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
involving more than $5,000 to which the Seller is a party or by which it or any
of its assets are bound;
(iv) no Security Interest has been imposed upon any of Seller's assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of related
capital expenditures) outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of any other person (or series of
related capital investments, loans, and acquisitions);
(vii) the Seller has not created, incurred, assumed, or guaranteed any
indebtedness (including capitalized lease obligations) outside the Ordinary
Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal practice
in the Ordinary Course of Business) the payment of accounts payable and other
Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the Ordinary
Course of Business;
(x) the Seller has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
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(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to any of its property or any action
adversely affecting the FCC Licenses;
(xii) the Seller has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees giving rise to
any claim or right on its part against the person or on the part of the person
against it;
(xiii) the Seller has not entered into any employment contract, consulting
contract or severance agreement or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;
(xiv) the Seller has not granted any increase (outside routine salary and
wage increases in the Ordinary Course of Business) in the rate of compensation,
commissions, bonus or other remuneration payable, or granted any severance or
termination pay to, any of its directors, officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing, (C)
incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other plan,
contract, or commitment for any of its directors, officers, and employees, or
modified or terminated any existing such plan, contract, or commitment;
(xvi) the Seller has not made any other change in employment terms for any
of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or other
capital contribution;
(xviii) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
the Station;
(xix) the Seller has not altered its credit and collection policies or its
accounting policies;
(xx) the Seller has not materially altered the programming, format or call
letters of the Station, or its promotional and marketing activities;
(xxi) the Seller has not applied to the FCC for any modification of the
FCC Licenses or failed to take any action necessary to preserve the FCC Licenses
and has operated the Station in substantial compliance therewith and with all
FCC rules and regulations; or
(xxii) the Seller has not committed to any of the foregoing.
(g) Tax Matters. The Seller has timely and properly filed all Tax Returns
that it was required to file with respect to the Seller's operations. All such
Tax Returns were correct and
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complete in all respects and properly reflect the tax liability of the Seller.
The Seller has not requested any extension of time within which to file returns
in respect of any Taxes with respect to the Seller's operations. No Tax
deficiencies have been proposed or assessed against the Seller. There are no
pending, or to the Seller's knowledge, threatened audits, investigations, or
claims for or relating to any liability in respect of Taxes with respect to the
Seller's operations. All Taxes owed by the Seller with respect to its operations
(whether or not shown on any Tax Return) have been paid. The Seller has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. No claim has ever been made by any authority in any
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security Interests on any
of the assets of the Seller that arose in connection with any failure (or
alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, and other tangible personal
property used in conducting the operation and business of the Station. The
Seller owns or leases all tangible assets necessary for the conduct of the
operation and business of the Station as presently conducted and as presently
proposed to be conducted and all leased assets are specifically identified as
such in Section 2(h) of the Disclosure Schedule. Each such tangible asset is
free from defects (patent and latent), has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it presently
is used. No such tangible asset is in need of replacement. Any leased personal
property included within the tangible personal property is in the condition
required of such property by the terms of the lease applicable thereto during
the term of the lease and upon the expiration thereof. All of the equipment
utilized in the operation of the Station is in substantial compliance with all
FCC and FAA requirements and is sufficient to satisfy the intended needs of the
normal customary operations of the Station at all times of the year and all such
equipment is in substantial compliance with all applicable laws.
(i) Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Seller has delivered to the Buyer correct and complete copies of
the Leases. With respect to the Real Estate:
(i) the Seller has good and marketable title to all of the Owned Real
Estate free and clear of all liens, charges, mortgages, security interests,
easements, restrictions or other encumbrances of any nature whatsoever except
real estate taxes for the year of Closing and municipal and zoning ordinances
and recorded utility easements which do not impair the current use, occupancy or
value or the marketability of title of the property and which are disclosed in
Section 2(i) of the Disclosure Schedule (collectively, the "Permitted Real
Estate Encumbrances");
(ii) the Leases are and, following the Closing will continue to be, legal,
valid, binding, enforceable, and in full force and effect;
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(iii) no party to any Lease is in breach or default (or has repudiated any
provision thereof), and no event has occurred which, with notice or lapse of
time, would constitute a breach or default thereunder or permit termination,
modification, or acceleration thereunder;
(iv) there are no disputes, oral agreements, or forbearance programs in
effect as to any Lease;
(v) none of the Owned Real Estate and to the Seller's Knowledge, none of
the properties subject to the Leases is subject to any lease (other than
Leases), option to purchase or rights of first refusal;
(vi) except for Permitted Real Estate Encumbrances, there are no (i)
actual or, to the Seller's Knowledge, proposed special assessments with respect
to any of the Real Estate; (ii) pending or, to the Seller's Knowledge,
threatened condemnation proceedings with respect to any of the Real Estate;
(iii) pending or, to the Seller's Knowledge, threatened litigation or
administrative actions with respect to any of the Real Estate; (iv) mechanic's
or materialmens' liens with respect to the Owned Real Estate; (v) structural or
mechanical defects in any of the buildings or improvements located in the Real
Estate; (vi) planned or commenced improvements which will result in an
assessment or otherwise affect the Real Estate; (vii) governmental agency or
court orders requiring the repair, alteration or correction of any existing
condition with respect to the Real Estate or any portion thereof; or (viii) any
pending or, to the Seller's Knowledge, threatened change in any zoning laws or
ordinances which may affect any of the Real Estate or Seller's use thereof;
(vii) all buildings and improvements on the Real estate are in good
operating condition and repair, normal wear and tear excepted;
(viii) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the Leases or its rights
thereunder;
(ix) to the Seller's Knowledge, all facilities on the Real Estate have
received all approvals of governmental authorities (including licenses, permits
and zoning approvals) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws, rules, and
regulations;
(x) all facilities on the Real Estate are supplied with utilities and
other services necessary for the operation of said facilities; and
(viii) to the Seller's Knowledge, the owner of each leased facility has
good and marketable title to the underlying parcel of real property, free and
clear of any Security Interest, easement, covenant, or other restriction, except
for Permitted Real Estate Encumbrances and Seller's leasehold interest in each
Lease has priority over any other interest except for the fee interest therein
and Permitted Real Estate Encumbrances;
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(j) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for or currently used in the operation of the business of the
Seller as presently conducted and as presently proposed to be conducted. Each
item of Intellectual Property owned or used by the Seller immediately prior to
the Closing hereunder will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has taken all necessary or desirable action to protect each item of
Intellectual Property that it owns or uses. With respect to such Intellectual
Property:
(i) The Seller has not interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, claim, or
notice alleging any such interference, infringement, misappropriation, or
violation. To the Knowledge of the Seller, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller.
(ii) Section 2(j) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller with
respect to any of its Intellectual Property and the call letters (current and
past) of the Station, identifies each pending patent, trademark or copyright
application for registration which the Seller has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which the Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). With respect to
each item of Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in and to
the item and all registrations and applications are in full force and
effect;
(B) the item is not subject to any outstanding judgment, order,
decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or entity
for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each item of
Intellectual Property that any third party owns and that the Seller uses
pursuant to license, sublicense, agreement, or permission including, but not
limited to the call letters of the Station. With respect to each such item of
used Intellectual Property:
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(A) the license, sublicense, agreement, or permission covering the
item is, and following the Closing will continue to be on identical terms,
legal, valid, binding, enforceable, and in full force and effect;
(B) no party to the license, sublicense, agreement, or permission is
in breach or default (or has repudiated any provision thereof), and no
event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and correct
with respect to the underlying license;
(D) the underlying item of Intellectual Property is not subject to
any outstanding judgment, order, decree, stipulation, injunction, or
charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or entity for
or against any interference, infringement, misappropriation, or other
conflict with respect to the underlying item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
(k) Contracts. Section 2(k) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time which are listed in Section 2(s) of the
Disclosure Schedule) to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under
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which it has imposed (or may impose) a Security Interest on any of its
assets, tangible or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, compensation
agreement, employment agreement, commission agreement, or severance
agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station;
(viii) any written arrangement concerning a guaranty by the Seller
of the obligations of any other party; or
(ix) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement listed in Section 2(k) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect; (B) the written arrangement
will continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(k) of the Disclosure Schedule under the terms
of this Section 2(k). Except for the Assumed Contracts, the Buyer shall not have
any Liability or obligations for or in respect of any of the contracts set forth
in Section 2(k) of the Disclosure Schedule or any other contracts or agreements
of the Seller. No advertiser of the Station has indicated within the past year
that it will stop, or decrease the rate of, buying services from them.
(l) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates of
compliance, and consents of governmental bodies, including, without limitation,
the FCC Licenses, used or useful in the operation of the Station as they are now
being operated are (A) in full force and effect, (B) unimpaired by any acts or
omissions of the Seller or the Seller's employees or agents, (C) free and clear
of any restrictions which might limit the full operation of the Station, and (D)
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detailed in Section 2(1) of the Disclosure Schedule. With respect to the
licenses, permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(1) of the Disclosure
Schedule also sets forth, without limitation, the date of the last renewal, the
expiration date thereof, and any conditions or contingencies related thereto.
Except as set forth in Section 2(1) of the Disclosure Schedule, no condition
exists or event has occurred that permits, or after notice or lapse of time, or
both, would permit, the revocation or termination of any such license, permit,
consent, franchise, or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction or limitation
upon the operation of the Station as now conducted. Except as set forth in
Section 2(1) of the Disclosure Schedule, the Seller is not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or revoked.
(ii) The Station is in compliance with the FCC's policy on exposure to
radio frequency radiation. No renewal of any FCC License would constitute a
major environmental action under the FCC's rules or policies. Access to the
Station' transmission facilities is restricted in accordance with the policies
of the FCC.
(iii) Except as set forth in Section 2(1) of the Disclosure Schedule, to
the Seller's Knowledge, the Seller is not the subject of any FCC or other
governmental investigation or any notice of violation or order, or any material
complaint, objection, petition to deny, or opposition issued by or filed with
the FCC or any other governmental authority in connection with the operation of
or authorization for the Station, and there are no proceedings (other than rule
making proceedings of general applicability) before the FCC or any other
governmental authority that could adversely affect any of the FCC Licenses or
the authorizations listed in Section 2(1) of the Disclosure Schedule.
(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Station all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(v) The Seller is not aware of any information concerning the Station that
could cause the FCC or any other regulatory authority not to issue to the Buyer
all regulatory certificates and approvals necessary for the consummation of the
transactions contemplated hereunder or the Buyer's operation and/or ownership of
the Station. Although Seller has not investigated the matter, Seller is not
aware of any pending FCC applications which, if approved, would allow for the
operation of a new radio station with a signal reaching the signal area of the
Station and, in addition, Seller is not aware of any plans or proposals by
existing radio Station with a signal reaching the signal area of the Station to
alter or change their format to a format similar to that of the Station.
(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth a true
and accurate copy of each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) to which the Seller is a
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party, a named insured, or otherwise the beneficiary of coverage. With respect
to each such insurance policy: (A) the policy is legal, valid, binding, and
enforceable and in full force and effect; (B) the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect through the
Closing Date.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(n) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Station of each employee of the
Seller. Section 2(o) of the Disclosure Schedule also sets forth a list of all
employee handbooks and/or manuals relating to the employees of the Seller, true
and correct copies of which have been delivered to the Buyer. To the Knowledge
of the Seller, no key employee or group of employees has any plans to terminate
employment with the Seller. The Seller is not a party to or bound by any
understanding (whether written or oral), agreement or contract with any union,
labor organization, employee group or other entity or individual which affects
the employment of employees of the Seller including, but not limited to any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. The
Seller has no Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Seller. The Seller has not been subject to a strike, slow down or other
work stoppage during the three (3) year period immediately preceding the date
hereof and, to the Seller's Knowledge, there are no strikes, slow downs or work
stoppages threatened against the Seller. To the Seller's Knowledge, it has not
committed any unfair labor practice. There is no basis for any claim by any past
or present employee of the Seller that such employee was subject to wrongful
discharge or any employment discrimination by the Seller or its management
arising out of or relating to the employee's race, sex, age, religion, national
origin, ethnicity, handicap or any other protected characteristic under
applicable law. No proceedings are pending before any court, governmental agency
or instrumentality or arbitrator relating to labor matters, and there is no
pending investigation by any governmental agency or, to the Knowledge of the
Seller, threatened claim by any such agency or other person relating to labor or
employment matters.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists all
Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to
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contribute for the benefit of any current or former employee of the Seller and
true and correct copies of each such Employee Benefit Plan have been delivered
to the Buyers. Each Employee Benefit Plan (and each related trust or insurance
contract) complies and at all times has complied in form and in operation in all
respects with the applicable requirements of ERISA and the Code. The Seller does
not have any commitment to create any additional Employee Benefit Plan or modify
or change any existing Employee Benefit Plan that would affect any employee or
terminated employee of the Seller. There are no pending or, to the Knowledge of
the Seller, threatened claims under, by or on behalf of any of the Employee
Benefit Plans, by any employee or beneficiary covered by any such Employee
Benefit Plan, or otherwise involving any such Employee Benefit Plan (other than
routine claims for benefits), nor have there been any Reportable Events or
Prohibited Transactions with respect to any Employee Benefit Plan.
(q) Environment, Health, and Safety.
(i) With respect to the operation of the Station and the Real
Estate, the Seller is, and at all times in the past has been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has ever been filed or commenced
or, to the Seller's Knowledge, is threatened, against the Seller alleging
any failure to comply with any such Environmental Law or laws concerning
employee health and safety.
(ii) With respect to the operation of the Station and the Real
Estate, the Seller has no Liability (and to Seller's Knowledge there is no
Basis related to the past or present operations of the Seller or its
predecessors for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Federal Water Pollution Control
Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of
1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899, or
the Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), or any other law of any federal, state, local, or foreign
government or agency thereof (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, or pollution or
protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes ("Environmental Laws");
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(iii) The Seller has no Liability (and to Seller's Knowledge there
is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Occupational Safety and Health
Act, as amended, or any other law (or rule or regulation thereunder) of
any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal
injury to any employee.
(iv) The Seller has obtained and at all times has been in compliance
in all material respects with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and
has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental Laws or law of any
federal, state, or local or foreign government relating to worker health
and safety.
(v) To Seller's Knowledge, all properties and equipment used in the
business of the Seller have been free of asbestos, PCB's, methylene
chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(vi) To Seller's Knowledge, no pollutant, contaminant, or chemical,
industrial, hazardous, or toxic material or waste ever has been buried,
stored, spilled, leaked, discharged, emitted, or released on any of the
Real Estate.
(vii) To Seller's Knowledge, none of the Acquired Assets are
required to be upgraded, modified or replaced to be in compliance with
Environmental Laws.
(viii) Section 2(q) of the Disclosure Schedule contains a copy of
all environmental claims, reports, studies, compliance actions or the like
of the Seller or which are available to the Seller with respect to any of
the Real Estate or any of the Acquired Assets.
(ix) No septic systems or wells exist on, in or under any of the
Real Estate. No above ground or underground storage tanks have ever been
located at, on or under the Real Estate. None of the Real Estate is
contaminated by hazardous or toxic substances or waste, as defined under
Environmental Laws, originating from off-site sources.
(r) Legal Compliance.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, local and
foreign governments (and all agencies thereof, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced or, to the Seller's Knowledge, is threatened, against the
Seller alleging any failure to comply with any such law or regulation, including
those relating to the employment of labor, employee civil rights, and equal
employment opportunities and relating to antitrust matters.
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(ii) The Seller has filed in a timely manner all reports, documents, and
other materials it was required to file (and the information contained therein
was correct and complete in all material respects) under all applicable laws
(including rules and regulations thereunder) of federal state, local and foreign
governments (and all agencies thereof). To the Seller's Knowledge, it has
possession of all records and documents it was required to retain under all
applicable laws (including rules and regulations thereunder).
(s) Advertising Contracts. Section 2(s) of the Disclosure Schedule lists
all arrangements for the sale of air time or advertising on the Station and the
amount to be paid to the Seller therefore, in the form of aging accounts
receivable for each month through October 31 in 1997, and a report of the
billing for each such month by each sales person. This information is correct
and complete, fairly represents the financial condition of the Seller on such
dates and the results of operations for the periods designated therein, and are
consistent with the books and records of the Seller (which books and records are
correct and complete). The Seller has no reason to believe and has not received
a notice or indication of the intention of any of the advertisers or third
parties to material contracts of the Seller to cease doing business or to reduce
in any material respect the business transacted with the Seller or to terminate
or modify any agreements with the Seller (whether as a result of consummation of
the transactions contemplated hereby or otherwise), although Seller cannot and
does not guarantee the amount of future advertising on the Station.
(t) Brokers' Fees. Other than the fee payable to Satterfield & Perry Inc.,
which shall be the exclusive responsibility of Seller, the Seller has no
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(u) Undisclosed Commitments or Liabilities. There are no commitments,
liabilities or obligations relating to the Station, whether accrued, absolute,
contingent or otherwise including, without limitation, guaranties by the Seller
of the liabilities of third parties, for which specific and adequate provisions
have not been made on the Financial Statements except those incurred in or as a
result of the Ordinary Course of Business since January 1, 1997 (none of which
Ordinary Course of Business obligations have had or will have a material adverse
effect on the Station).
(v) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer. Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
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arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada, and Broadcasting is qualified to do business in the state of
Texas.
(b) Authorization of Transaction. Buyers have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
their obligations hereunder and thereunder. This Agreement and the Ancillary
Agreements constitute the valid and legally binding obligation of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
(d) Brokers' Fees. Other than fees payable to Norman Fischer & Associates,
the Buyers have no Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which the Seller could become liable or obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
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(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use the commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have material adverse effect upon the Station or
upon any Affiliate or impose significant costs on such party). If the FCC
imposes any condition on either party to the Assignment Application, such party
shall use commercially reasonable efforts to comply with such condition,
provided, that neither party shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Station or any
Affiliate. The Seller and the Buyers shall jointly oppose any petition to deny,
informal objection to the assignment application, or request for reconsideration
or judicial review of FCC approval of the Assignment Application and shall
jointly request from the FCC extension of the effective period of FCC approval
of the Assignment Application if the Closing shall not have occurred prior to
the expiration of the original effective period of the FCC Consent. Nothing in
this Section 4(b) shall be construed to limit either party's right to terminate
this Agreement pursuant to Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyers may, at their option, extend offers of employment to all or any of
the Seller's employees effective on the Closing Date. From and after the
execution of this Agreement, the Seller shall use its best efforts to assist
Buyers in retaining those employees of the Station which the Buyers wish to hire
in connection with the operation of the Station by the Buyers subsequent to the
Closing, and the Seller will not take any action to preclude or discourage any
of the Seller's employees from accepting any offer of employment extended by the
Buyers.
(d) Notices and Consents. The Seller will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request in connection with the matters pertaining to the Seller
disclosed or required to be disclosed in the Disclosure Schedule (including,
without limitation, consents to assignment of the Leases and other Assumed
Contracts). Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
(e) Operation of Business. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business, with respect to the Station. Without
limiting the generality of the foregoing, the Seller
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will not engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction of the sort described in Section 2(f)
above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
(g) Operating Statements. The Seller shall deliver to the Buyers, for the
Buyers' informational purposes only, monthly unaudited statements of operating
revenues and operating expenses of the Station within ten (10) days after each
such statement is prepared by or for the Seller.
(h) Contracts. The Seller will not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on Section 2(k)
of the Disclosure Schedule in any material respect. The Seller will not without
prior written consent of the Buyers enter into any new contracts respecting the
Station or their properties, except (i) contracts for the sale of time on the
Station for cash, goods or services which are entered into in the Ordinary
Course of Business and comply with Sections 4(f) and 4(j) hereof, (ii) contracts
entered into in the Ordinary Course of Business which are cancelable on not more
than thirty-one (31) days' notice without penalty or premium, and (iii)
contracts entered into in the Ordinary Course of Business each of which does not
involve more than Five Thousand Dollars ($5,000) or all of which do not involve
more than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Station. The Seller shall operate the Station in
substantial compliance with the FCC Licenses and the rules and regulations of
the FCC, and the FCC Licenses shall at all times remain in full force and
effect. The Seller shall file with the FCC all material reports, applications,
documents, instruments and other information required to be filed in connection
with the operation of the Station.
(j) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Station and with respect to collecting accounts receivable arising from
such extension of credit.
(k) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensors,
advertisers, suppliers, customers, and employees, all of the Confidential
Information, call letters and trade secrets of the Station, and the FCC
Licenses.
(l) Full Access and Consultation. The Seller will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal
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business operations of the Station, to all premises, properties, books, records,
contracts, Tax records, and documents of or pertaining to the Seller for the
purpose of permitting the Buyer to, among other things: (a) conduct its review,
(b) review financial statements of the Seller, (c) verify the accuracy of
representations and warranties of the Seller contained in this Agreement, and
(d) prepare for the consummation of the transactions contemplated by this
Agreement. The Seller will consult with the Buyers' management with a view to
informing Buyer's management as to the operations, management and business of
the Station.
(m) Notice of Developments. The Seller will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller or the Station. Each Party will give prompt written
notice to the other of any material development affecting the ability of the
Parties to consummate the transactions contemplated by this Agreement. No
disclosure by any Party pursuant to this Section 4(m), however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Station; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Seller will notify
the Buyers immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments.
(i) The Seller will obtain, with respect to the Owned Real Estate, an
Owner's Title Insurance Policy issued by a title insurer, reasonably
satisfactory to the buyer, in an amount equal to the fair market value of the
Real Estate (including all improvements thereon) contained in the promulgated
form of title policy insuring fee simple title subject to the standard
pre-printed exceptions (with exceptions 2 and 7 deleted) and subject to the
Permitted Real Estate Encumbrances. The fair market value of the real estate is
Fifty Thousand Dollars ($50,000.00). Within twenty (20) days after the Title
Company receives a copy of this contract Seller shall furnish Buyers with a
commitment for title insurance (the "Commitment") including copies of recorded
documents evidencing title exceptions and the survey. Seller authorizes the
title company to deliver the Commitment and related documents to Buyers at
Buyers' address. Buyers shall have 15 days after receive of the Commitment and
legible copies of documents evidencing title exceptiosn and the survey required
by this contract to object in writing to matters disclosed in the Commitments
other than the standard printed exceptions as described or limited in this
paragraph and any matter disclosed in the survey.
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(ii) Seller will provide a Landlord's Estoppel Certificate and Consent to
Assignment for the Real Estate subject to the Leasehold Estate at Coulter Plaza,
Ltd., the form and substance of which Certificate is included as Section 2(o) of
the Disclosure Schedule hereto.
(iii) A current survey for Owned Real Estate described above, certified by
the surveyor to Buyers, Buyers' mortgagee if any and the title company. The
survey required shall be made by a Registered Professional Land Surveyor
acceptable to Buyer and the title company. The survey shall:
(a) identify the Property by metes and bounds or platted lot
description;
(b) show that the survey was made and taked on the ground with
corners permanently markets;
(c) set forth the dimensions and total area of the property;
(d) show the location of all improvements, highways, streets, roads,
railroads, rivers, creeks, or other waterways, fences, easements, and rights of
way on the Property with all easements and rights of way referenced to their
recording information;
(e) show any discrepancies or conflicts in boundaries, any visible
encroachments, and any portion of the Property lying within the 100-year
floodplain as shown on the current Federal Emergency Management Agency map; and
(f) contain the surveyor's certificate that the survey is true and
correct.
(iv) A current Phase I Environmental Site Assessment from an environmental
consultant or engineer reasonably satisfactory to the Buyers which indicates
that the Seller is in compliance with any environmental laws and which discloses
or recommends any action with respect to conditions to be remediated or invested
or any contamination on the site.
(v) Buyers and Seller shall divide equally the cost of the Owner's Title
Insurance Policy and the survey. Cost of the environmental assessment shall be
paid by Buyers.
(p) Control of Station. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Station, and such operation shall be the sole
responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyer
of all particulars thereof, stating the cause
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thereof (if known) and the extent to which the cost of restoration, replacement
and repair of the Acquired Assets lost, damaged or destroyed will be reimbursed
under any insurance policy with respect thereto. The Seller will, at Seller's
expense, repair or replace such Acquired Assets to their former condition as
soon as possible after loss, damage or destruction thereof and shall use its
best efforts to restore as promptly as possible transmissions as authorized in
the FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days after such loss, damage or destruction to
permit such repair or replacement. If repair or replacement cannot be
accomplished within sixty (60) days of such loss, damage or destruction, and the
Buyers determine that the Seller's failure to repair or replace, alone or in the
aggregate with any other then existing factors, would have a material adverse
effect on the operation of the Station:
(a) the Buyers may elect to terminate this Agreement; or
(b) the Buyers may postpone the Closing Date until such time as the
property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
(c) the Buyers may choose to accept the Acquired Asset in their
"then" condition, together with the Seller's assignment to the Buyers of
all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers of any proceeds under any such
insurance policies, previously received by the Seller with respect thereto
plus an amount equal to the amount of any deductible or self-insurance
maintained by Seller on such Acquired Assets.
In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
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(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to those relating to
transmitter and studio leases, and all of the title insurance commitments (and
endorsements), Surveys and environmental site assessments described in Section
4(o) above;
(iv) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the parties if such
transactions are consummated, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyer to own, operate, or control the Acquired Assets (and no
such judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(v) the Seller shall have delivered to the Buyer a certificate (without
qualification as to knowledge or materiality or otherwise except as specifically
provided in a particular representation in Section 2 above) to the effect that
each of the conditions specified above in Sections 5(a)(i) through (iv) is
satisfied in all respects and the statements contained in such certificate shall
be deemed a warranty of the Seller which shall survive the Closing;
(vi) the Assignment Application shall have been approved by a Final Order
of the FCC and the Buyer shall have received all governmental approvals required
to transfer all other authorizations, consents, and approvals of governments and
governmental agencies set forth in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Postclosing
Agreement;
(viii) the Buyers shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit F attached hereto,
addressed to the Buyers and its lender and dated as of the Closing Date; and
(ix) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer;
(x) the Seller shall have conveyed to Buyers the Acquired Assets as
described in Section 1.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Buyers may elect to (i) terminate this Agreement without
liability to the Seller, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Buyers elect to terminate this
Agreement or consummate the transactions described herein,
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if such failure shall be as a result of a breach of any provision of this
Agreement by the Seller (including, without limitation, any breach arising as a
result of the failure of the Seller to execute and/or deliver any item described
in this Section 5(a), the Buyers may seek appropriate remedies for any and all
damages, costs and expenses incurred by the Buyers by reason of such breach
including, without limitation, indemnification pursuant to Section 7, below.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of their
covenants hereunder in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the Parties if such
transactions are consummated, or (B) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Seller a certificate (without
qualification as to knowledge or materiality or otherwise except as specifically
provided in a particular representation in Section 3 above) to the effect that
each of the conditions specified above in Section 5(b)(i)-(iii) is satisfied in
all respects and the statements contained in such certificate shall be deemed a
warranty of the Buyers which shall survive the Closing;
(v) the Assignment Application shall have been approved by a Final Order
of the FCC and the Buyers shall have received all governmental approvals
required to transfer all other authorizations, consents, and approvals of
governments and governmental agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement; and
(viii) all actions to be taken by the Buyers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller; and
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(ix) the Buyers shall have paid the Purchase Price as described in Section
1.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Seller may elect to (i) terminate this Agreement without
liability to the Buyers, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Seller elects to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Buyers
(including, without limitation, any breach arising as a result of the failure of
the Buyers to execute and/or deliver any item described in this Section 5(a),
the Seller may seek appropriate remedies for any and all damages, costs and
expenses incurred by the Seller by reason of such breach including, without
limitation, indemnification pursuant to Section 7, below.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Station, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
(c) Adjustments. Subject to and consistent with the LMA Agreement,
operation of the Station and the income and expenses attributable thereto up
through the close of business on the day before the Closing Date shall be for
the account of the Seller and thereafter for the account of the Buyers. Such
items as employee salaries, vacation, sick day and personal time accruals, and
fringe benefits, power and utilities charges, insurance, real and personal
property taxes, prepaid expenses, deposits, music license fees, and rents and
payments pertaining to the Assumed Contracts (including any contracts for the
sale of time for cash, trade or barter so assigned) shall be prorated between
the Seller and the Buyers as of the Closing Date in accordance with the
foregoing principle. In addition, all commissions payable with respect to the
accounts receivable of the Seller (whether due before or after Closing) shall be
solely for
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the account and responsibility of the Seller. Contractual arrangements that do
not reflect an equal rate of compensation to a Station over the term of the
agreement shall be equitably adjusted as of the Closing Date. The prorations and
adjustments hereunder shall be made and paid insofar as feasible on the Closing
Date, with a final settlement sixty (60) days after the Closing Date. In the
event of any disputes between the Parties as to such adjustments, the amounts
not in dispute shall nonetheless be paid at such time and such disputes shall be
determined by an independent accounting firm mutually acceptable to both parties
and the fees and expenses of such accounting firm shall be paid one-half (1/2)
by the Seller and one-half (1/2) by the Buyer.
(d) Collection of Accounts Receivable. Subject to and consistent with the
LMA Agreement, at the Closing, the Seller will turn over to the Buyers, for
collection only, the accounts receivable of the Station owing to the Seller as
of the close of business on the Closing Date. A schedule of such accounts
receivable will be delivered by the Seller to the Buyers on the Closing Date or
as soon thereafter as possible. The Buyers agree to use commercially reasonable
efforts in the ordinary course of business (but without responsibility to
institute legal or collection proceedings) to collect such accounts receivable
during the 120-day period following the Closing Date, and will remit all
payments received on such accounts during each calendar month during this
120-day period together with an accounting of all payments received within such
period. The Buyers shall have the sole right to collect such accounts receivable
during such one hundred twenty (120) day period. In the event the Buyers receive
monies during the 120-day period following the Closing Date from an advertiser
who, after the Closing Date, is advertising over any of the Station, and that
advertiser was included among the accounts receivable as of the Closing Date,
the Buyer shall apply said monies to the oldest outstanding balance due on the
particular account, except in the case of a "disputed" account receivable. For
purposes of this Section 6(d), a "disputed" account receivable means one which
the account debtor refuses to pay because he asserts that the money is not owed
or the amount is incorrect. In the case of such a disputed account, the Buyers
shall immediately return the account to the Seller prior to expiration of the
120-day period following the Closing Date. If the Buyers return a disputed
account to the Seller, the Buyers shall have no further responsibility for its
collection and may accept payment from the account debtor for advertising
carried on any of the Station after the Closing Date. At the end of the 120-day
period following the Closing Date, the Buyers will turn back to the Seller all
of the accounts receivable of the Station as of the Closing Date owing to the
Seller which have not yet been collected, and the Buyers will thereafter have no
further responsibility with respect to the collection of such receivables.
During the 120-day period following the Closing Date, the Buyers shall afford
the Seller reasonable access to the accounts receivable "aging list." The Seller
acknowledges and agrees that the Buyers are acting as its collection agent
hereunder for the sole benefit of the Seller and that Buyers have accepted such
responsibility for the accommodation of the Seller. The Buyer shall not have any
duty to inquire as to the form, manner of execution or validity of any item,
document, instrument or notice deposited, received or delivered in connection
with such collection efforts, nor shall the Buyers have any duty to inquire as
to the identity, authority or rights of the persons who executed the same. The
Seller shall indemnify Buyers and hold them harmless from and against any
judgments (including legal fees, expenses, costs, or
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liabilities respecting such judgments) which the Buyers may incur or sustain as
a result of or by reason of such collection efforts.
(e) Severance Obligations. In the event an offer of employment is extended
by the Buyers to and accepted by an employee of the Seller pursuant to Section
4(c) and such subsequent employment by the Buyers is terminated within sixty
(60) days from the Closing Date, the Seller shall be responsible for, and shall
pay to such accepting employee, all severance benefits (if any, pursuant to the
Seller's practices as in effect on the Closing Date) that may be due and owing
such employee by reason of his or her employment with either the Seller or the
Buyers
(f) Consents. In the event any of the Assumed Contracts are not assignable
or any consent to such assignment is not obtained on or prior to the Closing
Date, and the Buyers elect to consummate the transactions contemplated herein
despite such failure or inability to obtain such consent, the Seller shall
continue to use commercially reasonable efforts to obtain any such assignment or
consent after the Closing Date. Until such time as such assignment or approval
has been obtained, the Seller will cooperate with Buyers in any lawful and
economically feasible arrangement to provide that the Buyer shall receive the
Seller's interest in the benefits under any such Assumed Contract, including
performance by the Seller as agent, if economically feasible; provided, however,
that the Buyers shall undertake to pay or satisfy the corresponding liabilities
for the enjoyment of such benefit to the extent that Buyers would have been
responsible therefor if such consent or assignment had been obtained.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g),
2(r) and 2(t) hereof or relating to the Seller's title to the Acquired Assets)
shall survive the Closing and continue in full force and effect for a period
until 90 days after the applicable statute of limitations has expired with
respect to any claim by the Buyers based on a claim or action by a third party
and for a period of three (3) years following Closing with respect to any claim
by the Buyers not based on a claim or action by a third party. All of the other
representations and warranties (including the representations and warranties of
the Seller contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g) 2(r) and 2(t)
hereof or relating to the Seller's title to the Acquired Assets) and all
covenants of the Buyers and the Seller contained in this Agreement shall survive
the Closing and continue in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a breach of a
warranty or covenant prior to the Closing Date, the Seller agrees to indemnify
the Buyers from and against the entirety of any Adverse Consequences the Buyers
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by:
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(i) any misrepresentation or breach of any of the Seller's representations
or warranties, and covenants contained in this Agreement or in any Ancillary
Agreement executed and/or delivered by the Seller (so long as the Buyers make a
written claim for indemnification within the applicable survival period);
(ii) any breach or nonfulfillment of any agreement or covenant of the
Seller contained herein or in any Ancillary Agreement;
(iii) any Liability of the Seller which is not an Assumed Liability;
and/or
(iv) any Liability of the Buyers arising by operation of law (including
under any bulk transfer law of any jurisdiction or under any common law doctrine
of defacto merger or successor liability) which is not an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agrees to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that not withstanding the provision in
Section 7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for a breach of any provision of this Agreement.
(e) Liquidated Damages. The Buyers and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
lieu of indemnification pursuant to Section 7(b) or 7(c), the non defaulting
Party shall be entitled to receive from the defaulting Party for such default
the sum of Thirty-Three Thousand Seven Hundred Fifty Dollars ($33,750.00) as
liquidated damages
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without the need for proof of damages, subject only to successfully proving in a
court of competent jurisdiction that the other Party has materially breached
this Agreement and that the transactions contemplated thereby have not occurred;
provided however, that the Buyers shall retain the option to receive, pursuant
to Section 7(d), and in lieu of receiving the liquidated damages provided in
this Section 7(e), the remedy of specific performance with respect to a breach
of this Agreement prior to the Closing. The Buyers and the Seller agree to pay
said sum of liquidated damages within ten (10) days of the date that the
non-defaulting party obtains such a judgment, and agree that in the event this
Agreement is terminated by the Seller prior to the Closing Date as a result of a
breach or default by the Buyers under this Agreement, the Seller shall proceed
against the Earnest Money as satisfaction of liquidated damages owed by Buyers.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnifica tion against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets that are used or useful in
the operation of the Station, wherever located, including but not limited to all
of its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and
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easements, rights-of-way, and other appurtenances thereto); (b) tangible
personal property (such as fixed assets, computers, data processing equipment,
electrical devices, monitoring equipment, test equipment, switching, terminal
and studio equipment, transmitters, transformers, receivers, broadcast
facilities, furniture, furnishings, inventories of compact disks, records, tapes
and other supplies, and all assignable warranties with respect thereto; (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions; (d) rights under orders and agreements
(including those Barter Agreements and Advertising Contracts identified on the
Disclosure Schedule) now existing or entered into in the Ordinary Course of
Business for the sale of advertising time on the Station; (e) Assumed Contracts,
indentures, Security Interests, guaranties, other similar arrangements, and
rights thereunder; (f) call letters of the Station, jingles, logos, slogans, and
business goodwill of the Station; (g) claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery (including rights under
policies of insurance), rights of set off, and rights of recoupment; (h)
Licenses and similar rights obtained from governments and governmental agencies;
and (i) FCC logs and records and all other books, records, ledgers, logs, files,
documents, correspondence, advertiser lists, all other lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, program production materials, studies,
reports, and other printed or written materials; and (j) goodwill of the
Station.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts listed on Exhibit G attached hereto.
"Assumed Liabilities" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
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<PAGE>
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section l(d) above.
"Closing Date" has the meaning set forth in Section l(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section l(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section l(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" has the meaning set forth in Section 2(q), above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Satterfield & Perry, Inc.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
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"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Station.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (b) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Leases" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites, as described in Section 2(i) of
the Disclosure Schedule.
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"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Noncompetition Agreement" means the Noncompetition Agreement with Roger
Anderson in the form attached hereto as Exhibit D.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section l(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller; and (iv) Cash.
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"Retained Liabilities" means any other obligations or Liabilities of the
Seller not assumed by Buyers, including but not limited to: (i) any Liability
relating to the ownership or operation of the Station prior to the Closing; (ii)
any Liability of the Seller for income, transfer, sales, use, and other Taxes
arising in connection with the consummation contemplated hereby; (iii) any
Liability of the Seller for costs and expenses incurred in connection with this
Agreement or the consummation of the transactions contemplated hereby (except as
set forth in Section 4(i) relating to Surveys, title commitments and
environmental audits and Section 4(b) with regard to the Assignment Application;
or (iv) any Liability or obligation of the Seller under this Agreement (or under
any side agreement between the Seller on the one hand and the Buyers on the
other hand entered into on or after the date of this Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
KARX-FM, licensed by the FCC to operate in Claude, Texas.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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9. Termination.
(a) Termination of Agreement. Seller and Buyers may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing in the event the Seller is in
material breach of any representation, warranty, or covenant contained in this
Agreement; provided, however, that (if such breach is capable of being cured)
such breach remains uncured for twenty (20) days after notice of breach is
received by the Seller from the Buyers;
(iii) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing in the event the Buyers are in
material breach of any representation, warranty, or covenant contained in this
Agreement; provided, however that (if such breach is capable being cured), such
breach remains uncured for twenty (20) days after notice of breach is received
by the Buyers from the Seller;
(iv) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(a) hereof
(unless the failure results primarily from the Buyers themselves breaching any
representation, warranty, or covenant contained in this Agreement);
(v) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(b) hereof
(unless the failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this Agreement); or
(vi) the Buyers or the Seller may terminate this Agreement if the
Assignment Application is set for hearing or is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in Section 7(a) hereof and the Post-Closing Agreement
with respect to Seller's owners.
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(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the filing of the Assignment Application without the prior written approval
of the other Party; provided, however, that any Party may make any public
disclosure it believes in good faith is required by law or regulation (in which
case the disclosing Party will advise the other Party prior to making the
disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that (i) the Buyers may assign all of its right,
title and interest in, to and under this Agreement to one or more Affiliates,
who shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Seller the Purchase Price therefor or to any successor to the Buyers in
the event of any sale, merger or consolidation of the Buyers, and (ii) Buyers
may assign their indemnification claims and their rights under the warranties
and representations of the Seller to the financial institution(s) providing
financing to the Buyers in connection with this transaction.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
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<PAGE>
If to the Seller:
West Jewell Management, Inc.
c/o Roger P. Anderson
P.O. Box 27258
Lakewood, CO 80227
.
Copy to:
Leonard Joyce, Esq.
5335 Wisconsin Avenue, NW
Suite 400
Washington, D.C. 20015
fax: (202) 686-8282
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
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<PAGE>
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Texas.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(1) Expenses. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Application and as set forth in
Section 4(o) with respect to Surveys, title commitments and environmental
audits. The Seller will pay all income taxes. The Seller and the Buyers will
each pay one-half (1/2) of any transfer or sales taxes and other recording or
similar fees necessary to vest title to each of the Acquired Assets in the
Buyers.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
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(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Amarillo, Texas in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(h) above. Nothing in this Section 10(o), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:__________________________
(printed)
_____________________________
Title:_______________________
CUMULUS LICENSING CORPORATION
By:__________________________
(printed)
_____________________________
Title:_______________________
WEST JEWELL MANAGEMENT, INC.
By:__________________________
(printed)
_____________________________
Title:_______________________
<PAGE>
SCHEDULE A
Purchase Price. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the amount of Six Hundred Seventy-Five Thousand Dollars
($675,000.00) (the "Purchase Price"), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Thirty-Three Thousand Seven Hundred Fifty Dollars
($33,750) (the "Earnest Money Deposit") in the form of an irrevocable letter of
credit from NationsBank; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Six Hundred Sixty Five Thousand Dollars ($665,000.00), with
adjustments as provided in this Agreement; and
(iii) on the Closing Date, the Buyer shall pay to the Seller, on
behalf of all parties to the Postclosing Agreement, the amount of Ten Thousand
Dollars ($10,000).
The Earnest Money Deposit referenced in this Section l(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement") and shall be
disbursed to Seller or returned to Buyer as provided in the Earnest Money Escrow
Agreement.
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of October 30, 1997, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing"), and KIKR Inc.
("the Seller"). Broadcasting and Licensing are referred to collectively herein
as the "Buyers." The Buyers and the Seller are referred to collectively herein
as the "Parties." Capitalized terms used in this Agreement are defined in
Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
station KIKR-FM, licensed to Asbury, Iowa (the "Station") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Licensing agrees to purchase from Seller, and
Seller agrees to sell, transfer, convey, and deliver to Licensing, all of the
FCC Licenses listed in Section 2(l) of the Disclosure Schedule. In addition,
Broadcasting agrees to purchase from Seller, and Seller agrees to sell,
transfer, convey, and deliver to Broadcasting, all of the Acquired Assets other
than the FCC Licenses. Both such sales shall take place at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities and the
Seller agrees to pay and discharge all Liabilities and obligations of the Seller
other than the Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the Purchase Price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
(the "Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Reinhart, Boerner,
Van Deuren, Norris, and Rieselbach, s.c., commencing at 9:00 a.m. local time on
the date mutually agreed not earlier than the fifth business day or later than
the tenth business day after the FCC approval of the Assignment
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Application becomes a Final Order, by which date all other conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
will have been satisfied or such other date and location as the Parties may
mutually determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in Section 5(a) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including Lease and other Assumed Contract assignments
and Intellectual Property transfer documents), bills of sale and warranty deeds
in the forms attached hereto as Exhibits B-1 through B-2, (B) such affidavits,
transfer tax returns, memorandums of lease, and other additional documents as
may be required by the terms of the title insurance commitments described in
Section 4(o) hereof, as necessary to furnish title insurance as required by such
section or as may be necessary to convey title to the Real Estate to the Buyers
in the condition required herein or provided public notice of existence of the
Leases, and (C) such other instruments of sale, transfer, conveyance, and
assignment as the Buyers and their counsel reasonably may request; (iv) the
Buyers will execute, acknowledge (if appropriate), and deliver to the Seller (A)
an assumption in the form attached hereto as Exhibit C and (B) such other
instruments of assumption as the Seller and its counsel reasonably may request;
and (v) the Buyers will deliver to the Seller the consideration specified in
Section l(c) above.
(f) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit D.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Organization of the Seller. Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation. Seller does not have any Subsidiaries. The Seller has the power
and authority to own or lease its properties and to carry on all business
activities now conducted by it. The shareholders of the Seller are Philip Fisher
and Janice Fisher.
(b) Authorization of Transaction. The Seller has full power and authority
(including full partnership power and authority) to execute and deliver this
Agreement and all agreements and instruments to be executed and delivered by
such Party pursuant to this Agreement (collectively, the "Ancillary Agreements")
and to perform its obligations hereunder and thereunder. Without limiting the
generality of the foregoing, the Board of Directors of Seller has duly
authorized the execution,
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delivery, and performance of this Agreement and the Ancillary Agreements by
Seller. This Agreement and the Ancillary Agreements constitute the valid and
legally binding obligation of the Seller, enforceable in accordance with their
respective terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the charter or bylaws of the Seller; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other agreement, arrangement to which the Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
(d) Title to Acquired Assets. Other than the Security Interests set forth
on Section 2(d) of the Disclosure Schedule (which shall be released at or before
the Closing) the Seller has good and marketable title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1995 and December 31,
1996, for the Seller; and (ii) unaudited balance sheets and statements of
income, as of and for each month during 1996 and each month ending August 31 in
1997 for the Seller. The Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered thereby,
are correct and complete, fairly represent the financial condition of the Seller
on such dates and the results of operations for the periods designated therein,
and are consistent with the books and records of the Seller (which books and
records are correct and complete).
(f) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(f) of the Disclosure Schedule, there has not been any
adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the Seller with
respect to the operation of the Station. Without limiting the generality of the
foregoing and with respect to the operation of the Station since that date:
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(i) the Seller has not sold, leased, transferred, or assigned any of its
material assets, tangible or intangible;
(ii) other than this Agreement, the Seller has not entered into any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
involving more than $5,000 to which the Seller is a party or by which it or any
of its assets are bound;
(iv) no Security Interest has been imposed upon any of Seller's assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of related
capital expenditures) outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of any other person (or series of
related capital investments, loans, and acquisitions);
(vii) the Seller has not created, incurred, assumed, or guaranteed any
indebtedness (including capitalized lease obligations) outside the Ordinary
Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal practice
in the Ordinary Course of Business) the payment of accounts payable and other
Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the Ordinary
Course of Business;
(x) the Seller has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to any of its property or any action
adversely affecting the FCC Licenses;
(xii) the Seller has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees giving rise to
any claim or right on its part against the person or on the part of the person
against it;
(xiii) the Seller has not entered into any employment contract, consulting
contract or severance agreement or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;
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(xiv) the Seller has not granted any increase (outside routine salary and
wage increases in the Ordinary Course of Business) in the rate of compensation,
commissions, bonus or other remuneration payable, or granted any severance or
termination pay to, any of its directors, officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing, (C)
incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other plan,
contract, or commitment for any of its directors, officers, and employees, or
modified or terminated any existing such plan, contract, or commitment;
(xvi) the Seller has not made any other change in employment terms for any
of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or other
capital contribution;
(xviii) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
the Seller;
(xix) the Seller has not altered its credit and collection policies or its
accounting policies;
(xx) the Seller has not materially altered the programming, format or call
letters of the Station, or its promotional and marketing activities;
(xxi) the Seller has not applied to the FCC for any modification of the
FCC Licenses or failed to take any action necessary to preserve the FCC Licenses
and has operated the Station in compliance therewith and with all FCC rules and
regulations; or
(xxii) the Seller has not committed to any of the foregoing.
(g) Tax Matters. The Seller has timely and properly filed all Tax Returns
that it was required to file with respect to the Seller's operations. All such
Tax Returns were correct and complete in all respects and properly reflect the
tax liability of the Seller. The Seller has not requested any extension of time
within which to file returns in respect of any Taxes with respect to the
Seller's operations. No Tax deficiencies have been proposed or assessed against
the Seller. There are no pending, or to the Seller's knowledge, threatened
audits, investigations, or claims for or relating to any liability in respect of
Taxes with respect to the Seller's operations. All Taxes owed by the Seller with
respect to its operations (whether or not shown on any Tax Return) have been
paid. The Seller has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. No claim has ever been made by any
authority in any jurisdiction where the Seller does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no
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Security Interests on any of the assets of the Seller that arose in connection
with any failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Station.
The Seller owns or leases all tangible assets necessary for the conduct of the
operation and business of the Station as presently conducted and as presently
proposed to be conducted and all leased assets are specifically identified as
such in Section 2(h) of the Disclosure Schedule. Each such tangible asset is
free from defects (patent and latent), has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it presently
is used. No such tangible asset is in need of replacement. Any leased personal
property included within the tangible personal property is in the condition
required of such property by the terms of the lease applicable thereto during
the term of the lease and upon the expiration thereof. All of the equipment
utilized in the operation of the Station is in compliance with all FCC and FAA
requirements and is sufficient to satisfy the intended needs of the normal
customary operations of the Station at all times of the year and all such
equipment is in compliance with all applicable laws.
(i) Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Seller has delivered to the Buyer correct and complete copies of
the Leases. With respect to the Real Estate:
(i) the Seller has good and marketable title to all of the Owned Real
Estate free and clear of all liens, charges, mortgages, security interests,
easements, restrictions or other encumbrances of any nature whatsoever except
real estate taxes for the year of Closing and municipal and zoning ordinances
and recorded utility easements which do not impair the current use, occupancy or
value or the marketability of title of the property and which are disclosed in
Section 2(i) of the Disclosure Schedule (collectively, the "Permitted Real
Estate Encumbrances");
(ii) the Leases are and, following the Closing will continue to be, legal,
valid, binding, enforceable, and in full force and effect;
(iii) no party to any Lease is in breach or default (or has repudiated any
provision thereof), and no event has occurred which, with notice or lapse of
time, would constitute a breach or default thereunder or permit termination,
modification, or acceleration thereunder;
(iv) there are no disputes, oral agreements, or forbearance programs in
effect as to any Lease;
(v) none of the Owned Real Estate and to the Seller's Knowledge, none of
the properties subject to the Leases is subject to any lease (other than
Leases), option to purchase or rights of first refusal;
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(vi) except for Permitted Real Estate Encumbrances, there are no (i)
actual or, to the Seller's Knowledge, proposed special assessments with respect
to any of the Real Estate; (ii) pending or, to the Seller's Knowledge,
threatened condemnation proceedings with respect to any of the Real Estate;
(iii) pending or, to the Seller's Knowledge, threatened litigation or
administrative actions with respect to any of the Real Estate; (iv) mechanic's
or materialmens' liens with respect to the Owned Real Estate; (v) structural or
mechanical defects in any of the buildings or improvements located in the Real
Estate; (vi) planned or commenced improvements which will result in an
assessment or otherwise affect the Real Estate; (vii) governmental agency or
court orders requiring the repair, alteration or correction of any existing
condition with respect to the Real Estate or any portion thereof; or (viii) any
pending or, to the Seller's Knowledge, threatened changed in any zoning laws or
ordinances which may affect any of the Real Estate or Seller's use thereof;
(vii) all buildings and improvements on the Real estate are in good
operating condition and repair, normal wear and tear excepted;
(viii) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the Leases or its rights
thereunder;
(ix) to the Seller's Knowledge, all facilities on the Real Estate have
received all approvals of governmental authorities (including licenses, permits
and zoning approvals) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws, rules, and
regulations;
(x) all facilities on the Real Estate are supplied with utilities and
other services necessary for the operation of said facilities; and
(viii) to the Seller's Knowledge, the owner of each leased facility has
good and marketable title to the underlying parcel of real property, free and
clear of any Security Interest, easement, covenant, or other restriction, except
for Permitted Real Estate Encumbrances and Seller's leasehold interest in each
Lease has priority over any other interest except for the fee interest therein
and Permitted Real Estate Encumbrances;
(j) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for or currently used in the operation of the business of the
Seller as presently conducted and as presently proposed to be conducted. Each
item of Intellectual Property owned or used by the Seller immediately prior to
the Closing hereunder will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has taken all necessary or desirable action to protect each item of
Intellectual Property that it owns or uses. With respect to such Intellectual
Property:
(i) The Seller has not interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, claim, or
notice alleging any such interference, infringement,
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misappropriation, or violation. To the Knowledge of the Seller, no third party
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of the Seller.
(ii) Section 2(j) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller with
respect to any of its Intellectual Property and the call letters (current and
past) of the Station, identifies each pending patent, trademark or copyright
application for registration which the Seller has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which the Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). The Seller has
delivered to the Buyer correct and complete copies of all such patents,
trademarks or copyright registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. With respect to each item of
Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in and to
the item and all registrations and applications are in full force and
effect;
(B) the item is not subject to any outstanding judgment, order,
decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or entity
for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each item of
Intellectual Property that any third party owns and that the Seller uses
pursuant to license, sublicense, agreement, or permission including, but not
limited to the call letters of the Station. The Seller has supplied the Buyer
with correct and complete copies of all such licenses, sublicenses, agreements,
and permissions (as amended to date). With respect to each such item of used
Intellectual Property:
(A) the license, sublicense, agreement, or permission covering the
item is, and following the Closing will continue to be on identical terms,
legal, valid, binding, enforceable, and in full force and effect;
(B) no party to the license, sublicense, agreement, or permission is
in breach or default (or has repudiated any provision thereof), and no
event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
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(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and correct
with respect to the underlying license;
(D) the underlying item of Intellectual Property is not subject to
any outstanding judgment, order, decree, stipulation, injunction, or
charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or entity for
or against any interference, infringement, misappropriation, or other
conflict with respect to the underlying item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
(iv) The Seller has no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or other third parties
have developed which reasonably could be expected to supersede or make obsolete
any product or process of the Seller.
(k) Contracts. Section 2(k) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time which are listed in Section 2(s) of the
Disclosure Schedule) to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under which
it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
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(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, compensation
agreement, employment agreement, commission agreement, or severance
agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station;
(viii) any written arrangement concerning a guaranty by the Seller
of the obligations of any other party; or
(ix) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement listed in Section 2(k) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect; (B) the written arrangement
will continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(k) of the Disclosure Schedule under the terms
of this Section 2(k). Except for the Assumed Contracts, the Buyer shall not have
any Liability or obligations for or in respect of any of the contracts set forth
in Section 2(k) of the Disclosure Schedule or any other contracts or agreements
of the Seller.
(l) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates of
compliance, and consents of governmental bodies, including, without limitation,
the FCC Licenses, used or useful in the operation of the Station as they are now
being operated are (A) in full force and effect, (B) unimpaired by any acts or
omissions of the Seller or the Seller's employees or agents, (C) free and clear
of any restrictions which might limit the full operation of the Station, and (D)
detailed in Section 2(1) of the Disclosure Schedule. With respect to the
licenses, permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(1) of the Disclosure
Schedule also sets forth, without limitation, the date of the last renewal, the
expiration date thereof, and any conditions or contingencies related thereto.
Except as set forth in Section 2(1) of the Disclosure Schedule, no condition
exists or event has occurred that permits, or after notice or lapse of time, or
both, would permit, the
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revocation or termination of any such license, permit, consent, franchise, or
authorization (other than pursuant to their express expiration date) or the
imposition of any material restriction or limitation upon the operation of the
Station as now conducted. Except as set forth in Section 2(1) of the Disclosure
Schedule, the Seller is not aware of any reason why the FCC licenses might not
be renewed in the ordinary course or revoked.
(ii) The Station is in compliance with the FCC's policy on exposure to
radio frequency radiation. No renewal of any FCC License would constitute a
major environmental action under the FCC's rules or policies. Access to the
Station' transmission facilities is restricted in accordance with the policies
of the FCC.
(iii) Except as set forth in Section 2(1) of the Disclosure Schedule, to
the Seller's Knowledge, the Seller is not the subject of any FCC or other
governmental investigation or any notice of violation or order, or any material
complaint, objection, petition to deny, or opposition issued by or filed with
the FCC or any other governmental authority in connection with the operation of
or authorization for the Station, and there are no proceedings (other than rule
making proceedings of general applicability) before the FCC or any other
governmental authority that could adversely affect any of the FCC Licenses or
the authorizations listed in Section 2(1) of the Disclosure Schedule.
(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Station all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(v) The Seller is not aware of any information concerning the Station that
could cause the FCC or any other regulatory authority not to issue to the Buyer
all regulatory certificates and approvals necessary for the consummation of the
transactions contemplated hereunder or the Buyer's operation and/or ownership of
the Station.
(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
(iii) the policy number and the period of coverage;
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(iv) the scope (including an indication of whether the coverage was on a
claims made, occurrence, or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms through the Closing Date.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(n) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Station of each employee of the
Seller. Section 2(o) of the Disclosure Schedule also sets forth a list of all
employee handbooks and/or manuals relating to the employees of the Seller, true
and correct copies of which have been delivered to the Buyer. To the Knowledge
of the Seller, no key employee or group of employees has any plans to terminate
employment with the Seller. The Seller is not a party to or bound by any
understanding (whether written or oral), agreement or contract with any union,
labor organization, employee group or other entity or individual which affects
the employment of employees of the Seller including, but not limited to any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. The
Seller has no Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Seller. The Seller has not been subject to a strike, slow down or other
work stoppage during the five (5) year period immediately preceding the date
hereof and, to the Seller's Knowledge, there are no strikes, slow downs or work
stoppages threatened against the Seller. To the Seller's Knowledge, it has not
committed any unfair labor practice. There is no basis for any claim by any past
or present employee of the Seller that such employee was subject to wrongful
discharge or any employment discrimination by the Seller or its management
arising out of or relating to the employee's race, sex, age, religion, national
origin, ethnicity, handicap or any other protected characteristic under
applicable law. No proceedings are pending before any court, governmental agency
or
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instrumentality or arbitrator relating to labor matters, and there is no pending
investigation by any governmental agency or, to the Knowledge of the Seller,
threatened claim by any such agency or other person relating to labor or
employment matters.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists all
Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Seller does not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Seller. There are no pending or, to the Knowledge of the Seller, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
(q) Environment, Health, and Safety.
(i) With respect to the operation of the Station and the Real
Estate, the Seller is, and at all times in the past has been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has ever been filed or commenced
or, to the Seller's Knowledge, is threatened, against the Seller alleging
any failure to comply with any such Environmental Law or laws concerning
employee health and safety.
(ii) With respect to the operation of the Station and the Real
Estate, the Seller has no Liability (and to Seller's Knowledge there is no
Basis related to the past or present operations of the Seller or its
predecessors for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Federal Water Pollution Control
Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of
1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899, or
the Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), or any other law of any federal, state, local, or foreign
government or agency thereof (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, or pollution or
protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
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pollutants, contaminants, or chemical, industrial, hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes ("Environmental Laws");
(iii) The Seller has no Liability (and to Seller's Knowledge there
is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Occupational Safety and Health
Act, as amended, or any other law (or rule or regulation thereunder) of
any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal
injury to any employee.
(iv) The Seller has obtained and at all times has been in compliance
in all material respects with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and
has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental Laws or law of any
federal, state, or local or foreign government relating to worker health
and safety.
(v) To Seller's Knowledge, all properties and equipment used in the
business of the Seller have been free of asbestos, PCB's, methylene
chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(vi) To Seller's Knowledge, no pollutant, contaminant, or chemical,
industrial, hazardous, or toxic material or waste ever has been buried,
stored, spilled, leaked, discharged, emitted, or released on any of the
Real Estate.
(vii) To Seller's Knowledge, none of the Acquired Assets are
required to be upgraded, modified or replaced to be in compliance with
Environmental Laws.
(viii) Section 2(q) of the Disclosure Schedule contains a copy of
all environmental claims, reports, studies, compliance actions or the like
of the Seller or which are available to the Seller with respect to any of
the Real Estate or any of the Acquired Assets.
(ix) To Seller's Knowledge, no septic systems or wells exist on, in
or under any of the Real Estate. No above ground or underground storage
tanks have ever been located at, on or under the Real Estate. None of the
Real Estate is contaminated by hazardous or toxic substances or waste, as
defined under Environmental Laws, originating from off-site sources.
(r) Legal Compliance.
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(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, local and
foreign governments (and all agencies thereof, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced or, to the Seller's Knowledge, is threatened, against the
Seller alleging any failure to comply with any such law or regulation, including
those relating to the employment of labor, employee civil rights, and equal
employment opportunities and relating to antitrust matters.
(ii) The Seller has filed in a timely manner all reports, documents, and
other materials it was required to file (and the information contained therein
was correct and complete in all material respects) under all applicable laws
(including rules and regulations thereunder) of federal state, local and foreign
governments (and all agencies thereof). To the Seller's Knowledge, it has
possession of all records and documents it was required to retain under all
applicable laws (including rules and regulations thereunder).
(s) Advertising Contracts. Section 2(s) of the Disclosure Schedule lists
all arrangements for the sale of air time or advertising on the Station in
excess of $1000, and the amount to be paid to the Seller therefor. The Seller
has no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Seller to cease doing business or to reduce in any material respect the
business transacted with the Seller or to terminate or modify any agreements
with the Seller (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
(t) Brokers' Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(u) Undisclosed Commitments or Liabilities. There are no commitments,
liabilities or obligations relating to any of the Station, whether accrued,
absolute, contingent or otherwise including, without limitation, guaranties by
the Seller of the liabilities of third parties, for which specific and adequate
provisions have not been made on the Financial Statements except those incurred
in or as a result of the Ordinary Course of Business since January 1, 1997 (none
of which Ordinary Course of Business obligations have had or will have a
material adverse effect on any Station).
(v) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer. Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
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arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
(b) Authorization of Transaction. Buyers have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
their obligations hereunder and thereunder. This Agreement and the Ancillary
Agreements constitute the valid and legally binding obligation of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
(d) Brokers' Fees. The Buyers have no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
(e) Assignment Application. Other than as described in Section 3(e) of the
Disclosure Schedule, Buyers are unaware of any facts that could cause the FCC or
any other regulatory authority not to issue to the Buyers all regulatory
certificates and approvals necessary for the consummation of the transactions
contemplated hereunder.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the
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transactions contemplated by this Agreement (including satisfying the closing
conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use the commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have material adverse effect upon the Station or
upon any Affiliate or impose significant costs on such party). If the FCC
imposes any condition on either party to the Assignment Application, such party
shall use commercially reasonable efforts to comply with such condition,
provided, that neither party shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Station or any
Affiliate. The Seller and the Buyers shall jointly oppose any requests for
reconsideration or judicial review of FCC approval of the Assignment Application
and shall jointly request from the FCC a single extension of the effective
period of FCC approval of the Assignment Application if the Closing shall not
have occurred prior to the expiration of the original effective period of the
FCC Consent. Nothing in this Section 4(b) shall be construed to limit either
party's right to terminate this Agreement pursuant to Section 9 of this
Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyers may, at their option, extend offers of employment to all or any of
the Seller's employees effective on the Closing Date. From and after the
execution of this Agreement, the Seller shall use its best efforts to assist
Buyers in retaining those employees of the Station which the Buyers wish to hire
in connection with the operation of the Station by the Buyers subsequent to the
Closing, and the Seller will not take any action to preclude or discourage any
of the Seller's employees from accepting any offer of employment extended by the
Buyers.
(d) Notices and Consents. The Seller will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request in connection with the matters pertaining to the Seller
disclosed or required to be disclosed in the Disclosure Schedule (including,
without limitation, consents to assignment of the Leases and other Assumed
Contracts). Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
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(e) Operation of Business. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 2(f) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
(g) Operating Statements. The Seller shall deliver to the Buyers, for the
Buyers' informational purposes only, monthly unaudited statements of operating
revenues and operating expenses of the Station within twenty (20) days after
each such statement is prepared by or for the Seller.
(h) Contracts. The Seller will not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on Section 2(k)
of the Disclosure Schedule in any material respect. The Seller will not without
prior written consent of the Buyers enter into any new contracts respecting the
Station or their properties, except (i) contracts for the sale of time on the
Station for cash, goods or services which are entered into in the Ordinary
Course of Business and comply with Sections 4(f) and 4(j) hereof, (ii) contracts
entered into in the Ordinary Course of Business which are cancelable on not more
than thirty-one (31) days' notice without penalty or premium, and (iii)
contracts entered into in the Ordinary Course of Business each of which does not
involve more than Five Thousand Dollars ($5,000) or all of which do not involve
more than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Station. The Seller shall operate the Station in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Station.
(j) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Station and with respect to collecting accounts receivable arising from
such extension of credit.
(k) Preservation of Business. The Seller will keep the business and
properties affected by this transaction substantially intact, including its
present operations, physical facilities, working conditions, relationships with
lessors, licensors, advertisers, suppliers, customers, and
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employees, all of the Confidential Information, call letters and trade secrets
of the Station, and the FCC Licenses.
(l) Full Access and Consultation. The Seller will permit representatives
of the Buyers to have full access upon prior notice between 8 a.m. and 7 p.m.
daily, and in a manner so as not to interfere with the normal business
operations of the Station, to all premises, properties, books, records,
contracts, Tax records, and documents of or pertaining to the Seller for the
purpose of permitting the Buyer to, among other things: (a) conduct its due
diligence review, (b) review financial statements of the Seller, (c) verify the
accuracy of representations and warranties of the Seller contained in this
Agreement, and (d) prepare for the consummation of the transactions contemplated
by this Agreement. The Seller will consult with the Buyers' management with a
view to informing Buyer's management as to the operations, management and
business of the Station.
(m) Notice of Developments. The Seller will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller or the Station. Each Party will give prompt written
notice to the other of any material development affecting the ability of the
Parties to consummate the transactions contemplated by this Agreement. No
disclosure by any Party pursuant to this Section 4(m), however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. The Seller
will obtain with respect to each parcel of Real Estate subject to the Leases, a
leasehold owner's policy issued by a title insurer reasonably satisfactory to
the Buyer, in an amount equal to One Hundred Thousand ($100,000) for each parcel
of Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably requests,
(ii) with respect to each parcel of Owned Real Estate, an owner's policy of
title insurance by a title insurer reasonably satisfactory to the Buyer, in an
amount equal to the fair market value of such Real Estate (including all
improvements located thereon), insuring over the standard pre-printed exceptions
and insuring title to the Owned Real Estate to be vested in the Buyers as of the
Closing free and clear of all liens and encumbrances except Permitted Real
Estate Encumbrances, together with
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such endorsements for zoning, contiguity, public access and extended coverage as
the Buyer or its lender reasonably requests, (iii) if Buyer's lender so
requires, a current survey of each parcel of Real Estate certified to the Buyer
and its lender, prepared by a licensed surveyor and conforming to current ALTA
Minimum Detail Requirements for Land Title Surveys, disclosing the location of
all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys") which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iv) with
respect to each parcel of Real Estate, if Buyer's lender so requires, a current
Phase I environmental site assessment from an environmental consultant or
engineer reasonably satisfactory to the Buyers which does not indicate that the
Seller and the Real Estate are not in compliance with any Environmental Law and
which shall not disclose or recommend any action with respect to any condition
to be remediated or investigated or any contamination on the site assessed. The
Buyers and the Seller will pay one-half (1/2) of the costs of the title
policies, and Seller will pay the cost of the Surveys and environmental
assessments should they be required.
(p) Control of Station. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Except to the extent permitted by applicable law,
between the date of this Agreement and the Closing Date, the Buyers and their
employees or agents shall not directly or indirectly control, supervise, or
direct, or attempt to control, supervise, or direct, the operation of the
Station, and such operation shall be the sole responsibility of and in the
control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyer
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will, at Seller's expense, repair or replace such
Acquired Assets to their former condition as soon as possible after loss, damage
or destruction thereof and shall use its best efforts to restore as promptly as
possible transmissions as authorized in the FCC Licenses. The Closing Date shall
be extended (with FCC consent, if necessary) for up to ninety (90) days to
permit such repair or replacement. If repair or replacement cannot be
accomplished within ninety (90) days of the date of the Seller's notice to the
Buyers, and the Buyers determine that the Seller's failure to repair or replace,
alone or in the aggregate with any other then existing factors, would have a
material adverse effect on the operation of the Station:
(a) the Buyers may elect to terminate this Agreement; or
(b) the Buyers may postpone the Closing Date until such time as the
property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within one hundred twenty
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(120) days of the date of the Seller's notice to the Buyers, in which case
either party may terminate this Agreement; or
(c) the Buyers may choose to accept the Acquired Asset in their
"then" condition, together with the Seller's assignment to the Buyers of
all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers of any proceeds under any such
insurance policies, previously received by the Seller with respect thereto
plus an amount equal to the amount of any deductible or self-insurance
maintained by Seller on such Acquired Assets.
In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
(r) Construction Permit for KXGE-FM. Buyers have entered into an agreement
with Communication Properties, Inc. to purchase certain radio properties in the
Dubuque metropolitan area. Subject to the restrictions in that agreement, Buyers
agree to use their best efforts to cause Communication Properties, Inc. to file
an application for a construction permit to construct a new tower for KXGE-FM
(the "Application"). Buyers represent that a site for the relocated facility has
been identified in Kieler, Wisconsin; preliminary engineering work has been
completed, the specifications for the tower have been completed; negotiations
for the purchase of the property have been undertaken; and work on the
application for a construction permit has begun. Best efforts shall include,
without limitation, payment of consideration necessary for the purchase of the
property located in Kieler, Wisconsin.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to those relating to
transmitter and studio leases, and all of the title insurance commitments (and
endorsements), Surveys and environmental site assessments described in Section
4(o) above;
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(iv) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the parties if such
transactions are consummated, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyer to own, operate, or control the Acquired Assets (and no
such judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(v) the Seller shall have delivered to the Buyer a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified above in Sections 5(a)(i) through (iv) is
satisfied in all respects and the statements contained in such certificate shall
be deemed a warranty of the Seller which shall survive the Closing;
(vi) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vii) if reasonably required by Buyers' lender, the Buyers shall have
received from counsel to the Seller an opinion with respect to the matters set
forth in Exhibit F attached hereto, addressed to the Buyers and its lender and
dated as of the Closing Date; and
(viii) the Buyers shall receive the approval of their Investment Committee
for the transaction discussed herein. If, by 6:00 p.m. Central Standard Time on
November 5, 1997, Buyers do not deliver to Seller a written notice terminating
this Agreement in regard to the contingency described in this Section 5(a)
(viii), then the contingency set forth in this Section 5(a) (viii) shall be
deemed waived by Buyers; and
(ix) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Buyers may elect to (i) terminate this Agreement without
liability to the Seller, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Buyers elect to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Seller
(including, without limitation, any breach arising as a result of the failure of
the Seller to execute and/or deliver any item described in this Section 5(a)),
the Buyers may seek appropriate remedies for any and all damages, costs and
expenses incurred by the Buyers by reason of such breach including, without
limitation, indemnification pursuant to Section 7, below.
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(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of their
covenants hereunder in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the Parties if such
transactions are consummated, or (B) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Seller a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified above in Section 5(b)(i)-(iii) is satisfied in
all respects and the statements contained in such certificate shall be deemed a
warranty of the Buyers which shall survive the Closing;
(v) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vi) all actions to be taken by the Buyers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Seller may elect to (i) terminate this Agreement without
liability to the Buyers, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Seller elects to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Buyers
(including, without limitation, any breach arising as a result of the failure of
the Buyers to execute and/or deliver any item described in this Section 5(a),
the Seller may seek appropriate
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remedies for any and all damages, costs and expenses incurred by the Seller by
reason of such breach including, without limitation, indemnification pursuant to
Section 7, below.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Station, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
(c) Adjustments. Operation of the Station and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Buyers as of the Closing
Date in accordance with the foregoing principle. In addition, all commissions
payable with respect to the accounts receivable of the Seller (whether due
before or after Closing) shall be solely for the account and responsibility of
the Seller. Contractual arrangements that do not reflect an equal rate of
compensation to a Station over the term of the agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by an
independent accounting firm mutually acceptable to both parties and the fees and
expenses of such accounting firm shall be paid one-half (1/2) by the Seller and
one-half (1/2) by the Buyer.
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(d) Collection of Accounts Receivable. At the Closing, the Seller will
turn over to the Buyers, for collection only, the accounts receivable of the
Station owing to the Seller as of the close of business on the Closing Date. A
schedule of such accounts receivable will be delivered by the Seller to the
Buyers on the Closing Date or as soon thereafter as possible. The Buyers agree
to use commercially reasonable efforts in the ordinary course of business (but
without responsibility to institute legal or collection proceedings) to collect
such accounts receivable during the 120-day period following the Closing Date,
and will remit all payments received on such accounts during each calendar month
during this 120-day period on the one hundred twentieth (120th) day together
with an accounting of all payments received within such period. The Buyers shall
have the sole right to collect such accounts receivable during such one hundred
twenty (120) day period. In the event the Buyers receive monies during the
120-day period following the Closing Date from an advertiser who, after the
Closing Date, is advertising over any of the Station, and that advertiser was
included among the accounts receivable as of the Closing Date, the Buyer shall
apply said monies to the oldest outstanding balance due on the particular
account, except in the case of a "disputed" account receivable. For purposes of
this Section 6(d), a "disputed" account receivable means one which the account
debtor refuses to pay because he asserts that the money is not owed or the
amount is incorrect. In the case of such a disputed account, the Buyers shall
immediately return the account to the Seller prior to expiration of the 120-day
period following the Closing Date. If the Buyers return a disputed account to
the Seller, the Buyers shall have no further responsibility for its collection
and may accept payment from the account debtor for advertising carried on any of
the Station after the Closing Date. At the end of the 120-day period following
the Closing Date, the Buyers will turn back to the Seller all of the accounts
receivable of the Station as of the Closing Date owing to the Seller which have
not yet been collected, and the Buyers will thereafter have no further
responsibility with respect to the collection of such receivables. During the
120-day period following the Closing Date, the Buyers shall afford the Seller
reasonable access to the accounts receivable "aging list." The Seller
acknowledges and agrees that the Buyers are acting as its collection agent
hereunder for the sole benefit of the Seller and that Buyers have accepted such
responsibility for the accommodation of the Seller. The Buyer shall not have any
duty to inquire as to the form, manner of execution or validity of any item,
document, instrument or notice deposited, received or delivered in connection
with such collection efforts, nor shall the Buyers have any duty to inquire as
to the identity, authority or rights of the persons who executed the same. The
Seller shall indemnify Buyers and hold them harmless from and against any
judgments, expenses (including attorney's fees) costs or liabilities which the
Buyers may incur or sustain as a result of or by reason of such collection
efforts.
(e) Consents. In the event any of the Assumed Contracts are not assignable
or any consent to such assignment is not obtained on or prior to the Closing
Date, and the Buyers elect to consummate the transactions contemplated herein
despite such failure or inability to obtain such consent, the Seller shall
continue to use commercially reasonable efforts to obtain any such assignment or
consent after the Closing Date. Until such time as such assignment or approval
has been obtained, the Seller will cooperate with Buyers in any lawful and
economically feasible arrangement to provide that the Buyer shall receive the
Seller's interest in the benefits under any such Assumed Contract, including
performance by the Seller as agent,
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if economically feasible; provided, however, that the Buyers shall undertake to
pay or satisfy the corresponding liabilities for the enjoyment of such benefit
to the extent that Buyers would have been responsible therefor if such consent
or assignment had been obtained.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Sections 2 and 3 of this Agreement (other than the representations
and warranties of the Seller contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g),
and 2(r) hereof or relating to the Seller's title to the Acquired Assets) shall
survive the Closing and continue in full force and effect for a period until 90
days after the applicable statute of limitations has expired with respect to any
claim by the Buyers based on a claim or action by a third party and for a period
of three (3) years following Closing with respect to any claim by the Buyers not
based on a claim or action by a third party. All of the other representations
and warranties (including the representations and warranties of the Seller
contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g), and 2(r) hereof or relating
to the Seller's title to the Acquired Assets) and all covenants of the Buyers
and the Seller contained in this Agreement shall survive the Closing and
continue in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(f) with respect to a breach of a
warranty or covenant prior to the Closing Date, the Seller agrees to indemnify
the Buyers from and against the entirety of any Adverse Consequences the Buyers
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by:
(i) any misrepresentation or breach of any of the Seller's representations
or warranties, and covenants contained in this Agreement or in any Ancillary
Agreement executed and/or delivered by the Seller (so long as the Buyers make a
written claim for indemnification within the applicable survival period);
(ii) any breach or nonfulfillment of any agreement or covenant of the
Seller contained herein or in any Ancillary Agreement;
(iii) any Liability of the Seller which is not an Assumed Liability;
and/or
(iv) any Liability of the Buyers arising by operation of law (including
under any bulk transfer law of any jurisdiction or under any common law doctrine
of defacto merger or successor liability) which is not an Assumed Liability;
provided, however, that the aggregate amounts, if any, paid by Seller to Buyers
to fulfill Seller's indemnification obligations under Subsection 7(b)(i) shall
not exceed One Million Dollars ($1,000,000.00).
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(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(f) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyer agrees to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability; provided, however, that
the aggregate amounts, if any, paid by Buyers to Seller to fulfill Buyers'
indemnification obligations under Subsection 7(c)(i) shall not exceed One
Million Dollars ($1,000,000.00).
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that not withstanding the provision in
Section 7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for a breach of any provision of this Agreement.
(e) Basket Amount. No indemnification shall be paid by any Party
("Indemnifying Party") to the other Party ("Indemnified Party") pursuant to
Subsections 7(b) and 7(c) unless the aggregate Adverse Consequences incurred by
the Indemnified Party exceeds Fifteen Thousand Dollars ($15,000) (the "Basket"),
and then the Indemnifying Party's indemnification will apply to the excess over
the Basket up to any and all indemnification limits provided in this Agreement.
(f) Liquidated Damages. The Buyer and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
lieu of indemnification pursuant to Section 7(b) or 7(c), the non defaulting
Party shall be entitled to receive from the defaulting Party for such default
the sum of Seventy Thousand Dollars ($70,000) as liquidated damages without the
need for proof of damages, subject only to successfully proving in a court of
competent jurisdiction that the other Party has materially breached this
Agreement and that the transactions contemplated thereby have not occurred;
provided however, that the Buyers shall retain the option to receive, pursuant
to Section 7(d), and in lieu of receiving the liquidated damages provided in
this Section 7(e), the remedy of specific performance with respect to a breach
of this Agreement prior to the
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Closing. The Buyers and the Seller agree to pay said sum of liquidated damages
within ten (10) days of the date that the non-defaulting party obtains such a
judgment, and agree that in the event this Agreement is terminated by the Seller
prior to the Closing Date as a result of a breach or default by the Buyers under
this Agreement, the Seller shall proceed against the Earnest Money as partial
satisfaction of liquidated damages owed by Buyers.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnifica tion against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within thirty (30) days after the Indemnified Party has given notice of
the matter that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense,
(iii) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the matter without the written consent
of the Indemnifying Party (not to be withheld unreasonably), and (iv) the
Indemnifying Party will not consent to the entry of any judgment with respect to
the matter, or enter into any settlement which does not include a provision
whereby the plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, without the written consent of the
Indemnified Party (not to be withheld unreasonably). In the event the
Indemnifying Party does not notify the Indemnified Party within thirty (30) days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets that are used or useful in
the operation of the Station, wherever located, including but not limited to all
of its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles, and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements
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(including those Barter Agreements and Advertising Contracts identified on the
Disclosure Schedule) now existing or entered into in the Ordinary Course of
Business for the sale of advertising time on the Station; (e) Assumed Contracts,
indentures, Security Interests, guaranties, other similar arrangements, and
rights thereunder; (f) call letters of the Station, jingles, logos, slogans, and
business goodwill of the Station; (g) claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery (including rights under
policies of insurance), rights of set off, and rights of recoupment; (h)
Licenses and similar rights obtained from governments and governmental agencies;
and (i) FCC logs and records and all other books, records, ledgers, logs, files,
documents, correspondence, advertiser lists, all other lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, program production materials, studies,
reports, and other printed or written materials; and (j) goodwill of the
Station.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts listed on Exhibit G attached hereto.
"Assumed Liabilities" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Basket" has the meaning set forth in Section 7(d) above.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
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"Closing" has the meaning set forth in Section l(d) above.
"Closing Date" has the meaning set forth in Section l(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section l(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section l(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" has the meaning set forth in Section 2(q), above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means First Bank-Madison.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Station.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay
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has passed; (b) no appeal, petition for rehearing or reconsideration, or
application for review is pending before the FCC and the deadline for filing any
such appeal, petition or application has passed; (c) the FCC has not initiated
reconsideration or review on its own motion and the time in which such
reconsideration or review is permitted has passed; and (d) no appeal to a court,
or request for stay by a court, of the FCC's action is pending or in effect, and
the deadline for filing any such appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (b) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Leases" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites in Asbury, Iowa, as described in
Section 2(i) of the Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
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"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section l(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller; and (iv) Cash.
"Retained Liabilities" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Station prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
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"Seller" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
KIKR-FM, licensed by the FCC to operate in Asbury, Iowa.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing in the event the Seller is in breach
of any representation, warranty, or covenant contained in this Agreement;
provided, however, that if such breach is capable of being cured, such breach
also remains uncured for thirty (30) days after notice of breach is received by
the Seller from the Buyers;
(iii) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing in the event the Buyers are in
breach of any representation,
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warranty, or covenant contained in this Agreement; provided, however that if
such breach is capable being cured, such breach remains uncured for thirty (30)
days after notice of breach is received by the Buyers from the Seller;
(iv) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(a) hereof
(unless the failure results primarily from the Buyers themselves breaching any
representation, warranty, or covenant contained in this Agreement);
(v) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(b) hereof
(unless the failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this Agreement); or
(vi) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in Section 7(a) hereof.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
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(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that (i) the Buyers may, upon written notice to
Seller, assign all of its right, title and interest in, to and under this
Agreement to one or more Affiliates, who shall then, subject to the terms and
conditions of this Agreement, have the right to receive the Acquired Assets,
assume the Assumed Liabilities, and to pay to the Seller the Purchase Price
therefor, and (ii) Buyers may assign their indemnification claims and their
rights under the warranties and representations of the Sellers to the financial
institution(s) providing financing to the Buyers in connection with this
transaction.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
KIKR Inc.
5837 Park Hill Circle
Madison, WI 53711
Attn: Mr. Phil Fisher
Fax No.: (608) 273-3554
Copy to:
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c.
7617 Mineral Point Road
Madison, WI 53717
Attn: Chris Jenkins
Phone: (608) 829-3434
Fax: (608) 829-0137
35
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(which copy shall not constitute notice to Seller except with
respect to any notice which may be provided by Buyers to Seller
under Section 5(a)(viii) above)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Phone: (312) 867-0091
Fax: (312) 867-0098
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, Indiana 46601
Attn: Peter Trybula
Phone: (219) 239-1936
Fax: (219) 239-1900
(which copies shall not constitute notice to Buyers)
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Wisconsin.
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(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(1) Expenses. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications and as set forth in
Section 4(o) with respect to Surveys, title commitments and environmental
audits. The Seller will pay all income taxes. The Seller and the Buyers will
each pay one-half (1/2) of any transfer or sales taxes and other recording or
similar fees necessary to vest title to each of the Acquired Assets in the
Buyers.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
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(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Madison, Wisconsin in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(h) above. Nothing in this Section 10(o), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:__________________________
(printed)
_____________________________
Title:_______________________
CUMULUS LICENSING CORPORATION
By:__________________________
(printed)
_____________________________
Title:_______________________
KIKR INC.
By:__________________________
(printed)
_____________________________
Title:_______________________
Guarantee
Philip Fisher ("Guarantor"), a shareholder of KIKR, Inc., individually
guarantees the obligations of KIKR, Inc. under the above Asset Purchase
Agreement, subject to the terms, limitations and conditions set forth therein,
up to and not in excess of One Million Dollars ($1,000,000.00); provided,
however, that all assets of KIKR, Inc. shall first have been exhausted before
any liability may accrue to Guarantor under this Agreement.
_____________________________
Philip Fisher, Individually
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<PAGE>
SCHEDULE A
Purchase Price. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the amount of One Million Three Hundred Fifty Thousand
Dollars ($1,350,000.00), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Sixty Seven Thousand Five Hundred Dollars ($67,500)
(the "Earnest Money Deposit") in the form of an irrevocable letter of credit
from NationsBank; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of One Million Three Hundred Fifty Thousand Dollars ($1,350,000.00), with
adjustments as provided specifically in this Agreement.
The Earnest Money Deposit referenced in this Schedule A shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), and shall
be disbursed to Seller or returned to Buyer as provided in the Earnest Money
Escrow Agreement.
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of December 5, 1997, by
and among Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing), and
Wiskes/Abaris Communications KQIZ Partnership, an Illinois limited partnership
(the "Seller"). Broadcasting and Licensing are referred to collectively herein
as the "Buyers." The Buyers and the Seller are referred to individually as the
"Party" or collectively as the "Parties." Capitalized terms used in this
Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
station KQIZ-FM, licensed to Amarillo, Texas (the "Station") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
a. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyers agree to purchase and the Seller agrees
to sell, transfer, convey and deliver to (i) Licensing all of the FCC Licenses
listed in Section 2(1) of the disclosure schedule ("Disclosure Schedule"); and
(ii) Broadcasting, all of the Acquired Assets other than the FCC Licenses. Both
such sales shall take place at the Closing for the consideration specified below
in this Section 1.
b. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Buyers agree to assume and become responsible for
all of the Assumed Liabilities at the Closing. The Buyers will not assume or
have any responsibility, however, with respect to any other obligation or
Liability of the Seller not included within the definition of Assumed
Liabilities, and the Seller agrees to pay and discharge all Liabilities and
obligations of the Seller other than the Assumed Liabilities.
c. Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the amount of Three Million One Hundred
Thousand Dollars ($3,100,000.00) (the "Purchase Price"). The Purchase Price
shall be payable as follows:
i. on the date of this Agreement, the Buyers will deliver to
the Escrow Agent an irrevocable letter of credit issued by NationsBank of
Texas, N.A. for the benefit of the Escrow Agent in substantially similar
form as the letter of credit attached hereto as
<PAGE>
Exhibit A in the amount of Three Hundred Ten Thousand Dollars
($310,000.00) (the "Earnest Money Deposit"); and
ii. on the Closing Date, the Buyers shall pay to the Seller
the amount of Three Million One Hundred Thousand Dollars ($3,100,000.00),
with adjustments as specifically provided in this Agreement.
The Earnest Money Deposit referenced in this Section 1(c) shall be held in
escrow by the Escrow Agent pursuant to an escrow agreement in the form attached
hereto as Exhibit B (the "Earnest Money Escrow Agreement"). If this Agreement is
terminated without Closing of the transaction contemplated herein, the Earnest
Money Deposit shall be paid to the Seller or returned to the Buyers as provided
in the Earnest Money Escrow Agreement.
d. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Sellers'
attorney in Chicago, Illinois, commencing at 9:00 a.m. local time promptly, but
in no event later than seven (7) days, after the FCC approval of the Assignment
Application becomes a Final Order, by which date all other conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
will have been satisfied, or such other date as the Parties may mutually
determine (the "Closing Date").
e. Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds in customary form, and (B) such other instruments of sale,
transfer, conveyance, and assignment as the Buyers and their counsel reasonably
may request; (iv) the Buyers will execute, acknowledge (if appropriate), and
deliver to the Seller (A) an assumption in the form attached hereto as Exhibit C
and (B) such other instruments of assumption as the Seller and its counsel
reasonably may request; and (v) the Buyers will deliver to the Seller the
consideration specified in Section 1(c) above by wire transfer of good U.S.
funds.
f. Postclosing Agreement. On the Closing Date, the Seller shall
execute, and shall cause each of its general partners to execute, a Postclosing
Agreement with the Buyers including covenants not to compete with the Buyers in
the markets served by the Station and agreements to indemnify the Buyers in the
form of Exhibit D attached hereto. A portion of the Purchase Price equal to
Fifty Thousand Dollars ($50,000) shall be paid to the Seller by the Buyers on
the Closing Date as consideration for the agreements set forth in the
Postclosing Agreement.
2. Representations and Warranties of the Seller.
The Seller represents and warrants to the Buyers that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
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<PAGE>
a. Organization of the Seller. The Seller is a limited partnership
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization. The Seller has the power and authority to own
or lease its properties and to carry on all business activities now conducted by
it. The general partners of the Seller are John P. Higgins and Don J. Wiskes.
b. Authorization of Transaction. The Seller has full power and
authority (including full partnership power and authority) to execute and
deliver this Agreement and all agreements and instruments to be executed and
delivered by Seller pursuant to this Agreement (collectively, the "Ancillary
Agreements") and to perform its obligations hereunder and thereunder. This
Agreement and the Ancillary Agreements constitute the valid and legally binding
obligation of the Seller, enforceable in accordance with their respective terms
and conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the partnership agreement of the Seller, which
will encumber or have a material adverese effect on the assets and rights to be
transferred hereunder; or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other agreement, arrangement to which the
Seller is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets), which will encumber or have a material adverse effect on the assets and
rights to be transferred hereunder; provided, however, that the assignment and
assumption of the Lease and the Assumed Contracts may require consent of the
other party thereto to be effective. Other than with respect to the Assignment
Application described in Section 4(b) the Seller does not need to give any
notice to, make any filing with, or obtain any Licenses, consent, or approval of
any court or government or governmental agency in order for the Parties to enter
into this agreement or the Ancillary Agreements or to consummate the
transactions contemplated by this Agreement or the Ancillary Agreements
(including the assignments and assumptions referred to in Section 1(e) above).
d. Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Seller has good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
e. Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited statements of income and expenses for the fiscal
years ended December 31, 1994, December 31, 1995, and December 31, 1996, for the
Station; and (ii) unaudited statements of income and expenses, as of and for
each month to date in 1997 for the Station. Except as described in Section 2(e)
of the
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<PAGE>
Disclosure Schedule, the Financial Statements have been prepared in conformity
with the Seller's normal accounting policies, practices and procedures applied
on a consistent basis, throughout the periods covered thereby, are correct and
complete, fairly present the financial condition of the Station and the results
of operation of the Station at the dates and for the periods indicated, and are
consistent with the books and records of the Seller (which books and records are
correct and complete). The Financial Statements accurately state the revenues of
the Station for the period indicated therein.
f. Events Subsequent to December 1, 1997. Since December 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule, the Station has
been operated in the Ordinary Course of Business. Without limiting the
generality of the foregoing and with respect to the operation of the Station
since December 1, 1997:
i. the Seller has not materially altered the programming,
format or call letters of the Station;
ii. the Seller has not applied to the FCC for any modification
of the FCC Licenses or failed to take any action necessary to preserve the
FCC Licenses and has operated the Station in material compliance therewith
and with all FCC rules and regulations;
iii. the Seller has not committed to any of the foregoing.
g. Tax Matters. As of the Closing, the Seller shall have timely and
properly filed all Tax Returns (which Tax Returns shall be correct and complete)
that it was required to file with respect to the Station's operations. All Taxes
owed by the Seller with respect to the operations of the Station (whether or not
shown on any Tax Return) have been, or as of Closing shall have been paid. As of
the Closing, the Seller shall have withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party with respect to the
Station. To Seller's Knowledge, no claim has ever been made by any authority in
any jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
h. Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Station. The Seller owns or leases all tangible assets necessary for the conduct
of the operation and business of the Station as presently conducted and as
presently proposed to be conducted and all leased assets are specifically
identified as such in Section 2(h) of the Disclosure Schedule. Buyer purchases
such tangible assets on an "as is, where is" basis with no warranty or
representation of condition or fitness for a particular purpose.
i. Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all real property leased to the Seller in connection with the
operation of the Station. The Seller has delivered to the Buyers correct and
complete copies of the Leases. With respect to those Leases which are Assumed
Contracts:
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<PAGE>
i. the Leases are legal, valid, binding, enforceable, and in
full force and effect, and Seller will not amend, modify, terminate or
default under the provisions thereof between the date hereof and Closing;
ii. To Seller's Knowledge, no party to any Lease is in breach
or default (or has repudiated any provision thereof), and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default thereunder or permit termination, modification, or acceleration
thereunder;
iii. To Seller's Knowledge, there are no disputes, oral
agreements, or forbearance programs in effect as to any Lease;
iv. the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder that will not be discharged as of Closing;
j. Contracts. Section 2(j) of the Disclosure Schedule lists
any written arrangement (or group of related written arrangements)
currently in effect and pertaining to the Station either involving more
than $5,000 or not entered into in the Ordinary Course of Business. Within
five (5) days of execution of this Agreement, the Seller shall have
delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(j) of the Disclosure Schedule (as amended
to date). With respect to each written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal,
valid, binding, enforceable, and in full force and effect; (B) the Seller
will not take any action outside the Ordinary Course of Business that will
cause any such arrangement not to continue to be legal, valid, binding,
and enforceable and in full force and effect on identical terms following
the Closing (if the arrangement has not expired according to its terms);
(C) to Seller's Knowledge, no party is in breach or default, and no event
has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement pertaining to the operation of the Station
which, if reduced to written form, would be required to be listed in
Section 2(j) of the Disclosure Schedule under the terms of this Section
2(j). Except for the Assumed Contracts, the Buyers shall not have any
Liability or obligations for or in respect of any of the contracts set
forth in Section 2(j) of the Disclosure Schedule or any other contracts or
agreements of the Seller. Buyers shall determine in their sole discretion
which of the contracts shall be Assumed Contracts and shall notify Seller
of this determination no later than the end of the Diligence Period.
k. Commission Licenses and Compliance with Commission Requirements.
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Station as they are now being operated are (A) in full
force and effect, (B) unimpaired by any acts or omissions of the Seller or
the
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Seller's employees or agents, (C) free and clear of any restrictions which
might limit the full operation of the Station, and (D) detailed in Section
2(k) of the Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and consents
referenced in the preceding sentence, Section 2(k) of the Disclosure
Schedule also sets forth, without limitation, the date of the last
renewal, the expiration date thereof, and any conditions or contingencies
related thereto. Except as set forth in Section 2(k) of the Disclosure
Schedule, to Seller's Knowledge, no condition exists or event has occurred
that permits, or after notice or lapse of time, or both, would permit, the
revocation or termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Station as now conducted. Except as set forth in Section
2(k) of the Disclosure Schedule, the Seller is not aware of any reason why
the FCC licenses might not be renewed in the ordinary course or revoked.
ii. The Station is in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Station's transmission facilities is restricted in
accordance with the policies of the FCC.
iii. Except as set forth in Section 2(k) of the Disclosure
Schedule, to Seller's Knowledge, the Station is not the subject of any FCC
or other governmental investigation or any notice of violation or order,
or any material complaint, objection, petition to deny, or opposition
issued by or filed with the FCC or any other governmental authority in
connection with the operation of or authorization for the Station, and
there are no proceedings (other than rule making proceedings of general
applicability) before the FCC or any other governmental authority that
could adversely affect any of the FCC Licenses or the authorizations
listed in Section 2(k) of the Disclosure Schedule.
iv. The Seller has filed with the FCC and all other
governmental authorities having jurisdiction over the Station all material
reports, applications, documents, instruments, and other information
required to be filed, and will continue to make such filings through the
Closing Date.
v. The Seller is not aware of any information concerning the
Station that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary
for the consummation of the transactions contemplated hereunder or the
Buyer's operation and/or ownership of the Station.
l. Intellectual Property. To Seller's Knowledge, the Seller owns or
has the right to use pursuant to license, sublicense, agreement or permission
all Intellectual Property necessary for the operation of the businesses of the
Station. To Seller's Knowledge, with respect to the operation of the Station,
the Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and to Seller's Knowledge, the Seller has never received any charge,
complaint, or notice alleging any such interference, infringement,
misappropriation, or violation. To Seller's Knowledge, with respect to
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<PAGE>
the operation of the Station, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Seller.
m. Insurance. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Seller's insurance coverage with
respect to the operation of the Station. With respect to each such insurance
policy: (A) the policy is legal, valid, binding, and enforceable and in full
force and effect; (B) except for modifications (or terminations and immediate
replacements) in the Ordinary Course of Business, the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect on identical
terms through the Closing Date.
n. Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Station: (i) to Seller's Knowledge, is subject to any
unsatisfied judgment, order, decree, stipulation, injunction, or charge; or (ii)
to Seller's Knowledge, is a party or is threatened to be made a party to any
charge, complaint, action, suit, proceeding, hearing, or investigation of or in
any court or quasijudicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(n) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Station taken as a whole. The Seller has
no Knowledge of any Basis for any such charge, complaint, action, suit,
proceeding, hearing, or investigation involving the Station.
o. Employees and Independent Contractors. Section 2(o) of the
Disclosure Schedule sets forth a listing of the names, positions, job
descriptions, salary or wage rates and all other forms of compensation paid for
work at the Station of each current employee and independent contractor, which
Buyers agree to assume as of Closing (or to assume any replacement employees or
independent contractors hired on substantially similar terms and conditions
before Closing). The Seller has no Knowledge of any Basis for any claim by past
or current employees of the Station or applicants for employment that the Seller
or its management has discriminated based on each individual's race, sex,
national origin, religion, ethnicity, handicap or any other protected
characteristic under applicable law.
p. Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Station and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. The Seller does not have any
commitment to create any additional Employee Benefit Plan or modify or change
any existing Employee Benefit Plan that would affect any employee or terminated
employee of the Station. To Seller's Knowledge, there are no pending or
threatened claims under, by or on behalf of any of the Employee Benefit Plans,
by any employee or beneficiary covered by any such Employee Benefit Plan, or
otherwise involving any such Employee Benefit Plan (other than routine claims
for benefits), nor, to Seller's Knowledge, have there been any Reportable Events
or Prohibited Transactions with respect to any Employee Benefit Plan.
q. Environment, Health, and Safety.
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i. To Seller's Knowledge, with respect to the operation of the
Station, the Seller is in compliance in all material respects with all
Environmental Laws and all laws (including rules and regulations
thereunder) of federal, state, and local governments (and all agencies
thereof) concerning employee health and safety, and the Seller has no
Liability (and to Seller's Knowledge there is no Basis related to the past
or present operations of the Seller or its predecessors for any present or
future Liability) under any Environmental Law, with respect to the
operation of the Station. To Seller's Knowledge, with respect to the
operation of the Station, the Seller has no Liability (and to Seller's
Knowledge there is no Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against
the Seller with respect to the operation of the Station giving rise to any
Liability) under the Occupational Safety and Health Act, as amended, or
any other law (or rule or regulation thereunder) of any federal, state,
local, or foreign government (or agency thereof) concerning employee
health and safety, or for any illness of or personal injury to any
employee.
ii. To Seller's Knowledge, with respect to the operation of
the Station, the Seller has obtained and at all times has been in
compliance in all material respects with all of the terms and conditions
of all permits, licenses, and other authorizations which are required
under, and has complied in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all Environmental Laws or law of any federal, state, or local or
foreign government relating to worker health and safety.
iii. To Seller's Knowledge, all properties and equipment used
in the Station and the Acquired Assets have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1, 2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances. To Seller's
Knowledge, no pollutant, contaminant, or chemical, industrial, hazardous,
or toxic material or waste ever has been buried, stored, spilled, leaked,
discharged, emitted, or released on any of the Real Estate. To Seller's
Knowledge, no above ground or underground storage tanks have ever been
located at, on or under the Real Estate. The Seller has delivered to the
Buyers a complete copy of all environmental claims, reports, studies,
compliance actions or the like of the Seller or which are available to the
Seller with respect to any of the Real Estate or any of the Acquired
Assets.
r. Advertising Contracts. Section 2(r) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Station in
excess of $1000.
s. Brokers' Fees. Other than the fee payable to McCoy Broadcast
Brokerage, Inc., which shall be the exclusive responsibility of Seller, the
Seller has no Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement.
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3. Representations and Warranties of the Buyers.
Buyers represent and warrant to the Seller that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
a. Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
b. Authorization of Transaction. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1 (e) above).
d. Brokers' Fees. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
4. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
a. General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the
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transactions contemplated by this Agreement (including satisfying the closing
conditions set forth in Section 5 below).
b. Assignment Applications. Within ten (10) business days after the
expiration or waiver of the Buyers' right to terminate pursuant to Section
5(a)(ix) below, the Seller and the Buyers shall jointly file with the FCC an
application for assignment of the FCC Licenses, permits and authorizations
pertaining to the Station from the Seller to Licensing (the "Assignment
Application"). The costs of the FCC filing fees in connection with the
Assignment Application shall be divided equally between the Parties. Each party
shall pay its own attorneys' fees. The Seller and the Buyers shall thereafter
prosecute the Assignment Application with all reasonable diligence and otherwise
use commercially reasonable efforts to obtain the grant of the Assignment
Application as expeditiously as practicable (but neither the Seller nor the
Buyers shall have any obligation to satisfy complainants or the FCC by taking
any steps which would have a material adverse effect upon the Station or impose
significant costs on such party). If the FCC imposes any condition on either
party to the Assignment Application, such party shall use commercially
reasonable efforts to comply with such condition, provided, that neither party
shall be required hereunder to comply with any condition that would have a
material adverse effect upon the Station or any Affiliate. The Seller and the
Buyers shall jointly oppose any requests for reconsideration or judicial review
of FCC approval of the Assignment Application and shall jointly request from the
FCC extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
c. Notices and Consents. Each of the Parties will file any
notification and report forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Hart-Scott-Rodino Act, will use its best
efforts to obtain an early termination of the applicable waiting period, and
will make any further filings pursuant thereto that may be necessary, proper or
advisable. Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
d. Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Twenty Thousand Dollars ($20,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date, which obligations shall be assumed by Buyers.
e. Operating Statements. The Seller shall deliver to the Buyers, for
the Buyers' informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Station within ten (10) days
after each such statement is prepared by or for the Seller.
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Seller shall provide such other financial information regarding the Station as
Buyers may reasonably request, including weekly or daily sales reports to the
extent available.
f. Contracts. The Seller will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(j) of the Disclosure Schedule which are Assumed Contracts in any material
respect. The Seller will not without prior written consent of the Buyers enter
into any contract outside the Ordinary Course of Business which involves more
than Five Thousand Dollars ($5,000).
g. Operation of Station. The Seller will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. The Seller shall operate the Station in compliance with the FCC
Licenses and the rules and regulations of the FCC, and the FCC Licenses shall at
all times remain in full force and effect. The Seller shall file with the FCC
all material reports, applications, documents, instruments and other information
required to be filed in connection with the operation of the Station.
h. Credit and Receivables. The Seller will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Station and with respect to collecting accounts receivable
arising from such extension of credit.
i. Preservation of Station and the Acquired Assets. The Seller will
keep its Station and the Acquired Assets and properties substantially intact and
will continue to operate the Station consistent with its past practices.
j. Full Access and Consultation. The Seller will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Station, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Station, for the purpose of permitting the
Buyers to, among other things: (a) conduct its due diligence review, (b) review
financial statements of the Station, (c) verify the accuracy of the
representations and warranties of the Seller contained in this Agreement, and
(d) prepare for the consummation of the transactions contemplated by this
Agreement. The Seller will consult with the Buyers' management with a view to
informing Buyers' management as to the operations, management and business of
the Station. Without limiting the foregoing, Seller acknowledges and agrees that
it will provide the Buyers and their representatives with such access to the
properties, books, records, documents and operations of the Seller with respect
to the operation of the Station as contemplated herein in a manner which will
permit the Buyers to fully complete their due diligence review within the
fourteen (14) day period referenced in Section 5(a) (ix), below.
k. Exclusivity. Except to the extent any of the following shall be
subject and subordinate to, and in no way shall interfere with, the consummation
of the transactions proposed in this Agreement, the Seller will not (i) solicit,
initiate, or encourage the submission of any proposal or offer from any person
relating to any (A) merger or consolidation, (B) acquisition or purchase of
securities or assets, or (C) similar transaction or business combination
involving the Station, or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to,
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assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing.
l. Control of Station. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Between the date of this Agreement and
the Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Station, and such operation shall be the sole
responsibility of and in the control of the Seller.
m. Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing. In the event
of any such material (in excess of $25,000) loss, damage, or destruction, the
Seller will promptly notify the Buyers of all particulars thereof, stating the
cause thereof (if known) and the extent to which the cost of restoration,
replacement and repair of the Acquired Assets lost, damaged or destroyed will be
reimbursed under any insurance policy with respect thereto. The Seller will, at
Seller's expense, repair or replace such Acquired Assets to their former
condition as soon as possible after loss, damage or destruction thereof and
shall use its best efforts to restore as promptly as possible transmissions as
authorized in the FCC Licenses. The Closing Date shall be extended (with FCC
consent, if necessary) for up to sixty (60) days to permit such repair or
replacement. If repair or replacement cannot be accomplished within sixty (60)
days of the date of the Seller's notice to the Buyers and the Buyers determine
that the Seller's failure to repair or replace would have a material adverse
effect on the operation of the Station:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time
as the property has been substantially repaired, replaced or restored,
unless the same cannot be reasonably effected within ninety (90) days of
the date of the Seller's notice to the Buyers, in which case either party
may terminate this Agreement; or
iii. the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to the
Buyers of all rights under any insurance claims covering the loss, damage
or destruction and payment over to the Buyers of any proceeds under any
such insurance policies, previously received by the Seller with respect
thereto plus an amount equal to the amount of any deductible or
self-insurance maintained by Seller on such Acquired Assets. In the event
the Closing Date is postponed pursuant to this Section 4(m), the parties
hereto will cooperate to extend the time during which this Agreement must
be closed as specified in the consent of the FCC.
n. Adverse Action. Neither Seller nor Buyers, directly or indirectly
(through any Affiliate), shall take or fail to take any action or enter into any
agreement which, to Seller's or Buyers' Knowledge, as the case may be, would
disqualify them from consummating the transaction proposed herein because of any
govermental law, code, rule or regulation.
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5. Conditions to Obligation to Close.
a. Conditions to Obligation of the Buyers. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions, any of which may
be waived in writing by Buyers:
i. the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Seller shall have performed and complied with all of
its covenants hereunder in all respects through the Closing;
iii. the Seller shall have procured all of the third party
consents specified in Section 4(d) above;
iv. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or impose damages or
penalties upon any of the parties if such transactions are consummated,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
v. the Seller shall have delivered to the Buyers a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Sections 5(a)(i)
through (iv) is satisfied in all respects;
vi. each of the Assignment Applications shall have been
approved by a Final Order of the FCC all applicable waiting periods (and
any extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or been terminated and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
vii. the relevant parties shall have entered into the
Postclosing Agreement;
viii. the Buyers shall have received from counsel to the
Seller an opinion with respect to the matters set forth in Exhibit F
attached hereto, addressed to the Buyers and its lender and dated as of
the Closing Date;
ix. the Buyers, shall, within fourteen (14) days after the
date hereof (the "Diligence Period"), be satisfied as to the results of
their examination and due diligence
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review referred to in Section 4(k) hereof. If, within the Diligence
Period, Buyers do not deliver to Seller a written notice terminating this
Agreement in regard to the contingency described in this Section 5(a)
(ix), then the contingency set forth in this Section 5(a) (ix) shall be
deemed waived by Buyers;
x. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with an allocation schedule to be delivered during the
Diligence Period (provided, however, that if the parties fail to agree on
such an allocation within the Diligence Period, this condition shall be
waived); and
xi. all actions to be taken by the Seller in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
b. Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions (any of which
may be waived in writing by Seller):
i. the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
iii. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
iv. the Buyers shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
v. each of the Assignment Applications shall have been
approved by a Final Order of the FCC and the Buyers shall have received
all governmental approvals
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required to transfer all other authorizations, consents, and approvals of
governments and governmental agencies set forth in the Disclosure
Schedule;
vi. the relevant parties shall have entered into the
Postclosing Agreement; and
vii. all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
6. Post-Closing Covenants.
The Parties agree as follows with respect to the period following
the Closing:
a. General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
b. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Station, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
c. Adjustments. Operation of the Station and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Buyers as of the Closing
Date in accordance with the foregoing principle; provided, however, Buyers shall
honor all such trade credits up to Twenty Thousand Dollars($20,000) and shall
receive no credit therefore. In addition, all commissions payable with respect
to the accounts receivable of the Seller (whether due before or after Closing)
shall be solely for the account and responsibility of the Seller.
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Contractual arrangements that do not reflect an equal rate of compensation to a
Station over the term of the agreement shall be equitably adjusted as of the
Closing Date. The prorations and adjustments hereunder shall be made and paid
insofar as feasible on the Closing Date, with a final settlement sixty (60) days
after the Closing Date. In the event of any disputes between the Parties as to
such adjustments, the amounts not in dispute shall nonetheless be paid at such
time and such disputes shall be determined by an independent accounting firm
mutually acceptable to both parties and the fees and expenses of such accounting
firm shall be paid one-half (1/2) by the Seller and one-half (1/2) by the Buyer.
d. Collection of Accounts Receivable. At the Closing, the Seller
will turn over to the Buyers, for collection only, the accounts receivable of
the Station owing to the Seller as of the close of business on the day before
the Closing Date. A schedule of such accounts receivable will be delivered by
the Seller to the Buyers on the Closing Date or as soon thereafter as possible.
The Buyers agree to use commercially reasonable efforts in the ordinary course
of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Closing Date, and will remit all payments received on such
accounts during this 120-day period as of the last day of each month during this
period, together with an accounting of all payments received within such period.
The Buyers shall have the sole right to collect such accounts receivable during
such one hundred twenty (120) day period. In the event the Buyers receive monies
during the 120-day period following the Closing Date from an advertiser who,
after the Closing Date, is advertising on the Station, and that advertiser was
included among the accounts receivable as of the Closing Date, the Buyers shall
apply said monies to the oldest outstanding balance due on the particular
account, except in the case of a "disputed" account receivable. For purposes of
this Section 6(d), a "disputed" account receivable means one which the account
debtor refuses to pay because he asserts that the money is not owed or the
amount is incorrect. In the case of such a disputed account, the Buyers shall
immediately return the account to the Seller prior to expiration of the 120-day
period following the Closing Date. If the Buyers return a disputed account to
the Seller, the Buyers shall have no further responsibility for its collection
and may accept payment from the account debtor for advertising carried on the
Station after the Closing Date. At the end of the 120-day period following the
Closing Date, the Buyers will turn back to the Seller all of the accounts
receivable of the Station as of the Closing Date owing to the Seller which have
not yet been collected, and the Buyers will thereafter have no further
responsibility with respect to the collection of such receivables. During the
120-day period following the Closing Date, the Buyers shall afford the Seller
reasonable access to the accounts receivable "aging list." The Seller
acknowledges and agrees that the Buyers are acting as collection agent hereunder
for the sole benefit of the Seller and that Buyers have accepted such
responsibility for the accommodation of the Seller. The Buyers shall not have
any duty to inquire as to the form, manner of execution or validity of any item,
document, instrument or notice deposited, received or delivered in connection
with such collection efforts, nor shall the Buyers have any duty to inquire as
to the identity, authority or rights of the persons who executed the same;
provided, however, the Buyers shall have no right to waive, negotiate, settle,
or defer any such claim without Seller's consent. The Seller shall indemnify
Buyers and hold them harmless from and against any judgments, expenses
(including attorney's fees) costs or liabilities which the Buyers may incur or
sustain as a result of or by reason of such collection efforts; provided,
however, Buyers shall undertake customary billing efforts at no cost to Seller.
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e. Consents. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
7. Remedies for Breaches of this Agreement.
a. Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), and 2(d) hereof
or relating to the Seller's title to the Acquired Assets) shall survive the
Closing and continue in full force and effect for a period until 90 days after
the applicable statute of limitations has expired with respect to any claim by
the Buyers based on a claim or action by a third party and for a period of
twelve (12) months following Closing with respect to any claim by the Buyers not
based on a claim or action by a third party. All of the other representations
and warranties (including the representations and warranties Seller contained in
Sections 2(a), 2(b), 2(c), and 2(d) hereof or relating to the Seller's title to
the Acquired Assets) and all covenants of the Buyers and the Seller contained in
this Agreement shall survive the Closing and continue in full force and effect
forever thereafter.
b. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement
or in any Ancillary Agreement executed and/or delivered by the Seller (so
long as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant
of the Seller contained herein or in any Ancillary Agreement;
iii. any Liability of the Seller which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
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Notwithstanding the foregoing, or any other provision to the contrary in this
Agreement, with respect to any breach of a warranty, representation or covenant
of Seller of which Buyers have knowledge prior to Closing, Seller shall have no
liability to Buyers therefore and Buyers shall be entitled to terminate this
Agreement only if such breach, if quantifiable, will result in a loss to Buyers
in excess of Twenty-Five Thousand Dollars ($25,000.00); provided, however, such
termination will be void if Seller agrees to be liable for any and all loss in
excess of $25,000 in the case of quantifiable losses, and for any and all loss
in the case of nonquantifiable losses.
c. Indemnification Provisions for the Benefit of the Seller. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
d. Specific Performance. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(o) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in Section
7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for Buyers for a breach of any provision of this
Agreement.
e. Liquidated Damages. The Buyers and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(c), the Seller
shall be entitled to receive from Buyers for such default the Earnest Money
Deposit as liquidated damages without the need for proof of damages, subject
only to successfully proving in a court of competent jurisdiction that the
Buyers materially breached this Agreement and that the transactions contemplated
thereby have not occurred. The Seller shall proceed against the Earnest Money
Deposit as full satisfaction of liquidated damages owed by the Buyers and as its
sole remedy for a failure of the transactions contemplated hereby to occur as a
result of a material breach of the terms of this Agreement by the Buyers. In
addition, in the event the transactions contemplated by this Agreement are not
closed because of a default by the Buyers under Section 3(e) above, Seller shall
be entitled to receive from Buyers liquidated damages, in addition to the
Earnest Money Deposit, in the amount of Three Hundred Ten Thousand Dollars
($310,000.00), subject only to
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successfully proving in a court of competent jurisdiction that the Buyers
materially breached Section 3(e) of this Agreement and that the transactions
contemplated by this Agreement have not occurred. In such a proceeding, the
prevailing party shall be awarded attorneys' fees and costs.
f. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnifica tion against any other Party (the "Indemnifying
Party",) under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
g. Limitation of Liability. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Identified Party, in
the aggregate from all indemnifiable events shall exceed Ten Thousand Dollars
($10,000) and indemnification shall be made by the indemnifying party only to
the extent of such excess over Ten Thousand Dollars ($10,000); provided however
that the foregoing limitation shall not be applicable to: (i) the obligations of
the Buyer to pay and discharge any Liability of the Seller to third parties from
and after the Closing Date assumed by the Buyer under the terms of this
Agreement; (ii) the obligation of the Seller to pay and discharge any Liability
to third parties not assumed by the Buyer under the terms of this Agreement, or
(iii) the Seller's obligation to deliver clear title to the Acquired Assets.
8. Definitions.
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"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller (other than Retained Assets) that are used or useful in
the operation of the Station, wherever located, including but not limited to all
of the following used in the operation of the Station: (a) leaseholds and other
interests of any kind therein, improvements, fixtures, and fittings thereon
(such as towers and antennae), and easements, rights-of-way, and other
appurtenances thereto); (b) tangible personal property (such as fixed assets,
computers, data processing equipment, electrical devices, monitoring equipment,
test equipment, switching, terminal and studio equipment, transmitters,
transformers, receivers, broadcast facilities, furniture, furnishings,
inventories of compact disks, records, tapes and other supplies, vehicles) and
all assignable warranties with respect thereto; (c) Intellectual Property,
goodwill associated therewith, licenses and sublicenses granted and obtained
with respect thereto, and rights thereunder, remedies against infringements
thereof, and rights to protection of interests therein under the laws of all
jurisdictions; (d) rights under orders and agreements (including those Barter
Agreements and Advertising Contracts identified on the Disclosure Schedule) now
existing or entered into in the Ordinary Course of Business for the sale of
advertising time on the Station; (e) Assumed Contracts, guaranties, other
similar arrangements, and rights thereunder; (f) call letters of the Station,
jingles, logos, slogans, and business goodwill of the Station; (g) claims,
deposits, prepayments, refunds, causes of action, chooses in action, rights of
recovery (including rights under policies of insurance), rights of set off, and
rights of recoupment; (h) Licenses and similar rights obtained from governments
and governmental agencies; and (i) FCC logs and records and all other books,
records, ledgers, logs, files, documents, correspondence, advertiser lists, all
other lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, program production materials,
studies, reports, and other printed or written materials; and (j) goodwill of
the Station.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(r), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(j) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"Assumed Liabilities" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other benefits to another party after the Closing; or (ii) to pay
for goods, services, and other benefits that another party will furnish to it
after the Closing. The Assumed Liabilities shall not include any Retained
Liabilities.
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"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Diligence Period" has the meaning set forth in Section 5(a)(ix) above.
"Disclosures" has the meaning set forth in Section 10(o) below.
"Disclosure Schedule" has the meaning set forth in Section 1 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state,
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local, or foreign government or agency thereof (including rules, regulations,
codes, plans, judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, or pollution or protection of
the environment, including, without limitation, laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means McCoy Broadcast Brokerage, Inc.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Station.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and
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corporate names and registrations and applications for registration thereof, (c)
all programs, programming materials, copyrights and registrations and
applications for registration thereof, (d) mask works and registrations and
applications for registration thereof, (e) computer software, data, and
documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, market and other
research information, drawings, specifications, designs, plans proposals,
technical data, copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information), (g) other proprietary rights, and (h) copies
and tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation, but
with respect to Seller means actual knowledge of Don Wiskes and John Higgins who
shall have no duty to investigate other than to make reasonable inquiry of Larry
Swikard.
"Leases" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites, as described in Section 2(i) of
the Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multi-employer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller's
owners in the form attached hereto as Exhibit D.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
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"Purchase Price " has the meaning set forth in Section 1(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation, tax returns, accounting and financial records (excluding those
related to the operation of the Station); (ii) any of the rights of the Seller
under this Agreement (or under any side agreement between the Seller on the one
hand and the Buyers on the other hand entered into on or after the date of this
Agreement); (iii) accounts, notes and other receivables of the Seller; (iv)
Cash; and (v) any assets of Seller not used or useful in the operation of the
Station.
"Retained Liabilities" means any obligations or Liabilities of the Seller
other than Assumed Liabilities, including but not limited to any of the
following to the extent not included within Assumed Liabilities: (i) any
Liability relating to the ownership or operation of the Station prior to the
Closing; (ii) any Liability of the Seller for income, transfer, sales, use, and
other Taxes arising in connection with the consummation contemplated hereby;
(iii) any Liability of the Seller for costs and expenses incurred in connection
with this Agreement or the consummation of the transactions contemplated hereby
(except as set forth in Section 4(i) relating to Surveys, title commitments and
environmental audits and Section 4(b) with regard to the Assignment
Application); or (iv) any Liability or obligation of the Seller under this
Agreement (or under any side agreement between the Seller on the one hand and
the Buyers on the other hand entered into on or after the date of this
Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
KQIZ-FM, licensed by the FCC to operate in Amarillo, Texas.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
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"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach of any representation, warranty, or covenant contained
in this Agreement; provided, however, that if such breach is capable of
being cured, such breach also remains uncured for twenty (20) days after
notice of breach is received by the Seller from the Buyers;
iii. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable being cured, such breach remains uncured for twenty (20) days
after notice of breach is received by the Buyers from the Seller
(provided, however, that such twenty (20) day cure period shall not be
applicable to the failure of Buyers to pay the Purchase Price or of Buyers
or Seller to deliver the Closing documents at Closing);
iv. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained
in this Agreement);
v. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant contained in
this Agreement);
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vi. the Buyer may terminate this Agreement on or before the
14th day after the date hereof in the event it has not satisfactorily
completed its due diligence review of the Stations; or
vii. the Buyers or the Seller may terminate this Agreement if
any Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. Miscellaneous.
a. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
b. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Seller the Purchase Price therefor or to any
successor to the Buyers in the event of any sale, merger or consolidation of the
Buyers (provided, however, in connection with any of the foregoing, Buyers shall
remain liable hereunder), and (ii) Buyers may assign their indemnification
claims and their rights under the warranties and representations of the Sellers
to the financial institution(s) providing financing to the Buyers in connection
with this transaction.
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
Wiskes/Abaris Communications KQIZ Partnership
650 Executive Drive
Willowbrook, Illinois 60521
Attn: Mr. Don J. Wiskes
Attn: Mr. John P. Higgins
Copy to:
John T. Roselli, Esquire
Suite 800
Six West Hubbard Street
Chicago, IL 60610-4695
Fax No.: (312) 245-9124
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
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<PAGE>
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Illinois.
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
k. Expenses. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(o) with respect to Surveys, title commitments and
environmental audits. The Seller and the Buyers will each pay one-half (1/2) of
any transfer or sales taxes and other recording or similar fees necessary to
vest title to each of the Acquired Assets in the Buyers.
l. Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
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requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
m. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Chicago, Illinois in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
o. Confidentiality. Buyers understand and acknowledge that any
unauthorized disclosure of any confidential information disclosed to or obtained
by Buyers ("Disclosures") could cause immeasurable harm to Seller and,
therefore, agree that the dissemination of such information shall be limited to
Buyers' professionals (e.g., attorneys, accountants), whose duties justify the
need to know such information in connection with the potential acquisition of
the Station and then only on the basis of a clear understanding by those parties
of their obligation to maintain the confidentiality and restrict the use of such
information.
Buyers agree to keep any and all Disclosures strictly confidential and
will not directly or indirectly disclose any confidential information to any
third party (except the professionals described above) without the written
consent of the Seller. Upon termination of the Agreement, Buyers shall promptly
return all Disclosures, including but not limited to data, financial statements,
financial information and other material provided to them pursuant to this
Agreement.
Prior to the Closing Date or, if this Agreement is terminated, for two (2)
years following the termination date, Buyers agree that they will (1) refrain
from soliciting for employment, employing or offering employment to (whether as
an independent contractor or an employee), any employees or independent
contractors performing services for the Station; (ii) refrain from visiting the
station
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<PAGE>
or contacting employees or independent contractors performing services for the
Station without the prior approval of the Seller; and (iii) refrain from
soliciting for employment, employing or offering employment to (whether as an
independent contractor or employee) Eric Stevens, Larry Swikard or Danley West.
In connection with any due diligence conducted by Buyers, Buyers shall not
disrupt the operation of the Station and shall not interfere with the
contractual relationships of Seller.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:______________________________
(printed)
_________________________________
Title:___________________________
CUMULUS LICENSING CORPORATION
By:______________________________
(printed)
_________________________________
Title:___________________________
WISKES/ABARIS COMMUNICATIONS KQIZ PARTNERSHIP
By:______________________________
(printed)
_________________________________
Title:___________________________
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of January 30, 1998, by
and among Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing), Pacific
Broadcasting of Beaumont, Inc., a Texas corporation ("Pacific"), Beaumont
Skywave Inc., an Indiana corporation ("BSI"), and (solely with respect to
Sections 7(a), (b), (f), and (g) below relating to indemnification) Richard
Dames, an individual resident of Nevada. Broadcasting and Licensing are referred
to collectively herein as the "Buyers." Pacific and BSI are referred to
collectively herein as the Sellers. The Buyers and the Sellers are referred to
individually as the "Party" or collectively as the "Parties." Capitalized terms
used in this Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Sellers that are used or useful in the operation of radio
station KTCX(FM), licensed to Beaumont, Texas (the "Station") in return for
cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
a. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, (i) BSI agrees to sell, transfer, convey and
deliver to Licensing, and Licensing agrees to purchase from BSI, all of the FCC
Licenses listed in Section 2(1) of the disclosure schedule ("Disclosure
Schedule"); and (ii) Sellers agree to sell, transfer, convey and deliver to
Broadcasting, and Broadcasting agrees to purchase from Sellers, all of the
Acquired Assets other than the FCC Licenses. Both such sales shall take place at
the Closing for the consideration specified below in this Section 1.
b. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Sellers not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Sellers agree to pay
and discharge all Liabilities and obligations of the Sellers other than the
Assumed Liabilities.
c. Purchase Price. The Buyers agree to pay to the Sellers, as
consideration for the Acquired Assets, the amount of Three Million Six Hundred
Thousand Dollars ($3,600,000) (the "Purchase Price") in U.S. dollars by wire
transfer. The Purchase Price shall be payable as follows:
i. On the date of this Agreement, the Buyers will deliver to
the Escrow Agent an irrevocable letter of credit issued by NationsBank of
Texas, N.A. for the benefit of the Escrow Agent in substantially similar
form as the letter of credit attached hereto as
<PAGE>
Exhibit A in the amount of One Hundred Eighty Thousand Dollars
($180,000.00) (the "Earnest Money Deposit"); and
ii. on the Closing Date, the Buyers shall pay to the Sellers
the amount of Three Million Six Hundred Thousand Dollars ($3,600,000.00)
in U.S. dollars by wire transfer, with adjustments as provided in this
Agreement.
The Earnest Money Deposit referenced in this Section 1(c) shall be
held in escrow by the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit B (the "Earnest Money Escrow Agreement"). If this
Agreement is terminated without Closing of the transaction contemplated herein,
the Earnest Money Deposit shall be paid to the Sellers or returned to the Buyers
as provided in the Earnest Money Escrow Agreement.
d. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Station in
Beaumont, Texas, or such other location as the parties may mutually agree,
commencing at 9:00 a.m. local time within five (5) business days after the FCC
approval of the Assignment Application becomes a Final Order, or such other date
as the Parties may mutually determine, by which date all other conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
will have been satisfied (the "Closing Date").
e. Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Sellers will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents) in form acceptable to
the Buyers and substantially in the form of Exhibit C hereto, (B) if and to the
extent required by Buyer's lenders (and if this condition has not been waived by
Buyers under Sections 4(n) and 5(a)(vi) below) such affidavits, transfer tax
returns, memorandums of lease, and other additional documents as may be required
by the terms of the title insurance commitments described in Section 4(n)
hereof, as necessary to furnish title insurance as required by such section or
provide public notice of existence of the Leases, and (C) such other instruments
of sale, transfer, conveyance, and assignment as the Buyers and their counsel
reasonably may request; (iv) the Buyers will execute, acknowledge (if
appropriate), and deliver to the Sellers (A) an assumption in the form attached
hereto as Exhibit D and (B) such other instruments of assumption as the Sellers
and their counsel reasonably may request; and (v) the Buyers will deliver to the
Sellers the consideration specified in Section 1(c) above.
f. Noncompetition Agreement. On the Closing Date, the Sellers shall
cause each of their shareholders to execute a Noncompetition Agreement with the
Buyers including covenants not to compete with the Buyers within seventy-five
(75) miles of the Station's Transmitter, for a period of three years, in the
form attached hereto as Exhibit E. A portion of the Purchase Price equal to
Fifty Thousand Dollars ($50,000) shall be paid to the Sellers by the Buyers on
the Closing Date as consideration for the agreements set forth in the
Noncompetition Agreement.
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<PAGE>
2. Representations and Warranties of the Sellers.
The Sellers represent and warrant to the Buyers that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
a. Organization of the Sellers. Sellers are corporations duly
organized, validly existing, and in good standing under the laws of their
respective jurisdictions of incorporation. The Sellers have the power and
authority to own or lease their properties and to carry on all business
activities now conducted by them. The sole shareholder of BSI is Pacific. The
sole shareholders of Pacific are Richard Dames, P. Stephen Bunyard, and James G.
Withers.
b. Authorization of Transaction. The Sellers have full corporate
power and authority to execute and deliver this Agreement and all agreements and
instruments to be executed and delivered pursuant to this Agreement
(collectively, the "Ancillary Agreements") by Sellers and to perform their
obligations hereunder and thereunder. Without limiting the generality of the
foregoing, the Boards of Directors of the Sellers have duly authorized the
execution, delivery, and performance of this Agreement and the Ancillary
Agreements by the Sellers. This Agreement and the Ancillary Agreements
constitute the valid and legally binding obligation of the Sellers, enforceable
in accordance with their respective terms and conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the
Sellers are subject or any provision of the charter or bylaws of the Sellers; or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice or third party consent under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other agreement, arrangement to which the Sellers are a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). Other than with
respect to the Assignment Application described in Section 4(b) the Sellers do
not need to give any notice to, make any filing with, or obtain any Licenses,
consent, or approval of any court or government or governmental agency in order
for the Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
d. Title to Acquired Assets. Other than the Security Interests set
forth in Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Sellers have good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
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<PAGE>
e. Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal year ended December 31, 1996 for the Sellers; and
(ii) unaudited balance sheets and statements of income, as of and for each month
during 1996 and each month to date in 1997 for the Sellers. The Financial
Statements have been prepared in conformity with the Sellers' normal accounting
policies, practices and procedures applied on a consistent basis, throughout the
periods covered thereby, are correct and complete, fairly present the financial
condition of the Sellers and the results of operation of Sellers at the dates
and for the periods indicated, and are consistent with the books and records of
the Sellers (which books and records are correct and complete). The Financial
Statements accurately state the revenues of the Station for the period indicated
therein and include an accurate breakout of cash and trade revenues.
f. Events Subsequent to January 1, 1997. Since January 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule, there has not
been any material adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations, or future prospects of the Sellers
with respect to the operation of the Station. For purposes of this Section 2(f),
"material" shall be defined as any event or series of events which affect the
value of the Station or the Acquired Assets by or otherwise involve an amount in
excess of $5,000. Without limiting the generality of the foregoing and with
respect to the operation of the Station since January 1, 1997:
i. other than this Agreement, the Sellers have not entered
into any agreement, contract, lease, sublease, license, or sublicense (or
series of related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
ii. the Sellers have not delayed or postponed (beyond its
normal practice in the Ordinary Course of Business) the payment of
accounts payable and other Liabilities;
iii. the Sellers have not altered its credit and collection
policies or its accounting policies;
iv. the Sellers have not entered into or terminated any
employment arrangement, employment contract, consulting contract or
severance agreement or collective bargaining agreement, written or oral,
or modified the terms of any existing such contract or agreement;
v. there have been no changes and, to Sellers' knowledge, any
threatened changes in employment terms for any of its directors, officers,
and employees;
vi. the Sellers have not materially altered the programming,
format or call letters of the Station, or its promotional and marketing
activities;
vii. except as provided in Section 2(k), the Sellers have not
applied to the FCC for any modification of the FCC Licenses or failed to
take any action necessary to
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<PAGE>
preserve the FCC Licenses and has operated the Station in material
compliance therewith and with all FCC rules and regulations;
viii. the Sellers have not terminated or received notice of
termination for any syndicated programming; and
ix. the Sellers have not committed to any of the foregoing (i)
through (viii).
g. Tax Matters. The Sellers have timely and properly filed all Tax
Returns that it was required to file with respect to the Sellers' operations.
All such Tax Returns were correct and complete in all material respects and
properly reflect the tax liability of the Sellers. No Tax deficiencies have been
proposed or assessed against the Sellers. All Taxes owed by the Sellers with
respect to their operations (whether or not shown on any Tax Return) have been
paid. The Sellers have withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. No claim has ever been
made by any authority in any jurisdiction where the Sellers do not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
h. Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Station. The Sellers own or lease all tangible assets necessary for the conduct
of the operation and business of the Station as presently conducted and as
presently proposed to be conducted and all leased assets are specifically
identified as such in Section 2(h) of the Disclosure Schedule. Each such
tangible asset is free from defects (patent and latent), has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.
i. Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all real property leased to the Sellers (including, without
limitation, complete legal descriptions for all of the Real Estate) and used in
the operation of the Station. The Sellers have delivered to the Buyers correct
and complete copies of the Leases. With respect to the Real Estate:
i. the Leases are and, immediately after the Closing will
continue to be, legal, valid, binding, enforceable, and in full force and
effect;
ii. no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default thereunder
or permit termination, modification, or acceleration thereunder;
iii. there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
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<PAGE>
iv. to the Sellers' Knowledge, none of the properties subject
to the Leases is subject to any lease (other than Leases), option to
purchase or rights of first refusal;
v. except for Permitted Real Estate Encumbrances, there are no
(i) actual or, to the Sellers' Knowledge, proposed special assessments
with respect to any of the Real Estate; (ii) pending or, to the Sellers'
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the
buildings or improvements located on the Real Estate; (iv) any pending or,
to the Sellers' Knowledge, threatened changes in any zoning laws or
ordinances which may materially adversely affect any of the Real Estate or
Sellers' use thereof;
vi. the Sellers have not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder; and
vii. to the Sellers' Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations.
j. Contracts. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) that is material
to the operation of the Station or not entered into in the Ordinary Course of
Business. The Sellers have delivered to the Buyers a correct and complete copy
of each written arrangement listed in Section 2(j) of the Disclosure Schedule
(as amended to date). With respect to each written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect; (B) the written arrangement
will continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Sellers are not parties to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(j) of the Disclosure Schedule under the terms
of this Section 2(j). Except for the Assumed Contracts, the Buyers shall not
have any Liability or obligations for or in respect of any of the contracts set
forth in Section 2(j) of the Disclosure Schedule or any other contracts or
agreements of the Sellers.
k. Commission Licenses and Compliance with Commission Requirements.
Except as set forth in Section 2(k) of the Disclosure Schedule:
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Station as they are now being operated are (A) in full
force and effect, (B) unimpaired by any acts or omissions of the Sellers
or the
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<PAGE>
Sellers' employees or agents, (C) free and clear of any restrictions which
might limit the full operation of the Station, and (D) detailed in Section
2(k) of the Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and consents
referenced in the preceding sentence, Section 2(k) of the Disclosure
Schedule also sets forth, without limitation, the date of the last
renewal, the expiration date thereof, and any conditions or contingencies
related thereto. Except as set forth in Section 2(k) of the Disclosure
Schedule, no condition exists or event has occurred that permits, or after
notice or lapse of time, or both, would permit, the revocation or
termination of any such license, permit, consent, franchise, or
authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Station as now conducted. Except as set forth in Section
2(k) of the Disclosure Schedule, the Sellers are not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or
revoked.
ii. The Station is in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Station's transmission facilities is restricted in
accordance with the policies of the FCC.
iii. Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Sellers' Knowledge, the Sellers are not the subject of
any FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Station, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(k) of the Disclosure Schedule.
iv. The Sellers have filed with the FCC and all other
governmental authorities having jurisdiction over the Station all material
reports, applications, documents, instruments, and other information
required to be filed, and will continue to make such filings through the
Closing Date.
v. The Sellers are not aware of any information concerning the
Station that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary
for the consummation of the transactions contemplated hereunder or the
Buyer's operation and/or ownership of the Station.
l. Intellectual Property. The Sellers own or have the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the Station as presently conducted and
as presently proposed to be conducted. Each item of Intellectual Property owned
or used by the Sellers immediately prior to the Closing hereunder is set forth
on Section 2(l) of the Disclosure Schedule and each item listed will be owned or
available for use the by the Buyers on identical terms and conditions
immediately subsequent to the Closing hereunder. The Sellers have not interfered
with, infringed upon, misappropriated, or otherwise come
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<PAGE>
into conflict with any Intellectual Property rights of third parties, and the
Sellers have never received any charge, complaint, or notice alleging any such
interference, infringement, misappropriation, or violation. To the Knowledge of
the Sellers, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Sellers.
m. Insurance. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Sellers' insurance coverage. With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
and enforceable and in full force and effect; (B) the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect on identical
terms through the Closing Date.
n. Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Sellers: (i) are subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) are parties or, to
the Knowledge of the Sellers, are threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(n) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Sellers or the Station taken as a whole.
The Sellers have no Knowledge of any Basis for any such charge, complaint,
action, suit, proceeding, hearing, or investigation against the Sellers.
o. Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Station of each employee. To
the Knowledge of the Sellers, no key employee or group of employees has any
plans to terminate employment with the Sellers. The Sellers are not a party to
or bound by any collective bargaining or similar agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. The Sellers have no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to the employees of the Sellers. The Sellers have no
Knowledge of any Basis for any claim by past or current employees of the Sellers
or applicants for employment that the Sellers or its management has
discriminated based on each individuals race, sex, national origin, religion,
ethnicity, handicap or any other protected characteristic under applicable law.
p. Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Sellers maintain or to which the Sellers
contribute or are required to contribute for the benefit of any current or
former employee of the Sellers and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Sellers do not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Sellers. There are no pending or, to the Knowledge of the Sellers, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any
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such Employee Benefit Plan, or otherwise involving any such Employee Benefit
Plan (other than routine claims for benefits), nor have there been any
Reportable Events or Prohibited Transactions with respect to any Employee
Benefit Plan.
q. Environment, Health, and Safety.
i. With respect to the operation of the Station and the Real
Estate, the Sellers are, and at all times since June 1996 have been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and the Sellers have no Liability (and to Sellers' Knowledge
there is no Basis related to the past or present operations of the Sellers
for any present or future Liability) under any Environmental Law. The
Sellers have no Liability (and to Sellers' Knowledge there is no Basis for
any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Sellers giving rise
to any Liability) under the Occupational Safety and Health Act, as
amended, or any other law (or rule or regulation thereunder) of any
federal, state or local government (or agency thereof) concerning employee
health and safety, or for any illness of or personal injury to any
employee.
ii. With respect to the operation of the Station, to Seller's
Knowledge, the Sellers have obtained, and at all times have been in
compliance in all material respects with all material terms and conditions
of all permits, licenses, and other authorizations which are required
under, and have complied with all other material limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
applicable Environmental Laws or law of any federal, state, or local
government relating to worker health and safety.
iii. All properties and equipment used in connection with the
operation of the Station and the Acquired Assets, to Seller's Knowledge,
do not contain and have not contained, asbestos, PCB-containing equipment
with levels of PCBs in excess of fifty parts per million (50 ppm),
methylene chloride, trichloroethylene, 1, 2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances, except in
compliance with Environmental Laws. To Seller's Knowledge, no pollutant,
contaminant, or chemical, industrial, hazardous, or toxic material or
waste ever has been buried, stored, spilled, leaked, discharged, emitted,
or released on any of the Real Estate. No above ground or underground
storage tanks are, and to Sellers' Knowledge since June of 1996 have been,
located at, on or under the Real Estate except in compliance with
Environmental Laws. The Sellers have delivered to the Buyers a complete
copy of all environmental claims, reports, studies, compliance actions or
the like of the Sellers in the Sellers' possession or control with respect
to any of the Real Estate or any of the Acquired Assets.
iv. Without limiting the foregoing, the Seller specifically
acknowledges and agrees that (a) certain of the capacitors in the back-up
transmitter identified on Section 2(q) of the Disclosure Schedule as
containing PCB's are maintained and operated in material
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compliance with all Environmental Laws, and (b) to Sellers' Knowledge,
such capacitors have not, between June of 1996 and the Closing Date, been
used, stored or maintained in any manner which would form the basis for
any claim against the Seller or the Buyers based on any Environment Law,
and (c) to Sellers' Knowledge, there has not been since June of 1996 any
release or discharge of PCB's with respect to such capacitors.
r. Legal Compliance. The Sellers have complied in all material
respects with all laws (including rules and regulations thereunder) of federal,
state, local and foreign governments (and all agencies thereof). The Sellers
have filed in a timely manner all reports, documents, and other materials it was
required to file (and the information contained therein was correct and complete
in all material respects) under all applicable laws.
s. Advertising Contracts. Section 2(s) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Station in
excess of $5000, and the amount to be paid to the Sellers therefor. The Sellers
have no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Sellers to cease doing business or to reduce in any material respect the
business transacted with the Sellers or to terminate or modify any agreements
with the Sellers (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
t. Brokers' Fees. The Sellers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
u. Undisclosed Commitments or Liabilities. There are no material
commitments, liabilities or obligations relating to the Station, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Sellers of the liabilities of third parties, for which
specific and adequate provisions have not been made on the Financial Statements
except those incurred in or as a result of the Ordinary Course of Business since
January 1, 1997.
v. Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer.
Buyers represent and warrant to the Sellers that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date.
a. Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada. Broadcasting is authorized to do business and is in good
standing in the state of Texas.
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b. Authorization of Transaction. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1 (e) above).
d. Brokers' Fees. Other than fees payable to Communications Equity
Associates, which shall be the exclusive liability of the Buyers, the Buyers
have no Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement
for which the Sellers could become liable or obligated.
e. Qualification as a Broadcast Licensee. Buyers know of no fact
that would, under the Communications Act and the existing rules, regulations,
and policies of the FCC, disqualify Buyers as owner and operator of the Station.
Buyers are financially qualified to consummate the transactions as contemplated
by this Agreement and shall so certify in the application filed with the FCC.
4. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
a. General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
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b. Assignment Application. Within five (5) business days after the
execution of this Agreement, the Sellers and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the operation of the Station from the Sellers to
Licensing (the "Assignment Application"). The costs of the FCC filing fees in
connection with the Assignment Application shall be divided equally between the
Sellers and Buyers. Each party shall pay its own attorneys' fees. The Sellers
and the Buyers shall thereafter prosecute the Assignment Application with all
reasonable diligence and otherwise use commercially reasonable efforts to obtain
the grant of the Assignment Application as expeditiously as practicable (but
neither the Sellers nor the Buyers shall have any obligation to satisfy
complainants or the FCC by taking any steps which would have a material adverse
effect upon the Station or impose significant costs on such party). If the FCC
imposes any condition on either party to the Assignment Application, such party
shall use commercially reasonable efforts to comply with such condition,
provided, that neither party shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Station or any
Affiliate. The Sellers and the Buyers shall jointly oppose any requests for
reconsideration or judicial review of FCC approval of the Assignment Application
and shall jointly request from the FCC extension of the effective period of FCC
approval of the Assignment Application if the Closing shall not have occurred
prior to the expiration of the original effective period of the FCC consent.
Nothing in this Section 4(b) shall be construed to limit either party's right to
terminate this Agreement pursuant to Section 9 of this Agreement.
c. Employment Offers. Upon notice to the Sellers, and at mutually
agreeable times (but in no event before before the Assignment Application is
filed with the FCC), the Sellers will permit the Buyers to meet with its
employees prior to the Closing Date. The Buyers may, at their option, extend
offers of employment to all or any of the Sellers' employees effective on the
Closing Date. From and after the execution of this Agreement, the Sellers shall
assist Buyers in retaining those employees of the Station which the Buyers wish
to hire in connection with the operation of the Station by the Buyers subsequent
to the Closing, and the Sellers will not take any action to preclude or
discourage any of the Sellers' employees from accepting any offer of employment
extended by the Buyers.
d. Notices and Consents. The Sellers will give all notices to third
parties and shall have obtained all third party consents that are required for
Buyers to acquire the rights and obligations under the Assumed Contracts. Each
of the Parties will take any additional action that may be necessary, proper, or
advisable in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental agencies,
and third parties that it may be required to give, make, or obtain.
e. Advertising Obligations. The Sellers shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate negative balance owing under all Barter Agreements as of the Closing
Date shall not exceed Five Thousand Dollars ($5,000.00) worth of air time
without the Buyers' consent. On the Closing Date, the Sellers shall deliver to
the Buyers a schedule, certified by an officer of the Sellers, reflecting the
aggregate outstanding balances under all Barter Agreements in existence as of
the Closing Date.
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f. Operating Statements. The Sellers shall deliver to the Buyers,
for the Buyers' informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Station within ten (10) days
after each such statement is prepared by or for the Sellers.
g. Contracts. The Sellers will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(j) of the Disclosure Schedule in any material respect. The Sellers will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Five Thousand Dollars
($5,000).
h. Operation of Station. The Sellers will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business, except as may be permitted under Section 2(f) above. The
Sellers shall operate the Station in material compliance with the FCC Licenses
and the rules and regulations of the FCC, and the FCC Licenses shall at all
times remain in full force and effect. The Sellers shall file with the FCC all
material reports, applications, documents, instruments and other information
required to be filed in connection with the operation of the Station.
i. Credit and Receivables. The Sellers will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Station and with respect to collecting accounts receivable
arising from such extension of credit.
j. Preservation of Station and the Acquired Assets. The Sellers will
use commercially reasonable efforts to keep its Station and the Acquired Assets
and properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensors,
advertisers, suppliers, customers, and employees, all of the Confidential
Information, call letters and trade secrets of the Station, and the FCC
Licenses.
k. Full Access and Consultation. The Sellers will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Station, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Sellers. The Sellers will consult with the
Buyers' management with a view to informing Buyers' management as to the
operations, management and business of the Station.
l. Notice of Developments. The Sellers will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Station or the Acquired Assets or the ability of the Sellers
to perform hereunder.
m. Exclusivity. The Sellers will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the
Sellers, or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or
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attempt by any person to do or seek any of the foregoing. The Sellers will
notify the Buyers immediately if any person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
n. Title Insurance, Surveys and Environmental Assessments. The
Buyers will obtain with respect to each parcel of Real Estate subject to the
Leases (i) within forty-five (45) days of the date of execution of this
Agreement, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request
(provided, however, that if Buyers fail to provide Sellers written notice within
the 45-day period that the survey is not acceptable, such requirement shall be
considered waived and such a survey shall not be a condition of Buyers' closing
under Section 5(a) below), (ii) a current survey of each parcel of Real Estate
certified to the Buyers and its lender, prepared by a licensed surveyor and
conforming to current ALTA Minimum Detail Requirements for Land Title Surveys,
disclosing the location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, and other matters shown customarily on such surveys,
and showing access affirmatively to public streets and roads (the "Surveys')
which shall not disclose any survey defect or encroachment from or onto any of
the Real Estate which has not been cured or insured over prior to the Closing;
and (iii) with respect to each parcel of Real Estate, a current Phase I
environmental site assessment from an environmental consultant or engineer
reasonably satisfactory to the Sellers which does not indicate that the Sellers
and the Real Estate are not in material compliance with any Environmental Law
and which shall not disclose or recommend any material action with respect to
any condition to be remediated or investigated or any contamination on the site
assessed; provided, however, that (a) such a Phase I assessment shall not be
required and shall not be a condition of Buyers' closing under Section 5(a)
above unless specifically required by Buyers' lender, and (b) in the event that
such assessments indicate that the Real Estate or any portion thereof is not in
material compliance with any Environmental Law, Sellers shall be obligated to
remedy the violations identified if the aggregate cost of such actions would not
exceed Seventy-Five Thousand Dollars ($75,000). The Buyers will pay the costs of
these title policies, Surveys and environmental assessments.
o. Control of Station. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application and such approval has become a Final
Order. Between the date of this Agreement and the Closing Date, the Buyers and
their employees or agents shall not directly or indirectly control, supervise,
or direct, or attempt to control, supervise, or direct, the operation of the
Station, and such operation shall be the sole responsibility of and in the
control of the Sellers.
p. Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Sellers until the Closing. In the
event of any such loss, damage, or destruction the Sellers will promptly notify
the Buyers of all particulars thereof, stating the cause thereof (if known) and
the extent to which the cost of restoration, replacement and repair of the
Acquired Assets lost, damaged or destroyed will be reimbursed under any
insurance policy with
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respect thereto. The Sellers will, at Sellers' expense, repair or replace such
Acquired Assets to their former condition as soon as possible after loss, damage
or destruction thereof and shall use its best efforts to restore as promptly as
possible transmissions as authorized in the FCC Licenses. The Closing Date shall
be extended (with FCC consent, if necessary) for up to sixty (60) days to permit
such repair or replacement. If repair or replacement cannot be accomplished
within sixty (60) days of the date of the Sellers' notice to the Buyers and the
Buyers determine that the Sellers' failure to repair or replace would have a
material adverse effect on the operation of the Station:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Sellers'
notice to the Buyers, in which case either party may terminate this
Agreement; or
iii. the Buyers may choose to accept the Acquired Assets in
their "then" condition, together with the Sellers' assignment to the
Buyers of all rights under any insurance claims covering the loss, damage
or destruction and payment over to the Buyers of any proceeds under any
such insurance policies, which have been previously received by the
Sellers with respect thereto but which have not yet been applied to
repairs, plus an amount equal to the amount of any deductible or
self-insurance maintained by Sellers on such Acquired Assets. In the event
the Closing Date is postponed pursuant to this Section 4(p), the parties
hereto will cooperate to extend the time during which this Agreement must
be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
a. Conditions to Obligation of the Buyers. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Sellers shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
iii. the Sellers shall have procured all of the third party
consents specified in Section 4(d) above;
iv. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any
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federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the parties if such
transactions are consummated, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or
(C) affect in a material adverse manner the right of the Buyers to own,
operate, or control the Acquired Assets (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
v. the Sellers shall have delivered to the Buyers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Sections 5(a)(i) through (iv) is satisfied in all respects;
vi. all of the title insurance commitments (and endorsements),
Surveys and environmental site assessments as required under Section 4(n)
and not previously waived by Buyers above shall have been received by
Buyers;
vii. the Assignment Application shall have been approved by a
Final Order of the FCC and the Buyers shall have received all governmental
approvals required to assign all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
viii. the relevant parties shall have entered into the
Noncompetition Agreement;
ix. the Buyers shall have received from counsel to the Sellers
an opinion with respect to the matters set forth in Exhibit F attached
hereto, addressed to the Buyers and its lender and dated as of the Closing
Date;
x. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with an allocation schedule to be delivered at Closing; and
xi. all actions to be taken by the Sellers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
b. Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
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ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
iii. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
iv. the Buyers shall have delivered to the Sellers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
v. the Assignment Application shall have been approved by a
Final Order of the FCC and the Sellers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
vi. the relevant parties shall have entered into the
Noncompetition Agreement; and
vii. all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
6. Post-Closing Covenants.
The Parties agree as follows with respect to the period following
the Closing:
a. General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
b. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan,
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occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Station, each of the other Parties will
reasonably cooperate with the contesting or defending Party and its counsel in
the contest or defense, make available his or its personnel, and provide such
testimony and access to its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 7 below); provided, however,
that such access and cooperation does not unreasonably disrupt the normal
operations of the cooperating party.
c. Adjustments. Operation of the Station and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Sellers and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned, except that Buyers shall assume up to a $5000 negative trade balance)
shall be prorated between the Sellers and the Buyers as of the Closing Date in
accordance with the foregoing principle. In addition, all commissions payable
with respect to the accounts receivable of the Sellers (whether due before or
after Closing) shall be solely for the account and responsibility of the
Sellers. Contractual arrangements that do not reflect an equal rate of
compensation to the Station over the term of the agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by an
independent accounting firm mutually acceptable to both parties and the fees and
expenses of such accounting firm shall be paid one-half (1/2) by the Sellers and
one-half (1/2) by the Buyer.
d. Collection of Accounts Receivable. At the Closing, the Sellers
will turn over to the Buyers, for collection only, the accounts receivable of
the Station owing to the Sellers as of the close of business on the day before
the Closing Date. A schedule of such accounts receivable will be delivered by
the Sellers to the Buyers on the Closing Date or as soon thereafter as possible.
The Buyers agree to use commercially reasonable efforts in the ordinary course
of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Closing Date, and will remit all payments received on such
accounts during this 120-day period within ten (10) days of the close of each
thirty-day period, together with an accounting of all payments received within
such period. The Buyers shall have the sole right to collect such accounts
receivable during such one hundred twenty (120) day period. In the event the
Buyers receive monies during the 120-day period following the Closing Date from
an advertiser who, after the Closing Date, is advertising on the Station, and
that advertiser was included among the accounts receivable as of the Closing
Date, the Buyers shall apply said monies to the oldest outstanding balance due
on the particular account, except in the case of a "disputed" account
receivable. For purposes of this Section 6(d), a "disputed" account receivable
means one which the account debtor refuses to pay because he asserts that the
money is not owed or the amount is incorrect. In the case of such a disputed
account, the Buyers shall immediately return the account
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to the Sellers prior to expiration of the 120-day period following the Closing
Date. If the Buyers return a disputed account to the Sellers, the Buyers shall
have no further responsibility for its collection and may accept payment from
the account debtor for advertising carried on the Station after the Closing
Date. At the end of the 120-day period following the Closing Date, the Buyers
will turn back to the Sellers all of the accounts receivable of the Station as
of the Closing Date owing to the Sellers which have not yet been collected, and
the Buyers will thereafter have no further responsibility with respect to the
collection of such receivables. During the 120-day period following the Closing
Date, the Buyers shall afford the Sellers reasonable access to the accounts
receivable "aging list." The Sellers acknowledges and agrees that the Buyers are
acting as collection agent hereunder for the sole benefit of the Sellers and
that Buyers have accepted such responsibility for the accommodation of the
Sellers. The Buyers shall not have any duty to inquire as to the form, manner of
execution or validity of any item, document, instrument or notice deposited,
received or delivered in connection with such collection efforts, nor shall the
Buyers have any duty to inquire as to the identity, authority or rights of the
persons who executed the same. The Sellers shall indemnify Buyers and hold them
harmless from and against any judgments, expenses (including attorney's fees)
costs or liabilities which the Buyers may incur or sustain as a result of or by
reason of such collection efforts, except in the event of Buyers' gross
negligence or willful misconduct.
e. Consents. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Sellers
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Sellers will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Sellers' interest in the benefits under any such Assumed Contract,
including performance by the Sellers as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
7. Remedies for Breaches of this Agreement.
a. Survival. All of the representations and warranties of the
Sellers contained in Section 2 of this Agreement (other than the representations
and warranties of the Sellers contained in Sections 2(a), 2(b), 2(c), and 2(d)
hereof and the representations and warranties of the Buyers contained in
Sections 3(a), 3(b), and 3(c) hereof) shall survive the Closing and continue in
full force and effect for a period of eighteen (18) months after Closing. The
representations and warranties of the Sellers contained in Sections 2(a), 2(b),
2(c), and 2(d) hereof and all of the representations and warranties of the
Buyers contained in Sections 3(a), 3(b), and 3(c) hereof shall survive the
Closing and continue in full force and effect forever thereafter.
b. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Sellers agree to indemnify the Buyers
from and against the entirety of any Adverse
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Consequences the Buyers may suffer resulting from, arising out of, relating to,
in the nature of, or caused by:
i. any misrepresentation or breach of any of the Sellers'
representations or warranties, and covenants contained in this Agreement
or in any Ancillary Agreement executed and/or delivered by the Sellers (so
long as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant
of the Sellers contained herein or in any Ancillary Agreement;
iii. any Liability, known or unknown, of the Sellers which is
not an Assumed Liability; or
iv. any Liability, known or unknown, of the Buyers arising by
operation of law from Sellers' operation of the Station prior to Closing
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
In addition, Richard Dames agrees to indemnify the Buyers from and against the
entirety of any Adverse Consequences the Buyers may suffer resulting from,
arising out of, relating to, in the nature of, or caused by (i) through (iv)
above; provided, however, that Richard Dames shall not be liable for any such
Adverse Consequences to the extent they (a) relate to a misrepresentation or
breach of any of the Sellers' representations under Sections 2(i) and 2(q); or
(b) exceed (i) One Million Dollars ($1,000,000) with respect to claims of which
Buyer notifies Seller and Dames within six (6) months of the Closing Date, or
(ii) Two Hundred Fifty Thousand Dollars ($250,000) with respect to claims of
which Buyer notifies Seller and Dames between six (6) months and eighteen (18)
months after the Closing Date; or (c) relate to a breach of the Noncompetition
Agreement by a Shareholder other than Dames.
c. Indemnification Provisions for the Benefit of the Sellers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Sellers
from and against the entirety of any Adverse Consequences the Sellers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Sellers makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
d. Specific Performance. Each of the Parties acknowledges and agrees
that in the event that the transactions contemplated by this Agreement are not
closed because of a default by the Sellers, the Buyers shall be entitled to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 10(n)
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below), in addition to any other remedy to which it may be entitled, at law or
in equity. Each of the Parties acknowledges and agrees that notwithstanding the
provision in Section 7(e) with respect to the remedy of liquidated damages upon
a breach of a warranty or covenant of this Agreement prior to the Closing, money
damages would not be an adequate remedy for Buyers for Sellers' failure to
consummate this transaction.
e. Liquidated Damages. The Buyers and the Sellers acknowledge that
in the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Sellers as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(c), the Sellers
shall be entitled to receive from the defaulting Party for such default the
Earnest Money Deposit as liquidated damages without the need for proof of
damages. The Sellers shall proceed against the Earnest Money Deposit as full
satisfaction of liquidated damages owed by the Buyers and as its sole remedy for
a failure of the transactions contemplated hereby to occur as a result of a
material breach of the terms of this Agreement by the Buyers.
f. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnifica tion against any other Party (the "Indemnifying
Party",) under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
g. Limitation of Liability. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the
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Identified Party, in the aggregate from all indemnifiable events shall exceed
Twenty-Five Thousand Dollars ($25,000) and indemnification shall be made by the
indemnifying party only to the extent of such excess over Twenty-Five Thousand
Dollars ($25,000); provided however that the foregoing limitation shall not be
applicable to: (i) the obligations of the Buyer to pay and discharge any
Liability of the Sellers to third parties from and after the Closing Date
assumed by the Buyer under the terms of this Agreement; (ii) the obligation of
the Sellers to pay and discharge any Liability to third parties not assumed by
the Buyer under the terms of this Agreement, or (iii) the Sellers' obligation to
deliver clear title to the Acquired Assets.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Sellers, other than Retained Assets that are used or useful in
the operation of the Station, wherever located, including but not limited to all
of its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles) and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those barter agreements and Advertising Contracts identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Station; (e) Assumed Contracts, indentures,
Security Interests, guaranties, other similar arrangements, and rights
thereunder; (f) call letters of the Station, jingles, logos, slogans, and
business goodwill of the Station; (g) claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery (including rights under
policies of insurance), rights of set off, and rights of recoupment; (h)
Licenses and similar rights obtained from governments and governmental agencies;
and (i) FCC logs and records and all other books, records, ledgers, logs, files,
documents, correspondence, advertiser lists, all other lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, program production materials, studies,
reports, and other printed or written materials; and (j) goodwill of the
Station.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all reasonable attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
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"Ancillary Agreements" has the meaning set forth in Section 2(b) above.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(j) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"Assumed Liabilities" means obligations of the Sellers which accrue after
the Closing Date under the Assumed Contracts either: (i) to furnish services,
and other non-Cash benefits to another party after the Closing; or (ii) to pay
for goods, services, and other non-Cash benefits that another party will furnish
to it after the Closing. The Assumed Liabilities shall not include any Retained
Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could reasonably form the basis for
any specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Station.
"Disclosure Schedule" has the meaning set forth in Section 1 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
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"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, or the Emergency Planning and Community Right-to-Know Act of 1986 (each
as amended), or any other law of any federal, state, local, or foreign
government or agency thereof (including rules and regulations thereunder)
relating to public health and safety, or pollution or protection of the
environment, including, without limitation, laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Bank One Trust Company, NA.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Sellers in connection with the conduct of the business and operation
of the Station.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
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"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Leases" means those real estate leases to which Sellers are a party
governing Sellers' studios and FM tower sites, as described in Section 2(i) of
the Disclosure Schedule.
"Liability" means any liability (whether absolute or contingent, whether
liquidated or unliquidated, and whether due or to become due), including any
liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Sellers with respect
to the operations of the Station and all applications therefor, together with
any renewals, extension or modifications thereof and additions thereto.
"Multi-employer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Noncompetition Agreement" means the Noncompetition Agreement with
Sellers' Owners in the form attached hereto as Exhibit E.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
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<PAGE>
"Purchase Price " has the meaning set forth in Section 1(c) above.
"Real Estate" means the real estate, building, fixtures and improvements
which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the
Sellers as a corporation; (ii) any of the rights of the Sellers under this
Agreement; (iii) accounts, notes and other receivables of the Sellers; and (iv)
Cash.
"Retained Liabilities" means any other obligations or Liabilities of the
Sellers, including but not limited to: (i) any Liability relating to the
ownership or operation of the Station prior to the Closing; (ii) any Liability
of the Sellers for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby consistent with Section
10(k) below; (iii) any Liability of the Sellers for costs and expenses incurred
in connection with this Agreement or the consummation of the transactions
contemplated hereby (except as set forth in Section 4(n) relating to Surveys,
title commitments and environmental audits and Section 4(b) with regard to the
Assignment Application); or (iv) any Liability or obligation of the Sellers
under this Agreement.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Sellers" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
KTCX(FM), authorized by the FCC to operate in Beaumont, Texas.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(n) above.
"Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding,
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social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing in the event the
Sellers is in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however, that if such breach is
capable of being cured, such breach also remains uncured for twenty (20)
days after notice of breach is received by the Sellers from the Buyers;
iii. the Sellers may terminate this Agreement by giving
written notice to the Buyers at any time prior to the Closing in the event
the Buyers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable of being cured, such breach remains uncured for twenty (20) days
after notice of breach is received by the Buyers from the Sellers;
iv. the Buyers may terminate this Agreement by giving written
notice to the Sellers within sixty (60) days of the date of this Agreement
if (a) the Buyers have received title reports which do not satisfy the
standards of Section 4(n)(i) above, (b) the Buyers have received surveys
which do not satisfy the standards of Section 4(n)(ii) above, or (iii) the
Buyers have received environmental assessments which indicate the
necessity for remedial action estimated to cost in excess of Seventy-Five
Thousand Dollars ($75,000) and neither Seller nor Buyer agrees to bear
such costs beyond that amount;
v. the Buyers may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing if the Closing
shall not have occurred on or before the 270th day following the date of
this Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained
in this Agreement);
vi. the Sellers may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before
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<PAGE>
the 270th day following the date of this Agreement by reason of the
failure of any condition precedent under Section 5(b) hereof (unless the
failure results primarily from the Sellers themselves breaching any
representation, warranty, or covenant contained in this Agreement); or
vii. the Buyers or the Sellers may terminate this Agreement if
any Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. Miscellaneous.
a. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
b. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Sellers the Purchase Price therefor or to any
successor to the Buyers in the event of any sale, merger or consolidation of the
Buyers (provided that no such assignment shall require the initiation of another
statutory thirty (30) day public comment period once the Assignment Application
is filed), and (ii) Buyers may assign their indemnification claims and their
rights under the warranties and representations of the Sellers to the financial
institution(s) providing financing to the Buyers in connection with this
transaction.
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to Richard Dames:
Mr. Richard Dames
7355 S. Valley View
Las Vegas, Nevada 89139
Fax: (702) 260-8891
If to the Sellers:
Mr. Richard Dames
7355 S. Valley View
Las Vegas, Nevada 89139
Fax: (702) 260-8891
Copy to:
Pamela C. Cooper, Esquire
Davis Wright Tremaine LLP
1155 Connecticut Avenue, NW
Suite 700
Washington, DC 20036
Fax: (202) 508-6699
(which copy shall not constitute notice to Sellers)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
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Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Texas.
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
k. Expenses. The Buyers and the Sellers will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(n) with respect to Surveys, title commitments
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and environmental audits. The Sellers will pay all income taxes on the Purchase
Price. The Sellers and the Buyers will each pay one-half (1/2) of any transfer
or sales taxes and other recording or similar fees necessary to vest title to
each of the Acquired Assets in the Buyers.
l. Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all published rules and regulations promulgated thereunder, unless the
context requires otherwise. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. The Parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
m. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Houston, Texas, in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
* * * * *
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:______________________________
(printed)
_________________________________
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<PAGE>
Title:___________________________
CUMULUS LICENSING CORPORATION
By:______________________________
(printed)
_________________________________
Title:___________________________
"Buyers"
PACIFIC BROADCASTING OF BEAMONT, INC.
By:______________________________
(printed)
_________________________________
Title:___________________________
BEAUMONT SKYWAVE, INC.
By:______________________________
(printed)
_________________________________
Title:___________________________
"Sellers"
(Solely with respect to Section 7(a), (b), (f) and (g) of this Agreement):
RICHARD DAMES
_________________________________
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of December 30, 1997, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing"), and Sovereign
Communications Corporation, a Texas corporation (the "Seller"). Broadcasting and
Licensing are referred to collectively herein as the "Buyers." The Buyers and
the Seller are referred to collectively herein as the "Parties." Capitalized
terms used in this Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) that are used in the operation of radio station KZRK-FM and
KZRK-AM, licensed to Canyon, Texas (the "Stations") in return for cash. Seller
does not currently own those assets but shall own those assets as of the
Closing, and representations by the Seller as to ownership of the assets in this
Agreement shall be interpreted accordingly.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Licensing agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to Licensing, all of
the FCC Licenses listed in Section 2(l) of the Disclosure Schedule. In addition,
Broadcasting agrees to purchase from the Seller, and the Seller agrees to sell,
transfer, convey, and deliver to Broadcasting, all of the Acquired Assets other
than the FCC Licenses. Both such sales shall take place at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities and the
Seller agrees to pay and discharge all Liabilities and obligations of the Seller
other than the Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the amount of One Million Dollars
($1,000,000.00) (the "Purchase Price"). The Purchase Price shall be payable as
follows:
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i. on the date of this Agreement, the Buyers will deliver to the
Escrow Agent an irrevocable letter of credit issued by NationsBank of
Texas, N.A. for the benefit of the Escrow Agent in substantially similar
form as the letter of credit attached hereto as Exhibit A in the amount of
Fifty Thousand Dollars ($50,000.00) (the "Earnest Money Deposit"); and
ii. on the Closing Date, the Buyers shall pay to the Seller the
amount of One Million Dollars ($1,000,000.00), with adjustments as
specifically provided in this Agreement.
The Earnest Money Deposit referenced in this Section 1(c) shall be held in
escrow by the Escrow Agent pursuant to an escrow agreement in the form attached
hereto as Exhibit B (the "Earnest Money Escrow Agreement"). If this Agreement is
terminated without Closing of the transaction contemplated herein, the Earnest
Money Deposit shall be paid to the Seller or returned to the Buyers as provided
in the Earnest Money Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Seller in
Cleburne, Texas, or another mutually agreed location, commencing at 9:00 a.m.
local time on the date set by the Buyers not earlier than the fifth business day
or later than the tenth business day after the FCC approval of the Assignment
Application becomes a Final Order, by which date all other conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
will have been satisfied, or such other date as the Parties may mutually
determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in Section 5(a) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including Lease and other Assumed Contract assignments
and Intellectual Property transfer documents), bills of sale and warranty deeds,
in a form mutually satisfactory to Buyers and Seller; (B) such affidavits,
transfer tax returns, memorandums of lease, and other additional documents as
may be required by the terms of the title insurance commitments described in
Section 4(o) hereof, as necessary to furnish title insurance as required by such
section or as may be necessary to convey title to the Real Estate to the Buyers
in the condition required herein or provided public notice of existence of the
Leases, and (C) such other instruments of sale, transfer, conveyance, and
assignment as the Buyers and their counsel reasonably may request; (iv) the
Buyers will execute, acknowledge (if appropriate), and deliver to the Seller (A)
an assumption in a form mutually satisfactory to Buyers and Seller; and (B) such
other instruments of assumption as the Seller and its counsel reasonably may
request; and (v) the Buyers will deliver to the Seller the consideration
specified in Section 1(c) above.
(f) Postclosing Agreement. On the Closing Date, the Seller shall execute,
and shall cause shareholder United Heritage Corporation to execute, a
Postclosing Agreement with the Buyer including covenants not to compete with the
Buyer in the markets served by the Stations and agreements to indemnify the
Buyer in the form of Exhibit C attached hereto. A portion of the
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Purchase Price equal to Fifty Thousand Dollars ($50,000) shall be paid to the
Seller by the Buyers on the Closing Date as consideration for the agreements set
forth in the Postclosing Agreement.
(g) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit D.
(h) Local Marketing Agreement. Concurrent with the execution of this
Agreement, the Seller and Buyer shall execute the Local Marketing Agreement (the
"LMA Agreement") which includes the terms and conditions pursuant to which
Broadcasting will purchase the airtime on the Stations. The accounts receivable
of the Stations in existence as of the date of this Agreement shall be collected
pursuant to the terms and conditions of the LMA Agreement.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2; provided, however, that Seller shall have the right to submit
an amended Disclosure Schedule prior to Closing so long as the amendments are
not material or Buyer consents to the amendments, which consent shall not be
unreasonably withheld.
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The Seller has the power and authority to own or lease its properties and to
carry on all business activities now conducted by it. The sole shareholder of
the Seller is United Heritage Corporation.
(b) Authorization of Transaction. The Seller has full power and authority
to execute and deliver this Agreement and all agreements and instruments to be
executed and delivered by such Party pursuant to this Agreement (collectively,
the "Ancillary Agreements") and to perform its obligations hereunder and
thereunder. Without limiting the generality of the foregoing, the Board of
Directors of the Seller has duly authorized the execution, delivery, and
performance of this Agreement and the Ancillary Agreements by the Seller. This
Agreement and the Ancillary Agreements constitute the valid and legally binding
obligation of the Seller, enforceable in accordance with their respective terms
and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision
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of the charter or bylaws of the Seller; or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice or third party consent under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other agreement,
arrangement to which the Seller is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Other than with respect to the Assignment
Application described in Section 4(b) the Seller does not need to give any
notice to, make any filing with, or obtain any Licenses, consent, or approval of
any court or government or governmental agency in order for the Parties to enter
into this agreement or the Ancillary Agreements or to consummate the
transactions contemplated by this Agreement or the Ancillary Agreements
(including the assignments and assumptions referred to in Section 1(e) above).
(d) Title to Acquired Assets. Other than the Security Interests set forth
on Section 2(d) of the Disclosure Schedule (which shall be released at or before
the Closing), at Closing the Seller will have good title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer.
(e) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(e) of the Disclosure Schedule, there has not been any
adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the Stations. Without
limiting the generality of the foregoing and with respect to the operation of
the Stations since that date:
(i) the Seller has not sold, leased, transferred, or assigned any of its
material assets, tangible or intangible;
(ii) other than this Agreement, the Seller has not entered into any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
involving more than $5,000 to which the Seller is a party or by which it or any
of its assets are bound;
(iv) no Security Interest has been imposed upon any of Seller's assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of related
capital expenditures) outside the Ordinary Course of Business;
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(vi) the Seller has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of any other person (or series of
related capital investments, loans, and acquisitions);
(vii) the Seller has not created, incurred, assumed, or guaranteed any
indebtedness (including capitalized lease obligations) outside the Ordinary
Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal practice
in the Ordinary Course of Business) the payment of accounts payable and other
Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the Ordinary
Course of Business;
(x) the Seller has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to any of its property or any action
adversely affecting the FCC Licenses;
(xii) the Seller has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees giving rise to
any claim or right on its part against the person or on the part of the person
against it;
(xiii) the Seller has not adopted any (A) bonus, (B) profit-sharing, (C)
incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other plan,
contract, or commitment for any of its directors, officers, and employees, or
modified or terminated any existing such plan, contract, or commitment;
(xiv) the Seller has not made or pledged to make any charitable or other
capital contribution;
(xv) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
the Seller;
(xvi) the Seller has not altered its credit and collection policies or its
accounting policies;
(xvii) the Seller has not materially altered the programming, format or
call letters of the Stations, or its promotional and marketing activities;
(xviii) the Seller has not applied to the FCC for any modification of the
FCC Licenses or failed to take any action necessary to preserve the FCC Licenses
and has operated the Stations in compliance therewith and with all FCC rules and
regulations; or
(xix) the Seller has not committed to any of the foregoing.
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(f) Tax Matters. The Seller has timely and properly filed all Tax Returns
that they were required to file with respect to the operations of the Station.
All such Tax Returns were correct and complete in all respects and properly
reflect the tax liability of the Seller. The Seller has not requested any
extension of time within which to file returns in respect of any Taxes with
respect to the Seller's operations. No Tax deficiencies have been proposed or
assessed against the Seller. There are no pending, or to the Seller's knowledge,
threatened audits, investigations, or claims for or relating to any liability in
respect of Taxes with respect to the Seller's operations. All Taxes owed by the
Seller with respect to its operations (whether or not shown on any Tax Return)
have been paid. The Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. No claim has ever been
made by any authority in any jurisdiction where the Seller does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the assets of the Seller that arose in
connection with any failure (or alleged failure) to pay any Tax.
(g) Tangible Assets. Section 2(g) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Stations.
The Seller will, as of Closing, own or lease all tangible assets necessary for
the conduct of the operation and business of the Stations as presently conducted
and as presently proposed to be conducted and all leased assets are specifically
identified as such in Section 2(g) of the Disclosure Schedule. Each such
tangible asset is transferred to Buyers on an "as is, where is" basis, with no
implied or express warranties, including warranty of marketability or fitness
for a particular purpose.
(h) Real Property. Section 2(h) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Seller has delivered to the Buyer correct and complete copies of
the Leases. With respect to the Real Estate:
(i) the Seller will have as of Closing good title to all of the Owned Real
Estate free and clear of all liens, charges, mortgages, security interests,
easements, restrictions or other encumbrances of any nature whatsoever except
real estate taxes for the year of Closing and municipal and zoning ordinances
and recorded utility easements which do not impair the current use, occupancy or
value or the marketability of title of the property and which are disclosed in
Section 2(h) of the Disclosure Schedule (collectively, the "Permitted Real
Estate Encumbrances");
(ii) the Leases are and, following the Closing will continue to be, legal,
valid, binding, enforceable, and in full force and effect;
(iii) no party to any Lease is in breach or default (or has repudiated any
provision thereof), and no event has occurred which, with notice or lapse of
time, would constitute a breach or default thereunder or permit termination,
modification, or acceleration thereunder;
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(iv) there are no disputes, oral agreements, or forbearance programs in
effect as to any Lease;
(v) none of the Owned Real Estate and to the Seller's Knowledge, none of
the properties subject to the Leases is subject to any lease (other than
Leases), option to purchase or rights of first refusal;
(vi) all buildings and improvements on the Real Estate are being sold in
"as is" condition without warranty of their condition or habitability;
(vii) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the Leases or its rights
thereunder; and
(viii) to the Seller's Knowledge, all facilities on the Real Estate have
received all approvals of governmental authorities (including licenses, permits
and zoning approvals) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws, rules, and
regulations.
(i) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for or currently used in the operation of the business of the
Seller as presently conducted and as presently proposed to be conducted. Each
item of Intellectual Property owned or used by the Seller immediately prior to
the Closing hereunder will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing hereunder.
With respect to such Intellectual Property:
(i) To the Seller's Knowledge, the Seller has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and the Seller has never received
any charge, complaint, claim, or notice alleging any such interference,
infringement, misappropriation, or violation. To the Knowledge of the Seller, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of the Seller.
(ii) Section 2(i) of the Disclosure Schedule also identifies each item of
Intellectual Property that any third party owns and that the Seller uses
pursuant to license, sublicense, agreement, or permission including, but not
limited to the call letters of the Stations. The Seller has supplied the Buyer
with correct and complete copies of all such licenses, sublicenses, agreements,
and permissions (as amended to date). To Seller's Knowledge, with respect to
each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission covering the
item is, and following the Closing will continue to be on identical terms,
legal, valid, binding, enforceable, and in full force and effect;
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(B) no party to the license, sublicense, agreement, or permission is
in breach or default (or has repudiated any provision thereof), and no
event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and correct
with respect to the underlying license;
(D) the underlying item of Intellectual Property is not subject to
any outstanding judgment, order, decree, stipulation, injunction, or
charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or entity for
or against any interference, infringement, misappropriation, or other
conflict with respect to the underlying item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
(j) Contracts. Section 2(j) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time which are listed in Section 2(r) of the
Disclosure Schedule) to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under which
it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
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(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, compensation
agreement, employment agreement, commission agreement, or severance
agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations;
(viii) any written arrangement concerning a guaranty by the Seller
of the obligations of any other party; or
(ix) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement listed in Section 2(j) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect; (B) the written arrangement
will continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(j) of the Disclosure Schedule under the terms
of this Section 2(j). Except for the Assumed Contracts, the Buyer shall not have
any Liability or obligations for or in respect of any of the contracts set forth
in Section 2(j) of the Disclosure Schedule or any other contracts or agreements
of the Seller. No advertiser of the Stations has indicated within the past year
that it will stop, or decrease the rate of, buying services from them.
(k) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates of
compliance, and consents of governmental bodies, including, without limitation,
the FCC Licenses, used or useful in the operation of the Stations as they are
now being operated are (A) in full force and effect, (B) unimpaired by any acts
or omissions of the Seller or the Seller's employees or agents, (C) free and
clear of any restrictions which might limit the full operation of the Stations,
and (D) detailed in Section 2(k) of the Disclosure Schedule. With respect to the
licenses, permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(k) of the Disclosure
Schedule also sets forth, without limitation, the date
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of the last renewal, the expiration date thereof, and any conditions or
contingencies related thereto. Except as set forth in Section 2(k) of the
Disclosure Schedule, no condition exists or event has occurred that permits, or
after notice or lapse of time, or both, would permit, the revocation or
termination of any such license, permit, consent, franchise, or authorization
(other than pursuant to their express expiration date) or the imposition of any
material restriction or limitation upon the operation of the Stations as now
conducted. Except as set forth in Section 2(k) of the Disclosure Schedule, the
Seller is not aware of any reason why the FCC licenses might not be renewed in
the ordinary course or revoked.
(ii) The Stations are each in compliance with the FCC's policy on exposure
to radio frequency radiation. No renewal of any FCC License would constitute a
major environmental action under the FCC's rules or policies. Access to the
Stations' transmission facilities is restricted in accordance with the policies
of the FCC.
(iii) Except as set forth in Section 2(k) of the Disclosure Schedule, to
the Seller's Knowledge, the Seller is not the subject of any FCC or other
governmental investigation or any notice of violation or order, or any material
complaint, objection, petition to deny, or opposition issued by or filed with
the FCC or any other governmental authority in connection with the operation of
or authorization for the Stations, and there are no proceedings (other than rule
making proceedings of general applicability) before the FCC or any other
governmental authority that could adversely affect any of the FCC Licenses or
the authorizations listed in Section 2(k) of the Disclosure Schedule.
(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(v) The Seller is not aware of any information concerning the Stations
that could cause the FCC or any other regulatory authority not to issue to the
Buyer all regulatory certificates and approvals necessary for the consummation
of the transactions contemplated hereunder or the Buyer's operation and/or
ownership of the Stations. Seller is not aware of any pending FCC applications
which, if approved, would allow for the operation of a new radio Stations with a
signal reaching the signal area of the Stations and, in addition, Seller is not
aware of any plans or proposals by existing radio Stations with a signal
reaching the signal area of the Stations to alter or change their format to a
format similar to that of the Stations.
(l) Insurance. Section 2(l) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
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(ii) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was on a
claims made, occurrence, or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms through the Closing Date.
(m) Litigation. Section 2(m) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(m) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(n) Employees. Section 2(n) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
the Seller. Section 2(n) of the Disclosure Schedule also sets forth a list of
all employee handbooks and/or manuals relating to the employees of the Seller,
true and correct copies of which have been delivered to the Buyer. To the
Knowledge of the Seller, no key employee or group of employees has any plans to
terminate employment with the Seller. The Seller is not a party to or bound by
any understanding (whether written or oral), agreement or contract with any
union, labor organization, employee group or other entity or individual which
affects the employment of employees of the Seller including, but not limited to
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Seller has no Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of any of the Seller. The Seller has not been subject to a strike,
slow down or other work stoppage during the five (5) year period immediately
preceding the date hereof and, to the Seller's Knowledge, there are no strikes,
slow downs or work stoppages threatened against the Seller. To the Seller's
Knowledge, it has not
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committed any unfair labor practice. There is no basis for any claim by any past
or present employee of the Seller that such employee was subject to wrongful
discharge or any employment discrimination by the Seller or its management
arising out of or relating to the employee's race, sex, age, religion, national
origin, ethnicity, handicap or any other protected characteristic under
applicable law. No proceedings are pending before any court, governmental agency
or instrumentality or arbitrator relating to labor matters, and there is no
pending investigation by any governmental agency or, to the Knowledge of the
Seller, threatened claim by any such agency or other person relating to labor or
employment matters.
(o) Employee Benefits. Section 2(o) of the Disclosure Schedule lists all
Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Seller does not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Seller. There are no pending or, to the Knowledge of the Seller, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
(p) Environment, Health, and Safety.
(i) With respect to the operation of the Stations and the Real
Estate, to Seller's Knowledge, the Seller is, and at all times in the past
has been, in compliance in all material respects with all Environmental
Laws and all laws (including rules and regulations thereunder) of federal,
state, and local governments (and all agencies thereof) concerning
employee health and safety, and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has ever been
filed or commenced or, to the Seller's Knowledge, is threatened, against
the Seller alleging any failure to comply with any such Environmental Law
or laws concerning employee health and safety.
(ii) With respect to the operation of the Stations and the Real
Estate, to Seller's Knowledge, the Seller has no Liability (and to
Seller's Knowledge there is no Basis related to the past or present
operations of the Seller or its predecessors for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against the Seller giving rise to any Liability) under
the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act of 1976, the Federal
Water Pollution Control Act of 1972, the Clean Air Act of 1970, the Safe
Drinking Water Act of 1974, the Toxic
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Substances Control Act of 1976, the Refuse Act of 1899, or the Emergency
Planning and Community Right-to-Know Act of 1986 (each as amended), or any
other law of any federal, state, local, or foreign government or agency
thereof (including rules, regulations, codes, plans, judgments, orders,
decrees, stipulations, injunctions, and charges thereunder) relating to
public health and safety, or pollution or protection of the environment,
including, without limitation, laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes ("Environmental
Laws");
(iii) To Seller's Knowledge, the Seller has no Liability (and to
Seller's Knowledge there is no Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand against the Seller giving rise to any Liability) under the
Occupational Safety and Health Act, as amended, or any other law (or rule
or regulation thereunder) of any federal, state, local, or foreign
government (or agency thereof) concerning employee health and safety, or
for any illness of or personal injury to any employee.
(iv) To Seller's Knowledge, the Seller has obtained and at all times
has been in compliance in all material respects with all of the terms and
conditions of all permits, licenses, and other authorizations which are
required under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of
any federal, state, or local or foreign government relating to worker
health and safety.
(v) To Seller's Knowledge, all properties and equipment used in the
business of the Seller have been free of asbestos, PCB's, methylene
chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(vi) To Seller's Knowledge, no pollutant, contaminant, or chemical,
industrial, hazardous, or toxic material or waste ever has been buried,
stored, spilled, leaked, discharged, emitted, or released on any of the
Real Estate.
(vii) To Seller's Knowledge, none of the Acquired Assets are
required to be upgraded, modified or replaced to be in compliance with
Environmental Laws.
(viii) Section 2(p) of the Disclosure Schedule contains a copy of
all environmental claims, reports, studies, compliance actions or the like
of the Seller or which are available to the Seller with respect to any of
the Real Estate or any of the Acquired Assets.
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(ix) Other than as provided in Section 2(p) of the Disclosure
Schedule, no septic systems or wells exist on, in or under any of the Real
Estate. No above ground or underground storage tanks have ever been
located at, on or under the Real Estate. To Seller's Knowledge, none of
the Real Estate is contaminated by hazardous or toxic substances or waste,
as defined under Environmental Laws, originating from off-site sources.
(q) Legal Compliance.
(i) To Seller's Knowledge, the Seller has complied in all material
respects with all laws (including rules and regulations thereunder) of federal,
state, local and foreign governments (and all agencies thereof, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced or, to the Seller's Knowledge, is threatened,
against the Seller alleging any failure to comply with any such law or
regulation, including those relating to the employment of labor, employee civil
rights, and equal employment opportunities and relating to antitrust matters.
(ii) To Seller's Knowledge, the Seller has filed in a timely manner all
reports, documents, and other materials it was required to file (and the
information contained therein was correct and complete in all material respects)
under all applicable laws (including rules and regulations thereunder) of
federal state, local and foreign governments (and all agencies thereof). To the
Seller's Knowledge, it has possession of all records and documents it was
required to retain under all applicable laws (including rules and regulations
thereunder).
(r) Advertising Contracts. Section 2(r) of the Disclosure Schedule lists
all arrangements for the sale of air time or advertising on the Stations in
excess of $1000, and the amount to be paid to the Seller therefor. The Seller
has no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Seller to cease doing business or to reduce in any material respect the
business transacted with the Seller or to terminate or modify any agreements
with the Seller (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
(s) Brokers' Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(t) Undisclosed Commitments or Liabilities. There are no commitments,
liabilities or obligations relating to any of the Stations, whether accrued,
absolute, contingent or otherwise including, without limitation, guaranties by
the Seller of the liabilities of third parties, for which specific and adequate
provisions have not been made on the Financial Statements except those incurred
in or as a result of the Ordinary Course of Business since January 1, 1997 (none
of which Ordinary Course of Business obligations have had or will have a
material adverse effect on any Stations).
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(u) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer. Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
(b) Authorization of Transaction. Buyers have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
their obligations hereunder and thereunder. This Agreement and the Ancillary
Agreements constitute the valid and legally binding obligation of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
(d) Brokers' Fees. Other than the fee payable to Norman Fischer &
Associates (which shall be the exclusive responsibility of the Buyers and for
which the Seller shall have no responsibility), the Buyers have no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Seller
could become liable or obligated.
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4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Seller to Licensing (the
"Assignment Application"). Each side will pay its filing costs and attorneys'
fees associated with the Assignment Application. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use the commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have material adverse effect upon the Stations or
upon any Affiliate or impose significant costs on such party). If the FCC
imposes any condition on either party to the Assignment Application, such party
shall use commercially reasonable efforts to comply with such condition,
provided, that neither party shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Stations or any
Affiliate. The Seller and the Buyers shall jointly oppose any requests for
reconsideration or judicial review of FCC approval of the Assignment Application
and shall jointly request from the FCC extension of the effective period of FCC
approval of the Assignment Application if the Closing shall not have occurred
prior to the expiration of the original effective period of the FCC Consent.
Nothing in this Section 4(b) shall be construed to limit either party's right to
terminate this Agreement pursuant to Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyers may, at their option, extend offers of employment to all or any of
the Seller's employees effective on the Closing Date. From and after the
execution of this Agreement, the Seller shall use its best efforts to assist
Buyers in retaining those employees of the Stations which the Buyers wish to
hire in connection with the operation of the Stations by the Buyers subsequent
to the Closing, and the Seller will not take any action to preclude or
discourage any of the Seller's employees from accepting any offer of employment
extended by the Buyers.
(d) Notices and Consents. The Seller will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request in connection with the matters pertaining to the Seller
disclosed or required to be disclosed in the Disclosure Schedule (including,
without limitation, consents to assignment of the Leases and other Assumed
Contracts). Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents,
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and approvals of governments, governmental agencies, and third parties that it
may be required to give, make, or obtain.
(e) Operation of Business. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 2(e) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Stations for goods or services ("Barter Agreements") (excluding arrangements for
the supply of programming and the right to use the Z-ROCK trademark) such that
the outstanding aggregate balance owing under all Barter Agreements as of the
Closing Date shall not exceed Five Thousand Dollars ($5,000.00) worth of air
time without the Buyers' consent. On the Closing Date, the Seller shall deliver
to the Buyers a schedule, certified by an officer of the Seller, reflecting the
aggregate outstanding balances under all Barter Agreements in existence as of
the Closing Date.
(g) Operating Statements. The Seller shall deliver to the Buyers, for the
Buyers' informational purposes only, monthly unaudited statements of operating
revenues and operating expenses of the Stations within ten (10) days after each
such statement is prepared by or for the Seller; provided, however, that this
requirement shall not be in effect during the effective period of the Local
Marketing Agreement.
(h) Contracts. The Seller will not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on Section 2(j)
of the Disclosure Schedule in any material respect. The Seller will not without
prior written consent of the Buyers enter into any new contracts respecting the
Stations or their properties, except (i) contracts for the sale of time on the
Stations for cash, goods or services which are entered into in the Ordinary
Course of Business and comply with Sections 4(f) and 4(j) hereof, (ii) contracts
entered into in the Ordinary Course of Business which are cancelable on not more
than thirty-one (31) days' notice without penalty or premium, and (iii)
contracts entered into in the Ordinary Course of Business each of which does not
involve more than Five Thousand Dollars ($5,000) or all of which do not involve
more than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Stations. The Seller shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
(j) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Stations and with respect to collecting accounts receivable arising from
such extension of credit.
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(k) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensors,
advertisers, suppliers, customers, and employees, all of the Confidential
Information, call letters and trade secrets of the Stations, and the FCC
Licenses.
(l) Full Access and Consultation. The Seller will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Stations, to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to the Seller for the purpose of permitting the Buyer to, among
other things: (a) conduct its due diligence review, (b) review financial
statements of the Seller, (c) verify the accuracy of representations and
warranties of the Seller contained in this Agreement, and (d) prepare for the
consummation of the transactions contemplated by this Agreement. The Seller will
consult with the Buyers' management with a view to informing Buyer's management
as to the operations, management and business of the Stations.
(m) Notice of Developments. The Seller will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller or the Stations. Each Party will give prompt written
notice to the other of any material development affecting the ability of the
Parties to consummate the transactions contemplated by this Agreement. No
disclosure by any Party pursuant to this Section 4(m), however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Seller will notify
the Buyers immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. The Seller
will obtain (or will assist Buyers in obtaining) with respect to each parcel of
Real Estate subject to the Leases, a leasehold owner's policy issued by a title
insurer reasonably satisfactory to the Buyer, in an amount equal to the fair
market value of such Real Estate (including all improvements located thereon),
insuring over the standard pre-printed exceptions and insuring leasehold title
to such Real Estate in the Buyers as of the Closing subject only to the
Permitted Real Estate Encumbrances, together with such endorsements for zoning,
contiguity, public access and extended coverage as the Buyers or their lender
reasonably requests, (ii) with respect to each parcel of Owned Real Estate, an
owner's policy of title insurance by a title insurer reasonably satisfactory to
the Buyer, in an amount equal to the fair market value of such Real Estate
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(including all improvements located thereon), insuring over the standard
pre-printed exceptions and insuring title to the Owned Real Estate to be vested
in the Buyers as of the Closing free and clear of all liens and encumbrances
except Permitted Real Estate Encumbrances, together with such endorsements for
zoning, contiguity, public access and extended coverage as the Buyers or their
lender reasonably requests, (iii) a current survey of each parcel of Real Estate
certified to the Buyer and its lender, prepared by a licensed surveyor and
conforming to current ALTA Minimum Detail Requirements for Land Title Surveys,
disclosing the location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, and other matters shown customarily on such surveys,
and showing access affirmatively to public streets and roads (the "Surveys")
which shall not disclose any survey defect or encroachment from or onto any of
the Real Estate which has not been cured or insured over prior to the Closing;
and (iv) with respect to each parcel of Real Estate, a current Phase I
environmental site assessment from an environmental consultant or engineer
reasonably satisfactory to the Buyers which does not indicate that the Seller
and the Real Estate are not in compliance with any Environmental Law and which
shall not disclose or recommend any action with respect to any condition to be
remediated or investigated or any contamination on the site assessed. The Buyers
will pay the costs of these title policies and Surveys, and Buyers and the
Seller will each pay one-half (1/2) of the costs of these environmental
assessments.
(p) Control of Stations. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyer
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will, at Seller's expense, repair or replace such
Acquired Assets to their former condition as soon as possible after loss, damage
or destruction thereof and shall use its best efforts to restore as promptly as
possible transmissions as authorized in the FCC Licenses. The Closing Date shall
be extended (with FCC consent, if necessary) for up to sixty (60) days to permit
such repair or replacement. If repair or replacement cannot be accomplished
within sixty (60) days of the date of the Seller's notice to the Buyers, and the
Buyers determine that the Seller's failure to repair or replace, alone or in the
aggregate with any other then existing factors, would have a material adverse
effect on the operation of the Stations:
(a) the Buyers may elect to terminate this Agreement; or
(b) the Buyers may postpone the Closing Date until such time as the
property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory
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to the Buyers, unless the same cannot be reasonably effected within ninety
(90) days of the date of the Seller's notice to the Buyers, in which case
either party may terminate this Agreement; or
(c) the Buyers may choose to accept the Acquired Asset in their
"then" condition, together with the Seller's assignment to the Buyers of
all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers of any proceeds under any such
insurance policies, previously received by the Seller with respect thereto
plus an amount equal to the amount of any deductible or self-insurance
maintained by Seller on such Acquired Assets.
In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to those relating to
transmitter and studio leases, and all of the title insurance commitments (and
endorsements), Surveys and environmental site assessments described in Section
4(o) above;
(iv) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the parties if such
transactions are consummated, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyer to own, operate, or control the Acquired Assets (and no
such judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
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(v) the Seller shall have delivered to the Buyer a certificate (without
qualification as to knowledge or materiality or otherwise except as provided in
the representation itself) to the effect that each of the conditions specified
above in Sections 5(a)(i) through (iv) is satisfied in all respects and the
statements contained in such certificate shall be deemed a warranty of the
Seller which shall survive the Closing;
(vi) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Postclosing
Agreement;
(viii) the Buyers shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit E attached hereto,
addressed to the Buyers and its lender and dated as of the Closing Date; and
(ix) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Buyers may elect to (i) terminate this Agreement without
liability to the Seller, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Buyers elect to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Seller
(including, without limitation, any breach arising as a result of the failure of
the Seller to execute and/or deliver any item described in this Section 5(a),
the Buyers may seek appropriate remedies for any and all damages, costs and
expenses incurred by the Buyers by reason of such breach including, without
limitation, indemnification pursuant to Section 7, below.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of their
covenants hereunder in all respects through the Closing;
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(iii) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the Parties if such
transactions are consummated, or (B) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Seller a certificate (without
qualification as to knowledge or materiality or otherwise except as provided in
the representation itself) to the effect that each of the conditions specified
above in Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers which
shall survive the Closing;
(v) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement; and
(viii) all actions to be taken by the Buyers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Seller may elect to (i) terminate this Agreement without
liability to the Buyers, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Seller elects to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Buyers
(including, without limitation, any breach arising as a result of the failure of
the Buyers to execute and/or deliver any item described in this Section 5(a),
the Seller may seek appropriate remedies for any and all damages, costs and
expenses incurred by the Seller by reason of such breach including, without
limitation, indemnification pursuant to Section 7, below.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any
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other Party reasonably may request, all the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
(c) Adjustments. Income and expenses attributable to operation of the
Stations shall be allocated between Buyers and Seller as provided in the Local
Marketing Agreement. Such items as utilities charges, insurance, real and
personal property taxes, prepaid expenses, deposits, music license fees, and
rents and payments pertaining to the Assumed Contracts (including any contracts
for the sale of time for cash, trade or barter so assigned) up and through the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers, except as otherwise provided in the Local Marketing
Agreement. The prorations and adjustments hereunder shall be made and paid
insofar as feasible on the Closing Date, with a final settlement sixty (60) days
after the Closing Date. In the event of any disputes between the Parties as to
such adjustments, the amounts not in dispute shall nonetheless be paid at such
time and such disputes shall be determined by an independent accounting firm
mutually acceptable to both parties and the fees and expenses of such accounting
firm shall be paid one-half (1/2) by the Seller and one-half (1/2) by the Buyer.
(d) Severance Obligations. In the event an offer of employment is extended
by the Buyers to and accepted by an employee of the Seller pursuant to Section
4(c) and such subsequent employment by the Buyers is terminated within sixty
(60) days from the Closing Date, the Seller shall be responsible for, and shall
pay to such accepting employee, all severance benefits (if any, pursuant to the
Seller's practices as in effect on the Closing Date) that may be due and owing
such employee by reason of his or her employment with either the Seller or the
Buyers
(e) Consents. In the event any of the Assumed Contracts are not assignable
or any consent to such assignment is not obtained on or prior to the Closing
Date, and the Buyers elect to consummate the transactions contemplated herein
despite such failure or inability to obtain such consent, the Seller shall
continue to use commercially reasonable efforts to obtain any such assignment or
consent after the Closing Date. Until such time as such assignment or approval
has been obtained, the Seller will cooperate with Buyers in any lawful and
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economically feasible arrangement to provide that the Buyer shall receive the
Seller's interest in the benefits under any such Assumed Contract, including
performance by the Seller as agent, if economically feasible; provided, however,
that the Buyers shall undertake to pay or satisfy the corresponding liabilities
for the enjoyment of such benefit to the extent that Buyers would have been
responsible therefor if such consent or assignment had been obtained.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement and of the Buyers contained in Section
3 of this Agreement shall survive the Closing and continue in full force and
effect for a period of three (3) years following Closing.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a breach of a
warranty or covenant prior to the Closing Date, the Seller agrees to indemnify
the Buyers from and against the entirety of any Adverse Consequences the Buyers
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by:
(i) any misrepresentation or breach of any of the Seller's representations
or warranties, and covenants contained in this Agreement or in any Ancillary
Agreement executed and/or delivered by the Seller (so long as the Buyers make a
written claim for indemnification within the applicable survival period);
(ii) any breach or nonfulfillment of any agreement or covenant of the
Seller contained herein or in any Ancillary Agreement;
(iii) any Liability of the Seller which is not an Assumed Liability;
and/or
(iv) any Liability of the Buyers arising by operation of law (including
under any bulk transfer law of any jurisdiction or under any common law doctrine
of defacto merger or successor liability) which is not an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyer agrees to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
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(d) Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that not withstanding the provision in
Section 7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for a breach of any provision of this Agreement.
(e) Liquidated Damages. The Buyer and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
lieu of indemnification pursuant to Section 7(b) or 7(c), the non defaulting
Party shall be entitled to receive from the defaulting Party for such default
the sum of One Hundred Thousand Dollars ($100,000.00) as liquidated damages
without the need for proof of damages, subject only to successfully proving in a
court of competent jurisdiction that the other Party has materially breached
this Agreement and that the transactions contemplated thereby have not occurred;
provided however, that the Buyers and Seller shall retain the option to receive,
pursuant to Section 7(d), and in lieu of receiving the liquidated damages
provided in this Section 7(e), the remedy of specific performance with respect
to a breach of this Agreement prior to the Closing. The Buyers and the Seller
agree to pay said sum of liquidated damages within ten (10) days of the date
that the non-defaulting party obtains such a judgment, and agree that in the
event this Agreement is terminated by the Seller prior to the Closing Date as a
result of a breach or default by the Buyers under this Agreement, the Seller
shall proceed against the Earnest Money as partial satisfaction of liquidated
damages owed by Buyers.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnifica tion against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict
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of interest), (iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld unreasonably), and
(iv) the Indemnifying Party will not consent to the entry of any judgment with
respect to the matter, or enter into any settlement which does not include a
provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller with respect to the operation of the Station, wherever
located, including (a) leaseholds and other interests of any kind therein,
improvements, fixtures, and fittings thereon (such as towers and antennae), and
easements, rights-of-way, and other appurtenances thereto); (b) tangible
personal property identified in Section 2(h) of the Disclosure Schedule; (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions; (d) rights under orders and agreements
(including those Barter Agreements and Advertising Contracts identified on the
Disclosure Schedule) now existing or entered into in the Ordinary Course of
Business for the sale of advertising time on the Stations; (e) Assumed
Contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the Stations, jingles,
logos, slogans, and business goodwill of the Stations; (g) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment; (h) Licenses and similar rights obtained from governments and
governmental agencies; and (i) FCC logs and records and all other books,
records, ledgers, logs, files, documents, correspondence, advertiser lists, all
other lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, program production materials,
studies, reports, and other printed or written materials; and (j) goodwill of
the Stations.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(r), above.
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"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified as Assumed Contracts on
Section 2(j) of the Disclosure Schedule.
"Assumed Liabilities" means obligations of the Seller which accrue after
the Closing Date under the Assumed Contract either: (i) to furnish services, and
other non-Cash benefits to another party after the Closing; or (ii) to pay for
goods, services, and other non-Cash benefits that another party will furnish to
it after the Closing. The Assumed Liabilities shall not include any Retained
Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee
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Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare
Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" has the meaning set forth in Section 2(q), above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Norman Fischer & Associates.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
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thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (b) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge.
"Leases" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites, as described in Section 2(h) of
the Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller's
owners in the form attached hereto as Exhibit D.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
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"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Liabilities" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
KZRK-AM and KZRK-FM, licensed by the FCC to operate in Canyon, Texas.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
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"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing in the event the Seller is in breach
of any representation, warranty, or covenant contained in this Agreement;
provided, however, that if such breach is capable of being cured, such breach
also remains uncured for twenty (20) days after notice of breach is received by
the Seller from the Buyers;
(iii) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing in the event the Buyers are in
breach of any representation, warranty, or covenant contained in this Agreement;
provided, however that if such breach is capable being cured, such breach
remains uncured for twenty (20) days after notice of breach is received by the
Buyers from the Seller;
(iv) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(a) hereof
(unless the failure results primarily from the Buyers themselves breaching any
representation, warranty, or covenant contained in this Agreement);
(v) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(b) hereof
(unless the failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this Agreement); or
(vi) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
10. Miscellaneous.
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(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in Section 7(a) hereof and the Post-Closing Agreement
with respect to Seller's owners.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that the Parties acknowledge and reocognize that Seller is a wholly
owned subsidiary of a public company which is required to submit filings with
the Securities Exchange Commission and make other public announcements in the
Ordinary Course of Business, and any Party may make any public disclosure it
believes in good faith is required by law or regulation (in which case the
disclosing Party will advise the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that (i) the Buyers may assign all of its right,
title and interest in, to and under this Agreement to one or more Affiliates,
who shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Seller the Purchase Price therefor or to any successor to the Buyers in
the event of any sale, merger or consolidation of the Buyers, and (ii) Buyers
may assign their indemnification claims and their rights under the warranties
and representations of the Sellers to the financial institution(s) providing
financing to the Buyers in connection with this transaction.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
Sovereign Communications Corporation
P.O. Box 1956
Cleburne, Texas 76033-1956
Attn: Walter G. Mize
Fax: (817) 641-3583
Copy to:
Tracy & Holland LLP
306 W. 7th Street
Suite 500
Fort Worth, Texas 76102
Lewis Schwartz, Esquire
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
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Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Texas.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(1) Expenses. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications and as set forth in
Section 4(o) with respect to Surveys, title commitments and environmental
audits. The Seller and the Buyers will each pay one-half (1/2) of any recording
or similar fees necessary to vest title to each of the Acquired Assets in the
Buyers.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless
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the context requires otherwise. Nothing in the Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. The Parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Amarillo, Texas in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(h) above. Nothing in this Section 10(o), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
* * * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
-------------------------------
Richard Weening
Chairman
CUMULUS LICENSING CORPORATION
By:
-------------------------------
Richard Weening
Chairman
SOVEREIGN COMMUNICATIONS CORPORATION
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
36
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of December 19, 1997, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing"), and
Tryon-Seacoast Communications, Inc. ("Seller"), a Maine corporation, Seacoast
Broadcasting, Inc. ("Seacoast"), a Rhode Island corporation, and Kennebec-Tryon
Communications Corp. ("Kennebec"), a Maine corporation. Seacoast and Kennebec
are referred to collectively herein as the "Sellers' Shareholders." Broadcasting
and Licensing are referred to collectively herein as the "Buyers." The Buyers
and the Seller are referred to collectively herein as the "Parties." Capitalized
terms used in this Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
stations WABK-FM (licensed to Gardiner, Maine), WFAU(AM) (licensed to Gardiner,
Maine), WKCG-FM (licensed to Augusta, Maine), WIGY-FM (located in Madison,
Maine) and WCME-FM (licensed to Boothbay Harbor, Maine) (collectively, the
"Stations") in return for cash; provided, however, that if Seller is unable to
convey the assets of WCME-FM to Buyers by the later of the Closing Date or July,
1998, there shall be an adjustment of the purchase price as described below.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Licensing agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to Licensing, all of
the FCC Licenses listed in Section 2(l) of the Disclosure Schedule. In addition,
Broadcasting agrees to purchase from the Seller, and the Seller agrees to sell,
transfer, convey, and deliver to Broadcasting, all of the Acquired Assets other
than the FCC Licenses. Both such sales shall take place at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities and the
Seller agrees to pay and discharge all Liabilities and obligations of the Seller
other than the Assumed Liabilities.
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(c) Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the Purchase Price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
("Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Stations in
Augusta, Maine, or at another mutually agreeable location, commencing at 9:00
a.m. local time on the date set by the Buyers not earlier than the fifth
business day or later than the tenth business day after the FCC approval of the
Assignment Application becomes a Final Order, by which date all other conditions
to the obligations of the Parties to consummate the transactions contemplated
hereby will have been satisfied, or such other date as the Parties may mutually
determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in Section 5(a) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including Lease and other Assumed Contract assignments
and Intellectual Property transfer documents), bills of sale and warranty deeds
in the forms attached hereto as Exhibit B; (B) such affidavits, transfer tax
returns, memorandums of lease, and other additional documents as may be required
by the terms of the title insurance commitments described in Section 4(o)
hereof, as necessary to furnish title insurance as required by such section or
as may be necessary to convey title to the Real Estate to the Buyers in the
condition required herein or provided public notice of existence of the Leases,
and (C) such other instruments of sale, transfer, conveyance, and assignment as
the Buyers and their counsel reasonably may request; (iv) the Buyers will
execute, acknowledge (if appropriate), and deliver to the Seller (A) an
assumption in the form attached hereto as Exhibit C and (B) such other
instruments of assumption as the Seller and its counsel reasonably may request;
and (v) the Buyers will deliver to the Seller the consideration specified in
Section 1(c) above.
(f) Postclosing Agreement. On the Closing Date, the Seller shall execute,
and shall cause shareholders Seacoast and Kennebec to execute, a Postclosing
Agreement with the Buyer including covenants not to compete with the Buyer in
the markets served by the Stations and agreements to indemnify the Buyer in the
form of Exhibit D attached hereto. A portion of the Purchase Price equal to
Fifty Thousand Dollars ($50,000) shall be paid to the Seller by the Buyers on
the Closing Date as consideration for the agreements set forth in the
Postclosing Agreement.
(g) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit E.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this
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Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 2), except as set forth in the lettered and
numbered paragraphs contained in the disclosure schedule accompanying this
Agreement and initialed by the Parties (the "Disclosure Schedule") corresponding
to the lettered and numbered sections of this Section 2.
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The Seller has the power and authority to own or lease its properties and to
carry on all business activities now conducted by it. The shareholders of the
Seller are Seacoast and Kennebec.
(b) Authorization of Transaction. The Seller has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and all agreements and instruments to be executed and delivered by
such Party pursuant to this Agreement (collectively, the "Ancillary Agreements")
and to perform its obligations hereunder and thereunder. Without limiting the
generality of the foregoing, the Board of Directors of the Seller has duly
authorized the execution, delivery, and performance of this Agreement and the
Ancillary Agreements by the Seller. This Agreement and the Ancillary Agreements
constitute the valid and legally binding obligation of the Seller, enforceable
in accordance with their respective terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the charter or bylaws of the Seller; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other agreement, arrangement to which the Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
(d) Title to Acquired Assets. Other than the Security Interests set forth
on Section 2(d) of the Disclosure Schedule (which shall be released at or before
the Closing and title to Section WCME which has not yet been acquired by Seller)
the Seller has good and marketable title to all of the Acquired Assets, free and
clear of any Security Interest or restriction on transfer.
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(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1994, December 31, 1995
and December 31, 1996, for the Seller; and (ii) unaudited balance sheets and
statements of income, as of and for each month during 1996 and each month ending
October 31 in 1997 for the Seller. The Financial Statements have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, are correct and complete, fairly represent the financial
condition of the Seller on such dates and the results of operations for the
periods designated therein, and are consistent with the books and records of the
Seller (which books and records are correct and complete).
(f) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(f) of the Disclosure Schedule:
(i) the Seller has not sold, leased, transferred, or assigned any of its
material assets, tangible or intangible;
(ii) other than this Agreement, the Seller has not entered into any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
involving more than $5,000 to which the Seller is a party or by which it or any
of its assets are bound;
(iv) no Security Interest has been imposed upon any of Seller's assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of related
capital expenditures) outside the Ordinary Course of Business (other than the
purchase of WCME-FM and WIGY-FM);
(vi) the Seller has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of any other person (or series of
related capital investments, loans, and acquisitions);
(vii) the Seller has not created, incurred, assumed, or guaranteed any
indebtedness (including capitalized lease obligations) outside the Ordinary
Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal practice
in the Ordinary Course of Business) the payment of accounts payable and other
Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the Ordinary
Course of Business;
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(x) the Seller has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to any of its property or any action
adversely affecting the FCC Licenses;
(xii) the Seller has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees giving rise to
any claim or right on its part against the person or on the part of the person
against it;
(xiii) the Seller has not entered into any employment contract, consulting
contract or severance agreement or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;
(xiv) the Seller has not granted any increase (outside routine salary and
wage increases in the Ordinary Course of Business) in the rate of compensation,
commissions, bonus or other remuneration payable, or granted any severance or
termination pay to, any of its directors, officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing, (C)
incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other plan,
contract, or commitment for any of its directors, officers, and employees, or
modified or terminated any existing such plan, contract, or commitment;
(xvi) the Seller has not made any other change in employment terms for any
of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or other
capital contribution;
(xviii) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
the Seller;
(xix) the Seller has not altered its credit and collection policies or its
accounting policies;
(xx) the Seller has not materially altered the programming, format or call
letters of the Stations, or its promotional and marketing activities;
(xxi) the Seller has not applied to the FCC for any modification of the
FCC Licenses or failed to take any action necessary to preserve the FCC Licenses
and has operated the Stations in compliance therewith and with all FCC rules and
regulations;
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(xxii) the Seller has not committed to any of the foregoing;
(xxiii) there has been no material damage to the Station or any of its
assets; and
(xxiv) there has been no decline in the previous twelve months' Station
revenues as of April 30, 1998, which decline is greater than 15% over the
previous twelve-month period (on an annualized twelve-month basis, excluding the
month of March 1997).
(g) Tax Matters. The Seller has timely and properly filed all Tax Returns
that it was required to file with respect to the Seller's operations. All such
Tax Returns were correct and complete in all respects and properly reflect the
tax liability of the Seller. The Seller has not requested any extension of time
within which to file returns in respect of any Taxes with respect to the
Seller's operations. No Tax deficiencies have been proposed or assessed against
the Seller. There are no pending, or to the Seller's knowledge, threatened
audits, investigations, or claims for or relating to any liability in respect of
Taxes with respect to the Seller's operations. All Taxes owed by the Seller with
respect to its operations (whether or not shown on any Tax Return) have been
paid. The Seller has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. No claim has ever been made by any
authority in any jurisdiction where the Seller does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Seller that arose in connection with any
failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Stations.
The Seller owns or leases all tangible assets necessary for the conduct of the
operation and business of the Stations as presently conducted and as presently
proposed to be conducted and all leased assets are specifically identified as
such in Section 2(h) of the Disclosure Schedule. Except as provided in Section
2(h) of the Disclosure Schedule, each such tangible asset is free from defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used. No such
tangible asset is in need of replacement. Any leased personal property included
within the tangible personal property is in the condition required of such
property by the terms of the lease applicable thereto during the term of the
lease and upon the expiration thereof. All of the equipment utilized in the
operation of the stations is in compliance with all FCC and FAA requirements and
is sufficient to satisfy the intended needs of the normal customary operations
of the Stations at all times of the year and all such equipment is in compliance
with all applicable laws.
(i) Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Seller has delivered to the Buyer correct and complete copies of
the Leases. With respect to the Real Estate:
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(i) the Seller has good and marketable title to all of the Owned Real
Estate free and clear of all liens, charges, mortgages, security interests,
easements, restrictions or other encumbrances of any nature whatsoever except
real estate taxes for the year of Closing and municipal and zoning ordinances
and recorded utility easements which do not impair the current use, occupancy or
value or the marketability of title of the property and which are disclosed in
Section 2(i) of the Disclosure Schedule (collectively, the "Permitted Real
Estate Encumbrances");
(ii) the Leases are and, following the Closing will continue to be, legal,
valid, binding, enforceable, and in full force and effect;
(iii) no party to any Lease is in breach or default (or has repudiated any
provision thereof), and no event has occurred which, with notice or lapse of
time, would constitute a breach or default thereunder or permit termination,
modification, or acceleration thereunder;
(iv) there are no disputes, oral agreements, or forbearance programs in
effect as to any Lease;
(v) none of the Owned Real Estate and to the Seller's Knowledge, none of
the properties subject to the Leases is subject to any lease (other than
Leases), option to purchase or rights of first refusal;
(vi) except for Permitted Real Estate Encumbrances, there are no (i)
actual or, to the Seller's Knowledge, proposed special assessments with respect
to any of the Real Estate; (ii) pending or, to the Seller's Knowledge,
threatened condemnation proceedings with respect to any of the Real Estate;
(iii) pending or, to the Seller's Knowledge, threatened litigation or
administrative actions with respect to any of the Real Estate; (iv) mechanic's
or materialmens' liens with respect to the Owned Real Estate; (v) structural or
mechanical defects in any of the buildings or improvements located in the Real
Estate; (vi) planned or commenced improvements which will result in an
assessment or otherwise affect the Real Estate; (vii) governmental agency or
court orders requiring the repair, alteration or correction of any existing
condition with respect to the Real Estate or any portion thereof; or (viii) any
pending or, to the Seller's Knowledge, threatened changes in any zoning laws or
ordinances which may affect any of the Real Estate or Seller's use thereof;
(vii) all buildings and improvements on the Real Estate are in good
operating condition and repair, normal wear and tear excepted;
(viii) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the Leases or its rights
thereunder;
(ix) to the Seller's Knowledge, all facilities on the Real Estate have
received all approvals of governmental authorities (including licenses, permits
and zoning approvals) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws, rules, and
regulations;
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(x) all facilities on the Real Estate are supplied with utilities and
other services necessary for the operation of said facilities; and
(viii) to the Seller's Knowledge, the owner of each leased facility has
good and marketable title to the underlying parcel of real property, free and
clear of any Security Interest, easement, covenant, or other restriction, except
for Permitted Real Estate Encumbrances and Seller's leasehold interest in each
Lease has priority over any other interest except for the fee interest therein
and Permitted Real Estate Encumbrances;
(j) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for or currently used in the operation of the business of the
Seller as presently conducted and as presently proposed to be conducted. Each
item of Intellectual Property owned or used by the Seller immediately prior to
the Closing hereunder will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has taken all necessary or desirable action to protect each item of
Intellectual Property that it owns or uses. With respect to such Intellectual
Property:
(i) The Seller has not interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, claim, or
notice alleging any such interference, infringement, misappropriation, or
violation. To the Knowledge of the Seller, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller.
(ii) Section 2(j) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller with
respect to any of its Intellectual Property and the call letters (current and
past) of the Stations, identifies each pending patent, trademark or copyright
application for registration which the Seller has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which the Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). The Seller has
delivered to the Buyer correct and complete copies of all such patents,
trademarks or copyright registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. With respect to each item of
Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in and to
the item and all registrations and applications are in full force and
effect;
(B) the item is not subject to any outstanding judgment, order,
decree, stipulation, injunction, or charge;
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(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or entity
for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each item of
Intellectual Property that any third party owns and that the Seller uses
pursuant to license, sublicense, agreement, or permission including, but not
limited to the call letters of the Stations. The Seller has supplied the Buyer
with correct and complete copies of all such licenses, sublicenses, agreements,
and permissions (as amended to date). With respect to each such item of used
Intellectual Property:
(A) the license, sublicense, agreement, or permission covering the
item is, and following the Closing will continue to be on identical terms,
legal, valid, binding, enforceable, and in full force and effect;
(B) no party to the license, sublicense, agreement, or permission is
in breach or default (or has repudiated any provision thereof), and no
event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and correct
with respect to the underlying license;
(D) the underlying item of Intellectual Property is not subject to
any outstanding judgment, order, decree, stipulation, injunction, or
charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or entity for
or against any interference, infringement, misappropriation, or other
conflict with respect to the underlying item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
(iv) The Seller has no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or other third parties
have developed which reasonably could be expected to supersede or make obsolete
any product or process of the Seller.
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(k) Contracts. Section 2(k) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time which are listed in Section 2(s) of the
Disclosure Schedule) to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under which
it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, compensation
agreement, employment agreement, commission agreement, or severance
agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations;
(viii) any written arrangement concerning a guaranty by the Seller
of the obligations of any other party; or
(ix) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement listed in Section 2(k) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect; (B) the written arrangement
will continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according
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to its terms); (C) no party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration, under the written
arrangement; and (D) no party has repudiated any provision of the written
arrangement. The Seller is not a party to any verbal contract, agreement, or
other arrangement which, if reduced to written form, would be required to be
listed in Section 2(k) of the Disclosure Schedule under the terms of this
Section 2(k). Except for the Assumed Contracts, the Buyer shall not have any
Liability or obligations for or in respect of any of the contracts set forth in
Section 2(k) of the Disclosure Schedule or any other contracts or agreements of
the Seller.
(l) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates of
compliance, and consents of governmental bodies, including, without limitation,
the FCC Licenses, used or useful in the operation of the Stations as they are
now being operated are (A) in full force and effect, (B) unimpaired by any acts
or omissions of the Seller or the Seller's employees or agents, (C) free and
clear of any restrictions which might limit the full operation of the Stations,
and (D) detailed in Section 2(1) of the Disclosure Schedule. With respect to the
licenses, permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(1) of the Disclosure
Schedule also sets forth, without limitation, the date of the last renewal, the
expiration date thereof, and any conditions or contingencies related thereto.
Except as set forth in Section 2(1) of the Disclosure Schedule, no condition
exists or event has occurred that permits, or after notice or lapse of time, or
both, would permit, the revocation or termination of any such license, permit,
consent, franchise, or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction or limitation
upon the operation of the Stations as now conducted. Except as set forth in
Section 2(1) of the Disclosure Schedule, the Seller is not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or revoked.
(ii) The Stations are each in compliance with the FCC's policy on exposure
to radio frequency radiation. No renewal of any FCC License would constitute a
major environmental action under the FCC's rules or policies. Access to the
Stations' transmission facilities is restricted in accordance with the policies
of the FCC.
(iii) Except as set forth in Section 2(1) of the Disclosure Schedule, to
the Seller's Knowledge, the Seller is not the subject of any FCC or other
governmental investigation or any notice of violation or order, or any material
complaint, objection, petition to deny, or opposition issued by or filed with
the FCC or any other governmental authority in connection with the operation of
or authorization for the Stations, and there are no proceedings (other than rule
making proceedings of general applicability) before the FCC or any other
governmental authority that could adversely affect any of the FCC Licenses or
the authorizations listed in Section 2(1) of the Disclosure Schedule.
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(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(v) The Seller is not aware of any information concerning the Stations
that could cause the FCC or any other regulatory authority not to issue to the
Buyer all regulatory certificates and approvals necessary for the consummation
of the transactions contemplated hereunder or the Buyer's operation and/or
ownership of the Stations. Seller is not aware of any pending FCC applications
which, if approved, would allow for the operation of a new radio station with a
signal reaching the signal area of the Stations.
(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was on a
claims made, occurrence, or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms through the Closing Date.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(n) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no
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reason to believe that any such charge, complaint, action, suit, proceeding,
hearing, or investigation may be brought or threatened against the Seller.
(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
the Seller. Section 2(o) of the Disclosure Schedule also sets forth a list of
all employee handbooks and/or manuals relating to the employees of the Seller,
true and correct copies of which have been delivered to the Buyer. To the
Knowledge of the Seller, no key employee or group of employees has any plans to
terminate employment with the Seller. The Seller is not a party to or bound by
any understanding (whether written or oral), agreement or contract with any
union, labor organization, employee group or other entity or individual which
affects the employment of employees of the Seller including, but not limited to
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Seller has no Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of any of the Seller. The Seller has not been subject to a strike,
slow down or other work stoppage during the five (5) year period immediately
preceding the date hereof and, to the Seller's Knowledge, there are no strikes,
slow downs or work stoppages threatened against the Seller. To the Seller's
Knowledge, it has not committed any unfair labor practice. There is no basis for
any claim by any past or present employee of the Seller that such employee was
subject to wrongful discharge or any employment discrimination by the Seller or
its management arising out of or relating to the employee's race, sex, age,
religion, national origin, ethnicity, handicap or any other protected
characteristic under applicable law. No proceedings are pending before any
court, governmental agency or instrumentality or arbitrator relating to labor
matters, and there is no pending investigation by any governmental agency or, to
the Knowledge of the Seller, threatened claim by any such agency or other person
relating to labor or employment matters.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists all
Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Seller does not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Seller. There are no pending or, to the Knowledge of the Seller, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
(q) Environment, Health, and Safety.
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(i) With respect to the operation of the Stations and the Real
Estate, the Seller is, and at all times in the past has been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has ever been filed or commenced
or, to the Seller's Knowledge, is threatened, against the Seller alleging
any failure to comply with any such Environmental Law or laws concerning
employee health and safety.
(ii) With respect to the operation of the Stations and the Real
Estate, the Seller has no Liability (and to Seller's Knowledge there is no
Basis related to the past or present operations of the Seller or its
predecessors for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Federal Water Pollution Control
Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of
1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899, or
the Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), or any other law of any federal, state, local, or foreign
government or agency thereof (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, or pollution or
protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes ("Environmental Laws");
(iii) The Seller has no Liability (and to Seller's Knowledge there
is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Occupational Safety and Health
Act, as amended, or any other law (or rule or regulation thereunder) of
any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal
injury to any employee.
(iv) The Seller has obtained and at all times has been in compliance
in all material respects with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and
has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental Laws or law of any
federal, state, or local or foreign government relating to worker health
and safety.
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(v) All properties and equipment used in the business of the Seller
have been free of asbestos, PCB's, methylene chloride, trichloroethylene,
1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
(vi) No pollutant, contaminant, or chemical, industrial, hazardous,
or toxic material or waste ever has been buried, stored, spilled, leaked,
discharged, emitted, or released on any of the Real Estate.
(vii) None of the Acquired Assets are required to be upgraded,
modified or replaced to be in compliance with Environmental Laws.
(viii) Section 2(q) of the Disclosure Schedule contains a copy of
all environmental claims, reports, studies, compliance actions or the like
of the Seller or which are available to the Seller with respect to any of
the Real Estate or any of the Acquired Assets.
(ix) No septic systems or wells exist on, in or under any of the
Real Estate. No above ground or underground storage tanks have ever been
located at, on or under the Real Estate. To Seller's Knowledge, none of
the Real Estate is contaminated by hazardous or toxic substances or waste,
as defined under Environmental Laws, originating from off-site sources.
Without limiting the foregoing, the Seller specifically acknowledges and
agrees that (i) those transformers identified on Section 2(q) of the Disclosure
Schedule as potentially containing PCB's are maintained and operated in full
compliance with all Environmental Laws, (ii) such transformers have not, at any
time prior to the Closing Date, been used, stored or maintained in any manner
which would form the basis for any claim against the Seller or the Buyers based
on any Environment Law, and (iii) no release or discharge of PCB's has occurred
with respect to such transformers.
(r) Legal Compliance
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, local and
foreign governments (and all agencies thereof, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced or, to the Seller's Knowledge, is threatened, against the
Seller alleging any failure to comply with any such law or regulation, including
those relating to the employment of labor, employee civil rights, and equal
employment opportunities and relating to antitrust matters.
(ii) The Seller has filed in a timely manner all reports, documents, and
other materials it was required to file (and the information contained therein
was correct and complete in all material respects) under all applicable laws
(including rules and regulations thereunder) of federal state, local and foreign
governments (and all agencies thereof). To the Seller's
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Knowledge, it has possession of all records and documents it was required to
retain under all applicable laws (including rules and regulations thereunder).
(s) Advertising Contracts. Section 2(s) of the Disclosure Schedule, which
shall be provided within 30 days of execution of this Agreement, lists all
arrangements for the sale of air time or advertising on the Stations in excess
of $1000, and the amount to be paid to the Seller therefor. The Seller has no
reason to believe and has not received a notice or indication of the intention
of any of the advertisers or third parties to material contracts of the Seller
to cease doing business or to reduce in any material respect the business
transacted with the Seller or to terminate or modify any agreements with the
Seller (whether as a result of consummation of the transactions contemplated
hereby or otherwise).
(t) Brokers' Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(u) Undisclosed Commitments or Liabilities. There are no commitments,
liabilities or obligations relating to any of the Stations, whether accrued,
absolute, contingent or otherwise including, without limitation, guaranties by
the Seller of the liabilities of third parties, for which specific and adequate
provisions have not been made on the Financial Statements except those incurred
in or as a result of the Ordinary Course of Business since January 1, 1997 (none
of which Ordinary Course of Business obligations have had or will have a
material adverse effect on any Station).
(v) Disclosure. The representations and warranties contained in this
Section 2 do not contain any intentional untrue statement of a fact or
intentionally omit to state any fact necessary in order to make the statements
and information contained in this Section 2 not misleading. Facts and
information set forth in any subsection of the Disclosure Schedule under this
Section 2 shall be deemed incorporated by reference under any other subsection
where such incorporation may be reasonably inferred.
3. Representations and Warranties of the Buyer. Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
(b) Authorization of Transaction. Buyers have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
their obligations hereunder
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and thereunder. This Agreement and the Ancillary Agreements constitute the valid
and legally binding obligation of the Buyers, enforceable against the Buyers in
accordance with their respective terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
(d) Brokers' Fees. Other than with respect to the fee payable to George
Silverman & Associates, which shall be the exclusive responsibility of the
Buyers, the Buyers have no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Seller could become liable or
obligated.
(e) Disclosure. The representations and warranties contained in this
Section 3 do not contain any intentional untrue statement of a fact or
intentionally omit to state any fact necessary in order to make the statements
and information contained in this Section 3 not misleading.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
(b) Assignment Applications. On February 16, 1998, the Seller and the
Buyers shall jointly file with the FCC an application for assignment of the FCC
Licenses, permits and authorizations pertaining to the Stations from the Seller
to Licensing (the "Assignment Application"). The costs of the FCC filing fees in
connection with the Assignment Application
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shall be divided equally between the Parties. Each party shall pay its own
attorneys' fees. The Seller and the Buyers shall thereafter prosecute the
Assignment Application with all reasonable diligence and otherwise use the
commercially reasonable efforts to obtain the grant of the Assignment
Application as expeditiously as practicable (but neither the Seller nor the
Buyers shall have any obligation to satisfy complainants or the FCC by taking
any steps which would have material adverse effect upon the Stations or upon any
Affiliate or impose significant costs on such party). If the FCC imposes any
condition on either party to the Assignment Application, such party shall use
commercially reasonable efforts to comply with such condition, provided, that
neither party shall be required hereunder to comply with any condition that
would have a material adverse effect upon the Stations or any Affiliate. A
condition placed on the consent to assignment requiring that the parties not
close this transaction before the grant of any of the pending license renewal
applications for the Station shall not be considered a condition that would have
a material adverse effect upon the Stations. The Seller and the Buyers shall
jointly oppose any requests for reconsideration or judicial review of FCC
approval of the Assignment Application and shall jointly request from the FCC
extension of the effective period of FCC approval of the Assignment Application
if the Closing shall not have occurred prior to the expiration of the original
effective period of the FCC Consent. Nothing in this Section 4(b) shall be
construed to limit either party's right to terminate this Agreement pursuant to
Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyers may, at their option, extend offers of employment to all or any of
the Seller's employees effective on the Closing Date. From and after the
execution of this Agreement, the Seller shall use its best efforts to assist
Buyers in retaining those employees of the Stations which the Buyers wish to
hire in connection with the operation of the stations by the Buyers subsequent
to the Closing, and the Seller will not take any action to preclude or
discourage any of the Seller's employees from accepting any offer of employment
extended by the Buyers.
(d) Notices and Consents. The Seller shall give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request in connection with the matters pertaining to the Seller
disclosed or required to be disclosed in the Disclosure Schedule (including,
without limitation, consents to assignment of the Leases and other Assumed
Contracts) ("Material Consents"). All Material Consents noted in Buyers'
Disclosure Schedule Section 4(d) will be obtained prior to or at Closing. Buyers
shall not be obligated to assume any contracts or agreements requiring the
consent of any third party unless such written consent has been obtained and
delivered to Buyers; provided, however that Buyers agree to perform (but not
assume without such third party consent), for a period of up to six (6) months,
Seller's obligations under any contract or agreement which Buyer has indicated
its intent to assume and for which such consent has not been received by Closing
but for which the third party associated with the contract or agreement has
indicated that its consent would be forthcoming upon submission of the required
consent forms. Simultaneous with such delivery, Seller will take all steps
necessary to put Buyers in actual possession and operating control of those
Acquired
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Assets which are the subject of those consents, and the business associated
therewith. Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
(e) Operation of Business. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 2(f) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Stations for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Sixty Thousand Dollars ($60,000) worth of air time without the
Buyers' consent, provided that such Barter Agreements shall be for the benefit
of the Stations. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
(g) Operating Statements. The Seller shall deliver to the Buyers, for the
Buyers' informational purposes only, monthly unaudited statements of operating
revenues and operating expenses of the Stations within ten (10) days after each
such statement is prepared by or for the Seller.
(h) Contracts. The Seller will not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on Section 2(k)
of the Disclosure Schedule in any material respect. The Seller will not without
prior written consent of the Buyers enter into any new contracts respecting the
Stations or their properties, except (i) contracts for the sale of time on the
Stations for cash, goods or services which are entered into in the Ordinary
Course of Business and comply with Sections 4(f) and 4(j) hereof, (ii) contracts
entered into in the Ordinary Course of Business which are cancelable on not more
than thirty-one (31) days' notice without penalty or premium, and (iii)
contracts entered into in the Ordinary Course of Business each of which does not
involve more than Five Thousand Dollars ($5,000) or all of which do not involve
more than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Stations. The Seller shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
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(j) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Stations and with respect to collecting accounts receivable arising from
such extension of credit.
(k) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensers,
advertisers, suppliers, customers, and employees, all of the Confidential
Information, call letters and trade secrets of the Stations, and the FCC
Licenses.
(l) Full Access and Consultation. The Seller will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Stations, to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to the Seller for the purpose of permitting the Buyer to, among
other things: (a) conduct its due diligence review, (b) review financial
statements of the Seller, (c) verify the accuracy of representations and
warranties of the Seller contained in this Agreement, and (d) prepare for the
consummation of the transactions contemplated by this Agreement. The Seller will
consult with the Buyers' management with a view to informing Buyer's management
as to the operations, management and business of the Stations. Without limiting
the foregoing, Seller acknowledges and agrees that it will provide the Buyers
and their representatives with such access to the properties, books, records,
documents and operations of the Seller as contemplated herein in a manner which
will permit the Buyers to fully complete their due diligence review within the
thirty (30) day period reference in Section 5(a) (ix), below.
(m) Notice of Developments. The Seller will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller or the Stations. Each Party will give prompt written
notice to the other of any material development affecting the ability of the
Parties to consummate the transactions contemplated by this Agreement. No
disclosure by any Party pursuant to this Section 4(m), however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Seller will notify
the Buyers immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. The Seller
will obtain (i) with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Buyer, in an amount equal to the fair
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market value of such Real Estate (including all improvements located thereon),
insuring over the standard pre-printed exceptions and insuring leasehold title
to such Real Estate in the Buyers as of the Closing subject only to the
Permitted Real Estate Encumbrances, together with such endorsements for zoning,
contiguity, public access and extended coverage as the Buyers or their lender
reasonably requests, (ii) with respect to each parcel of Owned Real Estate, an
owner's policy of title insurance by a title insurer reasonably satisfactory to
the Buyer, in an amount equal to the fair market value of such Real Estate
(including all improvements located thereon), insuring over the standard
pre-printed exceptions and insuring title to the Owned Real Estate to be vested
in the Buyers as of the Closing free and clear of all liens and encumbrances
except Permitted Real Estate Encumbrances, together with such endorsements for
zoning, contiguity, public access and extended coverage as the Buyer or its
lender reasonably requests, (iii) a current survey of each parcel of Real Estate
certified to the Buyer and its lender, prepared by a licensed surveyor and
conforming to current ALTA Minimum Detail Requirements for Land Title Surveys,
disclosing the location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, and other matters shown customarily on such surveys,
and showing access affirmatively to public streets and roads (the "Surveys")
which shall not disclose any survey defect or encroachment from or onto any of
the Real Estate which has not been cured or insured over prior to the Closing;
and (iv) with respect to each parcel of Real Estate, a current Phase I
environmental site assessment from an environmental consultant or engineer
reasonably satisfactory to the Buyers which does not indicate that the Seller
and the Real Estate are not in compliance with any Environmental Law and which
shall not disclose or recommend any action with respect to any condition to be
remediated or investigated or any contamination on the site assessed. The Buyers
will pay the costs of these title policies, Surveys and environmental
assessments.
With respect to the Phase I environmental site assessments, Seller agrees
to take any remedial action necessary to remedy any environmental defects
disclosed in the assessments, or to undertake such further testing as may be
indicated, at an expense of up to a maximum of Fifty Thousand Dollars
($50,000.00) in the aggregate. If the cost to remedy the environmental defects,
or to conduct further testing, exceeds Fifty Thousand Dollars ($50,000.00),
Seller will have the right to terminate this Agreement unless Buyer agrees to
assume responsibility for expenses in excess of $50,000.
(p) Control of Stations. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyer
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the
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Acquired Assets lost, damaged or destroyed will be reimbursed under any
insurance policy with respect thereto. The Seller will, at Seller's expense,
repair or replace such Acquired Assets to their former condition as soon as
possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Seller's notice to the Buyers, and the Buyers determine that the Seller's
failure to repair or replace, alone or in the aggregate with any other then
existing factors, would have a material adverse effect on the operation of the
Stations:
(a) the Buyers may elect to terminate this Agreement; or
(b) the Buyers may postpone the Closing Date until such time as the
property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
(c) the Buyers may choose to accept the Acquired Asset in their
"then" condition, together with the Seller's assignment to the Buyers of
all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers of any proceeds under any such
insurance policies, previously received by the Seller with respect thereto
plus an amount equal to the amount of any deductible or self-insurance
maintained by Seller on such Acquired Assets.
In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above and identified by Buyers as material, including
but not limited to those relating to
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transmitter and studio leases, and all of the title insurance commitments (and
endorsements), Surveys and environmental site assessments described in Section
4(o) above;
(iv) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the parties if such
transactions are consummated, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyer to own, operate, or control the Acquired Assets (and no
such judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(v) the Seller shall have delivered to the Buyer a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified above in Sections 5(a)(i) through (iv) is
satisfied in all respects and the statements contained in such certificate shall
be deemed a warranty of the Seller which shall survive the Closing;
(vi) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Postclosing
Agreement;
(viii) the Buyers shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit F attached hereto,
addressed to the Buyers and its lender and dated as of the Closing Date; and
(ix) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Buyers may elect to (i) terminate this Agreement without
liability to the Seller, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Buyers elect to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Seller
(including, without limitation, any breach arising as a result of the failure of
the Seller to execute and/or deliver any item described in this Section 5(a),
the Buyers may seek appropriate remedies for any and all damages, costs and
expenses incurred by the Buyers by reason of such breach including, without
limitation, indemnification pursuant to Section 7, below.
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(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of their
covenants hereunder in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the Parties if such
transactions are consummated, or (B) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Seller a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified above in Section 5(b)(i)-(iii) is satisfied in
all respects and the statements contained in such certificate shall be deemed a
warranty of the Buyers which shall survive the Closing;
(v) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement; and
(viii) all actions to be taken by the Buyers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Seller may elect to (i) terminate this Agreement without
liability to the Buyers, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Seller elects to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Buyers
(including, without limitation, any breach arising as a result of the failure of
the Buyers to execute and/or deliver any item described in this Section 5(a),
the Seller may seek appropriate
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remedies for any and all damages, costs and expenses incurred by the Seller by
reason of such breach including, without limitation, indemnification pursuant to
Section 7, below.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
(c) Adjustments. Operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Buyers as of the Closing
Date in accordance with the foregoing principle. In addition, all commissions
payable with respect to the accounts receivable of the Seller (whether due
before or after Closing) shall be solely for the account and responsibility of
the Seller. Contractual arrangements that do not reflect an equal rate of
compensation to a Station over the term of the agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by an
independent accounting firm mutually acceptable to both parties and the fees and
expenses of such accounting firm shall be paid one-half (1/2) by the Seller and
one-half (1/2) by the Buyer.
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(d) Collection of Accounts Receivable. At the Closing, the Seller will
turn over to the Buyers, for collection only, the accounts receivable of the
Stations owing to the Seller as of the close of business on the Closing Date. A
schedule of such accounts receivable will be delivered by the Seller to the
Buyers on the Closing Date or as soon thereafter as possible. The Buyers agree
to use commercially reasonable efforts in the ordinary course of business (but
without responsibility to institute legal or collection proceedings) to collect
such accounts receivable during the 120-day period following the Closing Date,
and will remit all payments received on such accounts during each calendar month
during this 120-day period on the one hundred thirty-fifth (135th) day together
with an accounting of all payments received within such period. The Buyers shall
have the sole right to collect such accounts receivable during such one hundred
twenty (120) day period. In the event the Buyers receive monies during the
120-day period following the Closing Date from an advertiser who, after the
Closing Date, is advertising over any of the Stations, and that advertiser was
included among the accounts receivable as of the Closing Date, the Buyer shall
apply said monies to the oldest outstanding balance due on the particular
account, except in the case of a "disputed" account receivable. For purposes of
this Section 6(d), a "disputed" account receivable means one which the account
debtor refuses to pay because he asserts that the money is not owed or the
amount is incorrect. In the case of such a disputed account, the Buyers shall
immediately return the account to the Seller prior to expiration of the 120-day
period following the Closing Date. If the Buyers return a disputed account to
the Seller, the Buyers shall have no further responsibility for its collection
and may accept payment from the account debtor for advertising carried on any of
the Stations after the Closing Date. At the end of the 120-day period following
the Closing Date, the Buyers will turn back to the Seller all of the accounts
receivable of the Stations as of the Closing Date owing to the Seller which have
not yet been collected, and the Buyers will thereafter have no further
responsibility with respect to the collection of such receivables. During the
120-day period following the Closing Date, the Buyers shall afford the Seller
reasonable access to the accounts receivable "aging list." The Seller
acknowledges and agrees that the Buyers are acting as its collection agent
hereunder for the sole benefit of the Seller and that Buyers have accepted such
responsibility for the accommodation of the Seller. The Buyer shall not have any
duty to inquire as to the form, manner of execution or validity of any item,
document, instrument or notice deposited, received or delivered in connection
with such collection efforts, nor shall the Buyers have any duty to inquire as
to the identity, authority or rights of the persons who executed the same. The
Seller shall indemnify Buyers and hold them harmless from and against any
judgments, expenses (including attorney's fees) costs or liabilities which the
Buyers may incur or sustain as a result of or by reason of such collection
efforts.
(f) Consents. In the event any of the Assumed Contracts are not assignable
or any consent to such assignment is not obtained on or prior to the Closing
Date, and the Buyers elect to consummate the transactions contemplated herein
despite such failure or inability to obtain such consent, the Seller shall
continue to use commercially reasonable efforts to obtain any such assignment or
consent after the Closing Date. Until such time as such assignment or approval
has been obtained, the Seller will cooperate with Buyers in any lawful and
economically feasible arrangement to provide that the Buyer shall receive the
Seller's interest in the benefits under any such Assumed Contract, including
performance by the Seller as agent,
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if economically feasible; provided, however, that the Buyers shall undertake to
pay or satisfy the corresponding liabilities for the enjoyment of such benefit
to the extent that Buyers would have been responsible therefor if such consent
or assignment had been obtained. Following Closing, the Parties shall otherwise
carry out their respective obligations with respect to consents and Assumed
Contracts as described in Section 4(o) above.
(g) WCME-FM. Sellers will use best efforts to prosecute the application
for the transfer of WCME-FM to Sellers before the FCC and to close that
transaction on or before June 30, 1998.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g),
2(r) and 2(t) hereof or relating to the Seller's title to the Acquired Assets)
shall survive the Closing and continue in full force and effect for a period
until 90 days after the applicable statute of limitations has expired with
respect to any claim by the Buyers based on a claim or action by a third party
and for a period of eighteen (18) months following Closing with respect to any
claim by the Buyers not based on a claim or action by a third party. All of the
other representations and warranties (including the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g) 2(r)
and 2(t) hereof or relating to the Seller's title to the Acquired Assets) and
all covenants of the Buyers and the Seller contained in this Agreement shall
survive the Closing and continue in full force and effect thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a breach of a
warranty or covenant prior to the Closing Date, the Seller agrees to indemnify
the Buyers from and against the entirety of any Adverse Consequences the Buyers
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by:
(i) any misrepresentation or breach of any of the Seller's representations
or warranties, and covenants contained in this Agreement or in any Ancillary
Agreement executed and/or delivered by the Seller (so long as the Buyers make a
written claim for indemnification within the applicable survival period);
(ii) any breach or nonfulfillment of any agreement or covenant of the
Seller contained herein or in any Ancillary Agreement;
(iii) any Liability of the Seller which is not an Assumed Liability;
and/or
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(iv) any Liability of the Buyers arising by operation of law (including
under any bulk transfer law of any jurisdiction or under any common law doctrine
of defacto merger or successor liability) which is not an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyer agrees to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that not withstanding the provision in
Section 7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for a breach of any provision of this Agreement.
(e) Liquidated Damages. The Buyer and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
lieu of indemnification pursuant to Section 7(b) or 7(c), the non defaulting
Party shall be entitled to receive from the defaulting Party for such default
the sum of Four Hundred Thousand Dollars ($400,000) as liquidated damages
without the need for proof of damages, subject only to successfully proving in a
court of competent jurisdiction that the other Party has materially breached
this Agreement and that the transactions contemplated thereby have not occurred;
provided however, that the Buyers shall retain the option to receive, pursuant
to Section 7(d), and in lieu of receiving the liquidated damages provided in
this Section 7(e), the remedy of specific performance with respect to a breach
of this Agreement prior to the Closing. The Buyers and the Seller agree to pay
said sum of liquidated damages within ten (10) days of the date that the
non-defaulting party obtains such a judgment, and agree that in the event this
Agreement is terminated by the Seller prior to the Closing Date as a result of a
breach or default by the Buyers under this Agreement, the Seller shall proceed
against the Earnest Money as partial satisfaction of liquidated damages owed by
Buyers.
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(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnifica tion against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets that are used or useful in
the operation of the Stations, wherever located, including but not limited to
all of its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles, and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those Barter Agreements and Advertising Contracts identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Stations; (e) Assumed Contracts, indentures,
Security Interests,
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guaranties, other similar arrangements, and rights thereunder; (f) call letters
of the Stations, jingles, logos, slogans, and business goodwill of the Stations;
(g) claims, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery (including rights under policies of insurance), rights of set
off, and rights of recoupment; (h) Licenses and similar rights obtained from
governments and governmental agencies; and (i) FCC logs and records and all
other books, records, ledgers, logs, files, documents, correspondence,
advertiser lists, all other lists, plats, architectural plans, drawings, and
specifications, creative materials, advertising and promotional materials,
program production materials, studies, reports, and other printed or written
materials; and (j) goodwill of the Stations.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts listed on Exhibit G attached hereto.
"Assumed Liabilities" means (a) obligations of the Seller for [$60,000] in
barter agreement liabilities, and (b) obligations of the Seller which accrue
after the Closing Date under the Assumed Contracts either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" has the meaning set forth in Section 2(q), above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means, jointly, Dennis F. Begley of Reddy, Begley,and
McCormick, and John Johnson of Paul, Hastings, Janofsky & Walker.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the
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time in which such reconsideration or review is permitted has passed; and (d) no
appeal to a court, or request for stay by a court, of the FCC's action is
pending or in effect, and the deadline for filing any such appeal or request has
passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (b) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Leases" means those real estate leases to which Seller is a party
governing Seller's studios and tower sites in, as described in Section 2(i) of
the Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Material Consents" has the meaning set forth in Section 4(d) above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller's
owners in the form attached hereto as Exhibit D.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller; and (iv) Cash.
"Retained Liabilities" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
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"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Stations" means radio stations WABK-FM (licensed to Gardiner, Maine),
WFAU(AM) (licensed to Gardiner, Maine), WKCG-FM (licensed to Augusta, Maine),
WIGY-FM (located in Madison, Maine) and WCME-FM (licensed to Boothbay Harbor,
Maine) (if WCME-FM is conveyed in this transaction).
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
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(ii) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing in the event the Seller is in
material breach of any representation, warranty, or covenant contained in this
Agreement; provided, however, that if such breach is capable of being cured,
such breach also remains uncured for twenty (20) days after notice of breach is
received by the Seller from the Buyers;
(iii) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing in the event the Buyers are in
material breach of any representation, warranty, or covenant contained in this
Agreement; provided, however that if such breach is capable being cured, such
breach remains uncured for twenty (20) days after notice of breach is received
by the Buyers from the Seller;
(iv) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(a) hereof
(unless the failure results primarily from the Buyers themselves breaching any
representation, warranty, or covenant contained in this Agreement);
(v) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(b) hereof
(unless the failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this Agreement); or
(vi) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order or designated for hearing.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party (except for any Liability of any Party then
in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in Section 7(a) hereof and the Post-Closing Agreement
with respect to Seller's owners.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
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(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that (i) the Buyers may assign all of its right,
title and interest in, to and under this Agreement to one or more Affiliates,
who shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Seller the Purchase Price therefor or to any successor to the Buyers in
the event of any sale, merger or consolidation of the Buyers, and (ii) Buyers
may assign their indemnification claims and their rights under the warranties
and representations of the Sellers to the financial institution(s) providing
financing to the Buyers in connection with this transaction.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
Tryon-Seacoast Communications, Inc.
P.O. Box 99
Franklin, NH 03235
Attn: Mr. Jeff Fisher
Copy to:
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Dennis Begley, Esquire
Reddy, Begley, and McCormick
2175 K Street, NW
Washington, D.C. 20037
fax: (202) 659-5711
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
c/o QUAESTUS Management Corporation
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
fax: (312) 867-0091
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, Indiana 46601
Attn: Peter Trybula
(which copies shall not constitute notice to Buyers)
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
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<PAGE>
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Maine.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications and as set forth in
Section 4(o) with respect to Surveys, title commitments and environmental
audits; provided, however, that in the event the transaction does not close for
a reason other than default by Seller, Buyer will reimburse Seller for up to
Twenty Thousand Dollars ($20,000) in documented attorney's fees in connection
with this transaction. The Seller will pay all income taxes. The Seller and the
Buyers will each pay any transfer or sales taxes and other recording or similar
fees necessary to vest title to each of the Acquired Assets in the Buyers,
according to local custom.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of
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the relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Portland, Maine, in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(h) above. Nothing in this Section 10(o), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on and
as of the date first above written.
CUMULUS BROADCASTING, INC.
By:
-----------------------------
(printed)
- --------------------------------
Title:
--------------------------
CUMULUS LICENSING CORPORATION
By:
-----------------------------
(printed)
- --------------------------------
Title:
--------------------------
TRYON-SEACOAST COMMUNICATIONS, INC.
By:
-----------------------------
(printed)
- --------------------------------
Title:
--------------------------
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SEACOAST BROADCASTING, INC.
By:
-----------------------------
(printed)
- --------------------------------
Title:
--------------------------
KENNEBEC-TRYON COMMUNICATIONS CORP.
By:
-----------------------------
(printed)
- --------------------------------
Title:
--------------------------
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SCHEDULE A
Purchase Price. The Buyers agree to pay to the Seller (i) as consideration
for the Acquired Assets other than WCME-FM, the amount of Three Million Five
Hundred Thousand Dollars ($3,500,000.00) (the "Purchase Price"), and, (ii)
provided the assets of WCME-FM can be conveyed by Seller to Buyers no later than
July 1, 1998, as consideration for the assets of WCME-FM, the amount of Five
Hundred Thousand Dollars ($500,000). The Purchase Price shall be payable as
follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Two Hundred Thousand Dollars ($200,000) (the "Earnest
Money Deposit") in the form of an irrevocable letter of credit from NationsBank;
and
(ii) on the Closing Date, (a) if the Seller conveys the assets of
WCME-FM, the Buyers shall pay to the Seller the amount of Three Million Seven
Hundred Fifty Thousand Dollars ($3,750,000) , or (b) if Seller does not convey
the assets of WCME-FM, the buyer shall pay to the Seller the amount of Three
Million Two Hundred Fifty Thousand Dollars ($3,250,000), with adjustments as
provided in this Agreement;
(iii) on the Closing Date, the Buyer shall pay to the Seller, on
behalf of all parties to the Postclosing Agreement, the amount of Fifty Thousand
Dollars ($50,000); and
(iv) if Seller conveys the assets of WCME-FM to Buyers after the
Closing Date but no later than July 1, 1998, the Buyers shall pay to the Sellers
the amount of Five Hundred Thousand Dollars on such date of transfer ($500,000).
The Earnest Money Deposit referenced in this Section l(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement").
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of February 18, 1998, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing"), and George H.
Buck, Jr., d/b/a/ WHSC Radio (the "Seller"). Broadcasting and Licensing are
referred to collectively herein as the "Buyers." The Buyers and the Seller are
referred to collectively herein as the "Parties." Capitalized terms used in this
Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
stations WHSC-FM and WHSC-AM, licensed to Hartsville, South Carolina (the
"Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Licensing agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to Licensing, all of
the FCC Licenses listed in Section 2(k) of the Disclosure Schedule. In addition,
Broadcasting agrees to purchase from the Seller, and the Seller agrees to sell,
transfer, convey, and deliver to Broadcasting, all of the Acquired Assets other
than the FCC Licenses. Both such sales shall take place at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities and the
Seller agrees to pay and discharge all Liabilities and obligations of the Seller
other than the Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the amount of Seven Hundred Thousand
Dollars ($700,000.00) (the "Purchase Price"). The Purchase Price shall be
payable as follows:
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(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Thirty-Five Thousand Dollars ($35,000.00) (the
"Earnest Money Deposit") by wire transfer or delivery of other immediately
available funds; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Six Hundred Sixty Five Thousand Dollars ($665,000.00), less interest
earned on the Earnest Money Deposit.
The Earnest Money Deposit referenced in this Section 1(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), and shall
be deposited by the Escrow Agent with a federally insured financial institution
in an interest bearing account. Interest earned on the Earnest Money Deposit
shall accrue to the benefit of Buyers, and, together with the principal amount
of the Earnest Money Deposit, shall be payable to the Seller and credited
against the Purchase Price on the Closing Date. If this Agreement is terminated
without Closing of the transaction contemplated herein, the Earnest Money
Deposit and all accrued interest shall be paid to the Buyers or the Seller as
provided in the Earnest Money Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Station in
Hartsville, South Carolina, or at another mutually agreed location, commencing
at 9:00 a.m. local time on the date set by the Buyers not earlier than the fifth
business day or later than the tenth business day after the FCC approval of the
Assignment Application becomes a Final Order, by which date all other conditions
to the obligations of the Parties to consummate the transactions contemplated
hereby will have been satisfied, or such other date as the Parties may mutually
determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in Section 5(a) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including Lease and other Assumed Contract assignments
and Intellectual Property transfer documents), bills of sale and leases in the
forms attached hereto as Exhibit B, (B) such affidavits, transfer tax returns,
memorandums of lease, and other additional documents as may be required by the
terms of the title insurance commitments described in Section 4(o) hereof, as
necessary to furnish title insurance as required by such section or as may be
necessary to convey title to the Real Estate to the Buyers in the condition
required herein or provided public notice of existence of the Leases, and (C)
such other instruments of sale, transfer, conveyance, and assignment as the
Buyers and their counsel reasonably may request; (iv) the Buyers will execute,
acknowledge (if appropriate), and deliver to the Seller (A) an assumption in the
form attached hereto as Exhibit C and (B) such other instruments of assumption
as the Seller and its counsel reasonably may request; and (v) the Buyers will
deliver to the Seller the consideration specified in Section 1(c) above.
(f) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit D.
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2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Authorization of the Seller. The Seller is an individual who has full
power and authority to execute and deliver this Agreement and all agreements and
instruments to be executed and delivered by such Party pursuant to this
Agreement (collectively, the "Ancillary Agreements") and to perform his
obligations hereunder and thereunder. This Agreement and the Ancillary
Agreements constitute the valid and legally binding obligation of the Seller,
enforceable in accordance with their respective terms and conditions.
(b) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the charter or bylaws of the Seller; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other agreement, arrangement to which the Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
(c) Title to Acquired Assets. Other than the Security Interests set forth
on Section 2(c) of the Disclosure Schedule (which shall be released at or before
the Closing) the Seller has good and marketable title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer.
(d) Financial Statements. Included in Section 2(d) of the Disclosure
Schedule are the following WHSC Radio financial statements (collectively the
"Financial Statements"): (i) unaudited balance sheets and statements of income
as of and for the fiscal years ended December 31, 1994, December 31, 1995 and
December 31, 1996; and (ii) unaudited balance sheets and statements of income,
as of and for each month during 1996 and each month ending December 31
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in 1997 for the Seller. The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, are correct and complete, fairly represent the financial
condition of the Seller on such dates and the results of operations for the
periods designated therein, and are consistent with the books and records of the
Seller (which books and records are correct and complete).
(e) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(e) of the Disclosure Schedule:
(i) the Seller has not sold, leased, transferred, or assigned any of its
material assets, tangible or intangible;
(ii) other than this Agreement, the Seller has not entered into any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
involving more than $5,000 to which the Seller is a party or by which it or any
of its assets are bound;
(iv) no Security Interest has been imposed upon any of Seller's assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of related
capital expenditures) outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of any other person (or series of
related capital investments, loans, and acquisitions);
(vii) the Seller has not created, incurred, assumed, or guaranteed any
indebtedness (including capitalized lease obligations) outside the Ordinary
Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal practice
in the Ordinary Course of Business) the payment of accounts payable and other
Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the Ordinary
Course of Business;
(x) the Seller has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
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(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to any of its property or any action
adversely affecting the FCC Licenses;
(xii) the Seller has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees giving rise to
any claim or right on its part against the person or on the part of the person
against it;
(xiii) the Seller has not entered into any employment contract, consulting
contract or severance agreement or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;
(xiv) the Seller has not granted any increase (outside routine salary and
wage increases in the Ordinary Course of Business) in the rate of compensation,
commissions, bonus or other remuneration payable, or granted any severance or
termination pay to, any of its directors, officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing, (C)
incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other plan,
contract, or commitment for any of its directors, officers, and employees, or
modified or terminated any existing such plan, contract, or commitment;
(xvi) the Seller has not made any other change in employment terms for any
of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or other
capital contribution;
(xviii) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
the Seller;
(xix) the Seller has not altered its credit and collection policies or its
accounting policies;
(xx) the Seller has not materially altered the programming, format or call
letters of the Station, or its promotional and marketing activities;
(xxi) the Seller has not applied to the FCC for any modification of the
FCC Licenses or failed to take any action necessary to preserve the FCC Licenses
and has operated the Station in compliance therewith and with all FCC rules and
regulations; or
(xxii) the Seller has not committed to any of the foregoing.
(f) Tax Matters. The Seller and its partners have timely and properly
filed all Tax Returns that they were required to file with respect to the
Seller's operations. All such Tax Returns were
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correct and complete in all respects and properly reflect the tax liability of
the Seller. The Seller has not requested any extension of time within which to
file returns in respect of any Taxes with respect to the Seller's operations. No
Tax deficiencies have been proposed or assessed against the Seller. There are no
pending, or to the Seller's knowledge, threatened audits, investigations, or
claims for or relating to any liability in respect of Taxes with respect to the
Seller's operations. All Taxes owed by the Seller with respect to its operations
(whether or not shown on any Tax Return) have been paid. The Seller has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. No claim has ever been made by any authority in any
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security Interests on any
of the assets of the Seller that arose in connection with any failure (or
alleged failure) to pay any Tax.
(g) Tangible Assets. Section 2(g) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Station.
The Seller owns or leases all tangible assets necessary for the conduct of the
operation and business of the Station as presently conducted and as presently
proposed to be conducted and all leased assets are specifically identified as
such in Section 2(g) of the Disclosure Schedule. Each such tangible asset is
free from defects (patent and latent), has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it presently
is used. No such tangible asset is in need of replacement. Any leased personal
property included within the tangible personal property is in the condition
required of such property by the terms of the lease applicable thereto during
the term of the lease and upon the expiration thereof. All of the equipment
utilized in the operation of the Station is in compliance with all FCC and FAA
requirements and is sufficient to satisfy the intended needs of the normal
customary operations of the Station at all times of the year and all such
equipment is in compliance with all applicable laws.
(h) Real Property. Section 2(h) of the Disclosure Schedule lists and
describes briefly all real property leased to the Seller (including, without
limitation, complete legal descriptions for all of the Real Estate). The Seller
has delivered to the Buyer correct and complete copies of the Leases.
With respect to the Real Estate:
(i) the Leases are and, following the Closing will continue to be, legal,
valid, binding, enforceable, and in full force and effect;
(ii) no party to any Lease is in breach or default (or has repudiated any
provision thereof), and no event has occurred which, with notice or lapse of
time, would constitute a breach or default thereunder or permit termination,
modification, or acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance programs in
effect as to any Lease;
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(iv) To the Seller's Knowledge, none of the properties is subject to any
lease (other than Leases), option to purchase or rights of first refusal;
(v) except for Permitted Real Estate Encumbrances, there are no (i) actual
or, to the Seller's Knowledge, proposed special assessments with respect to any
of the Real Estate; (ii) pending or, to the Seller's Knowledge, threatened
condemnation proceedings with respect to any of the Real Estate; (iii) pending
or, to the Seller's Knowledge, threatened litigation or administrative actions
with respect to any of the Real Estate; (iv) structural or mechanical defects in
any of the buildings or improvements located in the Real Estate; (v) planned or
commenced improvements which will result in an assessment or otherwise affect
the Real Estate; (vi) governmental agency or court orders requiring the repair,
alteration or correction of any existing condition with respect to the Real
Estate or any portion thereof; or (vii) any pending or, to the Seller's
Knowledge, threatened changed in any zoning laws or ordinances which may affect
any of the Real Estate or Seller's use thereof;
(vi) all buildings and improvements on the Real Estate are in good
operating condition and repair, normal wear and tear excepted;
(vii) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the Leases or its rights
thereunder;
(viii) to the Seller's Knowledge, all facilities on the Real Estate have
received all approvals of governmental authorities (including licenses, permits
and zoning approvals) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws, rules, and
regulations;
(ix) except as noted in Section 2(h) of the Disclosure Schedule, all
facilities on the Real Estate are supplied with utilities and other services
necessary for the operation of said facilities; and
(x) to the Seller's Knowledge, the owner of each leased facility has good
and marketable title to the underlying parcel of real property, free and clear
of any Security Interest, easement, covenant, or other restriction, except for
Permitted Real Estate Encumbrances and Seller's leasehold interest in each Lease
has priority over any other interest except for the fee interest therein and
Permitted Real Estate Encumbrances;
(i) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for or currently used in the operation of the business of the
Seller as presently conducted and as presently proposed to be conducted. Each
item of Intellectual Property owned or used by the Seller immediately prior to
the Closing hereunder will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has taken all necessary or desirable action to protect each item of
Intellectual Property that it owns or uses. With respect to such Intellectual
Property:
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(i) The Seller has not interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, claim, or
notice alleging any such interference, infringement, misappropriation, or
violation. To the Knowledge of the Seller, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller.
(ii) Section 2(i) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller with
respect to any of its Intellectual Property and the call letters (current and
past) of the Station, identifies each pending patent, trademark or copyright
application for registration which the Seller has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which the Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). The Seller has
delivered to the Buyer correct and complete copies of all such patents,
trademarks or copyright registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. With respect to each item of
Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in and to
the item and all registrations and applications are in full force and
effect;
(B) the item is not subject to any outstanding judgment, order,
decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or entity
for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iii) Section 2(i) of the Disclosure Schedule also identifies each item of
Intellectual Property that any third party owns and that the Seller uses
pursuant to license, sublicense, agreement, or permission including, but not
limited to the call letters of the Station. The Seller has supplied the Buyer
with correct and complete copies of all such licenses, sublicenses, agreements,
and permissions (as amended to date). With respect to each such item of used
Intellectual Property:
(A) the license, sublicense, agreement, or permission covering the
item is, and following the Closing will continue to be on identical terms,
legal, valid, binding, enforceable, and in full force and effect;
(B) no party to the license, sublicense, agreement, or permission is
in breach or default (or has repudiated any provision thereof), and no
event has occurred which with
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notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and correct
with respect to the underlying license;
(D) the underlying item of Intellectual Property is not subject to
any outstanding judgment, order, decree, stipulation, injunction, or
charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or entity for
or against any interference, infringement, misappropriation, or other
conflict with respect to the underlying item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
(j) Contracts. Section 2(j) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time which are listed in Section 2(r) of the
Disclosure Schedule) to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under which
it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
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(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, compensation
agreement, employment agreement, commission agreement, or severance
agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station;
(viii) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement listed in Section 2(j) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect; (B) the written arrangement
will continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(j) of the Disclosure Schedule under the terms
of this Section 2(j). Except for the Assumed Contracts, the Buyer shall not have
any Liability or obligations for or in respect of any of the contracts set forth
in Section 2(j) of the Disclosure Schedule or any other contracts or agreements
of the Seller. No advertiser of the Station has indicated to Seller within the
past year that it will stop, or decrease the rate of, buying services from them.
(k) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates of
compliance, and consents of governmental bodies, including, without limitation,
the FCC Licenses, used or useful in the operation of the Station as they are now
being operated are (A) in full force and effect, (B) unimpaired by any acts or
omissions of the Seller or the Seller's employees or agents, (C) free and clear
of any restrictions which might limit the full operation of the Station, and (D)
detailed in Section 2(k) of the Disclosure Schedule. With respect to the
licenses, permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(k) of the Disclosure
Schedule also sets forth, without limitation, the date of the last renewal, the
expiration date thereof, and any conditions or contingencies related thereto.
Except as set forth in Section 2(k) of the Disclosure Schedule, no condition
exists or event has occurred that permits, or after notice or lapse of time, or
both, would permit, the revocation or termination of any such license, permit,
consent, franchise, or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction or
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limitation upon the operation of the Station as now conducted. Except as set
forth in Section 2(k) of the Disclosure Schedule, the Seller is not aware of any
reason why the FCC licenses might not be renewed in the ordinary course or
revoked.
(ii) The Stations are each in compliance with the FCC's policy on exposure
to radio frequency radiation. No renewal of any FCC License would constitute a
major environmental action under the FCC's rules or policies. Access to the
Station' transmission facilities is restricted in accordance with the policies
of the FCC.
(iii) Except as set forth in Section 2(k) of the Disclosure Schedule, to
the Seller's Knowledge, the Seller is not the subject of any FCC or other
governmental investigation or any notice of violation or order, or any material
complaint, objection, petition to deny, or opposition issued by or filed with
the FCC or any other governmental authority in connection with the operation of
or authorization for the Station, and there are no proceedings (other than rule
making proceedings of general applicability) before the FCC or any other
governmental authority that could adversely affect any of the FCC Licenses or
the authorizations listed in Section 2(k) of the Disclosure Schedule.
(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Station all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(v) The Seller is not aware of any information concerning the Station that
could cause the FCC or any other regulatory authority not to issue to the Buyer
all regulatory certificates and approvals necessary for the consummation of the
transactions contemplated hereunder or the Buyer's operation and/or ownership of
the Station.
(l) Insurance. Section 2(l) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was on a
claims made, occurrence, or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage; and
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(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms through the Closing Date.
(m) Litigation. Section 2(m) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(m) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(n) Employees. Section 2(n) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Station of each employee of the
Seller. Section 2(n) of the Disclosure Schedule also sets forth a list of all
employee handbooks and/or manuals relating to the employees of the Seller, true
and correct copies of which have been delivered to the Buyer. To the Knowledge
of the Seller, no key employee or group of employees has any plans to terminate
employment with the Seller. The Seller is not a party to or bound by any
understanding (whether written or oral), agreement or contract with any union,
labor organization, employee group or other entity or individual which affects
the employment of employees of the Seller including, but not limited to any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. The
Seller has no Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Seller. The Seller has not been subject to a strike, slow down or other
work stoppage during the five (5) year period immediately preceding the date
hereof and, to the Seller's Knowledge, there are no strikes, slow downs or work
stoppages threatened against the Seller. To the Seller's Knowledge, it has not
committed any unfair labor practice. There is no basis for any claim by any past
or present employee of the Seller that such employee was subject to wrongful
discharge or any employment discrimination by the Seller or its management
arising out of or relating to the employee's race, sex, age, religion, national
origin, ethnicity, handicap or any other protected characteristic under
applicable law. No proceedings are pending before any court, governmental agency
or instrumentality or arbitrator relating to labor matters, and there is no
pending investigation by any governmental agency or, to the Knowledge of the
Seller, threatened claim by any such agency or other person relating to labor or
employment matters.
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(o) Employee Benefits. Section 2(o) of the Disclosure Schedule lists all
Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Seller does not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Seller. There are no pending or, to the Knowledge of the Seller, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
(p) Environment, Health, and Safety.
(i) With respect to the operation of the Station and the Real
Estate, the Seller is, and at all times in the past has been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has ever been filed or commenced
or, to the Seller's Knowledge, is threatened, against the Seller alleging
any failure to comply with any such Environmental Law or laws concerning
employee health and safety.
(ii) With respect to the operation of the Station and the Real
Estate, the Seller has no Liability (and to Seller's Knowledge there is no
Basis related to the past or present operations of the Seller or its
predecessors for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Federal Water Pollution Control
Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of
1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899, or
the Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), or any other law of any federal, state, local, or foreign
government or agency thereof (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, or pollution or
protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or
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handling of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes ("Environmental Laws");
(iii) The Seller has no Liability (and to Seller's Knowledge there
is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Occupational Safety and Health
Act, as amended, or any other law (or rule or regulation thereunder) of
any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal
injury to any employee.
(iv) The Seller has obtained and at all times has been in compliance
in all material respects with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and
has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental Laws or law of any
federal, state, or local or foreign government relating to worker health
and safety.
(v) All properties and equipment used in the business of the Seller
have been free of asbestos, or emissions, discharges, releases or
threatened releases of PCB's, methylene chloride, trichloroethylene, 1,
2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances.
(vi) No pollutant, contaminant, or chemical, industrial, hazardous,
or toxic material or waste ever has been buried, stored, spilled, leaked,
discharged, emitted, or released on any of the Real Estate.
(vii) None of the Acquired Assets are required to be upgraded,
modified or replaced to be in compliance with Environmental Laws.
(viii) Section 2(p) of the Disclosure Schedule contains a copy of
all environmental claims, reports, studies, compliance actions or the like
of the Seller or which are available to the Seller with respect to any of
the Real Estate or any of the Acquired Assets.
(ix) No septic systems or wells exist on, in or under any of the
Real Estate. No above ground or underground storage tanks have ever been
located at, on or under the Real Estate. None of the Real Estate is
contaminated by hazardous or toxic substances or waste, as defined under
Environmental Laws, originating from off-site sources.
(q) Legal Compliance.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, local and
foreign governments (and all agencies thereof, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim,
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demand, or notice has been filed or commenced or, to the Seller's Knowledge, is
threatened, against the Seller alleging any failure to comply with any such law
or regulation, including those relating to the employment of labor, employee
civil rights, and equal employment opportunities and relating to antitrust
matters.
(ii) The Seller has filed in a timely manner all reports, documents, and
other materials it was required to file (and the information contained therein
was correct and complete in all material respects) under all applicable laws
(including rules and regulations thereunder) of federal state, local and foreign
governments (and all agencies thereof). To the Seller's Knowledge, it has
possession of all records and documents it was required to retain under all
applicable laws (including rules and regulations thereunder).
(r) Advertising Contracts. Section 2(r) of the Disclosure Schedule lists
all arrangements for the sale of air time or advertising on the Station in
excess of $1000, and the amount to be paid to the Seller therefor. The Seller
has no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Seller to cease doing business or to reduce in any material respect the
business transacted with the Seller or to terminate or modify any agreements
with the Seller (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
(s) Brokers' Fees. Other than the fee payable to Bergner & Co., which
shall be the exclusive responsibility of Seller, the Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(t) Undisclosed Commitments or Liabilities. There are no commitments,
liabilities or obligations relating to any of the Station, whether accrued,
absolute, contingent or otherwise including, without limitation, guaranties by
the Seller of the liabilities of third parties, for which specific and adequate
provisions have not been made on the Financial Statements except those incurred
in or as a result of the Ordinary Course of Business since January 1, 1997 (none
of which Ordinary Course of Business obligations have had or will have a
material adverse effect on any Station).
(u) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer. Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
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(a) Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
(b) Authorization of Transaction. Buyers have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
their obligations hereunder and thereunder. This Agreement and the Ancillary
Agreements constitute the valid and legally binding obligation of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
(d) Brokers' Fees. The Buyers have no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
(e) Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 3 not misleading.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
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(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use the commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have material adverse effect upon the Station or
upon any Affiliate or impose significant costs on such party). If the FCC
imposes any condition on either party to the Assignment Application, such party
shall use commercially reasonable efforts to comply with such condition,
provided, that neither party shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Station or any
Affiliate. The Seller and the Buyers shall jointly oppose any requests for
reconsideration or judicial review of FCC approval of the Assignment Application
and shall jointly request from the FCC extension of the effective period of FCC
approval of the Assignment Application if the Closing shall not have occurred
prior to the expiration of the original effective period of the FCC Consent.
Nothing in this Section 4(b) shall be construed to limit either party's right to
terminate this Agreement pursuant to Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyers may, at their option, extend offers of employment to all or any of
the Seller's employees effective on the Closing Date. From and after the
execution of this Agreement, the Seller shall use its best efforts to assist
Buyers in retaining those employees of the Station which the Buyers wish to hire
in connection with the operation of the Station by the Buyers subsequent to the
Closing, and the Seller will not take any action to preclude or discourage any
of the Seller's employees from accepting any offer of employment extended by the
Buyers.
(d) Notices and Consents. The Seller shall give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request in connection with the matters pertaining to the Seller
disclosed or required to be disclosed in the Disclosure Schedule (including,
without limitation, consents to assignment of the Leases and other Assumed
Contracts) ("Material Consents"). All Material Consents noted in Buyers'
Disclosure Schedule 4(d) will be obtained prior to or at Closing. Buyers shall
not be obligated to assume any contracts or agreements requiring the consent of
any third party unless such written consent has been obtained and delivered to
Buyers; provided, however that Buyers agree to perform (but not assume without
such third party consent), for a period of up to six (6) months, Seller's
obligations under any contract or agreement which Buyer has indicated its intent
to assume and for which such consent has not been received by Closing but for
which the third party associated with the contract or agreement has indicated
that its consent would be forthcoming upon submission of the required consent
forms. Simultaneous with such delivery, Seller will take all
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steps necessary to put Buyers in actual possession and operating control of
those Acquired Assets which are the subject of those consents, and the business
associated therewith. Each of the Parties will take any additional action that
may be necessary, proper, or advisable in connection with any other notices to,
filings with, and authorizations, consents, and approvals of governments,
governmental agencies, and third parties that it may be required to give, make,
or obtain.
(e) Operation of Business. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 2(e) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the commencement of
the Time Brokerage Agreement shall not exceed Five Thousand Dollars ($5,000.00)
worth of air time without the Buyers' consent. On the Closing Date, the Seller
shall deliver to the Buyers a schedule, certified by an officer of the Seller,
reflecting the aggregate outstanding balances under all Barter Agreements in
existence as of the Time Brokerage Agreement.
(g) Contracts. The Seller shall not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on Section 2(j)
of the Disclosure Schedule in any material respect. The Seller will not without
prior written consent of the Buyers enter into any new contracts respecting the
Station or their properties, except (i) contracts for the sale of time on the
Station for cash, goods or services which are entered into in the Ordinary
Course of Business and comply with Sections 4(f) and 4(j) hereof, (ii) contracts
entered into in the Ordinary Course of Business which are cancelable on not more
than thirty-one (31) days' notice without penalty or premium, and (iii)
contracts entered into in the Ordinary Course of Business each of which does not
involve more than Five Thousand Dollars ($5,000) or all of which do not involve
more than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Station. The Seller shall operate the Station in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Station.
(j) Full Access and Consultation. The Seller shall permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Station, to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to the Seller for the purpose of permitting the Buyer to, among
other things: (a) conduct its due diligence review, (b) review financial
statements of the
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Seller, (c) verify the accuracy of representations and warranties of the Seller
contained in this Agreement, and (d) prepare for the consummation of the
transactions contemplated by this Agreement. The Seller will consult with the
Buyers' management with a view to informing Buyer's management as to the
operations, management and business of the Station. Without limiting the
foregoing, Seller acknowledges and agrees that it will provide the Buyers and
their representatives with such access to the properties, books, records,
documents and operations of the Seller as contemplated herein in a manner which
will permit the Buyers to fully complete their due diligence review within the
thirty (30) day period reference in Section 5(a)(ix), below.
(k) Notice of Developments. The Seller will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller or the Station. Each Party will give prompt written
notice to the other of any material development affecting the ability of the
Parties to consummate the transactions contemplated by this Agreement. No
disclosure by any Party pursuant to this Section 4(m), however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller shall not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Seller will notify
the Buyers immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. The Seller
shall obtain with respect to each parcel of Real Estate subject to the Leases, a
leasehold owner's policy issued by a title insurer reasonably satisfactory to
the Buyer, in an amount equal to the fair market value of such Real Estate
(including all improvements located thereon), insuring over the standard
pre-printed exceptions and insuring leasehold title to such Real Estate in the
Buyers as of the Closing subject only to the Permitted Real Estate Encumbrances,
together with such endorsements for zoning, contiguity, public access and
extended coverage as the Buyers or their lender reasonably requests, (ii) a
current survey of each parcel of Real Estate certified to the Buyer and its
lender, prepared by a licensed surveyor and conforming to current ALTA Minimum
Detail Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys") which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iii) with
respect to each parcel of Real Estate, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Buyers which does not indicate that the Seller and the Real Estate are
not in compliance with any Environmental Law
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and which shall not disclose or recommend any action with respect to any
condition to be remediated or investigated or any contamination on the site
assessed. The Buyers and the Seller will each pay one-half (1/2) of the costs of
these title policies, Surveys and environmental assessments.
(p) Control of Station. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, except to the extent explicitly authorized under the Time
Brokerage Agreement, the Buyers and their employees or agents shall not directly
or indirectly control, supervise, or direct, or attempt to control, supervise,
or direct, the operation of the Station, and such operation shall be the sole
responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyer
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will, at Seller's expense, repair or replace such
Acquired Assets to their former condition as soon as possible after loss, damage
or destruction thereof and shall use its best efforts to restore as promptly as
possible transmissions as authorized in the FCC Licenses. The Closing Date shall
be extended (with FCC consent, if necessary) for up to sixty (60) days to permit
such repair or replacement. If repair or replacement cannot be accomplished
within sixty (60) days of the date of the Seller's notice to the Buyers, and the
Buyers determine that the Seller's failure to repair or replace, alone or in the
aggregate with any other then existing factors, would have a material adverse
effect on the operation of the Station:
(a) the Buyers may elect to terminate this Agreement; or
(b) the Buyers may postpone the Closing Date until such time as the
property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
(c) the Buyers may choose to accept the Acquired Asset in their
"then" condition, together with the Seller's assignment to the Buyers of
all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers of any proceeds under any such
insurance policies, previously received by the Seller with respect thereto
plus an amount equal to the amount of any deductible or self-insurance
maintained by Seller on such Acquired Assets.
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In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
(iii) the Seller shall have procured all of the material third party
consents specified in Section 4(d) above, including but not limited to those
relating to transmitter and studio leases, and all of the title insurance
commitments (and endorsements), Surveys and environmental site assessments
described in Section 4(o) above;
(iv) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the parties if such
transactions are consummated, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyer to own, operate, or control the Acquired Assets (and no
such judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(v) the Seller shall have delivered to the Buyer a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified above in Sections 5(a)(i) through (iv) is
satisfied in all respects and the statements contained in such certificate shall
be deemed a warranty of the Seller which shall survive the Closing;
(vi) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
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(viii) the Buyers shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit E attached hereto,
addressed to the Buyers and its lender and dated as of the Closing Date; and
(ix) the Buyers shall, within thirty (30) days after the date hereof, be
satisfied as to the results of their examination and due diligence review
referred to in Section 4(l) hereof. If, within thirty (30) days after the date
hereof, Buyers do not deliver to Seller a written notice terminating this
Agreement in regard to the contingency described in this Section 5(a)(ix), then
the contingency set forth in this Section 5(a)(ix) shall be deemed waived by
Buyers; and
(xi) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Buyers may elect to (i) terminate this Agreement without
liability to the Seller, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Buyers elect to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Seller
(including, without limitation, any breach arising as a result of the failure of
the Seller to execute and/or deliver any item described in this Section 5(a),
the Buyers may seek appropriate remedies for any and all damages, costs and
expenses incurred by the Buyers by reason of such breach including, without
limitation, indemnification pursuant to Section 7, below.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of their
covenants hereunder in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the Parties if such
transactions are consummated, or (B) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
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(iv) the Buyers shall have delivered to the Seller a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified above in Section 5(b)(i)-(iii) is satisfied in
all respects and the statements contained in such certificate shall be deemed a
warranty of the Buyers which shall survive the Closing;
(v) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
and
(vi) all actions to be taken by the Buyers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Seller may elect to (i) terminate this Agreement without
liability to the Buyers, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Seller elects to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Buyers
(including, without limitation, any breach arising as a result of the failure of
the Buyers to execute and/or deliver any item described in this Section 5(a),
the Seller may seek appropriate remedies for any and all damages, costs and
expenses incurred by the Seller by reason of such breach including, without
limitation, indemnification pursuant to Section 7, below.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Station, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless
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the contesting or defending Party is entitled to indemnification therefor under
Section 7 below); provided, however, that such access and cooperation does not
unreasonably disrupt the normal operations of the cooperating party.
(c) Adjustments. Operation of the Station and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Buyers as of the Closing
Date in accordance with the foregoing principle. In addition, all commissions
payable with respect to the accounts receivable of the Seller (whether due
before or after Closing) shall be solely for the account and responsibility of
the Seller. Contractual arrangements that do not reflect an equal rate of
compensation to a Station over the term of the agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by an
independent accounting firm mutually acceptable to both parties and the fees and
expenses of such accounting firm shall be paid one-half (1/2) by the Seller and
one-half (1/2) by the Buyer.
(d) Collection of Accounts Receivable. At the commencement of the Time
Brokerage Agreement, the Seller will turn over to the Buyers, for collection
only, the accounts receivable of the Stations owing to the Seller as of the
close of business on the Closing Date. A schedule of such accounts receivable
will be delivered by the Seller to the Buyers on the Closing Date or as soon
thereafter as possible. The Buyers agree to use commercially reasonable efforts
in the ordinary course of business (but without responsibility to institute
legal or collection proceedings) to collect such accounts receivable during the
120-day period following the Closing Date, and will remit all payments received
on such accounts during each calendar month during this 120-day period on the
one hundred thirty-fifth (135th) day together with an accounting of all payments
received within such period. The Buyers shall have the sole right to collect
such accounts receivable during such one hundred twenty (120) day period. In the
event the Buyers receive monies during the 120-day period following the Closing
Date from an advertiser who, after the Closing Date, is advertising over any of
the Stations, and that advertiser was included among the accounts receivable as
of the Closing Date, the Buyer shall apply said monies to the oldest outstanding
balance due on the particular account, except in the case of a "disputed"
account receivable. For purposes of this Section 6(d), a "disputed" account
receivable means one which the account debtor refuses to pay because he asserts
that the money is not owed or the amount is incorrect. In the case of such a
disputed account, the Buyers shall immediately return the account to the Seller
prior to expiration of the 120-day period following the Closing Date. If the
Buyers return a disputed account to the Seller, the Buyers shall have no further
responsibility for its collection and may accept payment from the account debtor
for
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advertising carried on any of the Stations after the Closing Date. At the end of
the 120-day period following the Closing Date, the Buyers will turn back to the
Seller all of the accounts receivable of the Stations as of the Closing Date
owing to the Seller which have not yet been collected, and the Buyers will
thereafter have no further responsibility with respect to the collection of such
receivables. During the 120-day period following the Closing Date, the Buyers
shall afford the Seller reasonable access to the accounts receivable "aging
list." The Seller acknowledges and agrees that the Buyers are acting as its
collection agent hereunder for the sole benefit of the Seller and that Buyers
have accepted such responsibility for the accommodation of the Seller. The Buyer
shall not have any duty to inquire as to the form, manner of execution or
validity of any item, document, instrument or notice deposited, received or
delivered in connection with such collection efforts, nor shall the Buyers have
any duty to inquire as to the identity, authority or rights of the persons who
executed the same. The Seller shall indemnify Buyers and hold them harmless from
and against any judgments, expenses (including attorney's fees) costs or
liabilities which the Buyers may incur or sustain as a result of or by reason of
such collection efforts.
(e) Consents. In the event any of the Assumed Contracts are not assignable
or any consent to such assignment is not obtained on or prior to the Closing
Date, and the Buyers elect to consummate the transactions contemplated herein
despite such failure or inability to obtain such consent, the Seller shall
continue to use commercially reasonable efforts to obtain any such assignment or
consent after the Closing Date. Until such time as such assignment or approval
has been obtained, the Seller will cooperate with Buyers in any lawful and
economically feasible arrangement to provide that the Buyer shall receive the
Seller's interest in the benefits under any such Assumed Contract, including
performance by the Seller as agent, if economically feasible; provided, however,
that the Buyers shall undertake to pay or satisfy the corresponding liabilities
for the enjoyment of such benefit to the extent that Buyers would have been
responsible therefor if such consent or assignment had been obtained.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g),
2(r) and 2(t) hereof or relating to the Seller's title to the Acquired Assets)
shall survive the Closing and continue in full force and effect for a period
until 90 days after the applicable statute of limitations has expired with
respect to any claim by the Buyers based on a claim or action by a third party
and for a period of three (3) years following Closing with respect to any claim
by the Buyers not based on a claim or action by a third party. All of the other
representations and warranties (including the representations and warranties of
the Seller contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g) 2(r) and 2(t)
hereof or relating to the Seller's title to the Acquired Assets) and all
covenants of the Buyers and the
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Seller contained in this Agreement shall survive the Closing and continue in
full force and effect thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a breach of a
warranty or covenant prior to the Closing Date, the Seller agrees to indemnify
the Buyers from and against the entirety of any Adverse Consequences the Buyers
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by:
(i) any misrepresentation or breach of any of the Seller's representations
or warranties, and covenants contained in this Agreement or in any Ancillary
Agreement executed and/or delivered by the Seller (so long as the Buyers make a
written claim for indemnification within the applicable survival period);
(ii) any breach or nonfulfillment of any agreement or covenant of the
Seller contained herein or in any Ancillary Agreement;
(iii) any Liability of the Seller which is not an Assumed Liability;
and/or
(iv) any Liability of the Buyers arising by operation of law (including
under any bulk transfer law of any jurisdiction or under any common law doctrine
of defacto merger or successor liability) which is not an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyer agrees to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the Buyers would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached by Seller. Accordingly, each of the Parties agrees that
the Buyers shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that not withstanding the provision in
Section 7(e) with respect to the remedy of liquidated damages
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upon a breach of a warranty or covenant of this Agreement prior to the Closing,
money damages would not be an adequate remedy for a breach of any provision of
this Agreement.
(e) Liquidated Damages. The Buyers and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by Buyers, the Adverse Consequences as a result of such
default may be difficult, if not impossible, to ascertain. Accordingly, in lieu
of indemnification pursuant to Section 7(b) or 7(c), the Seller shall be
entitled to receive from the Buyers for such default the Earnest Money Deposit
as liquidated damages. In the event this Agreement is terminated by the Seller
prior to the Closing Date as a result of a breach or default by the Buyers under
this Agreement, the Parties agree that the Seller shall proceed against the
Earnest Money Deposit as full satisfaction of liquidated damages owed by Buyers.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnifica tion against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets that are used or useful in
the operation of the Stations,
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wherever located, including but not limited to all of its (a) leaseholds and
other interests of any kind therein, improvements, fixtures, and fittings
thereon (such as towers and antennae), and easements, rights-of-way, and other
appurtenances thereto); (b) tangible personal property (such as fixed assets,
computers, data processing equipment, electrical devices, monitoring equipment,
test equipment, switching, terminal and studio equipment, transmitters,
transformers, receivers, broadcast facilities, furniture, furnishings,
inventories of compact disks, records, tapes and other supplies, vehicles, and
all assignable warranties with respect thereto; (c) Intellectual Property,
goodwill associated therewith, licenses and sublicenses granted and obtained
with respect thereto, and rights thereunder, remedies against infringements
thereof, and rights to protection of interests therein under the laws of all
jurisdictions; (d) rights under orders and agreements (including those Barter
Agreements and Advertising Contracts identified on the Disclosure Schedule) now
existing or entered into in the Ordinary Course of Business for the sale of
advertising time on the Stations; (e) Assumed Contracts, indentures, Security
Interests, guaranties, other similar arrangements, and rights thereunder; (f)
call letters of the Stations, jingles, logos, slogans, and business goodwill of
the Stations; (g) claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery (including rights under policies of
insurance), rights of set off, and rights of recoupment; (h) Licenses and
similar rights obtained from governments and governmental agencies; and (i) FCC
logs and records and all other books, records, ledgers, logs, files, documents,
correspondence, advertiser lists, all other lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, program production materials, studies, reports, and other printed or
written materials; and (j) goodwill of the Stations.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(r) above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts listed on Exhibit F attached hereto.
"Assumed Liabilities" means obligations of the Seller which accrue after
the Closing Date under the Assumed Contract either: (i) to furnish services, and
other non-Cash benefits to another party after the Closing; or (ii) to pay for
goods, services, and other non-Cash benefits that another party will furnish to
it after the Closing. The Assumed Liabilities shall not include any Retained
Liabilities.
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"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" has the meaning set forth in Section 2(q), above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Bergner & Co.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
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"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (b) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Leases" means those real estate leases to be entered into at Closing, as
described in Section 2(h) of the Disclosure Schedule.
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"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Material Consents" has the meaning set forth in Section 4(o) above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Real Estate" means the real estate, building, fixtures and improvements
which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller; (iv) all real estate; and
(v) Cash.
"Retained Liabilities" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard
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to the Assignment Application; or (iv) any Liability or obligation of the Seller
under this Agreement (or under any side agreement between the Seller on the one
hand and the Buyers on the other hand entered into on or after the date of this
Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcaststations having the call letters
WHSC-FM and WHSC-AM, licensed by the FCC to operate in Hartsville, South
Carolina.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
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(ii) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing in the event the Seller is in
material breach of any representation, warranty, or covenant contained in this
Agreement; provided, however, that if such breach is capable of being cured,
such breach also remains uncured for twenty (20) days after notice of breach is
received by the Seller from the Buyers;
(iii) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing in the event the Buyers are in
material breach of any representation, warranty, or covenant contained in this
Agreement; provided, however that if such breach is capable being cured, such
breach remains uncured for twenty (20) days after notice of breach is received
by the Buyers from the Seller;
(iv) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(a) hereof
(unless the failure results primarily from the Buyers themselves breaching any
representation, warranty, or covenant contained in this Agreement);
(v) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(b) hereof
(unless the failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this Agreement); or
(vi) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order or is designated for hearing by
the FCC.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in Section 7(a) hereof and the Post-Closing Agreement
with respect to Seller's owners.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
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(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that (i) the Buyers may assign all of its right,
title and interest in, to and under this Agreement to one or more Affiliates,
who shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Seller the Purchase Price therefor or to any successor to the Buyers in
the event of any sale, merger or consolidation of the Buyers, and (ii) Buyers
may assign their indemnification claims and their rights under the warranties
and representations of the Sellers to the financial institution(s) providing
financing to the Buyers in connection with this transaction.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
George H. Buck, Jr.
1206 Decatur Street
New Orleans, LA 70116
Fax: (504) 523-2629
Copy to:
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Dennis F. Begley, Esquire
Reddy, Begley & McCormick
2175 K Street, N.W.
Washington, D.C. 20037
Fax: (202) 659-5711
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
South Carolina.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default,
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misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications and as set forth in
Section 4(o) with respect to Surveys, title commitments and environmental
audits. The Seller will pay all income taxes. The Seller and the Buyers will pay
transfer or sales taxes and other recording or similar fees necessary to vest
title to each of the Acquired Assets in the Buyers in accordance with the local
custom.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Columbia, South Carolina,
in any action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court, and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties
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waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security that might
be required of any other Party with respect thereto. Any Party may make service
on the other Party by sending or delivering a copy of the process to the Party
to be served at the address and in the manner provided for the giving of notices
in Section 10(h) above. Nothing in this Section 10(o), however, shall affect the
right of any Party to serve legal process in any other manner permitted by law.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law.
* * * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
CUMULUS LICENSING CORPORATION
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
GEORGE H. BUCK, JR.
d/b/a WHSC Radio
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
38
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of February 12, 1998, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing"), and Pamplico
Broadcasting L.P. (the "Seller"). Broadcasting and Licensing are referred to
collectively herein as the "Buyers." The Buyers and the Seller are referred to
individually as the "Party" or collectively as the "Parties." Capitalized terms
used in this Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
station WMXT-FM, licensed to Pamplico, South Carolina, and WBZF-FM, licensed to
Marion, South Carolina. In addition, the parties intend that Seller will have
purchased WWFN-FM before the Closing of the sale of the assets of WMXT-FM and
WBZF-FM by Seller to Buyer (the "Initial Closing") as contemplated in this
Agreement, and that the assets of WWFN-FM will also be transferred by Seller to
Buyers under this Agreement. In such event, "Stations" as used in this Agreement
shall refer collectively to WMXT-FM, WBZF-FM and WWFN-FM. In the event Seller
does not close its purchase of WWFN-FM before the Initial Closing, "Stations"
shall refer collectively to WMXT-FM and WBZF-FM only for purposes of the Initial
Closing, and shall refer to WWFN-FM for purposes of any subsequent closing on
the sale of the assets of WWFN-FM by Seller to Buyer (the "Second Closing")
under the terms of this Agreement.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
a. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Seller agrees to sell, transfer, convey and
deliver to (i) Licensing, and Licensing agrees to purchase from the Seller, all
of the FCC Licenses listed in Section 2(k) of the disclosure schedule
("Disclosure Schedule"); and (ii) Broadcasting, and Broadcasting agrees to
accept assignment from the Seller, all of the Acquired Assets other than the FCC
Licenses. Both such transactions shall take place at the Closing for the
consideration specified below in this Section 1.
b. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Seller agrees to pay
and discharge all Liabilities and obligations of the Seller other than the
Assumed Liabilities on or before the Closing Date.
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c. Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the purchase price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
(the "Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Escrow Agreement") attached
hereto as Exhibit A.
d. Initial Closing and Second Closing. The closing of the
transactions contemplated by this Agreement (the "Initial Closing") shall take
place at the offices of the Stations in Florence, South Carolina, commencing at
9:00 a.m. local time on a date within five (5) business days after the FCC
approval of the Assignment Application becomes a Final Order, by which date all
other conditions to the obligations of the Parties to consummate the
transactions contemplated hereby will have been satisfied, or such other date
and location as the Parties may mutually determine (the "Initial Closing Date").
Buyer will provide Seller at least five (5) business days' notice of the
Closing. In the event there is a Second Closing, such Second Closing shall take
place at the offices of the Stations in Florence, South Carolina, commencing at
9:00 a.m. local time on a date within five (5) business days after the FCC
approval of the Assignment Application for WWFN-FM becomes a Final Order, by
which date all other conditions to the obligations of the Parties to consummate
the transactions contemplated hereby will have been satisfied, or such other
date and location as the Parties may mutually determine (the "Second Closing
Date"). The Initial Closing and the Second Closing shall be referred to
collectively as the "Closing."
e. Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds in form acceptable to the Buyers, (B) such affidavits, transfer
tax returns, memorandums of lease, and other additional documents as may be
required by the terms of the title insurance commitments described in Section
4(o) hereof, as necessary to furnish title insurance as required by such section
or as may be necessary to convey title to the Real Estate to the Buyers in the
condition required herein or provide public notice of existence of the Leases,
and (C) such other instruments of sale, transfer, conveyance, and assignment as
the Buyers and their counsel reasonably may request; (iv) the Buyers will
execute, acknowledge (if appropriate), and deliver to the Seller (A) an
assumption in the form attached hereto as Exhibit B and (B) such other
instruments of assumption as the Seller and its counsel reasonably may request;
and (v) the Buyers will deliver to the Seller the consideration specified in
Section 1(c) above.
f. Postclosing Agreement. On the Closing Date, the Seller shall
execute, and shall cause each of its shareholders to execute, a Postclosing
Agreement with the Buyers including covenants not to compete with the Buyers in
the markets served by the Stations and agreements to indemnify the Buyers in the
form of Exhibit C attached hereto. A portion of the Purchase Price equal to
Fifty Thousand Dollars ($50,000) shall be paid to the Seller by the Buyers on
the Closing Date as consideration for the agreements set forth in the
Postclosing Agreement.
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g. Local Marketing Agreement. Concurrent with the execution of this
Agreement, the Seller and Broadcasting shall execute the Local Marketing
Agreement (the "Local Marketing Agreement") which includes the terms and
conditions pursuant to which Broadcasting will purchase the airtime on the
Stations. The accounts receivable of the Stations in existence as of the
effective date of the Local Marketing Agreement shall be collected pursuant to
the terms and conditions of the Local Marketing Agreement.
2. Representations and Warranties of the Seller.
The Seller represents and warrants to the Buyers that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
a. Organization of the Seller. The Seller is a limited partnership
duly organized, validly existing, and in good standing under the laws of South
Carolina. The Seller has the power and authority to own or lease its properties
and to carry on all business activities now conducted by it. The partners of the
Seller are James C. Fort, Edward F. Seeger, and T. Furman Brodie.
b. Authorization of Transaction. The Seller has full power and
authority (including full partnership power and authority) to execute and
deliver this Agreement and all agreements and instruments to be executed and
delivered by Seller pursuant to this Agreement (collectively, the "Ancillary
Agreements") and to perform its obligations hereunder and thereunder. Without
limiting the generality of the foregoing, the partners of the Seller have duly
authorized the execution, delivery, and performance of this Agreement and the
Ancillary Agreements by the Seller. This Agreement and the Ancillary Agreements
constitute the valid and legally binding obligation of the Seller, enforceable
in accordance with their respective terms and conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the charter or bylaws of the Seller; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other agreement, arrangement to which the Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
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d. Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Seller has good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
e. Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1993, December 31, 1994,
and December 31, 1995 for the Seller; and (ii) unaudited balance sheets and
statements of income, as of and for each month during 1996 and each month in
1997 for the Seller. The Financial Statements have been prepared in conformity
with the Seller's normal accounting policies, practices and procedures applied
on a consistent basis, throughout the periods covered thereby, are correct and
complete, fairly present the financial condition of the Seller and the results
of operation of Seller at the dates and for the periods indicated, and are
consistent with the books and records of the Seller (which books and records are
correct and complete). The Financial Statements accurately state the revenues of
the Stations for the period indicated therein and include an accurate breakout
of cash and trade revenues.
f. Events Subsequent to January 1, 1997. Since January 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule, there has not
been any material adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations, or future prospects of the Seller
with respect to the operation of the Stations. Without limiting the generality
of the foregoing and with respect to the operation of the Stations since January
1, 1997:
i. other than this Agreement, the Seller has not entered into
any agreement, contract, lease, sublease, license, or sublicense (or
series of related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
ii. the Seller has not delayed or postponed (beyond its normal
practice in the Ordinary Course of Business) the payment of accounts
payable and other Liabilities;
iii. the Seller has not altered its credit and collection
policies or its accounting policies;
iv. the Seller has not entered into or terminated any
employment arrangement, employment contract, consulting contract or
severance agreement or collective bargaining agreement, written or oral,
or modified the terms of any existing such contract or agreement, except
in the Ordinary Course of Business;
v. there has not been any occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business
involving the Seller;
vi. the Seller has not materially altered the programming,
format or call letters of the Stations, or its promotional and marketing
activities;
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vii. except for the application to modify the license of WBZF,
described in Section 2(f) of the Disclosure Schedule, the Seller has not
applied to the FCC for any modification of the FCC Licenses or failed to
take any action necessary to preserve the FCC Licenses and has operated
the Stations in compliance therewith and with all FCC rules and
regulations;
viii. the Seller has not terminated or received notice of
termination for any syndicated programming; and
ix. the Seller has not committed to any of the foregoing.
g. Tax Matters. The Seller has timely and properly filed all Tax
Returns that it was required to file with respect to the Seller's operations.
All such Tax Returns were correct and complete and properly reflect the tax
liability of the Seller. No Tax deficiencies have been proposed or assessed
against the Seller. All Taxes owed by the Seller with respect to its operations
(whether or not shown on any Tax Return) have been paid. The Seller has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. No claim has ever been made by any authority in any
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
h. Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Stations. The Seller owns or leases all tangible assets necessary for the
conduct of the operation and business of the Stations as presently conducted and
as presently proposed to be conducted and all leased assets are specifically
identified as such in Section 2(h) of the Disclosure Schedule.
i. Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Seller has delivered to the Buyers correct and complete copies of
the Leases. With respect to the Real Estate:
i. the Seller has good and marketable title to all of the
Owned Real Estate free and clear of all liens, charges, mortgages,
security interests, easements, restrictions or other encumbrances of any
nature whatsoever except real estate taxes for the year of Closing and
municipal and zoning ordinances and recorded utility easements which do
not impair the current use, occupancy or value or the marketability of
title of the property and which are disclosed in Section 2(i) of the
Disclosure Schedule (collectively, the "Permitted Real Estate
Encumbrances");
ii. the Leases are and, immediately following the Closing will
be, legal, valid, binding, enforceable, and in full force and effect;
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iii. no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default thereunder
or permit termination, modification, or acceleration thereunder;
iv. there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
v. none of the Owned Real Estate and to the Seller's
Knowledge, none of the properties subject to the Leases is subject to any
lease (other than Leases), option to purchase or rights of first refusal;
vi. except for Permitted Real Estate Encumbrances, there are
no (i) actual or, to the Seller's Knowledge, proposed special assessments
with respect to any of the Real Estate; (ii) pending or, to the Seller's
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the
buildings or improvements located on the Real Estate; (iv) any pending or,
to the Seller's Knowledge, threatened changes in any zoning laws or
ordinances which may materially adversely affect any of the Real Estate or
Seller's use thereof;
vii. the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder;
viii. to the Seller's Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; and
ix. to the Seller's Knowledge, the owner of each leased
facility has good and marketable title to the underlying parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for Permitted Real Estate Encumbrances and
Seller's leasehold interest in each Lease has priority over any other
interest except for the fee interest therein and Permitted Real Estate
Encumbrances.
j. Contracts. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not entered into in the Ordinary Course of Business. The
Seller has delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(j) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed which constitutes an
Assumed Contract: (A) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect; (B) the written arrangement will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms no less favorable than the present terms following the
Closing (if the arrangement has not expired according to its terms); (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default or permit termination,
modification, or acceleration, under the written arrangement; and (D) no party
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has repudiated any provision of the written arrangement. The Seller is not a
party to any verbal contract, agreement, or other arrangement which, if reduced
to written form, would be required to be listed in Section 2(j) of the
Disclosure Schedule under the terms of this Section 2(j). Except for the Assumed
Contracts, the Buyers shall not have any Liability or obligations for or in
respect of any of the contracts set forth in Section 2(j) of the Disclosure
Schedule or any other contracts or agreements of the Seller.
k. Commission Licenses and Compliance with Commission Requirements.
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Stations as they are now being operated are (A) in full
force and effect, (B) unimpaired by any acts or omissions of the Seller or
the Seller's employees or agents, (C) free and clear of any restrictions
which might limit the full operation of the Stations, and (D) detailed in
Section 2(k) of the Disclosure Schedule. With respect to the licenses,
permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(k) of the
Disclosure Schedule also sets forth, without limitation, the date of the
last renewal, the expiration date thereof, and any conditions or
contingencies related thereto. Except as set forth in Section 2(k) of the
Disclosure Schedule, no condition exists or event has occurred that
permits, or after notice or lapse of time, or both, would permit, the
revocation or termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Stations as now conducted. Except as set forth in Section
2(k) of the Disclosure Schedule, the Seller is not aware of any reason why
the FCC licenses might not be renewed in the ordinary course or revoked.
ii. The Stations are in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Stations' transmission facilities is restricted in
accordance with the policies of the FCC.
iii. Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Seller's Knowledge, the Seller is not the subject of any
FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(k) of the Disclosure Schedule.
iv. The Seller has filed with the FCC and all other
governmental authorities having jurisdiction over the Stations all
material reports, applications, documents, instruments, and other
information required to be filed, and will continue to make such filings
through the Closing Date.
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v. The Seller is not aware of any information concerning the
Stations that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary
for the consummation of the transactions contemplated hereunder or the
Buyer's operation and/or ownership of the Stations. Seller is not aware of
any pending FCC applications which, if approved, would allow for the
operation of a new radio station with a signal reaching the signal area of
the Stations and, in addition, Seller is not aware of any plans or
proposals by any existing radio Station with a signal reaching the signal
area of the Stations to alter or change their format to a format similar
to that of the Stations.
l. Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use the by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
To Seller's Knowledge, the Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and the Seller has never received any charge,
complaint, or notice alleging any such interference, infringement,
misappropriation, or violation. To the Knowledge of the Seller, no third party
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of the Seller.
m. Insurance. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Seller's insurance coverage. With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
and enforceable and in full force and effect; (B) the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect on identical
terms through the Closing Date.
n. Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(n) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no Knowledge of any Basis for any such charge, complaint, action,
suit, proceeding, hearing, or investigation against the Seller.
o. Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee. To
the Knowledge of the Seller, no key employee or group of employees has any plans
to terminate employment with the Seller. The Seller is not a party to or bound
by any collective bargaining or similar agreement, nor has it experienced any
strikes,
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grievances, claims of unfair labor practices or other collective bargaining
disputes. The Seller has no Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to the
employees of the Seller. The Seller has no Knowledge of any Basis for any claim
by past or current employees of the Seller or applicants for employment that the
Seller or its management has discriminated based on each individuals race, sex,
national origin, religion, ethnicity, handicap or any other protected
characteristic under applicable law.
p. Employee Benefits. The Seller maintains, and has in the past
maintained, no Employee Benefit Plan to which it contributes or is required to
contribute for the benefit of any current or former employee of the Seller. The
Seller does not have any commitment to create any additional Employee Benefit
Plan or modify or change any existing Employee Benefit Plan that would affect
any employee or terminated employee of the Seller.
q. Environment, Health, and Safety.
i. To Seller's Knowledge, with respect to the operation of the
Stations and the Real Estate, the Seller is, and at all times in the past
has been, in compliance in all material respects with all Environmental
Laws and all laws (including rules and regulations thereunder) of federal,
state, and local governments (and all agencies thereof) concerning
employee health and safety, and the Seller has no Liability (and to
Seller's Knowledge there is no Basis related to the past or present
operations of the Seller or its predecessors for any present or future
Liability) under any Environmental Law. The Seller has no Liability (and
to Seller's Knowledge there is no Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand against the Seller giving rise to any Liability) under the
Occupational Safety and Health Act, as amended, or any other law (or rule
or regulation thereunder) of any federal, state, local, or foreign
government (or agency thereof) concerning employee health and safety, or
for any illness of or personal injury to any employee.
ii. To Seller's Knowledge, the Seller has obtained and at all
times has been in compliance in all material respects with all of the
terms and conditions of all permits, licenses, and other authorizations
which are required under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental Laws or law of any federal, state, or local or foreign
government relating to worker health and safety.
iii. To Seller's Knowledge, all properties and equipment used
in the Stations and the Acquired Assets have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1, 2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances. No pollutant,
contaminant, or chemical, industrial, hazardous, or toxic material or
waste ever has been buried, stored, spilled, leaked, discharged, emitted,
or released on any of the Real Estate. No above ground or underground
storage tanks have ever been located at, on or under the Real Estate. The
Seller has delivered to the Buyers a complete copy of all environmental
claims, reports, studies, compliance actions or the like
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of the Seller or which are available to the Seller with respect to any of
the Real Estate or any of the Acquired Assets.
r. Legal Compliance. The Seller has complied in all material
respects with all laws (including rules and regulations thereunder) of federal,
state, local and foreign governments (and all agencies thereof). To Seller's
Knowledge, the Seller has filed in a timely manner all reports, documents, and
other materials it was required to file (and the information contained therein
was correct and complete in all material respects) under all applicable laws.
s. Advertising Contracts. Section 2(s) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Stations
in excess of $1000 since January 1, 1996, and the amount to be paid to the
Seller therefor. The Seller has no reason to believe and has not received a
notice or indication of the intention of any of the advertisers or third parties
to material contracts of the Seller to cease doing business or to reduce in any
material respect the business transacted with the Seller or to terminate or
modify any agreements with the Seller (whether as a result of consummation of
the transactions contemplated hereby or otherwise).
t. Brokers' Fees. Other than the fee payable to Media Venture
Partners, which shall be the exclusive responsibility of Seller, the Seller has
no Liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement.
u. Undisclosed Commitments or Liabilities. There are no material
commitments, liabilities or obligations relating to the Stations, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Seller of the liabilities of third parties, for which specific
and adequate provisions have not been made on the Financial Statements except
those incurred in or as a result of the Ordinary Course of Business since
January 1, 1997.
v. Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer.
Buyers represent and warrant to the Seller that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
a. Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
b. Authorization of Transaction. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. Without limiting the
generality of the foregoing, the Boards of Directors of the Buyers have duly
authorized the execution, delivery, and performance of this Agreement and
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the Ancillary Agreements by the Buyers. This Agreement and the Ancillary
Agreements constitute the valid and legally binding obligation of the Buyers,
enforceable in accordance with their respective terms and conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
d. Brokers' Fees. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
e. Qualifications as FCC Licensee. Buyers are aware of no fact or
circumstance which would cause the FCC not to approve the Assignment Application
under the Communications Act of 1934 and the rules and regulations thereunder.
No waiver is required under Section 73.3555 of the Commission's rules and
regulations regarding ownership of multiple radio stations.
f. Financial Qualifications. Buyers are financially qualified to
purchase the Stations and will so certify in the Assignment Application.
g. Litigation. Buyers (i) are not subject to any unsatisfied
judgment, order, decree, stipulation, injunction, or charge; or (ii) are parties
or, to the Knowledge of the Buyers, are threatened to be made parties to any
charge, complaint, action, suit, proceeding, hearing, or investigation of or in
any court or quasijudicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator, which would adversely
affect Buyers' ability to complete the transactions contemplated under this
Agreement.
h. Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 3 not misleading.
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4. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
a. General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
b. Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon the Stations or
impose significant costs on such party). If the FCC imposes any condition on
either party to the Assignment Application, such party shall use commercially
reasonable efforts to comply with such condition, provided, that neither party
shall be required hereunder to comply with any condition that would have a
material adverse effect upon the Stations or any Affiliate. The Seller and the
Buyers shall jointly oppose any requests for reconsideration or judicial review
of FCC approval of the Assignment Application and shall jointly request from the
FCC extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
c. Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at their option, extend offers of
employment to all or any of the Seller's employees effective on the Closing
Date. From and after the execution of this Agreement, the Seller shall use its
best efforts to assist Buyers in retaining those employees of the Stations which
the Buyers wish to hire in connection with the operation of the Stations by the
Buyers subsequent to the Closing, and the Seller will not take any action to
preclude or discourage any of the Seller's employees from accepting any offer of
employment extended by the Buyers.
d. Notices and Consents. The Seller will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request. Each of the Parties will take any additional action that
may be necessary, proper, or advisable in connection with any other notices to,
filings with, and authorizations, consents, and approvals of governments,
governmental agencies, and third parties that it may be required to give, make,
or obtain.
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e. Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Stations for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
f. Operating Statements. The Seller shall deliver to the Buyers, for
the Buyers' informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Stations within ten (10) days
after each such statement is prepared by or for the Seller; provided, however,
that this requirement shall not be in effect during the effective period of the
Local Marketing Agreement.
g. Contracts. The Seller will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(k) of the Disclosure Schedule in any material respect. The Seller will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Five Thousand Dollars
($5,000).
h. Operation of Stations. Subject to the Local Marketing Agreement,
the Seller will not engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business without the advance written
consent of Buyers, which shall not be unreasonably withheld. The Seller shall
operate the Stations in compliance with the FCC Licenses and the rules and
regulations of the FCC, and the FCC Licenses shall at all times remain in full
force and effect. The Seller shall file with the FCC all material reports,
applications, documents, instruments and other information required to be filed
in connection with the operation of the Stations.
i. Credit and Receivables. Subject to the Local Marketing Agreement,
the Seller will follow its usual and customary policies with respect to
extending credit for sales of air time and advertising on the Stations and with
respect to collecting accounts receivable arising from such extension of credit.
j. Preservation of Stations and the Acquired Assets. Subject to the
Local Marketing Agreement, the Seller will keep its Stations and the Acquired
Assets and properties substantially intact, including its present operations,
physical facilities, working conditions, relationships with lessors, licensors,
advertisers, suppliers, customers, and employees, all of the Confidential
Information, call letters and trade secrets of the Stations, and the FCC
Licenses.
k. Full Access and Consultation. The Seller will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Stations, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Seller. The Seller will consult with the
Buyers' management with a view to informing Buyers' management as to the
operations, management and business of the Stations. Without limiting the
foregoing, Seller acknowledges and agrees that it will
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provide the Buyers and their representatives with such access to the properties,
books, records, documents and operations of the Seller as contemplated herein in
a manner which will permit the Buyers to fully complete their due diligence
review within the thirty (30) day period reference in Section 5(a) (ix), below.
l. Notice of Developments. The Seller will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Stations or the Acquired Assets or the ability of the Seller
to perform hereunder.
m. Exclusivity. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the Seller,
or (ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyers immediately if any person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
n. Title Insurance, Surveys and Environmental Assessments. The
Buyers will obtain (i) with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard preprinted exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request,
(ii) with respect to each parcel of Owned Real Estate, an owner's policy of
title insurance by a title insurer reasonably satisfactory to the Buyers, in an
amount equal to the fair market value of such Real Estate (including all
improvements located thereon), insuring over the standard pre-printed exceptions
and insuring title to the Owned Real Estate to be vested in the Buyers as of the
Closing free and clear of all liens and encumbrances except Permitted Real
Estate Encumbrances, together with such endorsements for zoning, contiguity,
public access and extended coverage as the Buyers or its lender reasonably
request, (iii) a current survey of each parcel of Real Estate certified to the
Buyers and its lender, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys') which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iv) with
respect to each parcel of Real Estate, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Sellers which does not indicate that the Seller and the Real Estate are
not in compliance with any Environmental Law and which shall not disclose or
recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. The Buyers will pay the
costs of these title policies, Surveys and environmental assessments.
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o. Control of Stations. Subject to the Local Marketing Agreement,
the transactions contemplated by this Agreement shall not be consummated until
after the FCC has given its consent and approval to the Assignment Application.
Between the date of this Agreement and the Closing Date, the Buyers and their
employees or agents shall not directly or indirectly control, supervise, or
direct, or attempt to control, supervise, or direct, the operation of the
Stations, and such operation shall be the sole responsibility of and in the
control of the Seller.
p. Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing. In the event
of any such loss, damage, or destruction the Seller will promptly notify the
Buyers of all particulars thereof, stating the cause thereof (if known) and the
extent to which the cost of restoration, replacement and repair of the Acquired
Assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will, at Seller's expense, repair or replace
such Acquired Assets to their former condition as soon as possible after loss,
damage or destruction thereof and shall use its best efforts to restore as
promptly as possible transmissions as authorized in the FCC Licenses. The
Closing Date shall be extended (with FCC consent, if necessary) for up to sixty
(60) days to permit such repair or replacement. If repair or replacement cannot
be accomplished within sixty (60) days of the date of the Seller's notice to the
Buyers and the Buyers determine that the Seller's failure to repair or replace
would have a material adverse effect on the operation of the Stations:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
iii. the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to the
Buyers of all rights under any insurance claims covering the loss, damage
or destruction and payment over to the Buyers of any proceeds under any
such insurance policies, previously received by the Seller with respect
thereto plus an amount equal to the amount of any deductible or
self-insurance maintained by Seller on such Acquired Assets. In the event
the Closing Date is postponed pursuant to this Section 4(p), the parties
hereto will cooperate to extend the time during which this Agreement must
be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
a. Conditions to Obligation of the Buyers. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
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i. the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Seller shall have performed and complied with all of
its covenants hereunder in all respects through the Closing;
iii. the Seller shall have procured all of the third party
consents specified in Section 4(d) above, and all of the title insurance
commitments (and endorsements), Surveys and environmental site assessments
described in Section 4(n) above shall have been procured;
iv. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or impose damages or
penalties upon any of the parties if such transactions are consummated,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
v. the Seller shall have exercised its option to purchase
WWFN-FM, licensed to Lake City, South Carolina;
vi. the Seller shall have delivered to the Buyers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Sections 5(a)(i) through (iv) is satisfied in all respects;
vii. each of the Assignment Applications shall have been
approved by a Final Order of the FCC, and the Buyers shall have received
all governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
viii. the relevant parties shall have entered into the
Postclosing Agreement;
ix. the Buyers shall have received from counsel to the Seller
an opinion with respect to the matters set forth in Exhibit E attached
hereto, addressed to the Buyers and its lender and dated as of the Closing
Date;
x. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with a mutually agreeable allocation schedule to be delivered
at closing; and
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xi. all actions to be taken by the Seller in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
b. Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
iii. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
iv. the Buyers shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
v. each of the Assignment Applications shall have been
approved by a Final Order of the FCC and the Buyers shall have received
all governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
vi. the relevant parties shall have entered into the
Postclosing Agreement;
vii. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with a mutually agreeable allocation schedule to be delivered
at closing; and
viii. all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions,
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instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to the Seller.
6. Post-Closing Covenants.
The Parties agree as follows with respect to the period following
the Closing:
a. General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
b. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
c. Adjustments. Operation of the Stations and the income and
expenses attributable thereto up through the close of business on the day before
the Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Buyers as of the Closing
Date in accordance with the foregoing principle. In addition, all commissions
payable with respect to the accounts receivable of the Seller (whether due
before or after Closing) shall be solely for the account and responsibility of
the Seller. Contractual arrangements that do not reflect an equal rate of
compensation to a Stations over the term of the agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by an
independent accounting firm mutually acceptable to both parties and the fees and
expenses of such accounting firm shall be paid one-half (1/2) by the Seller and
one-half (1/2) by the Buyer.
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d. Consents. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
7. Remedies for Breaches of this Agreement.
a. Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), and 2(d) hereof
or relating to the Seller's title to the Acquired Assets) shall survive the
Closing and continue in full force and effect for a period until 90 days after
the applicable statute of limitations has expired with respect to any claim by
the Buyers based on a claim or action by a third party and for a period of three
(3) years following Closing with respect to any claim by the Buyers not based on
a claim or action by a third party. All of the other representations and
warranties (including the representations and warranties Seller contained in
Sections 2(a), 2(b), 2(c), and 2(d) hereof or relating to the Seller's title to
the Acquired Assets) and all covenants of the Buyers and the Seller contained in
this Agreement shall survive the Closing and continue in full force and effect
forever thereafter.
b. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement
or in any Ancillary Agreement executed and/or delivered by the Seller (so
long as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant
of the Seller contained herein or in any Ancillary Agreement;
iii. any Liability of the Seller which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
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c. Indemnification Provisions for the Benefit of the Seller. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
d. Specific Performance. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(o) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in Section
7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for Buyers for a breach of any provision of this
Agreement.
e. Liquidated Damages. The Buyers and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(c), the Seller
shall be entitled to receive from the defaulting Party for such default the
Escrow Deposit as liquidated damages without the need for proof of damages,
subject only to successfully proving in a court of competent jurisdiction that
the Buyer materially breached this Agreement and that the transactions
contemplated thereby have not occurred. The Seller shall proceed against the
Escrow Deposit as full satisfaction of liquidated damages owed by the Buyers and
as its sole remedy for a failure of the transactions contemplated hereby to
occur as a result of a material breach of the terms of this Agreement by the
Buyers.
f. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnifica tion against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably
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satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
to the extent the Indemnified Party reasonably concludes that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iv) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
Liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event the Indemnifying Party
does not notify the Indemnified Party within 15 days after the Indemnified Party
has given notice of the matter that the Indemnifying Party is assuming the
defense thereof, however, and/or in the event the Indemnifying Party shall fail
to defend such claim actively and in good faith, then the Indemnified Party may
defend against, or enter into any settlement with respect to, the matter in any
manner it reasonably may deem appropriate.
g. Limitation of Liability. Except as provided in Section 7(e)
above, Notwithstanding anything in this Agreement to the contrary, after the
Closing neither party shall indemnify or otherwise be liable to the other party
from and after the Closing Date except to the extent that the Adverse
Consequences suffered by the Identified Party, in the aggregate from all
indemnifiable events shall exceed Ten Thousand Dollars ($10,000) and
indemnification shall be made by the indemnifying party only to the extent of
such excess over Ten Thousand Dollars ($10,000); provided however that the
foregoing limitation shall not be applicable to: (i) the obligations of the
Buyer to pay and discharge any Liability of the Seller to third parties from and
after the Closing Date assumed by the Buyer under the terms of this Agreement;
(ii) the obligation of the Seller to pay and discharge any Liability to third
parties not assumed by the Buyer under the terms of this Agreement, or (iii) the
Seller's obligation to deliver clear title to the Acquired Assets.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets that are used or useful in
the operation of the Stations, wherever located, including but not limited to
all of its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles) and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those Barter Agreements and Advertising Contracts identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Stations; (e) Assumed Contracts, indentures,
Security Interests, guaranties, other similar arrangements, and rights
thereunder; (f) call
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letters of the Stations, jingles, logos, slogans, and business goodwill of the
Stations; (g) claims, deposits, prepayments, refunds, causes of action, chooses
in action, rights of recovery (including rights under policies of insurance),
rights of set off, and rights of recoupment; (h) Licenses and similar rights
obtained from governments and governmental agencies; and (i) FCC logs and
records and all other books, records, ledgers, logs, files, documents,
correspondence, advertiser lists, all other lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, program production materials, studies, reports, and other printed or
written materials; (j) goodwill of the Stations; and (k) all of Seller's right,
title, and interest in any local marketing agreements and ancillary agreements
which Seller holds with respect to WWFN-FM.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(k) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"Assumed Liabilities" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; (ii)
to pay for goods, services, and other non-Cash benefits that another party will
furnish to it after the Closing; and (iii) the obligations of the Seller in
connection with the local marketing agreement and ancillary agreements
associated with WWFN-FM. The Assumed Liabilities shall not include any Retained
Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 1 above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Media Venture Partners.
"Escrow Agreement" has the meaning set forth in Section 1(c) above.
"Escrow Deposit" has the meaning set forth in Section 1(c) above.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
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"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Leases" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites, as described in Section 2(i) of
the Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
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"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multi-employer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller's
owners in the form attached hereto as Exhibit C.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price " has the meaning set forth in Section 1(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller;(iv) Cash; and (v) all
assets associated with radio station WYNA, licensed to Calabash, North Carolina.
"Retained Liabilities" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions
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contemplated hereby (except as set forth in Section 4(i) relating to Surveys,
title commitments and environmental audits and Section 4(b) with regard to the
Assignment Application; or (iv) any Liability or obligation of the Seller under
this Agreement (or under any side agreement between the Seller on the one hand
and the Buyers on the other hand entered into on or after the date of this
Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WMXT-FM, licensed to Pamplico, South Carolina; WBZF-FM, licensed to Marion,
South Carolina; and WWFN-FM, licensed to Lake City, South Carolina.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
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ii. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach of any representation, warranty, or covenant contained
in this Agreement; provided, however, that if such breach is capable of
being cured, such breach also remains uncured for twenty (20) days after
notice of breach is received by the Seller from the Buyers;
iii. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable being cured, such breach remains uncured for twenty (20) days
after notice of breach is received by the Buyers from the Seller;
iv. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained
in this Agreement);
v. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant contained in
this Agreement);
vi. the Buyer may terminate this Agreement on or before the
30th day after the date hereof in the event it has not satisfactorily
completed its due diligence review of the Stations; or
vii. the Buyers or the Seller may terminate this Agreement if
any Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. Miscellaneous.
a. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
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b. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Seller the Purchase Price therefor or to any
successor to the Buyers in the event of any sale, merger or consolidation of the
Buyers, and (ii) Buyers may assign their indemnification claims and their rights
under the warranties and representations of the Sellers to the financial
institution(s) providing financing to the Buyers in connection with this
transaction.
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
Pamplico Broadcasting L.P.
2014 North Irby Street
Florence, SC 29506
Attn: Edward Seeger
Fax: (803) 661-0888
Copy to:
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Frank Jazzo, Esquire
Fletcher, Heald & Hildreth, PLC
1300 N. 17th Street
11th Floor
Arlington, VA 22209
Fax: (703) 812-0486
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of South Carolina.
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
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j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
k. Expenses. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(o) with respect to Surveys, title commitments and
environmental audits. The Seller will pay all income taxes. The Seller and the
Buyers will each pay one-half (1/2) of any transfer or sales taxes and other
recording or similar fees necessary to vest title to each of the Acquired Assets
in the Buyers.
l. Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
m. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Florence, South Carolina,
in any action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court, and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Any Party may
make service on the other Party by sending or delivering a copy of the process
to the Party to
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be served at the address and in the manner provided for the giving of notices in
Section 10(g) above. Nothing in this Section 10(n), however, shall affect the
right of any Party to serve legal process in any other manner permitted by law.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
CUMULUS LICENSING CORPORATION
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
PAMPLICO BROADCASTING L.P.
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
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SCHEDULE A
Purchase Price. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the total amount of Three Million Eight Hundred
Thousand Dollars ($3,800,000.00), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of One Hundred Sixty Thousand Dollars ($160,000.00) (the
"Escrow Deposit") in the form of an irrevocable letter of credit from
NationsBank; and
(ii) on the Initial Closing Date, the Buyers shall pay to the Seller
the amount of Three Million Eight Hundred Thousand Dollars ($3,800,000.00), with
adjustments as provided specifically in this Agreement (the "Purchase Price");
provided, however, that in the event the Seller does not convey all of the
Acquired Assets with respect to WWFN-FM on the Initial Closing Date, the
purchase price shall be Three Million Two Hundred Fifty Thousand Dollars
($3,250,000.00), and the purchase price for purposes of the Second Closing as
described in Section 1(c) above shall be Five Hundred Fifty Thousand Dollars
($550,000.00), and such amount shall be considered the "Purchase Price" for
purposes of the Second Closing..
The Escrow Deposit referenced in this Schedule A shall be placed in escrow with
the Escrow Agent pursuant to an escrow agreement in the form attached hereto as
Exhibit A (the "Escrow Agreement"), and shall be disbursed to Seller or returned
to Buyer as provided in the Earnest Money Escrow Agreement.
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of October 8, 1997, by and
between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing"), Connor FM
Broadcasting Co., a Maryland corporation, Connor Broadcasting Corp., a Maryland
corporation, J. Parker Connor, and Susan C. Connor (as to real property on which
the WSBY-FM transmitter site is located only), both individual residents of
Delaware (collectively the "Sellers"). Broadcasting and Licensing are referred
to collectively herein as the "Buyers." The Buyers and the Sellers are referred
to collectively herein as the "Parties." Capitalized terms used in this
Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
stations WSBY-FM, licensed to Connor FM Broadcasting Co. in Salisbury, Maryland,
and WJDY-AM, licensed to Connor Broadcasting Corp. in Salisbury, Maryland (the
"Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Licensing agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to Licensing, all of
the FCC Licenses listed in Section 2(j) of the Disclosure Schedule. In addition,
Broadcasting agrees to purchase from the Seller, and the Seller agrees to sell,
transfer, convey, and deliver to Broadcasting, all of the Acquired Assets other
than the FCC Licenses. Both such sales shall take place at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyers agree to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyers will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Sellers not included within the definition of Assumed Liabilities and the
Sellers agree to pay and discharge all Liabilities and obligations of the
Sellers other than the Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the amount of One Million Three Hundred
Thousand Dollars ($1,300,000) (the "Purchase Price"). The Purchase Price shall
be payable as follows:
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(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of One Hundred Five Thousand Dollars ($105,000) (which
amount, together with the sum of $25,000.00 previously deposited with the Escrow
Agent pursuant to a letter agreement among the parties dated September 15, 1997,
shall hereinafter be referred to as the "Earnest Money Deposit") by wire
transfer or delivery of other immediately available funds; and
(ii) on the Closing Date, the Buyers shall pay to the Sellers the
amount of One Million One Hundred Sixty Thousand Dollars ($1,160,000.00), less
interest earned on the Earnest Money Deposit; and
(iii) on the Closing Date, the Buyers shall pay to the Sellers, on
behalf of all parties to the Postclosing Agreement, the amount of Ten Thousand
Dollars ($10,000).
The Earnest Money Deposit referenced in this Section 1(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), and shall
be deposited by the Escrow Agent with a federally insured financial institution
in an interest bearing account. Interest earned on the Earnest Money Deposit
shall accrue to the benefit of Buyers, and, together with the principal amount
of the Earnest Money Deposit, shall be payable to the Sellers and credited
against the Purchase Price on the Closing Date. If this Agreement is terminated
without Closing of the transaction contemplated herein, the Earnest Money
Deposit and all accrued interest shall be paid to the Buyers or the Sellers as
provided in the Earnest Money Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a location to be mutually agreed,
commencing at 9:00 a.m. local time on the date set by the Buyers not earlier
than the fifth business day or later than the tenth business day after the FCC
approval of the Assignment Application becomes a Final Order, by which date all
other conditions to the obligations of the Parties to consummate the
transactions contemplated hereby will have been satisfied or such other date as
the Parties may mutually determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds substantially in the forms attached hereto as Exhibits B-1
through B-2, (B) such affidavits, transfer tax returns, memorandums of lease,
and other additional documents as may be required by the terms of the title
insurance commitments described in Section 4(o) hereof, as necessary to furnish
title insurance as required by such section or as may be necessary to convey
title to the Real Estate to the Buyers in the condition required herein or
provided public notice of existence of the Leases, and (C) such other
instruments of sale, transfer, conveyance, and assignment as the Buyers and
their counsel reasonably may request; (iv) the Buyers will execute, acknowledge
(if appropriate), and deliver to the Sellers (A) an assumption in the form
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attached hereto as Exhibit C and (B) such other instruments of assumption as the
Sellers and its counsel reasonably may request; and (v) the Buyers will deliver
to the Sellers the consideration specified in Section 1(c) above.
(f) Postclosing Agreement. On the Closing Date, the Sellers shall execute,
and shall cause shareholders J. Parker Connor, Susan C. Connor, J. P. Connor, S.
Bradley Connor, and Matthew A. Connor (collectively, the "Seller Shareholders")
to execute, a Postclosing Agreement with the Buyers including covenants not to
compete with the Buyers in the markets served by the Stations (provided that the
Sellers shall be permitted pursuant to such Postclosing Agreement to continue to
own, operate and act on behalf of radio stations WSUX-FM and WJPY-AM, Seaford,
Delaware, as if such Postclosing Agreement did not exist) and agreements to
indemnify the Buyers in the form of Exhibit D attached hereto. A portion of the
Purchase Price equal to Ten Thousand Dollars ($10,000) shall be paid to the
Sellers by the Buyers on the Closing Date as consideration for the agreements
set forth in the Postclosing Agreement.
(g) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit E.
2. Representations and Warranties of the Sellers. The Sellers represent
and warrant to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Organization of the Seller. Sellers are corporations duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation. The Sellers do not have any Subsidiaries. The Sellers have the
power and authority to own or lease their properties and to carry on all
business activities now conducted by it. The shareholders of the Sellers are J.
Parker Connor, Susan C. Connor, J. P. Connor, and S. Bradley Connor and Matthew
A. Connor.
(b) Authorization of Transaction. The Sellers have full power and
authority to execute and deliver this Agreement and all agreements and
instruments to be executed and delivered by such Party pursuant to this
Agreement (collectively, the "Ancillary Agreements") and to perform their
obligations hereunder and thereunder. Without limiting the generality of the
foregoing, the Boards of Directors of the Sellers, and the individual Seller
Shareholders, as the case may be, have duly authorized the execution, delivery,
and performance of this Agreement and the Ancillary Agreements by the Sellers.
This Agreement and the Ancillary Agreements constitute the valid and legally
binding obligation of the Sellers, enforceable in accordance with their
respective terms and conditions.
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(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the
Sellers are subject or any provision of the charter or bylaws of the Sellers; or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice or third party consent under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other agreement, arrangement to which the Sellers are a party or by
which they are bound or to which any of their assets are subject (or result in
the imposition of any Security Interest upon any of its assets). Other than with
respect to the Assignment Application described in Section 4(b) the Seller does
not need to give any notice to, make any filing with, or obtain any Licenses,
consent, or approval of any court or government or governmental agency in order
for the Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
(d) Title to Acquired Assets. Other than the Security Interests set forth
on Section 2(d) of the Disclosure Schedule (which shall be released at or before
the Closing) the Sellers have good and marketable title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer.
(e) Tax Matters. The Sellers have timely and properly filed all Tax
Returns that they were required to file with respect to the Sellers' operations.
All such Tax Returns were correct and complete in all respects and properly
reflect the tax liability of the Sellers. The Sellers have not requested any
extension of time within which to file returns in respect of any Taxes with
respect to the Sellers' operations. No Tax deficiencies have been proposed or
assessed against the Sellers. There are no pending, or to the Sellers'
knowledge, threatened audits, investigations, or claims for or relating to any
liability in respect of Taxes with respect to the Sellers' operations. All Taxes
owed by the Sellers with respect to their operations (whether or not shown on
any Tax Return) have been paid. The Sellers have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other third party. No
claim has ever been made by any authority in any jurisdiction where the Sellers
do not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of the
Sellers that arose in connection with any failure (or alleged failure) to pay
any Tax.
(f) Tangible Assets. Section 2(f) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Station.
All such tangible assets are sold hereunder in AS IS condition WHERE IS.
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(g) Real Property. Section 2(g) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Sellers
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Sellers have delivered to the Buyer correct and complete copies of
the Leases. With respect to the Real Estate:
(i) the Sellers have good and marketable title to all of the Owned Real
Estate free and clear of all liens, charges, mortgages, security interests,
easements, restrictions or other encumbrances of any nature whatsoever except
real estate taxes for the year of Closing and municipal and zoning ordinances
and recorded utility easements which do not impair the current use, occupancy or
value or the marketability of title of the property and which are disclosed in
Section 2(f) of the Disclosure Schedule (collectively, the "Permitted Real
Estate Encumbrances");
(ii) the Leases are and, following the Closing will continue to be, legal,
valid, binding, enforceable, and in full force and effect;
(iii) no party to any Lease is in breach or default (or has repudiated any
provision thereof), and no event has occurred which, with notice or lapse of
time, would constitute a breach or default thereunder or permit termination,
modification, or acceleration thereunder;
(iv) there are no disputes, oral agreements, or forbearance programs in
effect as to any Lease;
(v) none of the Owned Real Estate and to the Sellers' Knowledge, none of
the properties subject to the Leases is subject to any lease (other than
Leases), option to purchase or rights of first refusal;
(vi) except for Permitted Real Estate Encumbrances, there are no (i)
actual or, to the Sellers' Knowledge, proposed special assessments with respect
to any of the Real Estate; (ii) pending or, to the Sellers' Knowledge,
threatened condemnation proceedings with respect to any of the Real Estate;
(iii) pending or, to the Sellers' Knowledge, threatened litigation or
administrative actions with respect to any of the Real Estate; (iv) mechanic's
or materialmens' liens with respect to the Owned Real Estate; (v) structural or
mechanical defects in any of the buildings or improvements located in the Real
Estate; (vi) planned or commenced improvements which will result in an
assessment or otherwise affect the Real Estate; (vii) governmental agency or
court orders requiring the repair, alteration or correction of any existing
condition with respect to the Real Estate or any portion thereof; or (viii) any
pending or, to the Sellers' Knowledge, threatened changed in any zoning laws or
ordinances which may affect any of the Real Estate or Sellers' use thereof;
(vii) all buildings and improvements on the Real Estate are in AS IS
condition WHERE IS;
(viii) the Sellers have not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the Leases or its rights
thereunder;
(ix) to the Sellers' Knowledge, all facilities on the Real Estate have
received all approvals of governmental authorities (including licenses, permits
and zoning approvals) required in
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connection with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(x) all facilities on the Real Estate are supplied with utilities and
other services necessary for the operation of said facilities; and
(viii) to the Sellers' Knowledge, the owner of each leased facility has
good and marketable title to the underlying parcel of real property, free and
clear of any Security Interest, easement, covenant, or other restriction, except
for Permitted Real Estate Encumbrances and Sellers' leasehold interest in each
Lease has priority over any other interest except for the fee interest therein
and Permitted Real Estate Encumbrances;
(h) Intellectual Property. The Sellers own or have the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for or currently used in the operation of the business of the
Sellers as presently conducted and as presently proposed to be conducted. Each
item of Intellectual Property owned or used by the Sellers immediately prior to
the Closing hereunder will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Sellers have taken all necessary or desirable action to protect each item of
Intellectual Property that it owns or uses. With respect to such Intellectual
Property:
(i) The Sellers have not interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of third
parties, and the Sellers have never received any charge, complaint, claim, or
notice alleging any such interference, infringement, misappropriation, or
violation. To the Knowledge of the Sellers, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Sellers.
(ii) Section 2(h) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Sellers with
respect to any of its Intellectual Property and the call letters (current and
past) of the Stations, identifies each pending patent, trademark or copyright
application for registration which the Sellers have made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which the Sellers have granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). The Sellers have
delivered to the Buyer correct and complete copies of all such patents,
trademarks or copyright registrations, applications, licenses, agreements, and
permissions (as amended to date) and have made available to the Buyer correct
and complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. With respect to each item of
Intellectual Property that the Sellers own:
(A) the Sellers possess all right, title, and interest in and to the
item and all registrations and applications are in full force and effect;
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(B) the item is not subject to any outstanding judgment, order,
decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of the
Sellers, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Sellers have not ever agreed to indemnify any person or
entity for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(iii) Section 2(h) of the Disclosure Schedule also identifies each item of
Intellectual Property that any third party owns and that the Sellers use
pursuant to license, sublicense, agreement, or permission including, but not
limited to the call letters of the Stations. The Sellers have supplied the
Buyers with correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each such item
of used Intellectual Property:
(A) the license, sublicense, agreement, or permission covering the
item is, and following the Closing will continue to be on identical terms,
legal, valid, binding, enforceable, and in full force and effect;
(B) no party to the license, sublicense, agreement, or permission is
in breach or default (or has repudiated any provision thereof), and no
event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and correct
with respect to the underlying license;
(D) the underlying item of Intellectual Property is not subject to
any outstanding judgment, order, decree, stipulation, injunction, or
charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of the
Sellers, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(F) the Sellers have not agreed to indemnify any person or entity
for or against any interference, infringement, misappropriation, or other
conflict with respect to the underlying item of Intellectual Property; and
(G) the Sellers have not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
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(iv) The Sellers have no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or other third parties
have developed which reasonably could be expected to supersede or make obsolete
any product or process of the Sellers.
(i) Contracts. Section 2(i) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time which are listed in Section 2(i) of the
Disclosure Schedule) to which the Sellers are a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under which
it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, compensation
agreement, employment agreement, commission agreement, or severance
agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Sellers or the Stations;
(viii) any written arrangement concerning a guaranty by the Sellers
of the obligations of any other party; or
(ix) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
The Sellers have delivered to the Buyers a correct and complete copy of each
written arrangement listed in Section 2(i) of the Disclosure Schedule (as
amended to date). With
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respect to each written arrangement so listed which constitutes an Assumed
Contract: (A) the written arrangement is legal, valid, binding, enforceable, and
in full force and effect; (B) the written arrangement will continue to be legal,
valid, binding, and enforceable and in full force and effect on identical terms
following the Closing (if the arrangement has not expired according to its
terms); (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the written arrangement; and
(D) no party has repudiated any provision of the written arrangement. The
Sellers are not a party to any verbal contract, agreement, or other arrangement
which, if reduced to written form, would be required to be listed in Section
2(i) of the Disclosure Schedule under the terms of this Section 2(i). Except for
the Assumed Contracts, the Buyers shall not have any Liability or obligations
for or in respect of any of the contracts set forth in Section 2(i) of the
Disclosure Schedule or any other contracts or agreements of the Seller. No
advertiser of the Stations has indicated within the past year that it will stop,
or decrease the rate of, buying services from them.
(j) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates of
compliance, and consents of governmental bodies, including, without limitation,
the FCC Licenses, used or useful in the operation of the Stations as they are
now being operated are (A) in full force and effect, (B) unimpaired by any acts
or omissions of the Sellers or the Sellers' employees or agents, (C) free and
clear of any restrictions which might limit the full operation of the Stations,
and (D) detailed in Section 2(j) of the Disclosure Schedule. With respect to the
licenses, permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(j) of the Disclosure
Schedule also sets forth, without limitation, the date of the last renewal, the
expiration date thereof, and any conditions or contingencies related thereto.
Except as set forth in Section 2(j) of the Disclosure Schedule, no condition
exists or event has occurred that permits, or after notice or lapse of time, or
both, would permit, the revocation or termination of any such license, permit,
consent, franchise, or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction or limitation
upon the operation of the Stations as now conducted. To the Knowledge of Seller,
there is no reason why the FCC licenses might not be renewed in the ordinary
course or revoked.
(ii) The Stations are each in compliance with the FCC's policy on exposure
to radio frequency radiation. No renewal of any FCC License would constitute a
major environmental action under the FCC's rules or policies. Access to the
Stations' transmission facilities is restricted in accordance with the policies
of the FCC.
(iii) Except as set forth in Section 2(j) of the Disclosure Schedule, to
the Sellers' Knowledge, the Sellers are not the subject of any FCC or other
governmental investigation or any notice of violation or order, or any material
complaint, objection, petition to deny, or opposition issued by or filed with
the FCC or any other governmental authority in connection with the operation of
or authorization for the Stations, and there are no proceedings (other than
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rule making proceedings of general applicability) before the FCC or any other
governmental authority that could adversely affect any of the FCC Licenses or
the authorizations listed in Section 2(j) of the Disclosure Schedule.
(iv) The Sellers have filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(v) The Sellers are not aware of any information concerning the Stations
that could cause the FCC or any other regulatory authority not to issue to the
Buyers all regulatory certificates and approvals necessary for the consummation
of the transactions contemplated hereunder or the Buyers' operation and/or
ownership of the Stations.
(k) Insurance. Section 2(k) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Sellers are a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was on a
claims made, occurrence, or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms through the Closing Date.
(l) Litigation. Section 2(l) of the Disclosure Schedule sets forth each
instance in which the Sellers: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Sellers, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(l) of the Disclosure Schedule could result in any
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adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the Seller or the
Station taken as a whole. The Sellers have no reason to believe that any such
charge, complaint, action, suit, proceeding, hearing, or investigation may be
brought or threatened against the Sellers.
(m) Employees. Section 2(m) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
the Seller. Section 2(m) of the Disclosure Schedule also sets forth a list of
all employee handbooks and/or manuals relating to the employees of the Sellers,
true and correct copies of which have been delivered to the Buyers. To the
Knowledge of the Sellers, no key employee or group of employees has any plans to
terminate employment with the Sellers. The Sellers are not a party to or bound
by any understanding (whether written or oral), agreement or contract with any
union, labor organization, employee group or other entity or individual which
affects the employment of employees of the Sellers including, but not limited to
any collective bargaining agreement, nor have they experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Sellers have no Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of any of the Sellers. The Sellers have not been subject to a strike,
slow down or other work stoppage during the five (5) year period immediately
preceding the date hereof and, to the Sellers' Knowledge, there are no strikes,
slow downs or work stoppages threatened against the Sellers. To the Sellers'
Knowledge, they have not committed any unfair labor practice. There is no basis
for any claim by any past or present employee of the Sellers that such employee
was subject to wrongful discharge or any employment discrimination by the
Sellers or their management arising out of or relating to the employee's race,
sex, age, religion, national origin, ethnicity, handicap or any other protected
characteristic under applicable law. No proceedings are pending before any
court, governmental agency or instrumentality or arbitrator relating to labor
matters, and there is no pending investigation by any governmental agency or, to
the Knowledge of the Sellers, threatened claim by any such agency or other
person relating to labor or employment matters.
(n) Employee Benefits. Section 2(n) of the Disclosure Schedule lists all
Employee Benefit Plans that the Sellers maintain or to which the Sellers
contribute or are required to contribute for the benefit of any current or
former employee of the Sellers and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Sellers do not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Sellers. There are no pending or, to the Knowledge of the Sellers, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have
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there been any Reportable Events or Prohibited Transactions with respect to any
Employee Benefit Plan.
(o) Environment, Health, and Safety.
(i) With respect to the operation of the Stations and the Real
Estate, the Sellers are, and at all times in the past has been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has ever been filed or commenced
or, to the Sellers' Knowledge (which Knowledge shall be defined for the
purposes of this Section 2(o) only as shall refer to actual knowledge
without inquiry), is threatened, against the Sellers alleging any failure
to comply with any such Environmental Law or laws concerning employee
health and safety.
(ii) With respect to the operation of the Stations and the Real
Estate, the Sellers have no Liability (and to Sellers' Knowledge there is
no Basis related to the past or present operations of the Sellers or their
predecessors for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Federal Water Pollution Control
Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of
1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899, or
the Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), or any other law of any federal, state, local, or foreign
government or agency thereof (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, or pollution or
protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes ("Environmental Laws");
(iii) The Sellers have no Liability (and to Sellers' Knowledge there
is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Sellers
giving rise to any Liability) under the Occupational Safety and Health
Act, as amended, or any other law (or rule or regulation thereunder) of
any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal
injury to any employee.
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(iv) The Sellers have obtained and at all times has been in
compliance in all material respects with all of the terms and conditions
of all permits, licenses, and other authorizations which are required
under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of
any federal, state, or local or foreign government relating to worker
health and safety.
(v) To Sellers' Knowledge, all properties and equipment used in the
business of the Sellers have been free of asbestos, PCB's, methylene
chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(vi) To Sellers' Knowledge, no pollutant, contaminant, or chemical,
industrial, hazardous, or toxic material or waste ever has been buried,
stored, spilled, leaked, discharged, emitted, or released on any of the
Real Estate.
(vii) To Sellers' Knowledge, none of the Acquired Assets are
required to be upgraded, modified or replaced to be in compliance with
Environmental Laws.
(viii) Section 2(o) of the Disclosure Schedule contains a copy of
all environmental claims, reports, studies, compliance actions or the like
of the Sellers or which are available to the Sellers with respect to any
of the Real Estate or any of the Acquired Assets.
(ix) To Sellers' Knowledge, no septic systems or wells exist on, in
or under any of the Real Estate. To Sellers' Knowledge, no above ground or
underground storage tanks have ever been located at, on or under the Real
Estate. To Sellers' Knowledge, none of the Real Estate is contaminated by
hazardous or toxic substances or waste, as defined under Environmental
Laws, originating from off-site sources.
(p) Legal Compliance.
(i) The Sellers have complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, local and
foreign governments (and all agencies thereof, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced or, to the Sellers' Knowledge, is threatened, against the
Sellers alleging any failure to comply with any such law or regulation,
including those relating to the employment of labor, employee civil rights, and
equal employment opportunities and relating to antitrust matters.
(ii) The Sellers have filed in a timely manner all reports, documents, and
other materials it was required to file (and the information contained therein
was correct and complete in all material respects) under all applicable laws
(including rules and regulations thereunder) of federal state, local and foreign
governments (and all agencies thereof). To the Sellers'
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Knowledge, they have possession of all records and documents they were required
to retain under all applicable laws (including rules and regulations
thereunder).
(q) Advertising Contracts. Section 2(q) of the Disclosure Schedule lists
all arrangements for the sale of air time or advertising on the Stations in
excess of $1000, and the amount to be paid to the Sellers therefor. The Sellers
have no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Sellers to cease doing business or to reduce in any material respect the
business transacted with the Sellers or to terminate or modify any agreements
with the Sellers (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
(r) Brokers' Fees. Other than the fee payable to William Shutz, which
shall be the exclusive responsibility of Sellers, the Sellers have no Liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
(s) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer. Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
(b) Authorization of Transaction. Buyers have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
their obligations hereunder and thereunder. This Agreement and the Ancillary
Agreements constitute the valid and legally binding obligation of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create
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in any party the right to accelerate, terminate, modify, or cancel, or require
any notice or third party consent under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other arrangement to
which the Buyers are a party or by which they are bound or to which any of their
assets is subject. Other than the Assignment Application described in Section
4(b), the Buyers do not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any court or government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement or the Ancillary Agreements (including the
assignments and assumptions referred to in Section 1(e) above).
(d) Brokers' Fees. The Buyers have no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Sellers and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use the commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Sellers
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have material adverse effect upon the Stations or
upon any Affiliate or impose significant costs on such party). If the FCC
imposes any condition on either party to the Assignment Application, such party
shall use commercially reasonable efforts to comply with such condition,
provided, that neither party shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Station or any
Affiliate. The Sellers and the Buyers shall jointly oppose any requests for
reconsideration or judicial review of FCC approval of the Assignment Application
and shall jointly request from the FCC extension of the effective period of FCC
approval of the Assignment Application if the Closing shall not have occurred
prior to the expiration of the original effective period of the FCC Consent.
Nothing in this Section 4(b) shall be construed to limit either party's right to
terminate this Agreement pursuant to Section 9 of this Agreement.
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(c) Employment Offers. Upon notice to the Sellers, and at mutually
agreeable times, the Sellers will permit the Buyers to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyers may, at their option, extend offers of employment to all or any of
the Sellers' employees effective on the Closing Date. From and after the
execution of this Agreement, the Sellers shall use their best efforts to assist
Buyers in retaining those employees of the Stations which the Buyers wish to
hire in connection with the operation of the Stations by the Buyers subsequent
to the Closing, and the Sellers will not take any action to preclude or
discourage any of the Sellers' employees from accepting any offer of employment
extended by the Buyers.
(d) Notices and Consents. The Sellers will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request in connection with the matters pertaining to the Sellers
disclosed or required to be disclosed in the Disclosure Schedule (including,
without limitation, consents to assignment of the Leases and other Assumed
Contracts). Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
(e) Operation of Business. The Sellers will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business.
(f) Advertising Obligations. The Sellers shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Ten Thousand Dollars ($10,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Sellers shall deliver to the Buyers a
schedule, certified by an officer of the Sellers, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
(g) Operating Statements. The Sellers shall deliver to the Buyers, for the
Buyers' informational purposes only, monthly unaudited statements of operating
revenues and operating expenses of the Stations within ten (10) days after each
such statement is prepared by or for the Sellers.
(h) Contracts. The Sellers will not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on Section 2(i)
of the Disclosure Schedule in any material respect. The Sellers will not without
prior written consent of the Buyers enter into any new contracts respecting the
Stations or their properties, except (i) contracts for the sale of time on the
Stations for cash, goods or services which are entered into in the Ordinary
Course of Business and comply with Sections 4(f) and 4(j) hereof, (ii) contracts
entered into in the Ordinary Course of Business which are cancelable on not more
than thirty-one (31) days' notice without penalty or premium, and (iii)
contracts entered into in the Ordinary Course of Business
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each of which does not involve more than Five Thousand Dollars ($5,000) or all
of which do not involve more than Ten Thousand Dollars ($10,000) in the
aggregate.
(i) Operation of Station. The Sellers shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Sellers
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
(j) Credit and Receivables. The Sellers will follow their usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Stations and with respect to collecting accounts receivable
arising from such extension of credit.
(k) Preservation of Business. The Sellers will keep their business and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensors,
advertisers, suppliers, customers, and employees, all of the Confidential
Information, call letters and trade secrets of the Stations, and the FCC
Licenses.
(l) Full Access and Consultation. The Sellers will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Stations, to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to the Sellers for the purpose of permitting the Buyers to, among
other things: (a) conduct its due diligence review, (b) review financial
statements of the Sellers, (c) verify the accuracy of representations and
warranties of the Sellers contained in this Agreement, and (d) prepare for the
consummation of the transactions contemplated by this Agreement. The Sellers
will consult with the Buyers' management with a view to informing Buyer's
management as to the operations, management and business of the Stations.
(m) Notice of Developments. The Sellers will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Sellers or the Stations. Each Party will give prompt written
notice to the other of any material development affecting the ability of the
Parties to consummate the transactions contemplated by this Agreement. No
disclosure by any Party pursuant to this Section 4(m), however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Sellers will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek
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any of the foregoing. The Sellers will notify the Buyers immediately if any
person makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. Sellers will
obtain, with respect to each parcel of Real Estate subject to the Leases, a
leasehold owner's policy issued by a title insurer reasonably satisfactory to
the Buyer, in an amount equal to the fair market value of such Real Estate
(including all improvements located thereon), insuring over the standard
pre-printed exceptions and insuring leasehold title to such Real Estate in the
Buyers as of the Closing subject only to the Permitted Real Estate Encumbrances,
together with such endorsements for zoning, contiguity, public access and
extended coverage as the Buyers or their lender reasonably requests, (ii) with
respect to each parcel of Owned Real Estate, an owner's policy of title
insurance by a title insurer reasonably satisfactory to the Buyer, in an amount
equal to the fair market value of such Real Estate (including all improvements
located thereon), insuring over the standard pre-printed exceptions and insuring
title to the Owned Real Estate to be vested in the Buyers as of the Closing free
and clear of all liens and encumbrances except Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyer or its lender reasonably requests,
(iii) a current survey of each parcel of Real Estate certified to the Buyer and
its lender, prepared by a licensed surveyor and conforming to current ALTA
Minimum Detail Requirements for Land Title Surveys, disclosing the location of
all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys") which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iv) with
respect to each parcel of Real Estate, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Buyers which does not indicate that the Sellers and the Real Estate are
not in compliance with any Environmental Law and which shall not disclose or
recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. The Buyers will pay the
costs of these title policies, Surveys and environmental assessments.
(p) Control of Station. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Sellers.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Sellers until the Closing. In the event of
any such loss, damage, or destruction the Sellers will promptly notify the
Buyers of all particulars thereof, stating the cause thereof (if known) and the
extent to which the cost of restoration, replacement and repair of the Acquired
Assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Sellers will, at Sellers' expense, repair or replace
such
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Acquired Assets to their former condition as soon as possible after loss, damage
or destruction thereof and shall use its best efforts to restore as promptly as
possible transmissions as authorized in the FCC Licenses. The Closing Date shall
be extended (with FCC consent, if necessary) for up to sixty (60) days to permit
such repair or replacement. If repair or replacement cannot be accomplished
within sixty (60) days of the date of the Sellers' notice to the Buyers, and the
Buyers reasonably determine that the Sellers' failure to repair or replace,
alone or in the aggregate with any other then existing factors, would have a
material adverse effect on the operation of the Stations:
(a) the Buyers may elect to terminate this Agreement; or
(b) the Buyers may postpone the Closing Date until such time as the
property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Sellers'
notice to the Buyers, in which case either party may terminate this
Agreement; or
(c) the Buyers may choose to accept the Acquired Asset in their
"then" condition, together with the Sellers' assignment to the Buyers of
all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers of any proceeds under any such
insurance policies, previously received by the Sellers with respect
thereto plus an amount equal to the amount of any deductible or
self-insurance maintained by Sellers on such Acquired Assets.
In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Sellers shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
(iii) the Sellers shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to those relating to
transmitter and studio leases;
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(iv) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the parties if such
transactions are consummated, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyers to own, operate, or control the Acquired Assets (and no
such judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(v) the Sellers shall have delivered to the Buyer a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified above in Sections 5(a)(i) through (iv) is
satisfied in all respects and the statements contained in such certificate shall
be deemed a warranty of the Sellers which shall survive the Closing;
(vi) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Postclosing
Agreement;
(viii) the Buyers shall have received from counsel to the Sellers an
opinion with respect to the matters set forth in Exhibit F attached hereto,
addressed to the Buyers and its lender and dated as of the Closing Date, and
with subject matter and language of the opinion of counsel to be subject to good
faith negotiation;
(xi) all actions to be taken by the Sellers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyers.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Buyers may elect to (i) terminate this Agreement without
liability to the Sellers, or (ii) consummate the transactions contemplated
herein despite such failure. Regardless of whether the Buyers elect to terminate
this Agreement or consummate the transactions described herein, if such failure
shall be as a result of a breach of any provision of this Agreement by the
Sellers (including, without limitation, any breach arising as a result of the
failure of the Sellers to execute and/or deliver any item described in this
Section 5(a), the Buyers may seek appropriate remedies for any and all damages,
costs and expenses incurred by the Buyers by reason of such breach including,
without limitation, indemnification pursuant to Section 7, below.
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(b) Conditions to Obligation of the Sellers. The obligation of the Sellers
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above shall
be true and correct in all respects at and as of the Closing Date as though made
on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of their
covenants hereunder in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or impose damages or penalties upon any of the Parties if such
transactions are consummated, or (B) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Sellers a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified above in Section 5(b)(i)-(iii) is satisfied in
all respects and the statements contained in such certificate shall be deemed a
warranty of the Buyers which shall survive the Closing;
(v) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement; and
(viii) all actions to be taken by the Buyers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Sellers.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Sellers may elect to (i) terminate this Agreement without
liability to the Buyers, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Sellers elect to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Buyers
(including, without limitation, any breach arising as a result of the failure of
the Buyers to execute and/or deliver any item described in this Section 5(a),
the Sellers may seek appropriate
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remedies for any and all damages, costs and expenses incurred by the Sellers by
reason of such breach including, without limitation, indemnification pursuant to
Section 7, below. If the Closing does not occur as a result of Buyer's breach of
any covenant, term or condition of the Asset Purchase Agreement, the Earnest
Money Deposit shall be paid to Sellers and shall constitute liquidated damages
and Sellers' exclusive remedy for such breach.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
(c) Adjustments. Operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Sellers and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Sellers and the Buyers as of the Closing
Date in accordance with the foregoing principle. In addition, all commissions
payable with respect to the accounts receivable of the Sellers (whether due
before or after Closing) shall be solely for the account and responsibility of
the Sellers. Contractual arrangements that do not reflect an equal rate of
compensation to a Stations over the term of the agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by an
independent accounting firm mutually acceptable to both
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parties and the fees and expenses of such accounting firm shall be paid one-half
(1/2) by the Sellers and one-half (1/2) by the Buyer.
(d) Collection of Accounts Receivable. All accounts receivable of the
Stations shall remain the property of Sellers. In the event that Buyers receives
a payment from an advertiser in payment for advertisements that aired on any of
the Stations prior to the Closing Date, Buyer shall promptly pay over such
amounts to Sellers under such procedures as may be reasonably acceptable to
Buyers and Sellers.
(f) Consents. In the event any of the Assumed Contracts are not assignable
or any consent to such assignment is not obtained on or prior to the Closing
Date, and the Buyers elect to consummate the transactions contemplated herein
despite such failure or inability to obtain such consent, the Sellers shall
continue to use commercially reasonable efforts to obtain any such assignment or
consent after the Closing Date. Until such time as such assignment or approval
has been obtained, the Sellers will cooperate with Buyers in any lawful and
economically feasible arrangement to provide that the Buyers shall receive the
Sellers' interest in the benefits under any such Assumed Contract, including
performance by the Sellers as agent, if economically feasible; provided,
however, that the Buyers shall undertake to pay or satisfy the corresponding
liabilities for the enjoyment of such benefit to the extent that Buyers would
have been responsible therefor if such consent or assignment had been obtained.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Sellers
contained in Section 2 of this Agreement (other than the representations and
warranties of the Sellers contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g),
2(r) and 2(t) hereof or relating to the Sellers' title to the Acquired Assets)
shall survive the Closing and continue in full force and effect for a period
until 90 days after the applicable statute of limitations has expired with
respect to any claim by the Buyers based on a claim or action by a third party
and for a period of eighteen (18) months following Closing with respect to any
claim by the Buyers not based on a claim or action by a third party. All of the
other representations and warranties (including the representations and
warranties of the Sellers contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g)
2(r) and 2(t) hereof or relating to the Sellers' title to the Acquired Assets)
and all covenants of the Buyers and the Sellers contained in this Agreement
shall survive the Closing and continue in full force and effect forever
thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a breach of a
warranty or covenant prior to the Closing Date, the Sellers agree to indemnify
the Buyers from and against the entirety of any Adverse Consequences the Buyers
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by:
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(i) any misrepresentation or breach of any of the Sellers' representations
or warranties, and covenants contained in this Agreement or in any Ancillary
Agreement executed and/or delivered by the Sellers (so long as the Buyers make a
written claim for indemnification within the applicable survival period);
(ii) any breach or nonfulfillment of any agreement or covenant of the
Sellers contained herein or in any Ancillary Agreement;
(iii) any Liability of the Sellers which is not an Assumed Liability;
and/or
(iv) any Liability of the Buyers arising by operation of law (including
under any bulk transfer law of any jurisdiction or under any common law doctrine
of defacto merger or successor liability) which is not an Assumed Liability.
The amounts for which an Indemnifying Party shall be liable hereunder shall be
net of any insurance proceeds received, or other third party recovery, by the
Indemnified Party in connection with the facts giving rise to the right of
indemnification (although this provision shall not require the Indemnified Party
to pursue insurance proceeds or third party recovery). The Buyers shall not have
the right to assert claims for indemnification under subsection (i) unless and
until the aggregate amount of any Adverse Consequences that the Buyers in total
may suffer or have suffered as a result of such breach exceeds Twenty-Five
Thousand ($25,000.00) and then only for the amounts in excess of such aggregate
amount. Notwithstanding the foregoing, the Sellers shall not be liable for
indemnification claims under subsection (i) in excess of an aggregate amount
equal to Two Hundred Fifty Thousand Dollars ($250,000.00).
(c) Indemnification Provisions for the Benefit of the Sellers. Except as
described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyer agrees to indemnify the Sellers
from and against the entirety of any Adverse Consequences the Sellers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Sellers makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to seek an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to seek to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in Section 10(o)
below), in addition to any other remedy to
24
<PAGE>
which it may be entitled, at law or in equity. Each of the Parties acknowledges
and agrees that not withstanding the provision in Section 7(e) with respect to
the remedy of liquidated damages upon a breach of a warranty or covenant of this
Agreement prior to the Closing, money damages would not be an adequate remedy
for a breach of any provision of this Agreement.
(e) Liquidated Damages. The Buyers and the Sellers acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
lieu of indemnification pursuant to Section 7(b) or 7(c), the non defaulting
Party shall be entitled to receive from the defaulting Party for such default
the sum of One Hundred Thirty Thousand Dollars ($130,000.00) as liquidated
damages without the need for proof of damages, subject only to successfully
proving in a court of competent jurisdiction that the other Party has materially
breached this Agreement and that the transactions contemplated thereby have not
occurred; provided however, that the Buyers shall retain the option to receive,
pursuant to Section 7(d), and in lieu of receiving the liquidated damages
provided in this Section 7(e), the remedy of specific performance with respect
to a breach of this Agreement prior to the Closing. The Buyers and the Sellers
agree to pay said sum of liquidated damages within ten (10) days of the date
that the non-defaulting party obtains such a judgment, and agree that in the
event this Agreement is terminated by the Sellers prior to the Closing Date as a
result of a breach or default by the Buyers under this Agreement, the Sellers
shall proceed against the Earnest Money as satisfaction of liquidated damages
owed by Buyers.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnifica tion against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter
25
<PAGE>
that the Indemnifying Party is assuming the defense thereof, however, and/or in
the event the Indemnifying Party shall fail to defend such claim actively and in
good faith, then the Indemnified Party may defend against, or enter into any
settlement with respect to, the matter in any manner it reasonably may deem
appropriate.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Sellers, other than Retained Assets that are used or useful in
the operation of the Stations, wherever located, including but not limited to
all of its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles, and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those Barter Agreements and Advertising Contracts identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Station; (e) Assumed Contracts, indentures,
Security Interests, guaranties, other similar arrangements, and rights
thereunder (but excluding rights under the Broadcast Programming format as
described more particularly in Section 2(h) to the Disclosure Schedule); (f)
call letters of the Stations, jingles, logos, slogans, and business goodwill of
the Station (but excluding rights to the "Love 98" slogan); (h) Licenses and
similar rights obtained from governments and governmental agencies; and (i) FCC
logs and records and all other books, records, ledgers, logs, files, documents,
correspondence, advertiser lists, all other lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, program production materials, studies, reports, and other printed or
written materials; and (j) goodwill of the Stations.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(q), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
26
<PAGE>
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts listed on Exhibit G attached hereto.
"Assumed Liabilities" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contracts either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Sellers.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
27
<PAGE>
"Environmental Laws" has the meaning set forth in Section 2(o), above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means __________________.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Station.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(f) above.
"Indemnifying Party" has the meaning set forth in Section 7(f) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (b) copies and tangible embodiments thereof (in whatever
form or medium).
28
<PAGE>
"Knowledge" means actual knowledge after reasonable investigation and
inquiry, provided that solely for purposes of Section 2(o) above, "Knowledge"
shall mean actual knowledge without inquiry.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Seller in Eden,
Maryland and Salisbury, Maryland, as described in Section 2(g) of the Disclosure
Schedule and all buildings, fixtures, and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(g), above.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller's
owners in the form attached hereto as Exhibit D.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence
29
<PAGE>
of the Seller as a corporation; (ii) any of the rights of the Seller under this
Agreement (or under any side agreement between the Seller on the one hand and
the Buyers on the other hand entered into on or after the date of this
Agreement); (iii) accounts, notes and other receivables of the Seller; (iv)
rights to the "Love 98" slogan; (v) rights under the Seller's contract for the
Broadcast Programming format; and (vi) Cash.
"Retained Liabilities" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Station prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application); or (iv) any Liability
or obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Stations" mean the radio broadcast station having the call letters
WSBY-FM and WJDY-AM, both licensed by the FCC to operate in Salisbury, Maryland.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
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<PAGE>
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Sellers may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written notice to
the Sellers at any time prior to the Closing in the event the Sellers are in
breach of any representation, warranty, or covenant contained in this Agreement;
provided, however, that if such breach is capable of being cured, such breach
also remains uncured for twenty (20) days after notice of breach is received by
the Sellers from the Buyers;
(iii) the Sellers may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing in the event the Buyers are in
breach of any representation, warranty, or covenant contained in this Agreement;
provided, however that if such breach is capable being cured, such breach
remains uncured for twenty (20) days after notice of breach is received by the
Buyers from the Sellers;
(iv) the Buyers may terminate this Agreement by giving written notice to
the Sellers at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(a) hereof
(unless the failure results primarily from the Buyers themselves breaching any
representation, warranty, or covenant contained in this Agreement);
(v) the Sellers may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(b) hereof
(unless the failure results primarily from the Sellers itself breaching any
representation, warranty, or covenant contained in this Agreement); or
(vi) the Buyers or the Sellers may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
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<PAGE>
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in Section 7(a) hereof and the Post-Closing Agreement
with respect to Sellers' owners.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that (i) the Buyers may assign all of its right,
title and interest in, to and under this Agreement to one or more Affiliates,
who shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Sellers the Purchase Price therefor or to any successor to the Buyers in
the event of any sale, merger or consolidation of the Buyers, and (ii) Buyers
may assign their indemnification claims and their rights under the warranties
and representations of the Sellers to the financial institution(s) providing
financing to the Buyers in connection with this transaction.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent
32
<PAGE>
by facsimile transmission actually received by the receiving equipment or three
(3) days after deposited in the United States mail, certified mail, postage
prepaid, return receipt requested, in each case addressed to the intended
recipient as set forth below:
If to the Seller:
J. Parker Connor
Susan C. Connor
759 Garfield Parkway
Bethany Beach, DE 19930
Fax No.: (302) 539-8164
Copy to:
Kevin J. Connor
Law Offices of Kevin J. Connor
9828 Log House Court
Gaithersburg, Maryland 20882-2704
Fax No: (301) 972-1499
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
33
<PAGE>
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Maryland.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyers and the Sellers, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications and as set forth in
Section 4(o) with respect to Surveys, title commitments and environmental
audits. The Sellers will pay all income taxes. The Sellers and the Buyers will
each pay one-half (1/2) of any transfer or sales taxes and other recording or
similar fees necessary to vest title to each of the Acquired Assets in the
Buyers.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts
34
<PAGE>
in reasonable detail. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Maryland in any action or
proceeding arising out of or relating to this Agreement, agrees that all claims
in respect of the action or proceeding may be heard and determined in any such
court, and agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(h) above. Nothing in this Section 10(o), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
(p) Section 1031 Treatment. Notwithstanding anything herein to the
contrary, it is the intent of the parties that the Sellers, or any one of them,
may, at their option, pursuant to Section 1031 of the Code, exchange the real
property and improvement thereon which are the subject of this Agreement (the
"Property") for other replacement property to be identified and acquired
subsequent to the Closing of the transactions contemplated herein (the
"Exchange"). Accordingly, Buyers acknowledge and agree that Sellers may, at or
prior to such Closing, assign their rights hereunder to a "qualified
intermediary" (as defined in the Code) selected by Sellers subject to all of
Sellers' rights and obligations hereunder and shall promptly provide written
notice of such assignment to Buyers. Buyers shall cooperate with all reasonable
requests of the Sellers and/or the qualified intermediaries in arranging and
effecting the Exchange to ensure that the Exchange qualifies under Section 1031
of the Code. Without limiting the generality of the foregoing, if Sellers have
given notice of their intention to effect the Exchange, Buyers shall at the
Closing deliver the purchase price for the Property directly to the qualified
intermediary rather than to Sellers (which delivery shall discharge the
obligation of Buyers to pay the purchase price hereunder) and/or take such other
actions to facilitate the Exchange as Sellers may reasonably request. An
assignment to a qualified intermediary shall not relieve Sellers of any of their
duties or obligations hereunder.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
35
<PAGE>
CUMULUS BROADCASTING, INC.
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
CUMULUS LICENSING CORPORATION
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
"Buyers"
CONNOR FM BROADCASTING CO.
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
CONNOR BROADCASTING CO.
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
J. PARKER CONNOR
- -----------------------------------
SUSAN C. CONNOR
- -----------------------------------
"Sellers"
36
<PAGE>
STOCK PURCHASE AGREEMENT
AMONG
CUMULUS HOLDINGS, INC.
AND
TOMMY R. VASCOCU, ELIZABETH L. YOUNG,
MICHAEL L. OWENS, ALAN OWENS,
ROBERT PODOLSKY, LARRY DANIELS,
SONJA ERSKINE, and JEFFREY D. ERSKINE
December 17, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Target Shares.........................................1
(a) Basic Transaction...................................................1
(b) Purchase Price......................................................1
(c) The Closing.........................................................2
(d) Deliveries at the Closing...........................................2
(e) Noncompetition Agreement............................................2
(f) Local Marketing Agreement...........................................2
2. Representations and Warranties of the Sellers..............................2
(a) Authorization of Transaction........................................2
(c) Noncontravention....................................................2
(d) Brokers' Fees.......................................................3
(e) Company Shares......................................................3
3. Representations and Warranties of the Buyer................................3
(a) Organization of the Buyer...........................................3
(b) Authorization of Transaction........................................3
(c) Noncontravention....................................................3
(d) Brokers' Fees.......................................................4
4. Representations and Warranties Concerning the Company......................4
(a) Organization, Qualification, and Corporate Power....................4
(b) Capitalization......................................................4
(c) Noncontravention....................................................5
(d) Financial Statements................................................5
(e) Subsequent Events...................................................5
(f) Undisclosed Liabilities.............................................7
(g) Tax Matters.........................................................8
(h) Tangible Assets.....................................................9
(i) Owned Real Property.................................................9
(j) Real Property Leases...............................................10
(k) Intellectual Property..............................................11
(l) Contracts..........................................................11
(m) FCC Licenses and Compliance with FCC Requirements..................12
(n) Insurance..........................................................13
(o) Litigation.........................................................13
(p) Employees..........................................................13
(q) Notes and Accounts Receivable......................................13
(r) Powers of Attorney.................................................13
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(s) Employee Benefits..................................................13
(t) Environment, Health, and Safety....................................15
(u) Legal Compliance...................................................16
(v) Certain Business Relationships With the
Company and Its Subsidiaries......................................16
(w) Brokers' Fees......................................................16
(x) Advertising Contracts..............................................16
(y) Disclosure.........................................................17
5. Pre-Closing Covenants.....................................................17
(a) General............................................................17
(b) Transfer Applications..............................................17
(c) Notices and Consents...............................................17
(d) Operation of Business..............................................18
(e) Employees..........................................................18
(f) Advertising Obligations............................................18
(g) Operating Statements...............................................18
(h) Contracts..........................................................18
(i) Operation of Stations..............................................18
(j) Credit and Receivables.............................................18
(k) Preservation of Business...........................................18
(l) Full Access and Consultation.......................................18
(m) Notice of Developments.............................................18
(n) Exclusivity........................................................19
(o) Title Insurance....................................................19
(p) Surveys............................................................20
(q) Environmental Assessments..........................................20
(r) Control of Stations................................................20
(s) Risk of Loss.......................................................20
6. Conditions to Obligation to Close.........................................21
(a) Conditions to Obligation of the Buyer..............................22
(b) Conditions to Obligation of the Sellers............................22
7. Post-Closing Covenants....................................................23
(a) General............................................................23
(b) Verification of Working Capital....................................23
(c) Litigation Support.................................................24
(d) Transition.........................................................24
(e) Confidentiality....................................................24
(F) Retainage Adjustment...............................................24
8. Remedies for Breaches of this Agreement...................................24
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(a) Survival...........................................................24
(b) Indemnification Provisions for the Benefit of the Buyer ...........25
(c) Indemnification Provisions for the Benefit of the Sellers .........25
(d) Matters Involving Third Parties....................................25
(e) Specific Performance...............................................26
(f) Liquidated Damages.................................................26
(g) Other Indemnification Provisions...................................26
9. Definitions...............................................................26
10. Termination...............................................................31
(a) Termination of Agreement...........................................31
(b) Effect of Termination..............................................31
11. Miscellaneous.............................................................31
(a) Survival...........................................................31
(b) Press Releases and Announcements...................................31
(c) No Third Party Beneficiaries.......................................32
(d) Section 338 Election...............................................32
(e) Entire Agreement...................................................32
(f) Succession and Assignment..........................................32
(g) Counterparts.......................................................32
(h) Headings...........................................................32
(i) Notices............................................................32
(i) Governing Law......................................................34
(j) Amendments and Waivers.............................................34
(k) Severability.......................................................34
(l) Expenses...........................................................34
(m) Construction.......................................................34
(n) Incorporation of Exhibits and Schedules............................34
(o) The Sellers........................................................35
(p) Submission to Jurisdiction.........................................35
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EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit A-1--Form of Letter of Credit
Exhibit B--Form of Noncompetition Agreement
Exhibit C--Form of Retainage Agreement
Exhibit D--Form of Opinion of Counsel to the Seller
SCHEDULES
Description Section Reference
- ----------- -----------------
Company Shares 2(e)
Directors and Officers 4(a)
Financial Statements 4(d)
Subsequent Events 4(e)
Tax Matters 4(g)
Tangible Assets 4(h)
Owned Real Property 4(i)
Real Property Leases 4(j)
Intellectual Property 4(k)
Contracts 4(l)
FCC Licenses 4(m)
Insurance 4(n)
Litigation 4(o)
Employees 4(p)
Employee Benefits 4(s)
Business Relationships 4(v)
Advertising Contracts 4(z)
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STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") entered into as of December 17, 1997,
by and among Cumulus Holdings, Inc., an Illinois corporation (the "Buyer"); and
Tommy R. Vascocu, a citizen of Texas; Elizabeth L. Young, a citizen of Texas;
Michael L. Owens, a citizen of Arizona; Alan Owens, a citizen of Arizona; Robert
Podolsky, a citizen of Arizona; Larry Daniels, a citizen of Arizona; Sonja
Erskine, a citizen of Arizona; and Jeffrey D. Erskine, a citizen of Arizona
(collectively the "Sellers"). The Buyer and the Sellers are referred to
collectively herein as the "Parties."
The Sellers in the aggregate own all of the outstanding capital
stock of New Frontier Communications, Inc., an Arizona corporation (the
"Company") which, in turn, owns and operates radio stations KBAT-FM (licensed to
Midland, Texas); KMND-AM (licensed to Midland, Texas); KODM-FM (licensed to
Odessa, Texas); KNFM-FM (licensed to Midland, Texas); and KGEE-FM (licensed to
Monahans, Texas) (collectively the "Stations").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding capital stock of the Company in return for Cash.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Purchase and Sale of Target Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from each of the Sellers, and each
of the Sellers agrees to sell to the Buyer, all of his or her Company Shares for
the consideration specified below in this Section 1.
(b) Purchase Price. The Buyer agrees to pay to the Sellers, as
consideration for all of the outstanding Company Shares, the Purchase Price (the
"Purchase Price") described in Schedule A to this Agreement, and agrees to make
the escrow deposit ("Escrow Deposit") in the form and manner described in
Schedule A and more particularly in the earnest money escrow agreement ("Earnest
Money Escrow Agreement") attached hereto as Exhibit A. The Purchase Price shall
be allocated among the Sellers in proportion to their respective holdings of
Company Shares as set forth in Section 2(e) of the Disclosure Schedule.
(c) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at a mutually agreeable
location, commencing at 9:00 a.m. local time on the date set by the Buyer not
earlier than the fifth business day or later than the tenth business day after
the FCC approval of the Transfer Application becomes a Final Order, by which
date all other conditions to the obligations of the Parties to consummate the
transactions contemplated hereby will
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have been satisfied or waived, or such other date as the Parties may mutually
determine which shall in no event be earlier than December 31, 1997 (the
"Closing Date").
(d) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6(a) below, (ii) the Buyer will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 6(b)
below, (iii) each of the Sellers will deliver to the Buyer stock certificates
representing all of his, her or its Company Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (iv) the Buyer will
deliver to each of the Sellers the consideration specified in Section 1(b)
above.
(e) Noncompetition Agreement. On the Closing Date the Company shall
cause Tommy R. Vascocu to execute a Noncompetition Agreement with the Buyer in
the form attached hereto as Exhibit B, which shall include a covenant not to
compete with the Buyer in the markets served by the Stations. In addition to the
Purchase Price, an amount equal to Five Hundred Thousand and no/100 Dollars
($500,000.00) shall be paid to Tommy R. Vascocu as consideration for the
agreements set forth in the Noncompetition Agreement, under the terms and
conditions set forth in that Agreement.
(f) Retainage Agreement. Concurrent with the execution of this
Agreement, the Sellers and Buyer shall execute the Retainage Agreement in the
form attached hereto as Exhibit C, which shall provide for the retention of a
portion of the Purchase Price by the Retainage Agent under the terms and
conditions set forth in that Agreement.
(g) Local Marketing Agreement. Concurrent with the execution of this
Agreement, the Seller and Buyer shall execute the Local Marketing Agreement (the
"Local Marketing Agreement") which includes the terms and conditions pursuant to
which the Buyer will purchase the airtime on the Stations. The accounts
receivable of the Station in existence as of the effective date of the Local
Marketing Agreement shall be collected pursuant to the terms and conditions of
the Local Marketing Agreement.
2. Representations and Warranties of the Sellers. Each of the
Sellers represents and warrants to the Buyer that the statements contained in
this Section 2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 2) with respect to himself, herself or itself, except as
set forth in Disclosure Schedule accompanying this Agreement and initialed by
the Parties (the "Disclosure Schedule") corresponding to the lettered and
numbered sections of this Section 2.
(a) Authorization of Transaction. Each Seller has full power and
authority to execute and deliver this Agreement and to perform his or her
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of each Seller, enforceable in accordance with its terms and
conditions. No Seller need give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order to
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consummate the transactions contemplated by this Agreement, other than Transfer
Assignment Applications described in Section 5(b).
(b) Noncontravention. Neither the execution and the delivery of this
Agreement, nor (assuming the receipt of all necessary regulatory approvals) the
consummation of the transactions contemplated hereby, or the performance of his
or her obligations hereunder, will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court to which any Seller is subject,
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or other
arrangement to which any Seller is a party or by which he, she or it is bound or
to which any of his, her or its assets is subject.
(c) Brokers' Fees. Other than Eighty Thousand and no/100 Dollars
($80,000.00) (40%) payable by the Sellers to Montcalm Media Brokerage, no Seller
has any Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transac tions contemplated by this
Agreement for which the Buyer could become liable or obligated.
(d) Company Shares. Each Seller holds of record and owns
beneficially the number of Company Shares set forth next to his or its name in
Section 2(d) of the Disclosure Schedule, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), claims, Taxes, Security Interests, options, warrants, rights,
contracts, calls, commitments, equities, and demands. No Seller is a party to
any option, warrant, right, contract, call, put, or other agreement or
commitment providing for the disposition or acquisition of any capital stock of
the Company (other than this Agreement). No Seller is a party to any voting
trust, proxy, or other agreement or understanding with respect to the voting of
any capital stock of the Company.
3. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Sellers that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Illinois.
(b) Authorization of Transaction. The Buyer has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Buyer, enforceable in accordance with its terms and conditions.
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(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor (assuming the receipt of all necessary regulatory approvals) the
consummation of the transactions contemplated hereby (including the assignments
and assumptions referred to in Section 1 above), will (i) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge, or
other restriction of any government, governmental agency, or court to which the
Buyer is subject or any provision of the charter or bylaws of the Buyer or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other arrangement to
which the Buyer is a party or by which it is bound or to which any of its assets
are subject. Other than with respect to the Transfer Application, the Buyer does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) Brokers' Fees. Other than One Hundred Twenty Thousand and no/100
Dollars ($120,000.00) payable by the Buyer to Montcalm Media Brokerage, the
Buyer has no Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which the Sellers could become liable or obligated.
4. Representations and Warranties Concerning the Company. The
Sellers represent and warrant to the Buyer that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date, except as set forth in the
Disclosure Schedule.
(a) Organization, Qualification, and Corporate Power. The Company is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction in
which the nature of its businesses or the ownership or leasing of its properties
requires such qualification. The Company has full corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. Section 4(a) of the Disclosure Schedule lists
the directors and officers of the Company. The Sellers have delivered to the
Buyer correct and complete copies of the charter and bylaws of the Company (as
amended to date). The minute books containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors, the stock certificate books, and the stock record books of the
Company are correct and complete. The Company is not in default under or in
violation of any provision of its charter or bylaws. The Company does not have
any Subsidiaries and does not control directly or indirectly or have any direct
or indirect equity participation in any corporation, partnership, trust, or
other business associ ation which is not a Subsidiary of the Company.
(b) Capitalization. The entire authorized capital stock of the
Company consists of One Million (1,000,000) Company Shares, of which Five
Hundred Sixty Thousand (560,000) Company Shares are issued and outstanding and
Four Hundred Forty-Thousand (440,000) Company Shares are held in treasury. All
of the issued and outstanding Company Shares have been duly
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authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the respective Sellers as set forth in Section 2(d) of the Disclosure
Schedule. There are no outstanding or authorized options, warrants, rights,
contracts, calls, puts, rights to subscribe, conversion rights, or other
agreements or commitments to which the Company is a party or which are binding
upon the Company providing for the issuance, disposition, or acquisition of any
of its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, or similar rights with respect to the Company. There are no
voting trusts, proxies, or any other agreements or understandings with respect
to the voting of the capital stock of the Company.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor (assuming receipt of all necessary regulatory approvals) the
consummation of the transactions contemplated hereby, will (i) violate any
statute, regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or court to
which the Company is subject or any provision of the charter or bylaws of the
Company or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which the Company is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to the
Transfer Application, the Company need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(d) Financial Statements. The following financial statements have
been provided to Buyer and are included in Section 4(d) of the Disclosure
Schedules (collectively the "Financial Statements"): (i) audited and/or reviewed
balance sheets and statements of income, changes in stockholders' equity, and
cash flow as of and for the fiscal years ended December 31, 1993; December 31,
1994; December 31, 1995; and December 31, 1996 (the "Most Recent Fiscal Year
End"), for the Company; and (ii) unaudited statements of income and Cash flow,
as of and for each month during 1996 and 1997 (through September) for the
Company. The Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby, are
correct and complete, and are consistent with the books and records of the
Company (which books and records are correct and complete). Without limiting the
generality of the foregoing, all material revenues and expenses of the Company
(A) are properly reflected in the Financial Statements, (B) have arisen in the
Ordinary Course of Business, (C) are valid and subject to no counter-claims, and
(D) will be or has been collected or paid at their recorded amounts subject only
to the reserve for bad debts set forth on the face of the Most Recent Balance
Sheets.
(e) Subsequent Events. Since December 1, 1997, except as set forth
in Section 4(e) of the Disclosure Schedule:
(i) the Company has not sold, leased, transferred, or assigned
any of its material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
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(ii) the Company has not entered into any contract, lease,
sublease, license, or sublicense (or series of related contracts, leases,
subleases, licenses, and sublicenses) outside the Ordinary Course of
Business;
(iii) no party has accelerated, terminated, modified, or
cancelled any contract, lease, sublease, license, or sublicense (or series
of related contracts, leases, subleases, licenses, and sublicenses)
involving more than $5,000 to which the Company is a party or by which it
is bound;
(iv) no Security Interest has been imposed upon any of the
Company's assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of
Business;
(vi) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of any other
person (or series of related capital investments, loans, and acquisitions)
outside the Ordinary Course of Business;
(vii) the Company has not created, incurred, assumed, or
guaranteed any indebtedness (including capitalized lease obligations)
outside the Ordinary Course of Business;
(viii) the Company has not delayed or postponed (beyond its
normal practice) the payment of accounts payable and other Liabilities;
(ix) the Company has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims)
outside the Ordinary Course of Business;
(x) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(xi) the Company has not experienced any action adversely
affecting the FCC Licenses;
(xii) 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 giving rise to any claim or right
on its part against the person or on the part of the person against it;
(xiii) outside the Ordinary Course of Business, the Company
has not terminated or entered into any employment arrangement, employment
contract, consulting
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contract or severance agreement or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement;
(xiv) the Company has not granted any increase outside the
Ordinary Course of Business in the base compensation of any of its
directors, officers, and employees;
(xv) the Company has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E) retirement,
(F) medical, hospitalization, life, or other insurance, (G) severance, or
(H) other plan, contract, or commitment for any of its directors,
officers, and employees, or modified or terminated any existing such plan,
contract, or commitment;
(xvi) outside the Ordinary Course of Business, the Company has
not made any other change in employment terms for any of its directors,
officers, and employees;
(xvii) the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xviii) the Company has not materially altered its credit and
collection policies or its accounting policies;
(xix) the Company has not materially altered the programming,
format or call letters of the Stations or their promotional and marketing
activities, nor has the Company terminated or received notice of
termination for any syndicated programming;
(xx) the Company has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in material
compliance therewith and with all FCC rules and regulations;
(xxi) there has been no change made or authorized in the
charter or bylaws of the Company;
(xxii) 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 or exercise) any
of its capital stock;
(xxiii) the Company has not declared, set aside, or paid any
dividend, distribution, or bonus with respect to its capital stock or
redeemed, purchased, or otherwise acquired any of its capital stock, other
than the December 1997 distribution not to exceed $200,000; and
(xxiv) the Company has not committed to any of the foregoing.
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(f) Undisclosed Liabilities. As of the Closing, the Company has no
undischarged Liability (and there is no Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or demand
against any of them giving rise to any Liability), except for (i) Liabilities
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (ii) Liabilities which have arisen after the Most Recent Fiscal
Year End in the Ordinary Course of Business (none of which relates to any breach
of contract, breach of warranty, tort, infringement, or violation of law or
arose out of any charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand).
(g) Tax Matters.
(i) The Company has filed all Tax Returns and returns that it
was required to file or may be required to file. All such Tax Returns that
were filed were correct and complete in all respects, and all such Tax
Returns that will be filed will be correct and complete in all respects.
All Taxes owed by the Company have been paid. The Company is not currently
a party to a pending Tax audit, aware of a threatened Tax audit, or the
beneficiary of any extension of time within which to file any Tax Return.
No claim has ever been made by an authority in a jurisdiction where the
Company does not file reports and returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any of
the assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, creditor, independent contractor, or other third party.
(iii) No Seller or director or officer (or employee
responsible for Tax matters) of the Company has Knowledge that any
authority has or will seek to assess any additional Taxes for any period
for which returns have been filed. There is no dispute or claim concerning
any Tax Liability of the Company either (A) claimed or raised by any
authority in writing or (B) as to which the Company and the directors and
officers (and employees responsible for Tax matters) of the Company has
Knowledge based upon personal contact with any agent of such authority.
The Company has provided to Buyer, and Section 4(g) of the Disclosure
Schedule lists, true and correct copies of all federal, state, local, and
foreign income Tax Returns filed with respect to the Company for taxable
periods ended on or after January 1, 1992, and all examination reports,
and statements of deficiencies assessed against or agreed to by the
Company since January 1, 1993. No such return has been the subject of
audit. The Company has delivered to the Buyer correct and complete copies
of all federal income Tax Returns.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Company is not a party to any Tax allocation or
sharing agreement. The Company has not ever been (or has any Liability for
unpaid Taxes because it once was)
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a member of an Affiliated Group during any part of any consolidated return
year within any part of a consolidated return year.
(vi) Section 4(g) of the Disclosure Schedule sets forth the
following information with respect the Company as of the most recent
practicable date: (A) the basis of the Company in its assets; (B) the
amount of any net operating loss, net capital loss, unused investment or
other credit, unused foreign tax, or excess charitable contribution
allocable to the Company; and (C) the amount of any deferred gain or loss
allocable to the Company arising out of any Deferred Intercompany
Transaction.
(vii) The unpaid Taxes of the Company do not exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth on the face of the Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company in
filing its Tax Returns.
(h) Tangible Assets. Section 4(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Stations. The Company owns or leases all tangible assets necessary for the
conduct of the operation and business of the Stations as presently conducted and
as presently proposed to be conducted. Each such tangible asset is free from
defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is used.
To the Knowledge of Sellers and the Company, no such tangible asset is in need
of replacement.
(i) Owned Real Property. Section 4(i) of the Disclosure Schedule
lists and describes briefly all real property that the Company owns. With
respect to each such parcel of owned real property:
(i) the Company has good and marketable title to the parcel of
real property, free and clear of any Security Interest, easement,
covenant, or other restriction, (including but not limited to leases or
other agreements granting to any party the right of use or occupancy of
and options or rights of first refusal to purchase) except for recorded
easements, covenants, and other restrictions which do not impair the
current use, occupancy, or value, or the marketability of title, of the
property subject thereto;
(ii) there are no (A) pending or, to the Knowledge of the
Sellers and the Company, threatened condemnation proceedings relating to
the property; (B) pending or, to the Knowledge of the Sellers and the
Company, threatened litigation or administrative actions relating to the
property; or (C) other matters affecting occupancy, or value thereof;
(iii) the legal description for the parcel contained in the
deed thereof describes such parcel fully and adequately, the buildings,
towers, antennae and improvements are located within the boundary lines of
the described parcels of land, are not
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in violation of applicable setback requirements, zoning laws, and
ordinances (and none of the properties or buildings or improvements
thereon are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), and do not encroach on any
easement which may burden the land, the land does not serve any adjoining
property for any purpose inconsistent with the use of the land, the
property is not subject to any restriction for which any permits or
licenses necessary to the use thereof have not been obtained, and access
to the property is provided by public right-of-way;
(iv) all facilities have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been operated
and maintained in accordance with applicable laws, rules, and regulations;
(v) there are no parties (other than the Seller) in possession
of the parcel of real property, other than tenants under any leases
disclosed in Section 4(j) of the Disclosure Schedule who are in possession
of space to which they are entitled, no leases, subleases or other
agreements granting to any party any right of use or occupancy or option
or right of refusal with respect to any parcel of real property;
(vi) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of
such facilities, including electricity and telephone, all of which
services are adequate in accordance with all applicable laws, ordinances,
rules, and regulations and are provided via public or private roads or via
permanent, irrevocable, appurtenant easements benefitting the parcel of
real property; and
(vii) each parcel of real property abuts on and has direct
vehicular access to a public road or access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of
real property.
(j) Real Property Leases. Section 4(j) of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to the
Company. Section 4(j) of the Disclosure Schedule also identifies the leased or
subleased properties for which title insurance policies are to be procured in
accordance with Section 6(i) below. The Company has delivered to the Buyer
correct and complete copies of the leases and subleases listed in Section 4(j)
of the Disclosure Schedule (as amended to date). With respect to each lease and
sublease listed in Section 4(j) of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing, will
continue to be, legal, valid, binding, enforceable, and in full force and
effect;
(ii) no party to the lease or sublease is in breach or default
(or has repudiated any provision thereof), and no event has occurred
which, with notice or lapse of time, would constitute a breach or default
or permit termination, modification, or acceleration thereunder;
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(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above are true and
correct with respect to the underlying lease;
(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vi) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses,
permits and zoning approvals) required in connection with the operation
thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations;
(vii) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of
said facilities; and
(viii) to the Knowledge of Sellers and the Company, the owner
of the facility leased or subleased has good and marketable title to the
parcel of real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for recorded easements,
covenants, and other restrictions impair the current use, occupancy, or
value, or the marketability of title, of the property subject thereto.
(k) Intellectual Property. The Company owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Company as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Company immediately prior to the
Closing hereunder is set forth on Section (k) of the Disclosure Schedule and
each item listed will be owned or available for use by the Buyer on identical
terms and conditions immediately subsequent to the Closing hereunder. To the
Knowledge of Sellers and the Company, the Company has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and the Company has never
received any charge, complaint, claim, or notice alleging any such interference,
infringement, misappropriation, or violation. To the knowledge of the Sellers
and the Company, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Company.
(l) Contracts. Other than Advertising Contracts, Section 4(l) of the
Disclosure Schedule lists the contracts, agreements, and other written
arrangements to which the Company is a party and either involving payment in
excess of Five Thousand Dollars ($5,000) per year or not entered into in the
Ordinary Course of Business. The Company has delivered to the Buyer a correct
and complete copy of each written arrangement listed in Section 4(l) of the
Disclosure Schedule (as amended to date). With respect to each written
arrangement so listed:
(i) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect;
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(ii) the written arrangement will continue to be legal, valid,
binding, and enforceable and in full force and effect on identical terms
following the Closing;
(iii) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification, or acceleration, under the
written arrangement; and
(iv) no party has repudiated any provision of the written
arrangement.
The written arrangements listed in Section 4(l) of the Disclosure Schedule are
all of the written arrangements necessary for the conduct of the operation and
business of the Stations as presently conducted and proposed to be conducted.
The Company is not a party to any verbal contract, agreement, or other
arrangement which, if reduced to written form, would be required to be listed in
Section 4(l) of the Disclosure Schedule under the terms of this Section 4(l).
(m) FCC Licenses and Compliance with FCC Requirements.
(i) All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Stations as they are now being operated are detailed in
Section 4(m) of the Disclosure Schedule and are in full force and effect,
are unimpaired by any acts or omissions of any Sellers, the Company or the
Company's employees or agents, and are free and clear of any restrictions
which might limit the full operation of the Stations. Except as set forth
in Section 4(m) of the Disclosure Schedule, no condition exists or event
has occurred that permits, or after notice or lapse of time, or both,
would permit, the revocation or termination of any such license, permit,
consent, franchise, or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction or
limitation upon the operation of the Stations as now conducted. Except as
set forth in Section 4(m) of the Disclosure Schedule, the Sellers and the
Company are not aware of any reason why the FCC licenses might not be
renewed in the ordinary course or revoked.
(ii) The Stations are each in compliance with the FCC's policy
on exposure to radio frequency radiation. No renewal of any FCC License
would constitute a major environmental action under the FCC's rules or
policies. Access to the Station's transmission facilities is restricted in
accordance with the policies of the FCC.
(iii) Except as set forth in Section 4(m) of the Disclosure
Schedule, to the best of the Knowledge of the Sellers and the Company, the
Company is not the subject of any FCC or other governmental investigation
or any notice of violation or order, or any material complaint, objection,
petition to deny, or opposition issued by or filed with the FCC or any
other governmental authority in connection with the operation of or
authorization for the Stations, and there are no proceedings (other than
rulemaking proceedings of general applicability) before the FCC or any
other governmental authority that could adversely affect
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any of the FCC Licenses or the authorizations listed in Section 4(m) of
the Disclosure Schedule.
(iv) The Company has filed with the FCC and all other
governmental authorities having jurisdiction over the Stations all
material reports, applications, documents, instruments, and other
information required to be filed, and will continue to make such filings
through the Closing Date.
(n) Insurance. Section 4(n) of the Disclosure Schedule sets forth a
complete and accurate description of all of the Company's insurance coverage.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; and (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing Date.
(o) Litigation. Section 4(o) of the Disclosure Schedule sets forth
each instance in which the Company: (i) is subject to any unsatisfied judgement,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Sellers and the Company, is threatened to be made a party to
any charge, complaint, action, suit, proceeding, hearing, or investigation of or
in any court or quasijudicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 4(o) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Company or the Stations taken as a whole.
The Sellers and the Company have no Knowledge of any Basis for any such charge,
complaint, action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Company.
(p) Employees. Section 4(p) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
Company. To the Knowledge of the Sellers and the Company, no key employee or
group of employees has any plans to terminate employment with the Company. The
Company is not a party to or bound by any collective bargaining agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. The Company has not committed any unfair
labor practice. The Sellers and the Company have no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
(q) Notes and Accounts Receivable. All notes and accounts receivable
of the Company are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are presently current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
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(s) Employee Benefits. Section 4(s) of the Disclosure Schedule lists
all Employee Benefit Plans that the Company maintains or has maintained, or to
which the Company contributes, or has contributed for the benefit of any current
or former employee of the Company. Each Employee Benefit Plan so listed is an
Employee Welfare Benefit Plan and none is an Employee Pension Benefit Plan.
(i) Each Employee Benefit Plan (and each related trust or
insurance contract) complies in form and in operation in all respects with
the applicable requirements of ERISA and the Code.
(ii) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to
each Employee Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Sec. 4980(B) have been met with respect to
each Employee Welfare Benefit Plan. All premiums or other payments for all
periods have been paid with respect to each Employee Welfare Benefit Plan
that is a group health plan within the meaning of the Code Sec.
4980(B)(g)(2) and Section 607 of ERISA.
(iii) There have been no Prohibited Transactions with respect
to any Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any Employee Benefit
Plan.
(iv) No charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand with respect to the administration or the
investment of the assets of any Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of any of the Sellers
and the Company, threatened. None of the Sellers and the Company has any
Knowledge of any Basis for any such charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand.
(v) The Company has delivered to the Buyer correct and
complete copies of (A) the plan documents and summary plan descriptions,
(B) the most recent determination letter received from the Internal
Revenue Service, (C) the most recent Form 5500 Annual Report, and (D) all
related trust agreements, insurance contracts, and other funding
agreements which implement each Employee Benefit Plan.
The Company does not contribute to, has never contributed to, or has never been
required to contribute to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan. The Company has not
incurred, and neither the Sellers nor the Company has any reason to expect that
the Company will incur any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any Employee Pension Benefit Plan
that the Company maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to
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<PAGE>
contribute. The Company does not maintain and has not maintained or contributed,
or been required to contribute to any Employee Pension Benefit Plan or Employee
Welfare Benefit Plan providing health, accident, or life insurance benefits to
former employees, their spouses, or their dependents (other than in accordance
with Code Sec. 4980(B)).
(t) Environment, Health, and Safety.
(i) The Company has complied in all material respects with all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning the environment,
public health and safety, and employee health and safety, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has been filed or commenced against the Company alleging
any failure to comply with any such law or regulation.
(ii) The Company has no Liability (and there is no Basis
related to the past or present operations, and its respective predecessors
for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Sellers giving rise
to any Liability) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Federal Water Pollution Control Act of 1972, the
Clean Air Act of 1970, the Safe Drinking Water Act of 1974, the Toxic
Substances Control Act of 1976, the Refuse Act of 1899, or the Emergency
Planning and Community Right-to-Know Act of 1986 (each as amended), or any
other law (or rule or regulation thereunder) of any federal, state, local,
or foreign government (or agency thereof, concerning release or threatened
release of hazardous substances, public health and safety, or pollution or
protection of the environment, or for damage to any site, location, or
body of water (surface or subsurface) or for illness or personal injury.
(iii) The Company has no Liability (and there is no Basis for
any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Sellers giving rise
to any Liability) under the Occupational Safety and Health Act, as
amended, or any other law (or rule or regulation thereunder) of any
federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal
injury to any employee.
(iv) The Company has obtained and has been in material
compliance with all of the terms and conditions of all permits, licenses,
and other authorizations which are required under, and has complied in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all federal, state, local, and foreign
laws (including rules, regulations, codes, plans, judgments, orders,
decrees, stipulations, injunctions, and charges thereunder) relating to
public health and safety, worker health and safety, and pollution or
protection of the environment, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise
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relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
(v) All properties and equipment used in the business of the
Company have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
(vi) To the Knowledge of Sellers and the Company, no
pollutant, contaminant, or chemical, industrial, hazardous, or toxic
material or waste ever has been buried, stored, spilled, leaked,
discharged, emitted, or released on any real property that the Company
owns or ever has owned or leases or ever has leased. The Sellers have
delivered to the Buyer a complete copy of all environmental claims,
reports, studies, compliance actions or the like of the Company which are
available to the Sellers or the Company with respect to any of the Real
Estate.
(u) Legal Compliance.
(i) The Company has complied in all material respects with all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof), and to the Knowledge of the
Sellers and the Company, no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice has been filed or
commenced against the Company alleging any failure to comply with any such
law or regulation, including those relating to the employment of labor,
employee civil rights, and equal employment opportunities and relating to
antitrust matters.
(ii) The Company has filed in a timely manner all reports,
documents, and other materials it was required to file (and the
information contained therein was correct and complete in all material
respects) under all applicable laws (including rules and regulations
thereunder). The Company has possession of all records and documents it
was required to retain under all applicable laws (including rules and
regulations thereunder).
(v) Certain Business Relationships With the Company and Its
Subsidiaries. Except as described in Section 4(v) of the Disclosure Schedule,
none of the Sellers and their Affiliates has been involved in any business
arrangement or relationship with the Company within the past twelve (12) months,
and none of the Sellers and their Affiliates owns any property or right,
tangible or intangible, which is used in the business of the Company.
(w) Brokers' Fees. Except as provided in Section 2(d) and Section
3(d) above, the Company has no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
(x) Advertising Contracts. Section 4(x) of the Disclosure Schedule
lists those Advertising Contracts covering the twelve-month period ending
November 30, 1997, as shown by a report of the Company's accounts receivable as
of that date. Other than to employees of the
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Company or as disclosed in Section 4(x) of the Disclosure Schedule, no
commission or other form of renumeration is paid by the Company with respect to
Advertising Contracts. No party to any Advertising Contract has indicated to the
Company within the past year that it will stop or decrease the rate of
advertising.
(y) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use commercially reasonable
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set for in Section 6 below).
(b) Transfer Application. Within ten (10) business days after the
execution of this Agreement, the Company and the Buyer shall jointly file with
the FCC an application for transfer or control of the Company, including its FCC
Licenses, permits and authorizations pertaining to the Stations from the Sellers
to the Buyer (the "Transfer Application"). The costs of the FCC filing fees in
connection with the Transfer Application shall be divided equally between the
Sellers and the Buyer. Each Party shall pay their own attorneys' fees. The
Sellers, the Company and the Buyer shall thereafter prosecute the Transfer
Application with all reasonable diligence and otherwise use their commercially
reasonable efforts to obtain the grant of the Transfer Application as
expeditiously as practicable (but neither the Sellers nor the Buyer shall have
any obligation to satisfy complainants or the FCC by taking any steps which
would have material adverse effect upon the Buyer, the Sellers, or the
Stations). If the FCC imposes any condition on any Party to the Transfer
Application, such Party shall use commercially reasonable efforts to comply with
such condition; provided that no such Party shall be required hereunder to
comply with any condition that would have a material adverse effect upon the
Buyer, the Sellers or the Stations. The Sellers and the Buyer shall jointly
oppose any requests for reconsideration or judicial review of FCC approval of
the Transfer Application and shall jointly request from the FCC an extension of
the effective period of FCC approval of the Transfer Application if the Closing
shall not have occurred prior to the expiration of the original effective period
of the FCC Consent. Nothing in this Section 5(b) shall be construed to limit any
Party's right to terminate this Agreement pursuant to Section 10 of this
Agreement.
(c) Notices and Consents. The Sellers will give any notices to third
parties, and the Sellers will cause the Company to use its commercially
reasonable efforts to obtain any third party consents, that the Buyer reasonably
may request in connection with the matters pertaining to the Company or the
Sellers disclosed or required to be disclosed in the Disclosure Schedule. Each
of the Parties will file any notification and report forms and related material
that he, she or it may be required to file Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act, will use his, her or its best efforts to obtain an early
termination of the applicable waiting period, and will make further filings
pursuant thereto
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that may be necessary, proper or advisable. Each of the Parties will take any
additional action that may be necessary, proper, or advisable in connection with
any other notices to, filings with, and authorizations, consents, and approvals
of governments, governmental agencies, and third parties that it may be required
to give, make, or obtain.
(d) Operation of Business. The Sellers will not cause or permit the
Company to engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, the Sellers will not (and will
not direct the Company to) engage in any practice, take any action, embark on
any course of inaction, or enter into any transaction of the sort described in
Section 4(e) above.
(e) Employees. Upon notice to the Sellers, and at mutually agreeable
times, the Company will permit the Buyer to meet with the Company's employees
prior to the Closing Date. Neither the Sellers nor the Company will take any
action to preclude or discourage any of the Company's employees from continuing
employment with the Company.
(f) Advertising Obligations. The Company shall satisfy its air time
obligations under its Advertising Contracts for goods or services ("Barter
Agreements") such that the outstanding aggregate balance owing under all Barter
Agreements as of the Closing Date (taking into account both trade receivables
and trade payables) shall not exceed Five Thousand Dollars ($5,000) worth of air
time. On the Closing Date, the Sellers shall deliver to the Buyer a schedule,
certified by an officer of the Company, reflecting the aggregate outstanding
balances under all Barter Agreements in existence as of the Closing Date.
(g) Operating Statements. The Sellers shall deliver to the Buyer,
for the Buyer's informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Stations with ten (10) days
after each such statement is prepared by or for the Company or the Sellers;
provided, however, that this requirement shall not be in effect during the
period that the Local Marketing Agreement is in effect.
(h) Contracts. The Company will not without the prior written
consent of the Buyer amend, change, or modify any of the contracts listed on
Section 2(1) of the Disclosure Schedule in any material respect. The Company
will not without prior written consent of the Buyer enter into any new contracts
respecting the Stations or their properties, except (i) Advertising Contracts
which comply with the representations and warranties pertaining to such
contracts set forth in Section 2(1) above; (ii) contracts entered into in the
Ordinary Course of Business which are cancelable on not more than thirty (30)
days' notice without penalty or premium; (iii) contracts entered into in the
Ordinary Course of Business each of which does not involve more than Ten
Thousand Dollars ($10,000) or all of which do not involve more than Fifty
Thousand Dollars ($50,000) in the aggregate.
(i) Operation of Stations. The Company shall operate the Stations in
material compliance with the FCC Licenses and the rules and regulations of the
FCC, and the FCC Licenses shall at all times remain in full force and effect.
The Company shall file with the FCC all material
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reports, applications, documents, instruments and other information required to
be filed in connection with the operation of the Stations.
(j) Credit and Receivables. The Company will follow its usual and
customary policies with respect to extending credit for Advertising Contracts
and with respect to collecting accounts receivable arising from such extension
of credit.
(k) Preservation of Business. The Sellers will use best efforts to
cause the Company to keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions,
relationships with lessors, licensers, advertisers, suppliers, customers, and
employees, all of the confidential information and trade secrets of the
Stations, and the FCC Licenses.
(l) Full Access and Consultation. The Sellers will permit and will
cause the Company to permit representatives of the Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Stations, to all premises, properties, books,
records, contracts, Tax records, and documents of or pertaining to the Company
for the purpose, among other things, to review financial statements of the
Company, to verify the accuracy of representations and warranties of the Sellers
and the Company contained in this Agreement, and to prepare for the consummation
of the transactions contemplated by this Agreement. The Sellers will cause the
Company to consult with the Buyer's management with a view to informing the
Buyer's management as to the operations, management and business of the
Stations.
(m) Notice of Developments. The Sellers will give prompt written
notice to the Buyer of any material development affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of the Company. Each Party will give prompt written notice
to the other of any material development affecting the ability of the Parties to
consummate the transactions contemplated by this Agreement. No disclosure by any
Party pursuant to this Section 5(g), however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
(n) Exclusivity. The Sellers will not (and the Sellers will not
cause or permit the Company to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving any of the Sellers; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Sellers will
notify the Buyer immediately if any person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(o) Title Insurance. To the extent required by Buyer's lender, the
Sellers will reasonably cooperate with the Buyer in obtaining with respect to
each parcel of real estate that the Company owns, leases or subleases an owner's
or leasehold owner's policy (as appropriate) issued
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by a title insurer reasonably satisfactory to the Buyer, in an amount equal to
the fair market value of such real property (including all improvements located
thereon), insuring title to such real property in the Buyer as of the Closing
subject only to the title exceptions which do not impair the current use,
occupancy or value or the marketability of title of the property and are
disclosed in Section 4(i) or Section 4(j) of the Disclosure Schedule, together
with such endorsements for zoning, contiguity, public access and extended
coverage and such other endorsements as the Buyer reasonably requests. The
Sellers shall pay the cost of such title policies.
(p) Surveys. To the extent required by Buyer's lender, with respect
to each parcel of real property that the Company owns, leases, or subleases, and
as to which a title insurance policy is to be procured pursuant to Section 5(o)
above, the Sellers will reasonably cooperate with the Buyer in the procurement
in preparation for the Closing a current survey of the real property certified
to the Buyer, prepared by a licensed surveyor and conforming to current expanded
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey shall not
disclose any survey defect or encroachment from or onto the real property which
has not been cured or insured over prior to the Closing. The Buyer shall pay the
costs of such Surveys.
(q) Environmental Assessments. The Sellers will assist the Buyer in
obtaining with respect to each parcel of real estate that the Company owns,
leases or subleases and as to which a title insurance policy is to be procured
pursuant to Section 5(o) above, a current Phase I environmental site assessment
from an environmental consultant or engineer reasonably satisfactory to the
Buyer which shall not disclose or recommend any action with respect to any
condition to be remediated or investigated or any contamination on the site
assessed. The Buyer shall pay the cost of such environmental site assessment.
(r) Control of Stations. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Transfer Application. Between the date of this Agreement and the
Closing Date, the Buyer and its employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Company.
(s) Risk of Loss. The risk of loss, damage, or destruction to any of
the assets of the Company shall remain with the Sellers until the Closing. In
the event of any such loss, damage, or destruction the Sellers will promptly
notify the Buyer of all particulars thereof, stating the cause thereof (if
known) and the extent to which the cost of restoration, replacement and repair
of the assets lost, damaged or destroyed will be reimbursed under any insurance
policy with respect thereto. The Sellers will repair or replace such assets as
soon as possible after loss, damage or destruction thereof and shall use its
best efforts to restore as promptly as possible transmissions as authorized in
the FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Sellers' notice to the Buyer, and the Buyer
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determines that the Sellers' failure to repair or replace, alone or in the
aggregate, would have a material adverse effect on the operation of the
Stations:
(i) the Buyer may elect to terminate this Agreement; or
(ii) the Buyer may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyer, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Sellers'
notice to the Buyer, in which case either Party may terminate this
Agreement; or
(iii) the Buyer may choose to accept the lost, damaged or
destroyed assets in their "then" condition, together with the Seller's
assignment to the Buyer all rights under any insurance claims covering the
loss, damage or destruction and payment over to the Buyer any proceeds
under any such insurance policies, previously received by the Sellers with
respect thereto.
In the event the Closing Date is postponed pursuant to this Section 5(s),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2
and Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Sellers shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
(iii) the Sellers and the Company shall have procured all of
the third party consents specified in Section 5(c) above, all of the title
insurance commitments, and endorsements specified in Section 5(o) above,
and all of the surveys specified in Section 5(p) above; and Sellers shall
have assisted the Buyer in obtaining all the Phase I environmental site
assessments described in Section 5(q) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyer to own,
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operate, or control the Company Shares, the Company or the Stations (and
no such judgment, order, decree, stipulation, injunction, or charge shall
be in effect);
(v) the Sellers shall have delivered to the Buyer a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 6(a)(i)-(iv) is satisfied in all respects;
(vi) the Transfer Applications shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
(vii) the Buyer shall have received from counsel to the
Sellers an opinion with respect to the matters set forth in Exhibit D
attached hereto, addressed to the Buyer and dated as of the Closing Date;
(viii) the relevant parties shall have entered into the
Postclosing Agreement;
(ix) the officers and directors of the Company shall have
tendered written confirmation of their resignation of service by and for
the Company and repaid or satisfied all Liabilities to the Company and all
shall have released the Company of all Liabilities;
(x) the Sellers and the Company shall have paid or obtained
the release of all Liabilities of the Company existing at the Closing Date
including, but not limited to, indebtedness for borrowed money and trade
accounts payable and all Liabilities to the Sellers, but excluding
obligations not yet due and payable under long-term leases and contracts
identified in Section 4(l) of the Disclosure Schedule; and
(xi) all actions in consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
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(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Transfer Applications shall have been approved
by a Final Order of the FCC and the Buyer shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule; and
(vi) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Sellers.
The Sellers may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
7. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing:
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below). At Sellers' request, Buyer shall provide Sellers with
reasonable access to such books and records of the Company as Sellers may
reasonably require to comply with their tax reporting and filing obligations.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investiga tion, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Company, each of the other Parties will cooperate with the
contesting or defending Party and its counsel in the contest or defense, make
available his or its personnel, and provide such testimony and access to its
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost
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and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 8 below).
(c) Transition. None of the Sellers will take any action that
primarily is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of any of the Stations
or the Company from maintaining the same business relationships with the
Stations or the Company after the Closing as it maintained with the Stations or
the Company prior to the Closing. Each of the Sellers will refer all customer
inquiries relating to the business of any of the Stations to the Buyer from and
after the Closing. No Seller and no Affiliate of any Seller will employ or offer
to employ any employee of the Company in the Odessa-Midland, Texas metropolitan
area for a period of two (2) years after the Closing Date, unless such employee
has been terminated by Buyer.
(d) Confidentiality. Each of the Sellers will treat and hold as
confidential such all of the Confidential Information, refrain from using any of
the Confidential Information except in connection with this Agreement, and
deliver promptly to the Buyer or destroy, at the request and option of the
Buyer, all tangible embodiments (and all copies) of the Confidential Information
which are in his or its possession. In the event that any of the Sellers is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, that Company will
notify the Buyer promptly of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the provisions of
this Section 6(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Sellers is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that Company may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Company shall use his or its
best efforts to obtain, at the request of the Buyer, an order or other assurance
that confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
(e) Retainage Adjustment. In the event and to the extent that the
Buyer or the Company may become obligated to pay after the Closing any Liability
of the Company that accrued prior to the Closing, such amount shall be deducted
from the Retainage Deposit pursuant to the terms of the Retainage Agreement.
8. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the
Sellers and the Company contained in Section 4 of this Agreement (other than the
representations and warranties of the Sellers and the Company contained in
Sections 4(a), 4(b), 4(c), 4(g) and 4(x) hereof) shall survive the Closing (even
if the Buyer knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect for the
period of the applicable statute of limitations plus ninety (90) days with
respect to any claim by the Buyer based on a claim or action by a third party
and for a period of two (2) years following Closing with respect
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to any claim by the Buyer not based on a claim or action by a third party. All
of the other representa tions, warranties, and covenants of the Buyer and the
Sellers contained in this Agreement (including the representations and
warranties of the Sellers contained in Sections 2 and of the Company contained
in Sections 4(a), 4(b), 4(c) and 4(g) hereof) shall survive the Closing (even if
the damaged Party knew or had reason to know of any misrepresentation or breach
of warranty or covenant at the time of Closing) and continue in full force and
effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyer. Each of
the Sellers agrees to indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by (i) any breach of any of the
Seller's representations, warranties, and covenants contained in this Agreement
(so long as the particular representation, warranty, or covenant survives the
Closing and the Buyer makes a written claim for indemnification within the
applicable survival period); or (ii) any Liability of the Company existing as of
the Closing; provided, however, that this Section 8(b) shall not apply if Buyer
seeks and obtains specific performance under Section 8(e) below or liquidated
damages under Section 8(f) below.
(c) Indemnification Provisions for the Benefit of the Sellers. The
Buyer agrees to indemnify the Sellers from and against the entirety of any
Adverse Consequences the Sellers may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the breach of any of the Buyer's
representations, warranties, and covenants contained in this Agreement (so long
as the particular representation, warranty, or covenant survives the Closing and
the Sellers make a written claim for indemnification within the applicable
survival period).
(d) Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 8, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party
will defend the Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may
retain separate co-counsel at its sole cost and expense (except that the
Indemnifying Party will be responsible for the fees and expenses of the separate
co-counsel to the extent the Indemnified Party concludes reasonably that the
counsel the Indemnifying Party has selected has a conflict of interest), (iii)
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the matter without the written consent of
the Indemnifying Party (not to be withheld unreasonably), and (iv) the
Indemnifying Party will not consent to the entry of any judgment with respect to
the matter, or enter into any settlement which does not include a provision
whereby the plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, without the written consent of the
Indemnified Party (not to be withheld unreasonably). In the event the
Indemnifying Party does not notify the Indemni fied Party within 15 days after
the Indemnified Party has given notice of the matter that the
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Indemnifying Party is assuming the defense thereof, however, the Indemnified
Party may defend against, or enter into any settlement with respect to, the
matter in any manner it reasonably may deem appropriate.
(e) Specific Performance. Each of the Parties acknowledges and
agrees that the Buyer would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the Buyer shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 11(p) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that notwithstanding the provision in
Section 8(f) with respect to the payment of the transaction fee upon a breach of
a covenant of this Agreement prior to the Closing, money damages would not be an
adequate remedy for a breach of any provision of this Agreement.
(f) Liquidated Damages. The Buyer and the Sellers acknowledge that
in the event that the transactions contemplated by this Agreement are not closed
because of a default by the Sellers, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
the event the transactions contemplated by this Agreement are not consummated
due to a default of this Agreement by the Sellers, then the Buyer shall be
entitled to receive from the Sellers for such default, the sum of One Hundred
Thousand and no/100 Dollars ($100,000.00) as transaction fee without the need
for proof of damages; provided, however, that the Buyer shall retain the option
to seek, pursuant to Section 8(e), and recover in lieu of the transaction fee
described in this Section 8(f), the remedy of specific performance. In the event
that the transactions contemplated by this Agreement are not consummated due to
a default of this Agreement by the Buyer, then the Sellers shall be entitled to
recover from the Buyer for such default, Seven Hundred Fifty Thousand and no/100
Dollars ($750,000.00). Sellers shall pursue the Earnest Money Escrow Deposit
under the terms of the Earnest Money Escrow Agreement as the sole means of
satisfaction of these liquidated damages. The Buyer and Sellers agree to pay
said liquidated damages within ten (10) days of the date that the other Party
obtains final and nonappealable judgment for the same.
(g) Other Indemnification Provisions. The remedies provided in
Sections 8(e) and 8(f) shall be exclusive remedies of the Parties prior to the
Closing for any breach of representation, warranty or covenant. The Buyer shall
have the right to recoup from any amount due to the Sellers any amount due from
the Sellers under this Section 8.
9. Definitions.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
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"Adjusted Accounts Receivable" means the Company's accounts receivable on
the effective date of the Local Marketing Agreement, less any trade payables or
other liabilities not otherwise satisfied by the Company, less amounts which
have not been collected by Buyer despite commercially reasonable efforts as of
the earlier of (i) the Closing Date, or (ii) a date 120 days after the effective
date of the Time Brokerage Agreement.
"Advertising Contract" means any arrangement with any third party under
which the Seller has created, incurred, assumed or guaranteed an obligation to
provide advertising or air time on the Station.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(c) above.
"Closing Date" has the meaning set forth in Section 1(c) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the Preface above.
"Company Share" means any share of the Common Stock of the Company.
"Confidential Information" means any information concerning the businesses
and affairs of the Company.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other items itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Agreement.
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"Earnest Money Deposit" has the meaning set forth in Section 1(b) above.
"Earnest Money Escrow Agent" means Bank One Arizona.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(b)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Entity" means a corporation, limited liability company, partnership,
limited partnership, limited liability partnership or other entity recognized by
any jurisdiction within the United States.
"ERISA" means the Employee Retirement Income Security Act of 1974 as
amended.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 4(d) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 8(d) above.
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"Indemnifying Party" has the meaning set forth in Section 8(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
market and other research information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing, and
business data, pricing and cost information, business and marketing plans, and
customer and supplier lists and information), (g) other proprietary rights, and
(b) copies and tangible embodiments thereof (in whatever form or medium).
"Joint and Several" has the meaning set forth in Section 10(o) below.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Sellers and the
Company with respect to the operations of the Stations and all applications
therefor, together with any renewals, extension or modifications thereof and
additions thereto.
"Local Marketing Agreement" has the meaning set forth in Section 1(f)
above.
"Most Recent Balance Sheet" means the balance sheet of the Company as of
the Most Recent Fiscal Year End.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(d)
above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Process Agent" has the meaning set forth in Section 11(p) below.
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"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(b) above.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Requisite Sellers" means holders of a majority of the Company Shares.
"Retainage Deposit" has the meaning set forth in Section 1(b) above.
"Retainage Agent" means Bank One Arizona.
"Retainage Agreement" has the meaning set forth in Section 1 above.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Sellers" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
KBAT-FM (licensed to Midland, Texas); KMND-AM (licensed to Midland, Texas);
KODM-FM (licensed to Odessa, Texas); KNFM-FM (licensed to Midland, Texas); and
KGEE-FM (licensed to Monahans, Texas).
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 5(j) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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"Transfer Application" has the meaning set forth in Section 5(b) above.
"Working Capital" means the current assets (net of reserves) less the
current Liabilities determined in accordance with GAAP.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing in the event the
Sellers are in breach, and the Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing in the
event the Buyer is in breach, of any material representation, warranty, or
covenant contained in this Agreement in any material respect in each case
if such breach remains uncured for twenty (20) days after notice of breach
is received from the other party;
(iii) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing if the Closing
shall not have occurred on or before the 270th day following the date of
this Agreement by reason of the failure of any condition precedent under
Section 7(a) hereof (unless the failure results primarily from the Buyer
breaching any representation, warranty, or covenant contained in this
Agreement);
(iv) the Sellers may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing if the
Closing shall not have occurred on or before the 270th day following the
date of this Agreement by reason of the failure of any condition precedent
under Section 7(b) hereof (unless the failure results primarily from the
Sellers breaching any representation, warranty, or covenant contained in
this Agreement); or
(v) the Buyer or the Sellers may terminate this Agreement if
any Transfer Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
11. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants
of the Parties contained in this Agreement shall survive the Closing hereunder
as and to the extent provided in Section 8(a).
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(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case, except as to public notices
required by FCC rules, the disclosing Party will advise the other Party prior to
making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(d) Section 338 Election. In the event that Buyer seeks to make an
election to treat the acquisition of Company Shares under this Agreement as an
asset purchase under Section 338 of the Code, Buyer and Sellers agree to
negotiate in good faith mutually acceptable terms for such an election, which
shall include no tax liability to the Sellers.
(e) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
(f) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that the Buyer may assign all right, title
and interest in, to and under this Agreement to one or more Affiliates of Buyer.
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(h) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers:
Tommy R. Vascocu and Elizabeth L. Young
2513 Seaboard
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<PAGE>
Midland, Texas 79705
Michael Owens
9837 E. Mariposa Grande
Scottsdale, Arizona 85255
Alan Owens
5035 N. Tenth Place
Number 108
Phoenix, Arizona 85014
Robert Podolsky
9380 N. 96th Place
Scottsdale, Arizona 85258
Larry Daniels
2019 E. Woodman Drive
Tempe, Arizona 85253
Sonja Erskine and Jeffrey D. Erskine
26031 N. Palomino Tr.
Scottsdale, Arizona 85255
Copy to: Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
Attn: Nathaniel F. Emmons
If to the Buyer: Cumulus Holdings, Inc.
Cumulus Broadcasting, Inc.
c/o QUAESTUS Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Copy to: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
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<PAGE>
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(j) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Texas.
(k) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(l) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(m) Expenses. The Buyer and the Sellers, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 5(b) with regard to the Transfer Application. The Sellers will
pay all income taxes, transfer taxes and other recording or similar fees
necessary to vest title to the Company Shares in the Buyer. The Sellers agree
that the Company has not borne or will bear any of the Sellers' costs and
expenses (including any of their legal fees and expenses) in connection with
this Agreement or any of the transactions contemplated hereby.
(n) Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
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requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(o) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(p) The Sellers. When the Sellers make a representation, warranty,
or covenant herein, then that representation, warranty, or covenant will be
referred to herein as the "Joint and Several" obligation of the Sellers. This
means that each Seller will be responsible for the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out of, relating to,
in the nature of, or caused by any breach thereof.
(q) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Odessa/Midland, Texas in
any action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court, and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Any Party may
make service on the other Party by sending or delivering a copy of the process
(i) to the Party to be served at the address and in the manner provided for the
giving of notices in Section 10(h) above. Nothing in this Section 10(p),
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law. Each Party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS HOLDINGS, INC.
By:
-----------------------------
Title:
---------------------------
"Buyer"
---------------------------------
Tommy R. Vascocu
---------------------------------
Elizabeth L. Young
---------------------------------
Michael L. Owens
---------------------------------
Alan Owens
---------------------------------
Robert Podolsky
---------------------------------
Larry Daniels
---------------------------------
Sonja Erskine
---------------------------------
Jeffrey D. Erskine
"Sellers"
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SCHEDULE A
Purchase Price. The Buyer agrees to pay to the Sellers the Purchase Price
(the "Purchase Price") payable as follows:
(i) on the date of this Agreement, the Buyer will deposit with
the Earnest Money Escrow Agent the amount of Seven Hundred Fifty Thousand
Dollars and no/100 Dollars ($750,000.00) (the "Earnest Money Deposit") in
the form of an irrevocable letter of credit of NationsBank in favor of the
Escrow Agent, in the form attached as Exhibit A-1;
(ii) on the Closing Date, the Buyer shall deposit with the
Retainage Agent the amount of Five Hundred Thousand and no/100 Dollars
($500,000.00) (the "Retainage Deposit") in Cash by wire transfer or
delivery of other immediately available funds, which shall be placed in an
interest-bearing account and shall be released in full to Sellers on the
first anniversary of the Closing Date if Buyer has submitted no notice of
a claim for indemnification under Section 8 of this Agreement; and
(iii) on the Closing Date, the Buyer shall pay to the Sellers
the amount of Thirteen Million and no/100 Dollars ($13,000,000.00), less
an amount equal to the total of the Company's long-term debt and other
liabilities except the lease obligations described in Section 4(j) of the
Disclosure Schedule; and
(iv) on the Closing Date, the Buyer shall pay to the Sellers
an amount equal to the Company's Cash at Closing plus the Adjusted
Accounts Receivable, with prorated adjustments as customary for the
Company's prepaid expenses and deposits.
The Earnest Money Deposit referenced in this Section 1(i) shall be placed in
escrow with the Earnest Money Escrow Agent pursuant to an escrow agreement in
the form attached hereto as Exhibit A (the "Earnest Money Escrow Agreement").
Under the terms and conditions of that Agreement, if the Closing does not take
place because the Buyer has breached this Agreement, the letter of credit shall
be paid to the Sellers, and if the Closing does not occur because the Sellers
have breached this Agreement, the letter of credit shall be cancelled and
returned to the issuer.
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<PAGE>
STOCK PURCHASE AGREEMENT
AMONG
CUMULUS HOLDINGS, INC.
AND
JOHN M. BORDERS, DON L. TURNER,
JERRY GOOS, AND KAN-D LAND, INC.
February 17, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Target Shares.........................................1
(a) Basic Transaction...................................................1
(b) Purchase Price......................................................1
(c) The Closing.........................................................2
(d) Deliveries at the Closing...........................................2
(e) Noncompetition Agreement............................................2
(f) Retainage Agreement.................................................2
2. Representations and Warranties of the Sellers..............................2
(a) Authorization of Transaction........................................2
(b) Noncontravention....................................................3
(c) Brokers' Fees.......................................................3
(d) Company Shares......................................................3
3. Representations and Warranties of the Buyer................................3
(a) Organization of the Buyer...........................................3
(b) Authorization of Transaction........................................3
(c) Noncontravention....................................................4
(d) Brokers' Fees.......................................................4
(e) Consents............................................................4
(f) Full Disclosure ....................................................4
4. Representations and Warranties Concerning the Company......................4
(a) Organization, Qualification, and Corporate Power....................5
(b) Capitalization......................................................5
(c) Noncontravention....................................................5
(d) Financial Statements................................................6
(e) Subsequent Events...................................................6
(f) Undisclosed Liabilities.............................................8
(g) Tax Matters.........................................................8
(h) Tangible Assets.....................................................9
(i) Owned Real Property................................................10
(j) Intellectual Property..............................................11
(k) Contracts..........................................................11
(l) FCC Licenses and Compliance with FCC Requirements..................12
(m) Insurance..........................................................12
(n) Litigation.........................................................13
(o) Employees..........................................................13
(p) Notes and Accounts ReceivableEmployees.............................13
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(q) Powers of Attorney.................................................13
(r) Employee Benefits..................................................13
(s) Environment, Health, and Safety....................................14
(t) Legal Compliance...................................................16
(u) Certain Business Relationships With the
Company and Its Subsidiaries......................................16
(v) Brokers' Fees......................................................16
(w) Advertising Contracts..............................................16
(x) Disclosure.........................................................17
5. Pre-Closing Covenants.....................................................17
(a) General............................................................17
(b) Transfer Applications..............................................17
(c) Notices and Consents...............................................17
(d) Operation of Business..............................................18
(e) Employees..........................................................18
(f) Advertising Obligations............................................18
(g) Operating Statements...............................................18
(h) Contracts..........................................................18
(i) Operation of Stations..............................................18
(j) Credit and Receivables.............................................19
(k) Preservation of Business...........................................19
(l) Full Access and Consultation.......................................19
(m) Notice of Developments.............................................19
(n) Exclusivity........................................................19
(o) Title Insurance....................................................19
(p) Surveys............................................................20
(q) Environmental Assessments..........................................20
(r) Control of Stations................................................20
(s) Risk of Loss.......................................................20
(t) Pre Closing Distributions..........................................21
(u) Right to Cure......................................................21
6. Conditions to Obligation to Close.........................................21
(a) Conditions to Obligation of the Buyer..............................21
(b) Conditions to Obligation of the Sellers............................23
7. Post-Closing Covenants....................................................24
(a) General............................................................24
(b) Litigation Support.................................................24
(c) Transition.........................................................24
(d) Confidentiality....................................................24
(e) Retainage Adjustment...............................................25
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<PAGE>
8. Remedies for Breaches of this Agreement...................................25
(a) Survival...........................................................25
(b) Indemnification Provisions for the Benefit of the Buyer ...........25
(c) Indemnification Provisions for the Benefit of the Sellers .........25
(d) Matters Involving Third Parties....................................26
(e) Specific Performance...............................................26
(f) Liquidated Damages.................................................27
(g) Other Indemnification Provisions...................................27
9. Definitions...............................................................27
10. Termination...............................................................31
(a) Termination of Agreement...........................................31
(b) Effect of Termination..............................................32
11. Miscellaneous.............................................................32
(a) Survival...........................................................32
(b) Press Releases and Announcements...................................32
(c) No Third Party Beneficiaries.......................................32
(d) Entire Agreement...................................................32
(e) Succession and Assignment..........................................33
(f) Counterparts.......................................................33
(g) Headings...........................................................33
(h) Notices............................................................33
(i) Governing Law......................................................34
(j) Amendments and Waivers.............................................34
(k) Severability.......................................................35
(l) Expenses...........................................................35
(m) Construction.......................................................35
(n) Incorporation of Exhibits and Schedules............................35
(o) Submission to Jurisdiction.........................................35
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EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit A-1--Form of Letter of Credit
Exhibit B--Form of Noncompetition Agreement
Exhibit C--Form of Retainage Agreement
Exhibits D, D-1, D-2--Form of Opinion of Counsel to the Seller
DISCLOSURE SCHEDULE
Description Section Reference
- ----------- -----------------
Company Shares 2(d)
Directors, Officers, and Subsidiaries 4(a)
Financial Statements 4(d)
Subsequent Events 4(e)
Tax Matters 4(g)
Tangible Assets 4(h)
Owned Real Property 4(i)
Intellectual Property 4(j)
Contracts 4(k)
FCC Licenses 4(l)
Insurance 4(m)
Litigation 4(n)
Employees 4(o)
Environmental 4(s)
Business Relationships 4(v)
Advertising Contracts 4(w)
Notices and Consents 5(c)
Assets to be Distributed Prior to Closing 5(t)
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<PAGE>
STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") entered into as of February 17, 1998,
by and among Cumulus Holdings, Inc., an Illinois corporation (the "Buyer"); and
John M. Borders, a citizen of Texas; Don L. Turner, a citizen of Texas; Jerry
Goos, a citizen of Louisiana; and Kan-D Land, Inc., a Texas corporation
(collectively the "Sellers"). The Buyer and the Sellers are referred to
collectively herein as the "Parties."
As of the Closing, the Sellers in the aggregate shall own all of the
outstanding capital stock of Louisiana Media Interests, Inc., a Louisiana
corporation (the "Company") which, in turn, owns and operates radio station
KKGB-FM (through its wholly-owned subsidiary KKGB Acquisition, Inc.), licensed
to Sulphur, Louisiana , and KBIU-FM, KXZZ-AM (both owned by the Company's
wholly-owned subsidiary KBIU Acquisition, Inc.), and KYXZ-FM, all licensed to
Lake Charles, Louisiana (collectively the "Stations").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding capital stock of the Company in return for Cash.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Purchase and Sale of Target Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from each of the Sellers, and each
of the Sellers agrees to sell to the Buyer, all of his or its Company Shares for
the consideration specified below in this Section 1.
(b) Purchase Price. The Buyer agrees to pay to the Sellers, as
consideration for all of the outstanding Company Shares, the Purchase Price (the
"Purchase Price") described in Schedule A to this Agreement, and agrees to make
the escrow deposit ("Escrow Deposit") in the form and manner described in
Schedule A and more particularly in the earnest money escrow agreement ("Earnest
Money Escrow Agreement") attached hereto as Exhibit A. The Purchase Price shall
be allocated among the Sellers in proportion to their respective holdings of
Company Shares as set forth in Section 2(d) of the Disclosure Schedule.
(c) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at a mutually agreeable
location, commencing at 9:00 a.m. local time on the date set by the Buyer not
earlier than the fifth business day or later than the tenth business day after
the FCC approval of the Transfer Application becomes a Final Order, by which
date all other conditions to the obligations of the Parties to consummate the
transactions contemplated hereby will
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<PAGE>
have been satisfied or waived, or such other date as the Parties may mutually
determine (the "Closing Date").
(d) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6(a) below, (ii) the Buyer will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 6(b)
below, (iii) each of the Sellers will deliver to the Buyer stock certificates
representing all of his or its Company Shares, endorsed in blank or accompanied
by duly executed assignment documents, and (iv) the Buyer will deliver to each
of the Sellers the consideration specified in Section 1(b) above.
(e) Noncompetition Agreement. On the Closing Date, John M. Borders,
Don L. Turner, and Sunburst Media Management, Inc.("Sunburst") shall execute a
Noncompetition Agreement with the Buyer in the form attached hereto as Exhibit
B, which shall include a covenant not to compete with the Buyer in the markets
served by the Stations. In addition to the Purchase Price, (a) an amount equal
to One Million Dollars ($1,000,000.00) shall be paid to Sunburst at Closing as
consideration for the agreements set forth in the Noncompetition Agreement, or
(b) in the event that as of Closing Buyer or its Affiliates have not entered
into an employment agreement with Jerry Goos, Nine Hundred Thousand Dollars
($900,000.00) shall be paid to Sunburst at Closing as consideration for the
agreements set forth in the Noncompetition Agreement, and One Hundred Thousand
Dollars ($100,000.00) shall be paid to Jerry Goos, subject to the condition that
he also be a party to the Noncompetition Agreement.
(f) Retainage Agreement. On the Closing Date, the Sellers and Buyer
shall execute the Retainage Agreement in the form attached hereto as Exhibit C,
which shall provide for the retention of a portion of the Purchase Price at
Closing by the Retainage Agent under the terms and conditions set forth in that
Agreement.
2. Representations and Warranties of the Sellers. Each of the
Sellers represents and warrants to the Buyer that the statements contained in
this Section 2 are correct and complete, as to such Seller, as of the date of
this Agreement and will be, as to such Seller, correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 2) with
respect to himself or itself, except as set forth in Disclosure Schedule
accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule") corresponding to the lettered and numbered sections of this Section
2.
(a) Authorization of Transaction. Each Seller has full power and
authority to execute and deliver this Agreement and to perform his or its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of each Seller, enforceable in accordance with its terms and
conditions, subject as to enforceability to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of equity
regardless of whether enforcement is sought in a proceeding at law or in equity.
No Seller need give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to
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<PAGE>
consummate the transactions contemplated by this Agreement, other than the
Transfer Application described in Section 5(b).
(b) Noncontravention. Neither the execution and the delivery of this
Agreement, nor (assuming the receipt of all necessary regulatory approvals) the
consummation of the transactions contemplated hereby, or the performance of his
or its obligations hereunder, will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court to which any Seller is subject,
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or other
arrangement to which any Seller is a party or by which he or it is bound or to
which any of his or its assets is subject.
(c) Brokers' Fees. No Seller has any Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(d) Company Shares. Other than as described on Section 2(d) of the
Disclosure Schedule, each Seller holds of record and owns beneficially the
number of Company Shares set forth next to his or its name in Section 2(d) of
the Disclosure Schedule, free and clear of any restrictions on transfer (other
than any restrictions under the Securities Act and state securities laws),
claims, Taxes, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities, and demands. Other than as described on Section 2(d) of
the Disclosure Schedule, no Seller is a party to any option, warrant, right,
contract, call, put, or other agreement or commitment providing for the
disposition or acquisition of any capital stock of the Company (other than this
Agreement). No Seller is a party to any voting trust, proxy, or other agreement
or understanding with respect to the voting of any capital stock of the Company.
3. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Sellers that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Illinois, has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and is duly
qualified and in good standing in each state in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary.
(b) Authorization of Transaction. The Buyer has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Buyer, enforceable in accordance with its
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terms and conditions, subject as to enforceability to appicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and to general principles of
equity regardless of whether enforcement is sought in a proceeding at law or in
equity.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor (assuming the receipt of all necessary regulatory approvals) the
consummation of the transactions contemplated hereby (including the assignments
and assumptions referred to in Section 1 above), will (i) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge, or
other restriction of any government, governmental agency, or court to which the
Buyer is subject or any provision of the charter or bylaws of the Buyer or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other arrangement to
which the Buyer is a party or by which it is bound or to which any of its assets
are subject. Other than with respect to the Transfer Application, the Buyer does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) Brokers' Fees. Other than Three Hundred Fifty-Two Thousand and
no/100 Dollars ($352,000.00) payable by the Buyer to Americom Radio Brokers,
Inc., the Buyer has no Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement for which the Sellers could become liable or obligated.
(e) Consents. Except for the FCC and Buyer's lender, no consent of
any person or governmental entity is required for the performance of Buyer's
obligations hereunder and otherwise for the consummation by Buyer of the
transactions contemplated hereby; provided that the foregoing shall not be
construed or deemed to imply that the Buyer's obligation to close the
transations contemplated hereby is conditioned upon the Buyer's first obtaining
any financing of any nature.
(f) Full Disclosure. None of the representations and warranties made
by Buyer herein or contained in any certificate or other instrument furnished or
to be furnished to Sellers pursuant hereto contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
4. Representations and Warranties Concerning the Company. The
Majority Shareholder represents and warrants to the Buyer that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, with respect
to the Company and the Company Subsidiaries as the context may require, except
as set forth in the Disclosure Schedule.
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<PAGE>
(a) Organization, Qualification, and Corporate Power. The Company
and the Company Subsidiaries are corporations duly organized, validly existing,
and in good standing under the laws of the jurisdiction of their incorporation.
The Company and the Company Subsidiaries are duly authorized to conduct business
and are in good standing under the laws of each jurisdiction in which the nature
of their businesses or the ownership or leasing of their properties requires
such qualification. The Company and the Company Subsidiaries have full corporate
power and authority to carry on the businesses in which they are engaged and to
own and use the properties owned and used by them. Section 4(a) of the
Disclosure Schedule lists the directors and officers of the Company and the
Company Subsidiaries. The Sellers have delivered to the Buyer correct and
complete copies of the charter and bylaws of the Company and Company
Subsidiaries (as amended to date). The minute books containing the records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors, the stock certificate books, and the stock record books of
the Company and Company Subsidiaries are correct and complete. The Company and
Company Subsidiaries are not in default under or in violation of any provision
of its charter or bylaws. Other than as set forth on Section 4(a) of the
Disclosure Schedule, the Company and Company Subsidiaries do not have any
Subsidiaries and do not control directly or indirectly or have any direct or
indirect equity participation in any corporation, partnership, trust, or other
business association which is not a Subsidiary of the Company.
(b) Capitalization. The entire authorized capital stock of the
Company and Company Subsidiaries, the number of shares issued and outstanding,
and the identities of the Shareholders are set forth in Section 2(d) of the
Disclosure Schedule. All of the issued and outstanding Company and Company
Subsidiary Shares have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the respective Sellers as set forth in
Section 2(d) of the Disclosure Schedule. Other than as set forth on Section 4(b)
of the Disclosure Schedule, there are no outstanding or authorized options,
warrants, rights, contracts, calls, puts, rights to subscribe, conversion
rights, or other agreements or commitments to which the Company or the Company
Subsidiaries are a party or which are binding upon the Company or the Company
Subsidiaries providing for the issuance, disposition, or acquisition of any of
its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, or similar rights with respect to the Company or Company
Subsidiaries. There are no voting trusts, proxies, or any other agree ments or
understandings with respect to the voting of the capital stock of the Company or
Company Subsidiaries.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor (assuming receipt of all necessary regulatory approvals) the
consummation of the transactions contemplated hereby, will (i) violate any
statute, regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or court to
which the Company is subject or any provision of the charter or bylaws of the
Company or (ii) other than as set forth in Section 4(c) of the Disclosure
Schedule, conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other arrangement to which the Company is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest
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upon any of its assets). Other than with respect to the Transfer Application,
the Company need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) Financial Statements. The following financial statements have
been provided to Buyer and are included in Section 4(d) of the Disclosure
Schedules (collectively the "Financial Statements"): (i) Balance Sheets and
Statements of Income for the fiscal years ended December 31, 1995 and December
31, 1996 (the "Most Recent Fiscal Year Ends") and (ii) the income statements as
of and for each month during 1996 and 1997 (through November 1997) for the
Company. The Financial Statements have been prepared on an accrual basis applied
consistently throughout the periods covered thereby, are correct and complete in
all material respects, and are consistent with the books and records of the
Company which books and records are materially correct and complete. Without
limiting the generality of the foregoing, all material revenues and expenses of
the Company (A) are properly reflected in the Financial Statements, (B) have
arisen in the Ordinary Course of Business (unless otherwise noted therein), (C)
are valid, and to the knowledge of the Company, are not subject to any
counterclaims and (D) to the Knowledge of the Company will be collected or paid
at their recorded amounts.
(e) Subsequent Events. Since January 1, 1998, except as set forth in
Section 4(e) of the Disclosure Schedule:
(i) the Company has not sold, leased, transferred, or assigned
any of its material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Company has not entered into any contract, lease,
sublease, license, or sublicense (or series of related contracts, leases,
subleases, licenses, and sublicenses) outside the Ordinary Course of
Business;
(iii) no party has accelerated, terminated, modified, or
cancelled any contract, lease, sublease, license, or sublicense (or series
of related contracts, leases, subleases, licenses, and sublicenses)
involving more than $5,000 to which the Company is a party or by which it
is bound;
(iv) no further Security Interest has been imposed upon any of
the Company's assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of
Business;
(vi) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of any other
person (or series of related capital investments, loans, and acquisitions)
outside the Ordinary Course of Business;
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<PAGE>
(vii) the Company has not created, incurred, assumed, or
guaranteed any indebtedness (including capitalized lease obligations)
outside the Ordinary Course of Business;
(viii) the Company has not delayed or postponed (beyond its
normal practice) the payment of accounts payable and other Liabilities;
(ix) the Company has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims)
outside the Ordinary Course of Business;
(x) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(xi) the Company has not experienced any action adversely
affecting the FCC Licenses;
(xii) 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 giving rise to any claim or right
on its part against the person or on the part of the person against it;
(xiii) outside the Ordinary Course of Business, the Company
has not terminated or entered into any employment arrangement, employment
contract, consulting contract or severance agreement or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xiv) the Company has not granted any increase outside the
Ordinary Course of Business in the base compensation of any of its
directors, officers, and employees;
(xv) the Company has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E) retirement,
(F) medical, hospitalization, life, or other insurance, (G) severance, or
(H) other plan, contract, or commitment for any of its directors,
officers, and employees, or modified or terminated any existing such plan,
contract, or commitment;
(xvi) outside the Ordinary Course of Business, the Company has
not made any other change in employment terms for any of its directors,
officers, and employees;
(xvii) the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xviii) the Company has not materially altered its credit and
collection policies or its accounting policies;
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<PAGE>
(xix) the Company has not materially altered the programming,
format or call letters of the Stations or their promotional and marketing
activities, nor has the Company terminated or received notice of
termination for any syndicated programming;
(xx) the Company has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in material
compliance therewith and with all FCC rules and regulations;
(xxi) there has been no change made or authorized in the
charter or bylaws of the Company;
(xxii) 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 or exercise) any
of its capital stock;
(xxiii) the Company has not declared, set aside, or paid any
dividend, distribution, or bonus with respect to its capital stock or
redeemed, purchased, or otherwise acquired any of its capital stock; and
(xxiv) the Company has not committed to any of the foregoing.
(f) Undisclosed Liabilities. As of the Closing, the Company has no
undischarged Liability (and there is no Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or demand
against any of them giving rise to any Liability), except for (i) Liabilities
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (ii) Liabilities which have arisen after the Most Recent Fiscal
Year End in the Ordinary Course of Business (none of which relates to any breach
of contract, breach of warranty, tort, infringement, or violation of law or
arose out of any charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand).
(g) Tax Matters.
(i) The Company has filed all Tax Returns and returns that it
was required to file or may be required to file prior to Closing. All such
Tax Returns that were filed are correct and complete in all respects, and
all such Tax Returns that will be filed, prior to Closing, will be correct
and complete in all respects. All Taxes owed by the Company, as reflected
on Tax Returns, have been paid. The Company is not currently a party to a
pending Tax audit, aware of a threatened Tax audit, or the beneficiary of
any extension of time within which to file any Tax Return. No claim has
ever been made by an authority in a jurisdiction where the Company does
not file reports and returns that it is or may be subject to taxation by
that jurisdiction. There are no Security Interests on any of the assets of
the Company that arose in connection with any failure (or alleged failure)
to pay any Tax.
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<PAGE>
(ii) The Company has withheld and paid (or will pay within the
required time periods prior to Closing) all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party.
(iii) No Seller or director or officer (or employee
responsible for Tax matters) of the Company has Knowledge that any
authority has or will seek to assess any additional Taxes for any period
for which returns have been filed. There is no dispute or claim concerning
any Tax Liability of the Company either (A) claimed or raised by any
authority in writing or (B) as to which the Company and the directors and
officers (and employees responsible for Tax matters) of the Company has
Knowledge based upon personal contact with any agent of such authority.
The Company has provided to Buyer, and Section 4(g) of the Disclosure
Schedule lists, true and correct copies of all federal, state, local, and
foreign income Tax Returns filed with respect to the Company for taxable
periods ended on or after January 1, 1994, and all examination reports,
and statements of deficiencies assessed against or agreed to by the
Company since January 1, 1994. Other than as set forth in Section 4(g) of
the Disclosure Schedule, no such return has been the subject of audit. The
Company has delivered to the Buyer correct and complete copies of all
federal income Tax Returns.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Company is not a party to any Tax allocation or
sharing agreement. The Company has not ever been (or has any Liability for
unpaid Taxes because it once was) a member of an Affiliated Group during
any part of any consolidated return year within any part of a consolidated
return year.
(vi) Section 4(g) of the Disclosure Schedule sets forth the
following information with respect the Company as of the most recent
practicable date: (A) the basis of the Company in its assets; and (B) the
amount of any net operating loss, net capital loss, unused investment or
other credit, unused foreign tax, or excess charitable contribution
allocable to the Company.
(vii) The unpaid Taxes of the Company do not exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth on the face of the Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company in
filing its Tax Returns.
(h) Tangible Assets. Section 4(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Stations. The Company owns or leases all tangible assets necessary for the
conduct of the operation and business of the Stations as presently conducted and
as presently proposed to be conducted. Except as set forth in Section 4(h) of
the Disclosure Schedule, each such tangible asset has been maintained in
accordance with normal industry practice,
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<PAGE>
is in good operating condition and repair (subject to normal wear and tear), and
is suitable for the purposes for which it presently is used. Except as set forth
in Section 4(h) of the Disclosure Schedule, to the Knowledge of the Majority
Shareholder and the Company, no such tangible asset with a replacement cost
(new) in excess of Two Thousand Dollars ($2,000.00) is in need of replacement.
(i) Owned Real Property. Section 4(i) of the Disclosure Schedule
lists and describes briefly all real property that the Company owns. With
respect to each such parcel of owned real property, and except as otherwise
disclosed in Section 4(i) of the Disclosure Schedule:
(i) the Company has good and marketable title to the parcel of
real property, free and clear of any Security Interest, easement,
covenant, or other restriction, (including but not limited to leases or
other agreements granting to any party the right of use or occupancy of
and options or rights of first refusal to purchase) except for recorded
easements, covenants, and other restrictions which do not impair the
current use, occupancy, or value, or the marketability of title, of the
property subject thereto;
(ii) there are no (A) pending or, to the Knowledge of the
Majority Shareholder or the Company, threatened condemnation proceedings
relating to the property; (B) pending or, to the Knowledge of the Sellers
and the Company, threatened litigation or administrative actions relating
to the property; or (C) other matters affecting occupancy, or value
thereof;
(iii) the legal description for the parcel contained in the
deed thereof describes such parcel fully and adequately, the buildings,
towers, antennae and improvements are located within the boundary lines of
the described parcels of land, are not in violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties or
buildings or improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications), and do not
encroach on any easement which may burden the land, the land does not
serve any adjoining property for any purpose inconsistent with the use of
the land, the property is not subject to any restriction for which any
permits or licenses necessary to the use thereof have not been obtained,
and access to the property is provided by public right-of-way;
(iv) all facilities have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been operated
and maintained in accordance with applicable laws, rules, and regulations;
(v) there are no parties (other than the Company and its
Subsidiaries) in possession of the parcel of real property, other than
tenants under any leases disclosed in Section 4(i) of the Disclosure
Schedule who are in possession of space to which they are entitled, no
leases, subleases or other agreements granting to any party any right of
use or occupancy or option or right of refusal with respect to any parcel
of real property;
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<PAGE>
(vi) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of
such facilities, including electricity and telephone, all of which
services are adequate in accordance with all applicable laws, ordinances,
rules, and regulations and are provided via public or private roads or via
permanent, irrevocable, appurtenant easements benefitting the parcel of
real property; and
(vii) each parcel of real property abuts on and has direct
vehicular access to a public road or access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of
real property.
(j) Intellectual Property. The Company owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Company as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Company immediately prior to the
Closing hereunder is set forth on Section 4(j) of the Disclosure Schedule and
each item listed will be owned or available for use by the Buyer on identical
terms and conditions immediately subsequent to the Closing hereunder. To the
Knowledge of the Majority Shareholder and the Company, the Company has not
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and the Company
has never received any charge, complaint, claim, or notice alleging any such
interference, infringement, misappropriation, or violation. To the Knowledge of
the Majority Shareholder and the Company, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.
(k) Contracts. Other than Advertising Contracts, Section 4(k) of the
Disclosure Schedule lists the contracts, agreements, and other written
arrangements to which the Company is a party and either involving payment in
excess of Five Thousand Dollars ($5,000) per year or not entered into in the
Ordinary Course of Business. The Company has delivered to the Buyer a correct
and complete copy of each written arrangement listed in Section 4(k) of the
Disclosure Schedule (as amended to date). With respect to each written
arrangement so listed:
(i) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the written arrangement will continue to be legal, valid,
binding, and enforceable and in full force and effect on identical terms
following the Closing;
(iii) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification, or acceleration, under the
written arrangement; and
(iv) no party has repudiated any material provision of the
written arrangement.
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<PAGE>
The written arrangements listed in Section 4(k) of the Disclosure Schedule are
all of the written arrangements necessary for the conduct of the operation and
business of the Stations as presently conducted. Other than as set forth in
Section 4(k) of the Disclosure Schedule, the Company is not a party to any
verbal contract, agreement, or other arrangement which, if reduced to written
form, would be required to be listed in Section 4(k) of the Disclosure Schedule
under the terms of this Section 4(k).
(l) FCC Licenses and Compliance with FCC Requirements.
(i) All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Staions as they are now being operated are detailed in
Section 4(l) of the Disclosure Schedule and are in full force and effect,
are unimpaired by any acts or omissions of any Sellers, the Company or the
Company's employees or agents, and are free and clear of any restrictions
which might limit the operation of the Stations as they are now being
operated. Except as set forth in Section 4(l) of the Disclosure Schedule,
no condition exists or event has occurred that permits, or after notice or
lapse of time, or both, would permit, the revocation or termination of any
such license, permit, consent, franchise, or authorization (other than
pursuant to their express expiration date) or the imposition of any
material restriction or limitation upon the operation of the Stations as
now conducted. Except as set forth in Section 4(l) of the Disclosure
Schedule, the Sellers and the Company are not aware of any reason why the
FCC licenses might not be renewed in the ordinary course or revoked.
(ii) The Stations are each in compliance with the FCC's policy
on exposure to radio frequency radiation. No renewal of any FCC License
would constitute a major environmental action under the FCC's rules or
policies. Access to the Station's respective transmission facilities is
restricted in accordance with the policies of the FCC.
(iii) Except as set forth in Section 4(l) of the Disclosure
Schedule, the Company is not the subject of any FCC or other governmental
investigation or any notice of violation or order, or any material
complaint, objection, petition to deny, or opposition issued by or filed
with the FCC or any other governmental authority in connection with the
operation of or authorization for the Stations, and there are no
proceedings (other than rulemaking proceedings of general applicability)
before the FCC or any other governmental authority that could adversely
affect any of the FCC Licenses or the authorizations listed in Section
4(l) of the Disclosure Schedule.
(iv) The Company has filed with the FCC and all other
governmental authorities having jurisdiction over the Stations all
material reports, applications, documents, instruments, and other
information required to be filed, and will continue to make such filings
through the Closing Date.
(m) Insurance. Section 4(m) of the Disclosure Schedule sets forth a
complete and accurate description of all of the Company's insurance coverage.
With respect to each such
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insurance policy: (A) the policy is legal, valid, binding, and enforceable and
in full force and effect; and (B) subject to the payment of policy premiums due
after the Closing Date, the policy will continue to be legal, valid, binding,
and enforceable and in full force and effect on identical terms following the
Closing Date.
(n) Litigation. Section 4(n) of the Disclosure Schedule sets forth
each instance in which the Company: (i) is subject to any unsatisfied judgement,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Majority Shareholder and the Company, is threatened to be made
a party to any charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any arbitrator.
None of the charges, complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 4(n) of the Disclosure Schedule could result
in any adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations of the Company or the Stations taken as a
whole. The Majority Shareholder and the Company have no Knowledge of any Basis
for any material charge, complaint, action, suit, proceeding, hearing, or
investigation that may be brought or threatened against the Company or
Subsidiaries.
(o) Employees. Section 4(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
Company or Subsidiaries. To the Knowledge of the Majority Shareholder and the
Company, no key employee or group of employees has any plans to terminate
employment with the Company. The Company is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. The
Company has not committed any unfair labor practice. The Sellers and the Company
have no Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of the
Company.
(p) Notes and Accounts Receivable. All notes and accounts receivable
of the Company are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are presently current and
collectible, and should be collected in accordance with their terms at their
recorded amounts in the Ordinary Course of Business, subject only to the reserve
for bad debts set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Company.
(q) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
(r) Employee Benefits. Section 4(r) of the Disclosure Schedule lists
all Employee Benefit Plans that the Company maintains or has maintained, or to
which the Company contributes, or has contributed for the benefit of any current
or former employee of the Company. Other than as set forth in Section 4(r) of
the Disclosure Schedule, each Employee Benefit Plan so listed is an Employee
Welfare Benefit Plan and none is an Employee Pension Benefit Plan.
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<PAGE>
(i) Each Employee Benefit Plan (and each related trust or
insurance contract) complies in form and in operation in all material
respects with the applicable requirements of ERISA and the Code.
(ii) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to
each Employee Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Sec. 4980(B) have been met with respect to
each Employee Welfare Benefit Plan. All premiums or other payments for all
periods have been paid with respect to each Employee Welfare Benefit Plan
that is a group health plan within the meaning of the Code Sec.
4980(B)(g)(2) and Section 607 of ERISA.
(iii) There have been no Prohibited Transactions with respect
to any Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any Employee Benefit
Plan.
(iv) No charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand with respect to the administration or the
investment of the assets of any Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of the Majority
Shareholder or the Company, threatened. Neither the Majority Shareholder
nor the Company has any Knowledge of any Basis for any such charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand.
(v) The Company has delivered to the Buyer correct and
complete copies of (A) the plan documents and summary plan descriptions,
(B) the most recent determination letter received from the Internal
Revenue Service, (C) the most recent Form 5500 Annual Report, and (D) all
related trust agreements, insurance contracts, and other funding
agreements which implement each Employee Benefit Plan.
The Company does not contribute to, has never contributed to, or has never been
required to contribute to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan. The Company has not
incurred, and neither the Sellers nor the Company has any reason to expect that
the Company will incur any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any Employee Pension Benefit Plan
that the Company maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to contribute. The Company does
not maintain and has not maintained or contributed, or been required to
contribute to any Employee Pension Benefit Plan or Employee Welfare Benefit Plan
providing health, accident, or life insurance benefits to former employees,
their spouses, or their dependents (other than in accordance with Code Sec.
4980(B)).
(s) Environment, Health, and Safety.
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<PAGE>
(i) To the Knowledge of the Majority Shareholder and the
Company, the Company has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof) concerning the environment, public
health and safety, and employee health and safety, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has been filed or commenced against the Company alleging
any failure to comply with any such law or regulation.
(ii) The Company has no Liability (and to the Knowledge of the
Majority Shareholder and the Company, there is no Basis related to the
past or present operations, and its respective predecessors for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Sellers giving rise to any
Liability) under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Resource Conservation and Recovery Act of
1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control
Act of 1976, the Refuse Act of 1899, or the Emergency Planning and
Community Right-to-Know Act of 1986 (each as amended), or any other law
(or rule or regulation thereunder) of any federal, state, local, or
foreign government (or agency thereof, concerning release or threatened
release of hazardous substances, public health and safety, or pollution or
protection of the environment, or for damage to any site, location, or
body of water (surface or subsurface) or for illness or personal injury.
(iii) To the Knowledge of the Majority Shareholder and the
Company, the Company has no Liability (and there is no Basis for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Company giving rise to any
Liability) under the Occupational Safety and Health Act, as amended, or
any other law (or rule or regulation thereunder) of any federal, state,
local, or foreign government (or agency thereof) concerning employee
health and safety, or for any illness of or personal injury to any
employee.
(iv) To the Knowledge of the Majority Shareholder and the
Company, the Company has obtained and has been in material compliance with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which
are contained in, all federal, state, local, and foreign laws (including
rules, regulations, codes, plans, judgments, orders, decrees,
stipulations, injunctions, and charges thereunder) relating to public
health and safety, worker health and safety, and pollution or protection
of the environment, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
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(v) To the Knowledge of the Majority Shareholder and the
Company, except as set forth in Section 4(s) of the Disclosure Schedule,
all properties and equipment used in the business of the Company have been
free of asbestos, PCB's, methylene chloride, trichloroethylene, 1,
2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances.
(vi) To the Knowledge of the Majority Shareholder and the
Company, no pollutant, contaminant, or chemical, industrial, hazardous, or
toxic material or waste ever has been buried, stored, spilled, leaked,
discharged, emitted, or released on any real property that the Company
owns or ever has owned or leases or ever has leased. The Company has
delivered to the Buyer a complete copy of all environmental claims,
reports, studies, compliance actions or the like of the Company which are
available to the Sellers or the Company with respect to any of the Real
Estate.
(t) Legal Compliance.
(i) The Company has complied in all material respects with all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof), and to the Knowledge of the
Majority Shareholder and the Company, no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced against the Company alleging any failure to comply with
any such law or regulation, including those relating to the employment of
labor, employee civil rights, and equal employment opportunities and
relating to antitrust matters.
(ii) The Company has filed in a timely manner all reports,
documents, and other materials it was required to file (and the
information contained therein was correct and complete in all material
respects) under all applicable laws (including rules and regulations
thereunder). The Company has possession of all records and documents it
was required to retain under all applicable laws (including rules and
regulations thereunder).
(u) Certain Business Relationships With the Company and Its
Subsidiaries. Except as described in Section 4(v) of the Disclosure Schedule,
none of the Sellers and their Affiliates has been involved in any business
arrangement or relationship with the Company within the past twelve (12) months,
and none of the Sellers and their Affiliates owns any property or right,
tangible or intangible, which is used in the business of the Company.
(v) Brokers' Fees. Except as may be provided in Section 2(c) and
Section 3(d) above, the Company has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
(w) Advertising Contracts. Section 4(w) of the Disclosure Schedule
lists an accounts receivable aging as of December 31, 1997. Other than to
employees of the Company and local and national advertising agencies and
representatives, no commission or other form of renumeration is paid by the
Company with respect to Advertising Contracts.
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(x) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use commercially reasonable
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set for in Section 6 below).
(b) Transfer Application. Within ten (10) business days after the
execution of this Agreement, the Company and the Buyer shall jointly file with
the FCC an application for transfer or control of the Company, including its FCC
Licenses, permits and authorizations pertaining to the Stations from the Sellers
to the Buyer (the "Transfer Application"). The costs of the FCC filing fees in
connection with the Transfer Application shall be divided equally between the
Company and the Buyer, which expense shall be satisfied by the Company prior to
Closing. Each Party shall pay their own attorneys' fees. The Sellers, the
Company and the Buyer shall thereafter prosecute the Transfer Application with
all reasonable diligence and otherwise use their commercially reasonable efforts
to obtain the grant of the Transfer Application as expeditiously as practicable
(but neither the Sellers nor the Buyer shall have any obligation to satisfy
complainants or the FCC by taking any steps which would have material adverse
effect upon the Buyer, the Sellers, or the Stations). If the FCC imposes any
condition on any Party to the Transfer Application, such Party shall use
commercially reasonable efforts to comply with such condition; provided that no
such Party shall be required hereunder to comply with any condition that would
have a material adverse effect upon such Party or the Stations. The Sellers and
the Buyer shall jointly oppose any requests for reconsideration or judicial
review of FCC approval of the Transfer Application and shall jointly request
from the FCC an extension of the effective period of FCC approval of the
Transfer Application if the Closing shall not have occurred prior to the
expiration of the original effective period of the FCC Consent. Nothing in this
Section 5(b) shall be construed to limit any Party's right to terminate this
Agreement pursuant to Section 10 of this Agreement.
(c) Notices and Consents. The Sellers will give any notices to third
parties, and the Sellers will cause the Company to use its commercially
reasonable efforts to obtain any third party consents set forth in Section 5(c)
of the Disclosure Schedule. Although none of the Parties believe that a filing
is required under the Hart-Scott-Rodino Act, each of the Parties will file any
notification and report forms and related material that he or it may be required
to file Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use his, her or its
best efforts to obtain an early termination of the applicable waiting period,
and will make further filings pursuant thereto that may be necessary, proper or
advisable. Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
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(d) Operation of Business. The Sellers will not cause or permit the
Company to engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, the Sellers will not (and will
not direct the Company to) engage in any practice, take any action, embark on
any course of inaction, or enter into any transaction of the sort described in
Section 4(e) above.
(e) Employees. Upon notice to the Company, and at mutually agreeable
times af ter the FCC grants initial consent to the change of control of the FCC
licenses from Sellers to Buyer, the Company will permit the Buyer to meet with
the Company's employees prior to the Closing Date. Neither the Sellers nor the
Company will take any action to preclude or discourage any of the Company's
employees from continuing employment with the Company.
(f) Advertising Obligations. The Company shall satisfy its air time
obligations under its Advertising Contracts for goods or services ("Barter
Agreements") such that the outstanding aggregate balance owing under all Barter
Agreements as of the Closing Date (taking into account both trade receivables
and trade payables) shall not exceed Twenty-Five Thousand Dollars ($25,000)
worth of air time. On the Closing Date, the Sellers shall deliver to the Buyer a
schedule, certified by an officer of the Company, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
(g) Operating Statements. The Sellers shall deliver to the Buyer,
for the Buyer's informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Stations with ten (10) days
after each such statement is prepared by or for the Company or the Sellers.
(h) Contracts. The Company will not without the prior written
consent of the Buyer amend, change, or modify any of the contracts listed on
Section 4(1) of the Disclosure Schedule in any material respect. The Company
will not without prior written consent of the Buyer enter into any new contracts
respecting the Stations or their properties, except (i) Advertising Contracts
which comply with the representations and warranties pertaining to such
contracts set forth in Section 4(1) above; (ii) contracts entered into in the
Ordinary Course of Business which are cancelable on not more than thirty (30)
days' notice without penalty or premium; (iii) contracts entered into in the
Ordinary Course of Business each of which does not involve more than Ten
Thousand Dollars ($10,000) in any one instance, or Thirty Thousand Dollars
($30,000) in the aggregate.
(i) Operation of Stations. The Company shall operate the Stations in
material compliance with the FCC Licenses and the rules and regulations of the
FCC, and the FCC Licenses shall at all times remain in full force and effect.
The Company shall file with the FCC all material reports, applications,
documents, instruments and other information required to be filed in connection
with the operation of the Stations.
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(j) Credit and Receivables. The Company will follow its usual and
customary policies with respect to extending credit for Advertising Contracts
and with respect to collecting accounts receivable arising from such extension
of credit.
(k) Preservation of Business. The Sellers will use best efforts to
cause the Company to keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions,
relationships with lessors, licensers, advertisers, suppliers, customers, and
employees, all of the confidential information and trade secrets of the
Stations, and the FCC Licenses.
(l) Full Access and Consultation. The Sellers will permit and will
cause the Company to permit representatives of the Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Stations, to all premises, properties, books,
records, contracts, Tax records, and documents of or pertaining to the Company
for the purpose, among other things, to review financial statements of the
Company, to verify the accuracy of representations and warranties of the
Majority Shareholder and the Company contained in this Agreement, and to prepare
for the consummation of the transactions contemplated by this Agreement. The
Sellers will cause the Company to consult with the Buyer's management with a
view to informing the Buyer's management as to the operations, management and
business of the Stations.
(m) Notice of Developments. The Sellers will give prompt written
notice to the Buyer of any material development affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of the Company. Each Party will give prompt written notice
to the other of any material development affecting the ability of the Parties to
consummate the transactions contemplated by this Agreement. No disclosure by any
Party pursuant to this Section 5(m), however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
(n) Exclusivity. The Sellers will not (and the Sellers will not
cause or permit the Company to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets of the Company, or (D) similar
transaction or business combination involving any of the Sellers that would
preclude or impair the Sellers, or any of them, from consummating the
transactions contemplated by this Agreement; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Sellers will
notify the Buyer immediately if any person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(o) Title Insurance. The Sellers will reasonably cooperate with the
Buyer in obtaining with respect to each parcel of real estate that the Company
owns, an owner's policy (as appropriate) issued by a title insurer reasonably
satisfactory to the Buyer (or reputable local counsel as may be the custom in
the jurisdiction), in an amount equal to the fair market value of such real
property (including all improvements located thereon), insuring title to such
real property in the
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Buyer as of the Closing subject only to the title exceptions which do not impair
the current use, occupancy or value or the marketability of title of the
property and are disclosed in Section 4(i) or Section 4(j) of the Disclosure
Schedule, together with such endorsements for zoning, contiguity, public access
and extended coverage and such other endorsements as the Buyer reasonably
requests. The Sellers shall pay the cost of such title policies.
(p) Surveys. With respect to each parcel of real property that the
Company owns, leases, or subleases, and as to which a title insurance policy is
to be procured pursuant to Section 5(o) above, the Sellers will assist the Buyer
in the procurement in preparation for the Closing a current survey of the real
property certified to the Buyer, prepared by a licensed surveyor and conforming
to current expanded ALTA Minimum Detail Requirements for Land Title Surveys, if
applicable or customary in Louisiana, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey shall not
disclose any survey defect or encroachment from or onto the real property which
has not been cured or insured over prior to the Closing. The Company shall pay
the costs of such Surveys.
(q) Environmental Assessments. The Sellers will assist the Buyer in
obtaining with respect to each parcel of real estate that the Company owns,
leases or subleases and as to which a title insurance policy is to be procured
pursuant to Section 5(o) above, a current Phase I environmental site assessment
from an environmental consultant or engineer reasonably satisfactory to the
Buyer which shall not disclose or recommend any action with respect to any
condition to be remediated or investigated or any contamination on the site
assessed. The Buyer shall pay the cost of such environmental site assessments.
(r) Control of Stations. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Transfer Application. Between the date of this Agreement and the
Closing Date, the Buyer and its employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Company.
(s) Risk of Loss. The risk of loss, damage, or destruction to any of
the assets of the Company shall remain with the Sellers until the Closing. In
the event of any material loss, damage, or destruction the Sellers will promptly
notify the Buyer of all particulars thereof, stating the cause thereof (if
known) and the extent to which the cost of restoration, replacement and repair
of the assets lost, damaged or destroyed will be reimbursed under any insurance
policy with respect thereto. The Company will repair or replace such assets as
soon as possible after loss, damage or destruction thereof and shall use its
best efforts to restore as promptly as possible transmissions as authorized in
the FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Sellers' notice to the Buyer, and the Buyer determines that the Company's
failure to repair or replace, alone or in the aggregate, would have a material
adverse effect on the operation of the Stations:
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(i) the Buyer may elect to terminate this Agreement; or
(ii) the Buyer may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyer, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Sellers'
notice to the Buyer, in which case either Party may terminate this
Agreement; or
(iii) the Buyer may choose to accept the lost, damaged or
destroyed assets in their "then" condition, together with the Company's
Shares with all rights under any insurance policies covering the loss,
damage or destruction and retention by the Company of any proceeds under
any such insurance policies, previously received by, or to be received by,
the Company with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 5(s),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
(t) Pre-Closing Distributions. At any time prior to Closing the
Sellers shall have the right to cause, and will cause, the Company and its
Subsidiaries to distribute and transfer to the Sellers the assets and properties
listed in Section 5(t) of the Disclosure Schedule which will become the assets
and properties of the Sellers free and clear of any claims of the Buyer or the
Company other than as provided in this Agreement or the Ancillary Agreements.
(u) Right To Cure. The Parties agree that if prior to Closing either
Sellers or Buyer should discover that the other has breached any of the
representations, warranties, covenants and agreements made by such other Party
(or, in the case of Sellers, any person comprising the Sellers) in this
Agreement, then the non-breaching Party shall promptly notify the breaching
Party of such breach and the breaching Party shall have a reasonable opportunity
to cure such breach and Closing shall be postponed in order to allow the
breaching Party a reasonable opportunity to cure such breach.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2
and Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Sellers shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
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(iii) the Sellers and the Company shall have procured all of
the third party consents specified in Section 5(c) above, all of the title
insurance commitments, and endorsements specified in Section 5(o) above,
and all of the surveys specified in Section 5(p) above; and Sellers shall
have assisted the Buyer in obtaining all the Phase I environmental site
assessments described in Section 5(q) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyer to own, operate, or control the Company Shares, the
Company or the Stations (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) the Sellers shall have delivered to the Buyer a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 6(a)(i)-(iv) is satisfied in all respects;
(vi) the Transfer Application shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals, if any, required to transfer control of all other
authorizations, consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
(vii) the Buyer shall have received from one or more legal
counsel to the Sellers an opinion or opinions with respect to the matters
set forth in Exhibits D, D-1, and D-2 attached hereto or such other form
reasonably satisfactory to Buyer, addressed to the Buyer and dated as of
the Closing Date;
(viii) the relevant parties shall have entered into the
Retainage Agreement;
(ix) the officers and directors of the Company shall have
tendered written confirmation of their resignation of service by and for
the Company and repaid or satisfied all Liabilities to the Company and all
shall have released the Company of all Liabilities owed to such persons;
(x) the Sellers and the Company shall have paid or obtained
the release of all Liabilities of the Company existing at the Closing Date
including, but not limited to, indebtedness for borrowed money and trade
accounts payable and all Liabilities to the Sellers, but excluding
obligations not yet due and payable under long-term leases and contracts
identified in Section 4(l) of the Disclosure Schedule; and
(xi) all actions in consummation of the transactions
contemplated hereby and all agreements, certificates, opinions,
instruments, and other documents required to effect the
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transactions contemplated hereby will be executed and delivered at Closing
in form and substance reasonably satisfactory to the Buyer.
The Buyer may waive any condition specified in this Section 6(a) if it executes
a writing so stating at or prior to the Closing or otherwise elects to close
without such condition having been met.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects;
(v) the Transfer Application shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals, if any, required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vi) the Sellers shall have received from legal counsel to the
Buyer an opinion with respect to the matters set forth in Exhibit D-4
attached hereto or such other form reasonably satisfactory to Sellers,
addressed to the Sellers and dated as of the Closing Date;
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all agreements,
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will executed and ready for
delivery at Closing in form and substance reasonably satisfactory to the
Sellers.
The Sellers may waive any condition specified in this Section 6(b) if they
execute a writing so stating at or prior to the Closing.
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7. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing:
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below). At Sellers' request, Buyer shall provide Sellers with
reasonable access to such books and records of the Company as Sellers may
reasonably require to comply with their tax reporting and filing obligations.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction involving the Company, each of
the other Parties will cooperate with the contesting or defending Party and its
counsel in the contest or defense, make available his or its personnel, and
provide such testimony and access to its books and records as shall be necessary
in connection with the contest or defense, all at the sole cost and expense of
the contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 below).
(c) Transition. None of the Sellers will take any action that
primarily is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of any of the Stations
or the Company from maintaining the same business relationships with the
Stations or the Company after the Closing as it maintained with the Stations or
the Company prior to the Closing. Each of the Sellers will refer all customer
inquiries relating to the business of any of the Stations to the Buyer from and
after the Closing. No Seller and no Affiliate of any Seller will employ or offer
to employ any employee of the Company in the Lake Charles, Louisiana
metropolitan area for a period of three (3) years after the Closing Date, unless
such employee has been terminated by Buyer.
(d) Confidentiality. Each of the Sellers will treat and hold as
confidential such all of the Confidential Information, refrain from using any of
the Confidential Information except in connection with this Agreement, and
deliver promptly to the Buyer or destroy, at the request and option of the
Buyer, all tangible embodiments (and all copies) of the Confidential Information
which are in his or its possession. In the event that any of the Sellers is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, that such Seller will
notify the Buyer promptly of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the provisions of
this Section 6(d). The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
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(e) Retainage Adjustment. In the event and to the extent that the
Buyer or the Company may become obligated to pay after the Closing any Liability
of the Company that accrued prior to the Closing, such amount shall be deducted
from the Retainage Deposit pursuant to the terms of the Retainage Agreement.
8. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the
Majority Shareholder contained in Section 4 of this Agreement (other than the
representations and warranties contained in Sections 4(a), 4(b), 4(c), and
4(g)hereof) shall survive the Closing (even if the Buyer knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for the period of the applicable statute of
limitations plus ninety (90) days with respect to any claim by the Buyer based
on a claim or action by a third party and for a period of eighteen (18) months
following Closing with respect to any claim by the Buyer not based on a claim or
action by a third party. All of the representations, warranties, and covenants
of the Buyer and the Sellers contained in this Agreement, and all of the other
representations and warranties of the Majority Shareholder contained in Sections
4(a), 4(b), 4(c) and 4(g) hereof shall survive the Closing (even if the damaged
Party knew or had reason to know of any misrepresentation or breach of warranty
or covenant at the time of Closing) and continue in full force and effect until
ninety (90) days after the expiration of all applicable statutes of limitation.
(b) Indemnification Provisions for the Benefit of the Buyer. The
Majority Shareholder hereby indemnifies the Buyer from and against the entirety
of any Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by (i) any breach of his
representations, warranties, and covenants contained in this Agreement (so long
as the particular representation, warranty, or covenant survives the Closing and
the Buyer makes a written claim for indemnification within the applicable
survival period); or (ii) any Liability of the Company existing as of the
Closing, including but not limited to any Liability arising from the pre-Closing
distribution of Assets described in Section 5(t) above. Each Seller hereby
indemnifies the Buyer from and against the entirety of any Adverse Consequences
the Buyer may suffer resulting from, arising out of, relating to, in the nature
of, or caused by any breach of such Seller's representations, warran ties, and
covenants contained in this Agreement (so long as the particular representation,
warranty, or covenant survives the Closing and the Buyer makes a written claim
for indemnification within the applicable survival period). This Section 8(b)
shall not apply if Buyer seeks and obtains specific performance under Section
8(e) below.
(c) Indemnification Provisions for the Benefit of the Sellers. The
Buyer agrees to indemnify the Sellers from and against the entirety of any
Adverse Consequences the Sellers may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the breach of any of the Buyer's
representations, warranties, and covenants contained in this Agreement (so long
as the particular representation, warranty, or covenant survives the Closing and
the Sellers make a written claim for indemnification within the applicable
survival period). his Section 8(c) shall not apply if Sellers seek and obtain
liquidated damages under Section 8(f) below.
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(d) Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 8, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party
will defend the Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may
retain separate co-counsel at its sole cost and expense (except that the
Indemnifying Party will be responsible for the fees and expenses of the separate
co-counsel to the extent the Indemnified Party concludes reasonably that the
counsel the Indemnifying Party has selected has a conflict of interest), (iii)
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the matter without the written consent of
the Indemnifying Party (not to be withheld unreasonably), and (iv) the
Indemnifying Party will not consent to the entry of any judgment with respect to
the matter, or enter into any settlement which does not include a provision
whereby the plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, without the written consent of the
Indemnified Party (not to be withheld unreasonably). In the event the
Indemnifying Party does not notify the Indemnified Party within 15 days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
is assuming the defense thereof, however, the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in any manner
it reasonably may deem appropriate.
(e) Specific Performance. Each of the Parties acknowledges and
agrees that the Buyer would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the Buyer shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 11(p) below). Each of the
Parties acknowledges and agrees that notwithstanding the provision in Section
8(f) with respect to the payment of the transaction fee upon a breach of a
covenant of this Agreement prior to the Closing, money damages would not be an
adequate remedy for a breach of any provision of this Agreement. Specific
performance shall be Buyer's sole remedy for a failure of the transactions
contemplated hereby to occur as a result of a material breach of the terms of
this Agreement by the Sellers. In the event the Buyer must file a court action
to obtain the remedy of specific performance, and is the prevailing party in
such an action, Buyer shall be entitled to recover its attorneys' fees and costs
in connection with such action.
(f) Liquidated Damages. The Buyer and the Sellers acknowledge that
in the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyer, the Adverse Consequences as a result of such
default may be difficult, if not impossible, to ascertain. Accordingly, in the
event the transactions contemplated by this Agreement are not
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consummated due to a default of this Agreement by the Buyer, then the Sellers
shall be entitled to receive from the Buyer for such default, the sum of Seven
Hundred Forty-Two Thousand Four Hundred and no/100 Dollars ($742,400.00) as
liquidated damages without the need for proof of damages. In such event, Sellers
shall be entitled to receive the Earnest Money Escrow Deposit. Such recovery of
liquidated damages shall be Sellers' sole remedy for a failure of the
transactions contemplated hereby to occur as a result of a material breach of
the terms of this Agreement by the Buyer. In the event the Sellers must file a
court action to recover such liquidated damages, and is the prevailing party in
such an action, Sellers shall be entitled to recover their attorneys' fees and
costs in connection with such action.
(g) Other Indemnification Provisions. The remedies provided in
Sections 8(e) and 8(f) shall be exclusive remedies of the Parties prior to the
Closing for any breach of representation, warranty or covenant. The Buyer shall
have the right to recoup from any amount due to the Sellers any amount due from
the Sellers under this Section 8.
9. Definitions.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contract" means any arrangement with any third party under
which the Seller has created, incurred, assumed or guaranteed an obligation to
provide advertising or air time on the Station.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Agreement" means this Agreement, the Earnest Money Escrow Agreement, the
Noncompetition Agreement, the Retainage Agreement and any other agreement or
commitment delivered by any Party hereto to any other Party hereto in connection
with any of said agreements or in connection with the consummation of the
transactions contemplated hereby.
"Ancillary Agreements" means the Agreements other than the Stock Purchase
Agreement.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
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"Closing" has the meaning set forth in Section 1(c) above.
"Closing Date" has the meaning set forth in Section 1(c) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the Preface above.
"Company Share" means any share of the Common Stock of the Company.
"Company Subsidiaries" means KBIU Acquisition, Inc., a Louisiana
corporation, and KKGB Acquisition, Inc., a Louisiana corporation.
"Confidential Information" means any information concerning the businesses
and affairs of the Company, which is not public knowledge.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other items itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Agreement.
"Earnest Money Deposit" has the meaning set forth in Section 1(b) above.
"Earnest Money Escrow Agent" means Americom Radio Brokers, Inc.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(b)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Entity" means a corporation, limited liability company, partnership,
limited partnership, limited liability partnership or other entity recognized by
any jurisdiction within the United States.
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"ERISA" means the Employee Retirement Income Security Act of 1974 as
amended.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 4(d) above.
"Indemnified Party" has the meaning set forth in Section 8(d) above.
"Indemnifying Party" has the meaning set forth in Section 8(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
market and other research information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing, and
business data, pricing and cost information, business and marketing plans, and
customer and supplier lists and information), (g) other proprietary rights, and
(b) copies and tangible embodiments thereof (in whatever form or medium).
"Joint and Several" has the meaning set forth in Section 10(o) below.
"Knowledge" means actual knowledge after reasonable investigation, when a
reasonable person under the same circumstances would deem an investigation
necessary.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
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"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Sellers and the
Company with respect to the operations of the Stations and all applications
therefor, together with any renewals, extension or modifications thereof and
additions thereto.
"Majority Shareholder" means John M. Borders.
"Most Recent Balance Sheet" means the balance sheet of the Company as of
the Most Recent Fiscal Year End.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(d)
above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Process Agent" has the meaning set forth in Section 11(p) below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(b) above.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Requisite Sellers" means holders of a majority of the Company Shares.
"Retainage Deposit" has the meaning set forth in Section 1(b) above.
"Retainage Agent" means Bank One Trust Company, NA.
"Retainage Agreement" has the meaning set forth in Section 1 above.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c)
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other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Sellers" has the meaning set forth in the preface above.
"Stations" means the radio stations having the call letters KKGB-FM,
licensed to Sulphur, Louisiana, and KBIU-FM, KKYZ-FM, and KXZZ-AM, all licensed
to Lake Charles, Louisiana (collectively the "Stations").
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 5(p) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Transfer Application" has the meaning set forth in Section 5(b) above.
"Working Capital" means the current assets (net of reserves) less the
current Liabilities determined in accordance with GAAP.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing in the event the
Sellers are in breach, and the Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing in the
event the Buyer is in breach, of any material representation, warranty, or
covenant contained in this Agreement in any material respect in each case
if such breach remains uncured for thirty (30) days after notice of breach
is received from the other party;
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(iii) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing if the Closing
shall not have occurred on or before the 270th day following the date of
this Agreement by reason of the failure of any condition precedent under
Section 7(a) hereof (unless the failure results primarily from the Buyer
breaching any representation, warranty, or covenant contained in this
Agreement);
(iv) the Sellers may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing if the
Closing shall not have occurred on or before the 270th day following the
date of this Agreement by reason of the failure of any condition precedent
under Section 7(b) hereof (unless the failure results primarily from the
Sellers breaching any representation, warranty, or covenant contained in
this Agreement); or
(v) the Buyer or the Sellers may terminate this Agreement if
any Transfer Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
11. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants
of the Parties contained in this Agreement shall survive the Closing hereunder
as and to the extent provided in Section 8(a).
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case, except as to public notices
required by FCC rules, the disclosing Party will advise the other Party prior to
making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder
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without the prior written approval of the other Party, provided that the Buyer
may assign all right, title and interest in, to and under this Agreement to one
or more Affiliates of Buyer.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers: John M. Borders
1350 One Galleria Tower
13555 Noel Road
Dallas, Texas 75240
Phone: (972) 702-7371
Fax: (972) 503-2183
Don L. Turner
1350 One Galleria Tower
13355 Noel Road
Dallas, Texas 75240
Phone: (972) 702-7371
Fax: (972) 503-2183
Kan-D Land, Inc.
615 West 7th Avenue
Corsicana, Texas 75110
Phone: (903) 874-1121
Fax: (903) 874-1744
Jerry Goos
131 Sandpiper Lane
Lake Charles, Louisiana 70607
Phone: (318) 598-3207
Copy to: Robert Q. Stanton
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
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1201 Elm Street
Dallas, Texas 75270
Phone: (214) 745-5159
Fax: 9214) 745-5390
If to the Buyer: Cumulus Holdings, Inc.
Cumulus Broadcasting, Inc.
c/o QUAESTUS Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Copy to: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Texas.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
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competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyer and the Company, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 5(b) with regard to the Transfer Application. The Company shall
have no obligation to pay any Company or Sellers' expenses following the
Closing, and all such expenses shall be satisfied prior to Closing. The Sellers
will pay all transfer taxes and other recording or similar fees necessary to
vest title to the Company Shares in the Buyer.
(m) Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Dallas, Texas in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process (i) to the Party to be
served at the address and in the manner provided for the giving of notices in
Section 10(h) above. Nothing in this Section 10(o), however, shall affect the
right of any Party to serve legal process in any other manner permitted by law.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS HOLDINGS, INC.
By:
---------------------------
Title:
------------------------
"Buyer"
------------------------------
John M. Borders
------------------------------
Don L. Turner
------------------------------
Jerry Goss
KAN-D LAND, INC.
By:
---------------------------
Title:
------------------------
"Sellers"
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SCHEDULE A
Purchase Price. The Buyer agrees to pay to the Sellers the Purchase Price
(the "Purchase Price") payable as follows:
(i) on the date of this Agreement, the Buyer will deposit with
the Earnest Money Escrow Agent the amount of Seven Hundred Forty Two
Thousand Four Hundred and no/100 Dollars ($742,400.00) (the "Earnest Money
Deposit") in the form of an irrevocable letter of credit of NationsBank in
favor of the Escrow Agent, in the form attached as Exhibit A-1;
(ii) on the Closing Date, the Buyer shall pay the amount of
Fourteen Million Eight Hundred Forty-Eight Thousand Dollars
($14,848,000.00), as follows: (a) Buyer shall deposit with the Retainage
Agent the amount of Seven Hundred Forty Two Thousand Four Hundred and
no/100 Dollars ($742,400.00) (the "Retainage Deposit") in cash by wire
transfer or delivery to the Retainage Agent under the terms of the
Retainage Agreement, which amount shall be released in full to Sellers on
the first anniversary of the Closing Date except to the extent of the
aggregate amounts claimed by Buyer for indemnification under Section 8 of
this Agreement; (b) Buyer shall pay to creditors of the Company and the
Company Subsidiaries an amount equal to the total of the Company's and the
Company's Subsidiaries' outstanding indebtedness as of the Closing Date,
listed in Exhibit 1 to this Schedule A (amounts presently estimated --
actual amounts to be identified at Closing), including an amount to redeem
or repurchase the preferred stock of KBIU Acquisition, Inc. and notes
payable to Robert Magruder and Roy Hoffstetter in connection with the
Company's repurchase of their common stock; and (c) the balance shall be
paid to each Shareholder in accordance with the percentage interests
listed in Section 2(d) of the Disclosure Schedule;
(iii) on the Closing Date, the Buyer shall pay to the Sellers
an amount equal to the prorated adjustments as customary for the Company's
prepaid expenses and deposits.
The Earnest Money Deposit referenced above shall be placed in escrow with the
Earnest Money Escrow Agent pursuant to an escrow agreement in the form attached
hereto as Exhibit A (the "Earnest Money Escrow Agreement"). Under the terms and
conditions of that Agreement, if the Closing does not take place because the
Buyer has breached this Agreement, the letter of credit shall be collected by
the Escrow Agent and the $742,400 proceeds thereof shall be delivered by the
Escrow Agent to the Sellers as provided in the Earnest Money Escrow Agreement,
and if the Closing does not occur because the Sellers have breached this
Agreement, the letter of credit shall be cancelled and returned to the issuer.
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of December 15, 1997, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing), Clearly
Superior Radio, L.L.C. ("Clearly"), an Illinois limited liability company; 3-D
Communications Corporation, a Delaware corporation. ("3-D"); and Dennis F.
Doelitzsch ("Doelitzsch"), an individual citizen of Illinois. Clearly, 3-D and
Doelitzsch are referred to collectively herein as the "Sellers." Broadcasting
and Licensing are referred to collectively herein as the "Buyers." The Buyers
and the Sellers are referred to individually as the "Party" or collectively as
the "Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Sellers that are used or useful in the operation of radio
stations WDDD-FM (Marion, Illinois), WDDD-AM (Johnston City, Illinois), WFRX-AM
(West Frankfort, Illinois), WTAO-FM (Murphysboro, Illinois), WVZA-FM (Herrin,
Illinois), WQUL-FM (West Frankfort, Illinois), and Sellers' application for a
station on AM-1690 (Johnston City, Illinois) (the"Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
a. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Sellers agree to sell, transfer, convey and
deliver to (i) Licensing, and Licensing agrees to purchase from the Sellers, all
of the FCC Licenses listed in Section 2(1) of the disclosure schedule
("Disclosure Schedule"); and (ii) Broadcasting, and Broadcasting agrees to
purchase from the Sellers, all of the Acquired Assets other than the FCC
Licenses. Both such sales shall take place at the Closing for the consideration
specified below in this Section 1.
b. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Sellers not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Sellers agree to pay
and discharge all Liabilities and obligations of the Sellers other than the
Assumed Liabilities.
c. Purchase Price. The Buyers agree to pay to the Sellers, as
consideration for the Acquired Assets, the amounts payable below (the "Purchase
Price"). The Purchase Price shall be payable as follows:
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i. on the date of this Agreement, the Buyers will deliver to
the Escrow Agent an irrevocable letter of credit issued by NationsBank of
Texas, N.A. for the benefit of the Escrow Agent in substantially similar
form as the letter of credit attached hereto as Exhibit A in the amount of
Six Hundred Twenty-Five Thousand Dollars ($625,000.00) (the "Earnest Money
Deposit"); and
ii. on the Closing Date, the Buyers shall pay to the Sellers
the amount of (a) Twelve Million Five Hundred Thousand Dollars
($12,500,000.00), plus (b) the Building Amount ("Building Amount") as
defined below, with adjustments as specifically provided in this
Agreement.
The Earnest Money Deposit referenced in this Section 1(c) shall be held in
escrow by the Escrow Agent pursuant to an escrow agreement in the form attached
hereto as Exhibit B (the "Earnest Money Escrow Agreement"). If this Agreement is
terminated without Closing of the transaction contemplated herein, the Earnest
Money Deposit shall be paid to the Seller or returned to the Buyers as provided
in the Earnest Money Escrow Agreement.
d. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Stations in
Marion-Carbondale, Illinois, commencing at 9:00 a.m. local time no less than ten
(10) days after the FCC approval of the Assignment Application becomes a Final
Order, by which date all other conditions to the obligations of the Parties to
consummate the transactions contemplated hereby will have been satisfied, or
such other date as the Parties may mutually determine (the "Closing Date").
e. Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Sellers will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds in form acceptable to the Buyers, (B) such affidavits, transfer
tax returns, memorandums of lease, and other additional documents as may be
required by the terms of the title insurance commitments described in Section
4(o) hereof, as necessary to furnish title insurance as required by such section
or as may be necessary to convey title to the Real Estate to the Buyers in the
condition required herein or provide public notice of existence of the Leases,
and (C) such other instruments of sale, transfer, conveyance, and assignment as
the Buyers and their counsel reasonably may request; (iv) the Buyers will
execute, acknowledge (if appropriate), and deliver to the Sellers (A) an
assumption in the form attached hereto as Exhibit C and (B) such other
instruments of assumption as the Sellers and its counsel reasonably may request;
and (v) the Buyers will deliver to the Sellers the consideration specified in
Section 1(c) above.
f. Postclosing Agreement. On the Closing Date, the Sellers shall
execute, and shall cause each of its shareholders to execute, a Postclosing
Agreement with the Buyers including
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covenants not to compete with the Buyers in the markets served by the Sellers
and agreements to indemnify the Buyers in the form of Exhibit D attached hereto.
g. Time Brokerage Agreement. Concurrent with the execution of this
Agreement, the Seller and Buyer shall execute the Time Brokerage Agreement (the
"Time Brokerage Agreement") which includes the terms and conditions pursuant to
which the Broadcasting will purchase the airtime on the Sellers. The accounts
receivable of the Sellers in existence as of the date of this Agreement (and the
Effective Date of the Time Brokerage Agreement) shall be collected pursuant to
the terms and conditions of the Time Brokerage Agreement.
2. Representations and Warranties of the Seller.
The Sellers represent and warrant to the Buyers that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
a. Organization and Authority of the Sellers. Clearly and 3-D are
corporations duly organized, validly existing, and in good standing under the
laws of the jurisdictions of their incorporation. Clearly and 3-D have the power
and authority to own or lease their properties and to carry on all business
activities now conducted by them. The sole members of Clearly are 3-D and
Doelitzsch, and the sole shareholder of 3-D is Doelitzsch. Doelitzsch has title
to the assets to be conveyed by him under this Agreement.
b. Authorization of Transaction. The Sellers have full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and all agreements and instruments to be executed and delivered
by Sellers pursuant to this Agreement (collectively, the "Ancillary Agreements")
and to perform their obligations hereunder and thereunder. Without limiting the
generality of the foregoing, the Boards of Directors of 3-D and Clearly have
duly authorized the execution, delivery, and performance of this Agreement and
the Ancillary Agreements by the Sellers. This Agreement and the Ancillary
Agreements constitute the valid and legally binding obligation of the Sellers,
enforceable in accordance with their respective terms and conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the
Sellers are subject or any provision of the charter or bylaws of the Sellers; or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice or third party consent under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other agreement, arrangement to which the Sellers are a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). Other than with
respect to the Assignment
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Application described in Section 4(b) the Sellers do not need to give any notice
to, make any filing with, or obtain any Licenses, consent, or approval of any
court or government or governmental agency in order for the Parties to enter
into this agreement or the Ancillary Agreements or to consummate the
transactions contemplated by this Agreement or the Ancillary Agreements
(including the assignments and assumptions referred to in Section 1(e) above).
d. Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Sellers have good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
e. Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1994, December 31, 1995,
and December 31, 1996 for the Sellers; and (ii) unaudited balance sheets and
statements of income, as of and for each month during 1996 and each month to
date in 1997 for the Seller. The Financial Statements have been prepared in
conformity with the Sellers' normal accounting policies, practices and
procedures applied on a consistent basis, throughout the periods covered
thereby, are correct and complete, fairly present the financial condition of the
Sellers and the results of operation of Sellers at the dates and for the periods
indicated, and are consistent with the books and records of the Sellers (which
books and records are correct and complete). The Financial Statements accurately
state the revenues of the Sellers for the period indicated therein and include
an accurate breakout of cash and trade revenues.
f. Events Subsequent to October 1, 1997. Since October 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule, there has not
been any material adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations, or future prospects of the Seller
with respect to the operation of the Stations. Without limiting the generality
of the foregoing and with respect to the operation of the Sellers since October
1, 1997:
i. other than this Agreement, the Sellers have not entered
into any agreement, contract, lease, sublease, license, or sublicense (or
series of related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
ii. the Sellers have not delayed or postponed (beyond their
normal practice in the Ordinary Course of Business) the payment of
accounts payable and other Liabilities;
iii. the Sellers have not altered their credit and collection
policies or their accounting policies;
iv. the Sellers have not entered into or terminated any
employment arrangement, employment contract, consulting contract or
severance agreement or collective
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bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
v. there have been no changes and, to Sellers' knowledge, any
threatened changes in employment terms for any of its directors, officers,
and employees;
vi. there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Sellers;
vii. the Sellers have not materially altered the programming,
format or call letters of the Stations, or their promotional and marketing
activities;
viii. the Sellers have not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in compliance
therewith and with all FCC rules and regulations;
ix. the Sellers have not terminated or received notice of
termination for any syndicated programming; and
x. the Sellers have not committed to any of the foregoing.
g. Tax Matters. The Sellers have timely and properly filed all Tax
Returns that it was required to file with respect to the Sellers' operations.
All such Tax Returns were correct and complete and properly reflect the tax
liability of the Sellers. No Tax deficiencies have been proposed or assessed
against the Sellers. All Taxes owed by the Sellers with respect to its
operations (whether or not shown on any Tax Return) have been paid. The Sellers
have withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party. No claim has ever been made by any authority
in any jurisdiction where the Sellers do not file Tax Returns that it is or may
be subject to taxation by that jurisdiction.
h. Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Stations. The Sellers own or lease all tangible assets necessary for the conduct
of the operation and business of the Stations as presently conducted and as
presently proposed to be conducted and all leased assets are specifically
identified as such in Section 2(h) of the Disclosure Schedule.
i. Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Sellers
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Sellers have delivered to the Buyers correct and complete copies of
the Leases. With respect to the Real Estate:
i. the Sellers have good and marketable title to all of the
Owned Real Estate free and clear of all liens, charges, mortgages,
security interests, easements,
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restrictions or other encumbrances of any nature whatsoever except real
estate taxes for the year of Closing and municipal and zoning ordinances
and recorded utility easements which do not impair the current use,
occupancy or value or the marketability of title of the property and which
are disclosed in Section 2(i) of the Disclosure Schedule (collectively,
the "Permitted Real Estate Encumbrances");
ii. the Leases are and, following the Closing will continue to
be, legal, valid, binding, enforceable, and in full force and effect;
iii. no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default thereunder
or permit termination, modification, or acceleration thereunder;
iv. there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
v. none of the Owned Real Estate and to the Sellers'
Knowledge, none of the properties subject to the Leases is subject to any
lease (other than Leases), option to purchase or rights of first refusal;
vi. except for Permitted Real Estate Encumbrances, there are
no (i) actual or, to the Sellers' Knowledge, proposed special assessments
with respect to any of the Real Estate; (ii) pending or, to the Sellers'
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the
buildings or improvements located on the Real Estate; (iv) any pending or,
to the Sellers' Knowledge, threatened changed in any zoning laws or
ordinances which may materially adversely affect any of the Real Estate or
Sellers' use thereof;
vii. the Sellers have not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder;
viii. to the Sellers' Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; and
ix. to the Sellers' Knowledge, the owner of each leased
facility has good and marketable title to the underlying parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for Permitted Real Estate Encumbrances and
Sellers' leasehold interest in each Lease has priority over any other
interest except for the fee interest therein and Permitted Real Estate
Encumbrances.
j. Contracts. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not
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entered into in the Ordinary Course of Business. The Sellers have delivered to
the Buyers a correct and complete copy of each written arrangement listed in
Section 2(j) of the Disclosure Schedule (as amended to date). With respect to
each written arrangement so listed which constitutes an Assumed Contract: (A)
the written arrangement is legal, valid, binding, enforceable, and in full force
and effect; (B) the written arrangement will continue to be legal, valid,
binding, and enforceable and in full force and effect on identical terms
following the Closing (if the arrangement has not expired according to its
terms); (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the written arrangement; and
(D) no party has repudiated any provision of the written arrangement. The
Sellers are not a party to any verbal contract, agreement, or other arrangement
which, if reduced to written form, would be required to be listed in Section
2(j) of the Disclosure Schedule under the terms of this Section 2(j). Except for
the Assumed Contracts, the Buyers shall not have any Liability or obligations
for or in respect of any of the contracts set forth in Section 2(j) of the
Disclosure Schedule or any other contracts or agreements of the Sellers.
k. Commission Licenses and Compliance with Commission Requirements.
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Stations as they are now being operated are (A) in full
force and effect, (B) unimpaired by any acts or omissions of the Sellers
or the Sellers' employees or agents, (C) free and clear of any
restrictions which might limit the full operation of the Stations, and (D)
detailed in Section 2(k) of the Disclosure Schedule. With respect to the
licenses, permits, authorizations, franchises, certificates of compliance
and consents referenced in the preceding sentence, Section 2(k) of the
Disclosure Schedule also sets forth, without limitation, the date of the
last renewal, the expiration date thereof, and any conditions or
contingencies related thereto. Except as set forth in Section 2(k) of the
Disclosure Schedule, no condition exists or event has occurred that
permits, or after notice or lapse of time, or both, would permit, the
revocation or termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Stations as now conducted. Except as set forth in Section
2(k) of the Disclosure Schedule, the Sellers are not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or
revoked.
ii. The Stations are in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Stations' transmission facilities is restricted in
accordance with the policies of the FCC.
iii. Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Sellers' Knowledge, the Sellers are not the subject of
any FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Stations, and there are
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no proceedings (other than rule making proceedings of general
applicability) before the FCC or any other governmental authority that
could adversely affect any of the FCC Licenses or the authorizations
listed in Section 2(k) of the Disclosure Schedule.
iv. The Sellers have filed with the FCC and all other
governmental authorities having jurisdiction over the Stations all
material reports, applications, documents, instruments, and other
information required to be filed, and will continue to make such filings
through the Closing Date.
v. The Sellers are not aware of any information concerning the
Stations that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary
for the consummation of the transactions contemplated hereunder or the
Buyer's operation and/or ownership of the Stations. Except as described in
Section 2(k) of the Disclosure Schedule, Sellers are not aware of any
pending FCC applications which, if approved, would allow for the operation
of a new radio station with a signal reaching the signal area of the
Stations and, in addition, Sellers are not aware of any plans or proposals
by any existing radio Stations with a signal reaching the signal area of
the Stations to alter or change their format to a format similar to that
of the Stations.
l. Intellectual Property. The Sellers own or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Sellers as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Sellers immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use the by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Sellers have not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and the Sellers have never received any charge, complaint, or notice
alleging any such interference, infringement, misappropriation, or violation. To
the Knowledge of the Sellers, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Sellers.
m. Insurance. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Sellers' insurance coverage. With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
and enforceable and in full force and effect; (B) the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect on identical
terms through the Closing Date.
n. Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Sellers: (i) are subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Sellers, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(n) of the Disclosure Schedule could result in any adverse change
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in the assets, Liabilities, business, financial condition, operations, results
of operations, or future prospects of the Sellers or the Stations taken as a
whole. The Sellers have no Knowledge of any Basis for any such charge,
complaint, action, suit, proceeding, hearing, or investigation against the
Sellers.
o. Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee. To
the Knowledge of the Sellers, no key employee or group of employees has any
plans to terminate employment with the Seller. The Sellers are not a party to or
bound by any collective bargaining or similar agreement, nor have they
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. The Sellers have no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to the employees of the Seller. The Sellers have no
Knowledge of any Basis for any claim by past or current employees of the Sellers
or applicants for employment that the Sellers or their management have
discriminated based on each individual's race, sex, national origin, religion,
ethnicity, handicap or any other protected characteristic under applicable law.
p. Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Sellers maintain or to which the Sellers
contribute or is required to contribute for the benefit of any current or former
employee of the Sellers and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Sellers do not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Seller. There are no pending or, to the Knowledge of the Sellers, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
q. Environment, Health, and Safety.
i. With respect to the operation of the Stations and the Real
Estate, the Sellers are, and at all times in the past has been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and the Sellers have no Liability (and to Sellers' Knowledge
there is no Basis related to the past or present operations of the Sellers
or its predecessors for any present or future Liability) under any
Environmental Law. The Sellers have no Liability (and to Sellers'
Knowledge there is no Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against
the Sellers giving rise to any Liability) under the Occupational Safety
and Health Act, as amended, or any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign government (or agency
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thereof) concerning employee health and safety, or for any illness of or
personal injury to any employee.
ii. The Sellers have obtained and at all times has been in
compliance in all material respects with all of the terms and conditions
of all permits, licenses, and other authorizations which are required
under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of
any federal, state, or local or foreign government relating to worker
health and safety.
iii. All properties and equipment used in the Station and the
Acquired Assets have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans- dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances. No pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste ever has been
buried, stored, spilled, leaked, discharged, emitted, or released on any
of the Real Estate. No above ground or underground storage tanks have ever
been located at, on or under the Real Estate. The Sellers have delivered
to the Buyers a complete copy of all environmental claims, reports,
studies, compliance actions or the like of the Sellers or which are
available to the Sellers with respect to any of the Real Estate or any of
the Acquired Assets.
r. Legal Compliance. The Sellers have complied in all material
respects with all laws (including rules and regulations thereunder) of federal,
state, local and foreign governments (and all agencies thereof. The Sellers have
filed in a timely manner all reports, documents, and other materials it was
required to file (and the information contained therein was correct and complete
in all material respects) under all applicable laws.
s. Advertising Contracts. Section 2(s) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Sellers in
excess of $10,000, and the amount to be paid to the Sellers therefor. The
Sellers have no reason to believe and has not received a notice or indication of
the intention of any of the advertisers or third parties to material contracts
of the Sellers to cease doing business or to reduce in any material respect the
business transacted with the Sellers or to terminate or modify any agreements
with the Sellers (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
t. Brokers' Fees. Other than the fee payable to Media Services
Group, which shall be the exclusive responsibility of Sellers, the Sellers have
no Liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement.
u. Undisclosed Commitments or Liabilities. There are no material
commitments, liabilities or obligations relating to the Sellerss, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Sellers of the liabilities of third parties, for which
specific and adequate provisions have not been made on the Financial Statements
except those incurred in or as a result of the Ordinary Course of Business since
January 1, 1997.
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v. Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer.
Buyers represent and warrant to the Sellers that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
a. Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
b. Authorization of Transaction. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
d. Brokers' Fees. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
4. Pre-Closing Covenants.
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The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
a. General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
b. Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Sellers and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Sellers to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Sellers and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Sellers
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon the Station or
impose significant costs on such party). If the FCC imposes any condition on
either party to the Assignment Application, such party shall use commercially
reasonable efforts to comply with such condition, provided, that neither party
shall be required hereunder to comply with any condition that would have a
material adverse effect upon the Stations or any Affiliate. The Sellers and the
Buyers shall jointly oppose any requests for reconsideration or judicial review
of FCC approval of the Assignment Application and shall jointly request from the
FCC extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
c. Employment Offers. Upon notice to the Sellers, and at mutually
agreeable times, the Sellers will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at their option, extend offers of
employment to all or any of the Sellers' employees effective on the Closing
Date. From and after the execution of this Agreement, the Sellers shall use
their best efforts to assist Buyers in retaining those employees of the Station
which the Buyers wish to hire in connection with the operation of the Sellers by
the Buyers subsequent to the Closing, and the Sellers will not take any action
to preclude or discourage any of the Sellers' employees from accepting any offer
of employment extended by the Buyers.
d. Notices and Consents. The Sellers will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request. Each of the Parties will file any notification and
report forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its best efforts
to obtain an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary, proper or advisable.
Each of the Parties will take any additional action that may be necessary,
proper, or advisable in connection with any other notices to, filings with, and
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authorizations, consents, and approvals of governments, governmental agencies,
and third parties that it may be required to give, make, or obtain.
e. Advertising Obligations. The Sellers shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Sellers for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Sellers shall deliver to the Buyers a
schedule, certified by an officer of the Sellers, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
f. Operating Statements. The Sellers shall deliver to the Buyers,
for the Buyers' informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Sellers within ten (10) days
after each such statement is prepared by or for the Sellers.
g. Contracts. The Sellers will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(k) of the Disclosure Schedule in any material respect. The Sellers will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Five Thousand Dollars
($5,000).
h. Operation of Station. The Sellers will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. The Sellers shall operate the Stations in compliance with
the FCC Licenses and the rules and regulations of the FCC, and the FCC Licenses
shall at all times remain in full force and effect. The Sellers shall file with
the FCC all material reports, applications, documents, instruments and other
information required to be filed in connection with the operation of the
Stations.
i. Credit and Receivables. The Sellers will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Stations and with respect to collecting accounts receivable
arising from such extension of credit.
j. Preservation of Sellers and the Acquired Assets. The Sellers will
keep its Stations and the Acquired Assets and properties substantially intact,
including its present operations, physical facilities, working conditions,
relationships with lessors, licensors, advertisers, suppliers, customers, and
employees, all of the Confidential Information, call letters and trade secrets
of the Stations, and the FCC Licenses.
k. Full Access and Consultation. The Sellers will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Stations, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Sellers. The Sellers will consult with the
Buyers' management with a view to informing Buyers' management as to the
operations, management and business of the Stations.
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l. Notice of Developments. The Sellers will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Stations or the Acquired Assets or the ability of the
Sellers to perform hereunder.
m. Exclusivity. The Sellers will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the
Sellers, or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any person to do or seek any of the
foregoing. The Sellers will notify the Buyers immediately if any person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.
n. Title Insurance, Surveys and Environmental Assessments. The
Buyers will obtain with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request,
(ii) with respect to each parcel of Owned Real Estate, an owner's policy of
title insurance by a title insurer reasonably satisfactory to the Buyers, in an
amount equal to the fair market value of such Real Estate (including all
improvements located thereon), insuring over the standard pre-printed exceptions
and insuring title to the Owned Real Estate to be vested in the Buyers as of the
Closing free and clear of all liens and encumbrances except Permitted Real
Estate Encumbrances, together with such endorsements for zoning, contiguity,
public access and extended coverage as the Buyers or its lender reasonably
request, (iii) a current survey of each parcel of Real Estate certified to the
Buyers and its lender, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys') which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iv) with
respect to each parcel of Owned Real Estate (but not parcels of leased Real
Estate except to the extent reasonably required by Buyers' lender), a current
Phase I environmental site assessment from an environmental consultant or
engineer reasonably satisfactory to the Buyers which does not indicate that the
Sellers and the Real Estate are not in compliance with any Environmental Law and
which shall not disclose or recommend any action with respect to any condition
to be remediated or investigated or any contamination on the site assessed.
o. Control of Sellers. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Between the date of this Agreement and
the Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control,
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supervise, or direct, the operation of the Stations, and such operation shall be
the sole responsibility of and in the control of the Sellers.
p. Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Sellers until the Closing. In the
event of any such loss, damage, or destruction the Sellers will promptly notify
the Buyers of all particulars thereof, stating the cause thereof (if known) and
the extent to which the cost of restoration, replacement and repair of the
Acquired Assets lost, damaged or destroyed will be reimbursed under any
insurance policy with respect thereto. The Sellers will, at Sellers' expense,
repair or replace such Acquired Assets to their former condition as soon as
possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Sellers' notice to the Buyers and the Buyers determine that the Sellers'
failure to repair or replace would have a material adverse effect on the
operation of the Stations:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Sellers'
notice to the Buyers, in which case either party may terminate this
Agreement; or
iii. the Buyers may choose to accept the Acquired Assets in
their "then" condition, together with the Sellers' assignment to the
Buyers of all rights under any insurance claims covering the loss, damage
or destruction and payment over to the Buyers of any proceeds under any
such insurance policies, previously received by the Sellers with respect
thereto plus an amount equal to the amount of any deductible or
self-insurance maintained by Sellers on such Acquired Assets. In the event
the Closing Date is postponed pursuant to this Section 4(p), the parties
hereto will cooperate to extend the time during which this Agreement must
be closed as specified in the consent of the FCC.
q. Phase I Assessments. If the Phase I assessments described in
Section 4(n) above prescribe further testing or indicate that the Real Estate is
not in compliance with Environmental Laws or that certain conditions must be
remedied, Seller shall bear the cost of such further testing or remedial
measures up to Fifty Thousand Dollars ($50,000). In the event the cost of
further testing or remedial measures exceeds Fifty Thousand Dollars, either (i)
Seller shall agree to bear such excess cost and shall complete the testing and
remedial measures to the satisfaction of Buyers, or (ii) if the Seller declines
to bear such expense, Buyer shall have the right to terminate the Agreement
without penalty under Section 9(a)(vii) below.
5. Conditions to Obligation to Close.
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a. Conditions to Obligation of the Buyers. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Sellers shall have performed and complied with all of
its covenants hereunder in all respects through the Closing;
iii. the Sellers shall have procured all of the third party
consents specified in Section 4(d) above and all of the title insurance
commitments (and endorsements), Surveys and environmental site assessments
described in Section 4(o) above;
iv. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or impose damages or
penalties upon any of the parties if such transactions are consummated,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
v. the Sellers shall have delivered to the Buyers a
certificate (without qualification as to knowledge or materiality or
otherwise except as otherwise provided in the specific representation
under Section 2) to the effect that each of the conditions specified above
in Sections 5(a)(i) through (iv) is satisfied in all respects;
vi. each of the Assignment Applications shall have been
approved by a Final Order of the FCC all applicable waiting periods (and
any extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or been terminated and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
vii. the relevant parties shall have entered into the
Postclosing Agreement;
viii. the Buyers shall have received from counsel to the
Sellers an opinion with respect to the matters set forth in Exhibit F
attached hereto, addressed to the Buyers and its lender and dated as of
the Closing Date;
ix. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial
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accounting and tax purposes) in accordance with an allocation schedule to
be delivered at closing; and
x. all actions to be taken by the Sellers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
b. Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
iii. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
iv. the Buyers shall have delivered to the Sellers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
v. each of the Assignment Applications shall have been
approved by a Final Order of the FCC and the Buyers shall have received
all governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
vi. the relevant parties shall have entered into the
Postclosing Agreement; and
vii. all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions,
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instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance
to the Sellers.
6. Post-Closing Covenants.
The Parties agree as follows with respect to the period following
the Closing:
a. General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
b. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
c. Adjustments. Operation of the Stations and the income and
expenses attributable thereto up through the close of business on the day before
the Closing Date shall be for the account of the Sellers and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Sellers and the Buyers as of the Closing
Date in accordance with the foregoing principle. Contractual arrangements that
do not reflect an equal rate of compensation to a Stations over the term of the
agreement shall be equitably adjusted as of the Closing Date. The prorations and
adjustments hereunder shall be made and paid insofar as feasible on the Closing
Date, with a final settlement sixty (60) days after the Closing Date. In the
event of any disputes between the Parties as to such adjustments, the amounts
not in dispute shall nonetheless be paid at such time and such disputes shall be
determined by an independent accounting firm mutually acceptable to both parties
and the fees and expenses of such accounting firm shall be paid one-half (1/2)
by the Sellers (up to a maximum of $5,000) and one-half (1/2) by the Buyers.
d. Collection of Accounts Receivable. Accounts receivable shall be
collected and remitted under the procedures specified in the Time Brokerage
Agreement.
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e. Severance Obligations. In the event an offer of employment is
extended by the Buyers to and accepted by an employee of the Sellers pursuant to
Section 4(c) and such subsequent employment by the Buyers is terminated within
sixty (60) days from the Closing Date, the Sellers shall be responsible for, and
shall pay to such accepting employee, all severance benefits (if any, pursuant
to the Sellers' practices as in effect on the Closing Date) that may be due and
owing such employee by reason of his or her employment with either the Sellers
or the Buyers.
f. Consents. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Sellers
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Sellers will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Sellers' interest in the benefits under any such Assumed Contract,
including performance by the Sellers as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
7. Remedies for Breaches of this Agreement.
a. Survival. All of the representations and warranties of the Buyers
and Sellers contained in Section 2 of this Agreement shall survive the Closing
and continue in full force and effect for a period of two (years) following the
Closing Date.
b. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Sellers agree to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Sellers'
representations or warranties, and covenants contained in this Agreement
or in any Ancillary Agreement executed and/or delivered by the Sellers (so
long as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant
of the Sellers contained herein or in any Ancillary Agreement;
iii. any Liability of the Sellers which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
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c. Indemnification Provisions for the Benefit of the Sellers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Sellers
from and against the entirety of any Adverse Consequences the Sellers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Sellers make a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
d. Specific Performance. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(o) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in Section
7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for Buyers for a breach of any provision of this
Agreement.
e. Liquidated Damages. The Buyers and the Sellers acknowledge that
in the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Sellers as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(c), the Sellers
shall be entitled to receive from the defaulting Party for such default the
Earnest Money Deposit as liquidated damages without the need for proof of
damages, subject only to successfully proving in a court of competent
jurisdiction that the Buyer materially breached this Agreement and that the
transactions contemplated thereby have not occurred. The Sellers shall proceed
against the Earnest Money Deposit as full satisfaction of liquidated damages
owed by the Buyers and as its sole remedy for a failure of the transactions
contemplated hereby to occur as a result of a material breach of the terms of
this Agreement by the Buyers.
f. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnifica tion against any other Party (the "Indemnifying
Party",) under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably
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satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
to the extent the Indemnified Party reasonably concludes that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iv) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
Liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event the Indemnifying Party
does not notify the Indemnified Party within 15 days after the Indemnified Party
has given notice of the matter that the Indemnifying Party is assuming the
defense thereof, however, and/or in the event the Indemnifying Party shall fail
to defend such claim actively and in good faith, then the Indemnified Party may
defend against, or enter into any settlement with respect to, the matter in any
manner it reasonably may deem appropriate.
g. Limitation of Liability. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Identified Party, in
the aggregate from all indemnifiable events shall exceed Twenty-Five Thousand
Dollars ($25,000) and indemnification shall be made by the indemnifying party
only to the extent of such excess over Twenty-Five Thousand Dollars ($25,000);
provided however that the foregoing limitation shall not be applicable to: (i)
the obligations of the Buyer to pay and discharge any Liability of the Sellers
to third parties from and after the Closing Date assumed by the Buyer under the
terms of this Agreement; (ii) the obligation of the Sellers to pay and discharge
any Liability to third parties not assumed by the Buyer under the terms of this
Agreement, or (iii) the Sellers' obligation to deliver clear title to the
Acquired Assets.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Sellers, other than Retained Assets that are used or useful in
the operation of the Stations, wherever located, including but not limited to
all of its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles) and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those Barter Agreements and Advertising Contracts identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Sellers; (e) Assumed Contracts, indentures,
Security Interests, guaranties, other similar arrangements, and rights
thereunder; (f) call
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letters of the Stations, jingles, logos, slogans, and business goodwill of the
Stations; (g) claims, deposits, prepayments, refunds, causes of action, chooses
in action, rights of recovery (including rights under policies of insurance),
rights of set off, and rights of recoupment; (h) Licenses and similar rights
obtained from governments and governmental agencies; and (i) FCC logs and
records and all other books, records, ledgers, logs, files, documents,
correspondence, advertiser lists, all other lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, program production materials, studies, reports, and other printed or
written materials; and (j) goodwill of the Stations.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(k) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"Assumed Liabilities" means (a) obligations of the Sellers which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence
"Building Amount" means the lower of (a) the documented out-of-pocket
costs of Seller, through the Closing Date, associated with completion of the
addition, the consolidation of operations, and the move into the Marion building
described in Section 2(i) of the Disclosure Schedule, or (b) Two Hundred
Thousand Dollars ($200,000.00).
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
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"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 1 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Media Services Group.
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<PAGE>
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Sellers.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
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<PAGE>
"Leases" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites, as described in Section 2(i) of
the Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Sellers and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multi-employer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller's
Owner in the form attached hereto as Exhibit D.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price " has the meaning set forth in Section 1(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller; and (iv) Cash.
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<PAGE>
"Retained Liabilities" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Sellers prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Sellers" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations WDDD-FM (Marion, Illinois),
WDDD-AM (Johnston City, Illinois), WFRX-AM (West Frankfort, Illinois), WTAO-FM
(Murphysboro, Illinois), WVZA-FM (Herrin, Illinois), WQUL-FM (West Frankfort,
Illinois), and the application for a station at AM-1690 (Johnson City,
Illinois).
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Time Brokerage Agreement" has the meaning set forth in Section 1(g)
above.
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<PAGE>
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing in the event the
Sellers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however, that if such breach is
capable of being cured, such breach also remains uncured for twenty (20)
days after notice of breach is received by the Sellers from the Buyers;
iii. the Sellers may terminate this Agreement by giving
written notice to the Buyers at any time prior to the Closing in the event
the Buyers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable being cured, such breach remains uncured for twenty (20) days
after notice of breach is received by the Buyers from the Sellers;
iv. the Buyers may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing if the Closing
shall not have occurred on or before the 270th day following the date of
this Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained
in this Agreement);
v. the Sellers may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Sellers
itself breaching any representation, warranty, or covenant contained in
this Agreement);
vi. the Buyers or the Sellers may terminate this Agreement if
any Assignment Application is denied by Final Order; or
vii. the Buyers may terminate this Agreement if the Seller
declines to undertake the expense of environmental remedial measures
described in Section 4(q) above.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. Miscellaneous.
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<PAGE>
a. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
b. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Sellers the Purchase Price therefor or to any
successor to the Buyers in the event of any sale, merger or consolidation of the
Buyers, and (ii) Buyers may assign their indemnification claims and their rights
under the warranties and representations of the Sellers to the financial
institution(s) providing financing to the Buyers in connection with this
transaction.
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
Dennis F. Doelitzsch
Chairman and CEO
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<PAGE>
Clearly Superior Radio, LLC
1822 North Court Street
One Broadcast Center
Marion, Illinois 62959
Copy to:
John Brewster, Esquire
Winters, Brewster, Crosby & Patchett
111 West Main, P.O. Box 700
Marion, Illinois 62959
Fax: (618) 997-6522
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
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<PAGE>
h. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Illinois.
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
k. Expenses. The Buyers and the Sellers, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(o) with respect to Surveys, title commitments and
environmental audits. The Sellers will pay all income taxes. The Sellers and the
Buyers will each pay one-half (1/2) of any transfer or sales taxes and other
recording or similar fees necessary to vest title to each of the Acquired Assets
in the Buyers.
l. Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
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<PAGE>
m. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state court sitting in Williamson County, Illinois, or
federal court sitting in the Southern District of Illinois in any action or
proceeding arising out of or relating to this Agreement, agrees that all claims
in respect of the action or proceeding may be heard and determined in any such
court, and agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
CUMULUS LICENSING CORPORATION
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
CLEARLY SUPERIOR RADIO, LLC
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
3-D COMMUNICATIONS CORPORATION
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
DENNIS F. DOELITZSCH
- ----------------------------------
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of February 12, 1998, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing), and Lyle R.
Evans d/b/a/ Brillion Radio Company (the "Seller"). Broadcasting and Licensing
are referred to collectively herein as the "Buyers." The Buyers and the Seller
are referred to individually as the "Party" or collectively as the "Parties."
Capitalized terms used in this Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
station WEZR-FM, licensed to Lyle Evans d/b/a/ Brillion Radio Company (the
"Station") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
a. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Seller agrees to sell, transfer, convey and
deliver to (i) Licensing, and Licensing agrees to purchase from the Seller, all
of the FCC Licenses listed in Section 2(i) of the disclosure schedule
("Disclosure Schedule"); and (ii) Broadcasting, and Broadcasting agrees to
purchase from the Seller, all of the Acquired Assets other than the FCC
Licenses. Both such sales shall take place at the Closing for the consideration
specified below in this Section 1.
b. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Seller agrees to pay
and discharge all Liabilities and obligations of the Seller other than the
Assumed Liabilities.
c. Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the purchase price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
(the "Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
d. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a mutually agreed location,
commencing at 9:00 a.m. local time
<PAGE>
promptly (but not more than ten (10) business days after that date) after the
FCC approval of the Assignment Application becomes a Final Order, by which date
all other conditions to the obligations of the Parties to consummate the
transactions contemplated hereby will have been satisfied, or such other date as
the Parties may mutually determine (the "Closing Date").
e. Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds in form acceptable to the Buyers, and (B) such other instruments
of sale, transfer, conveyance, and assignment as the Buyers and their counsel
reasonably may request; (iv) the Buyers will execute, acknowledge (if
appropriate), and deliver to the Seller (A) an assumption in the form attached
hereto as Exhibit B and (B) such other instruments of assumption as the Seller
and its counsel reasonably may request; and (v) the Buyers will deliver to the
Seller the consideration specified in Section 1(c) above.
2. Representations and Warranties of the Seller.
The Seller represents and warrants to the Buyers that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
a. Authority of the Seller. The Seller is an individual citizen of
the state of Wisconsin. The Seller has full power and authority to own or lease
his properties; to carry on all business activities now conducted by him; to
execute and deliver this Agreement and all agreements and instruments to be
executed and delivered by Seller pursuant to this Agreement (collectively, the
"Ancillary Agreements"); and to perform his obligations hereunder and
thereunder. This Agreement and the Ancillary Agreements constitute the valid and
legally binding obligation of the Seller, enforceable in accordance with their
respective terms and conditions.
b. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will in any material way (i) violate any
statute, regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or court to
which the Seller is subject; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice or
third party consent (other than as described in the Disclosure Schedule) under
any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
Security Interest, or other agreement, arrangement to which the Seller is a
party or by which he is bound or to which any of his assets is subject (or
result in the imposition of any Security Interest upon any of its assets). Other
than with respect to the Assignment Application described in Section 4(b) the
Seller does not need to give any notice to, make any filing with, or obtain any
Licenses, consent, or approval of any court or government or
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<PAGE>
governmental agency in order for the Parties to enter into this agreement or the
Ancillary Agreements or to consummate the transactions contemplated by this
Agreement or the Ancillary Agreements (including the assignments and assumptions
referred to in Section 1(e) above).
c. Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(c) of the Disclosure Schedule (which shall be released at or
before the Closing) the Seller has good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
d. Events Subsequent to January 1, 1997. Since January 1, 1997,
except as set forth in Section 2(d) of the Disclosure Schedule, there has not
been any material adverse change in the assets of the Station.
e. Tax Matters. Except as set forth in Section 2(e) of the
Disclosure Schedule, the Seller has timely and properly filed all Tax Returns
that it was required to file with respect to the Seller's operations. All such
Tax Returns were correct and complete and properly reflect the tax liability of
the Seller. No Tax deficiencies have been proposed or assessed against the
Seller. All Taxes owed by the Seller with respect to its operations (whether or
not shown on any Tax Return) have been paid. The Seller has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor, or other third
party. No claim has ever been made by any authority in any jurisdiction where
the Seller does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction.
f. Tangible Assets. Section 2(f) of the Disclosure Schedule sets
forth a listing of all equipment to be transferred to Buyers under this
Agreement.
g. Real Property. Section 2(g) of the Disclosure Schedule lists and
describes briefly all real property leased to the Seller (including, without
limitation, complete legal descriptions for all of the Real Estate). The Seller
has delivered to the Buyers correct and complete copies of the Leases. With
respect to the Real Estate:
i. the Leases are and, following the Closing will continue to
be, legal, valid, binding, enforceable, and in full force and effect;
ii. no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default thereunder
or permit termination, modification, or acceleration thereunder;
iii. there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
iv. to the Seller's Knowledge, none of the properties subject
to the Leases is subject to any lease (other than Leases), option to
purchase or rights of first refusal;
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v. to the Seller's Knowledge, there are no (i) actual or
proposed special assessments with respect to any of the Real Estate; (ii)
pending or threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the
buildings or improvements located on the Real Estate; (iv) any pending or
threatened changes in any zoning laws or ordinances which may materially
adversely affect any of the Real Estate or Seller's use thereof;
vi. the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder; and
vii. to the Seller's Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations.
h. Contracts. Section 2(h) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not entered into in the Ordinary Course of Business. The
Seller has delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(h) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed which constitutes an
Assumed Contract: (A) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect; (B) the written arrangement will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(h) of the Disclosure Schedule under the terms
of this Section 2(h). Except for the Assumed Contracts, the Buyers shall not
have any Liability or obligations for or in respect of any of the contracts set
forth in Section 2(h) of the Disclosure Schedule or any other contracts or
agreements of the Seller.
i. Commission Licenses and Compliance with Commission Requirements.
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Station as they are now being operated are (A) in full
force and effect, (B) unimpaired by any acts or omissions of the Seller or
the Seller's employees or agents, (C) free and clear of any restrictions
which might limit the full operation of the Station, and (D) detailed in
Section 2(i) of the Disclosure Schedule. With respect to the licenses,
permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(i) of the
Disclosure Schedule also sets forth, without limitation, the date of the
last renewal, the expiration date thereof, and any conditions or
contingencies related thereto. Except as set forth in Section 2(i) of the
Disclosure Schedule, no condition exists or event has occurred that
permits, or after notice
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or lapse of time, or both, would permit, the revocation or termination of
any such license, permit, consent, franchise, or authorization (other than
pursuant to their express expiration date) or the imposition of any
material restriction or limitation upon the operation of the Station as
now conducted. Except as set forth in Section 2(i) of the Disclosure
Schedule, the Seller is not aware of any reason why the FCC licenses might
not be renewed in the ordinary course or revoked.
ii. The Station is in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Station's transmission facilities is restricted in
accordance with the policies of the FCC.
iii. Except as set forth in Section 2(i) of the Disclosure
Schedule, to the Seller's Knowledge, the Seller is not the subject of any
FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Station, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(i) of the Disclosure Schedule.
iv. The Seller has filed with the FCC and all other
governmental authorities having jurisdiction over the Station all material
reports, applications, documents, instruments, and other information
required to be filed, and will continue to make such filings through the
Closing Date.
v. The Seller is not aware of any information concerning the
Station that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary
for the consummation of the transactions contemplated hereunder or the
Buyer's operation and/or ownership of the Station.
j. Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder is set forth on Section 2(j) of the Disclosure Schedule and
each item listed will be owned or available for use the by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, or notice
alleging any such interference, infringement, misappropriation, or violation. To
the Knowledge of the Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Seller.
k. Insurance. Section 2(k) of the Disclosure Schedule sets forth a
complete and accurate description of all Seller's insurance coverage. With
respect to each such insurance policy:
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(A) the policy is legal, valid, binding, and enforceable and in full force and
effect; (B) the policy will continue to be legal, valid, binding, and
enforceable and in full force and effect on identical terms through the Closing
Date.
l. Litigation. Section 2(l) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(l) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station taken as a whole.
The Seller has no Knowledge of any Basis for any such charge, complaint, action,
suit, proceeding, hearing, or investigation against the Seller.
m. Employees. Section 2(m) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Station of each employee. To
the Knowledge of the Seller, no key employee or group of employees has any plans
to terminate employment with the Seller. The Seller is not a party to or bound
by any collective bargaining or similar agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to the employees of the Seller. The Seller has no Knowledge of any Basis
for any claim by past or current employees of the Seller or applicants for
employment that the Seller or its management has discriminated based on each
individuals race, sex, national origin, religion, ethnicity, handicap or any
other protected characteristic under applicable law.
n. Employee Benefits. Section 2(n) of the Disclosure Schedule lists
all Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Seller does not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Seller. There are no pending or, to the Knowledge of the Seller, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
o. Environment, Health, and Safety.
i. With respect to the operation of the Station, the Seller
is, and at all times in the past has been, in compliance in all material
respects with all Environmental
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Laws and all laws (including rules and regulations thereunder) of federal,
state, and local governments (and all agencies thereof) concerning
employee health and safety, and the Seller has no Liability (and to
Seller's Knowledge there is no Basis related to the past or present
operations of the Seller or its predecessors for any present or future
Liability) under any Environmental Law. The Seller has no Liability (and
to Seller's Knowledge there is no Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand against the Seller giving rise to any Liability) under the
Occupational Safety and Health Act, as amended, or any other law (or rule
or regulation thereunder) of any federal, state, local, or foreign
government (or agency thereof) concerning employee health and safety, or
for any illness of or personal injury to any employee.
ii. The Seller has obtained and at all times has been in
compliance in all material respects with all of the terms and conditions
of all permits, licenses, and other authorizations which are required
under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of
any federal, state, or local or foreign government relating to worker
health and safety.
iii. All properties and equipment used in the Station and the
Acquired Assets have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances. No pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste ever has been
buried, stored, spilled, leaked, discharged, emitted, or released on any
of the Real Estate. To Seller's Knowledge, no above ground or underground
storage tanks have ever been located at, on or under the Real Estate. The
Seller has delivered to the Buyers a complete copy of all environmental
claims, reports, studies, compliance actions or the like of the Seller or
which are available to the Seller with respect to any of the Real Estate
or any of the Acquired Assets.
p. Legal Compliance. The Seller has complied in all material
respects with all laws (including rules and regulations thereunder) of federal,
state, local and foreign governments (and all agencies thereof. The Seller has
filed in a timely manner all reports, documents, and other materials it was
required to file (and the information contained therein was correct and complete
in all material respects) under all applicable laws.
q. Advertising Contracts. Section 2(q) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Station in
excess of $1000, and the amount to be paid to the Seller therefor. The Seller
has no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Seller to cease doing business or to reduce in any material respect the
business transacted with the Seller or to terminate or modify any agreements
with the Seller (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
r. Brokers' Fees. Other than the fee payable to Broadcasting Asset
Management Corporation, which shall be the exclusive responsibility of Seller,
the Seller has no
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Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
s. Undisclosed Commitments or Liabilities. There are no material
commitments, liabilities or obligations relating to the Station, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Seller of the liabilities of third parties, for which specific
and adequate provisions have not been made on the Financial Statements except
those incurred in or as a result of the Ordinary Course of Business since
January 1, 1997.
t. Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. Representations and Warranties of the Buyer.
Buyers represent and warrant to the Seller that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
a. Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
b. Authorization of Transaction. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder, and are financially
capable of doing so. This Agreement and the Ancillary Agreements constitute
legally binding obligations of the Buyers, enforceable against the Buyers in
accordance with their respective terms and conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1 (e) above).
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d. Brokers' Fees. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
e. Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
4. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
a. General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
b. Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon the Station or
impose significant costs on such party). If the FCC imposes any condition on
either party to the Assignment Application, such party shall use commercially
reasonable efforts to comply with such condition, provided, that neither party
shall be required hereunder to comply with any condition that would have a
material adverse effect upon the Station or any Affiliate. The Seller and the
Buyers shall jointly oppose any requests for reconsideration or judicial review
of FCC approval of the Assignment Application and shall jointly request from the
FCC extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
c. Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at their option, extend offers of
employment to all or any of the Seller's employees effective on the Closing
Date. From and after the execution of this Agreement, the Seller shall use its
best efforts to assist Buyers in retaining those employees of the Station which
the Buyers wish to hire in connection with the operation of the Station by the
Buyers subsequent to the Closing, and
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the Seller will not take any action to preclude or discourage any of the
Seller's employees from accepting any offer of employment extended by the
Buyers.
d. Notices and Consents. The Seller will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request. Each of the Parties will file any notification and
report forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its best efforts
to obtain an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary, proper or advisable.
Each of the Parties will take any additional action that may be necessary,
proper, or advisable in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental agencies,
and third parties that it may be required to give, make, or obtain, and Buyers
will reasonably cooperate in obtaining consents, including providing financial
information that may be required by third parties.
e. Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
f. Contracts. The Seller will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(i) of the Disclosure Schedule in any material respect. The Seller will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Five Thousand Dollars
($5,000).
h. Operation of Station. The Seller will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. The Seller shall operate the Station in compliance with the FCC
Licenses and the rules and regulations of the FCC, and the FCC Licenses shall at
all times remain in full force and effect. The Seller shall file with the FCC
all material reports, applications, documents, instruments and other information
required to be filed in connection with the operation of the Station.
i. Credit and Receivables. The Seller will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Station and with respect to collecting accounts receivable
arising from such extension of credit.
j. Preservation of Station and the Acquired Assets. The Seller will
keep its Station and the Acquired Assets and properties substantially intact,
including its present operations, physical facilities, working conditions,
relationships with lessors, licensors, advertisers, suppliers, customers, and
employees, all of the Confidential Information, call letters and trade secrets
of the Station, and the FCC Licenses.
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k. Full Access and Consultation. The Seller will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Station, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Seller. Buyers agree to keep such
information confidential. The Seller will consult with the Buyers' management
with a view to informing Buyers' management as to the operations, management and
business of the Station..
l. Notice of Developments. The Seller will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Station or the Acquired Assets or the ability of the Seller
to perform hereunder.
m. Exclusivity. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the Seller,
or (ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyers immediately if any person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
n. Title Insurance, Surveys and Environmental Assessments. The
Buyers will obtain with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request,
(ii) a current survey of each parcel of Real Estate certified to the Buyers and
its lender, prepared by a licensed surveyor and conforming to current ALTA
Minimum Detail Requirements for Land Title Surveys, disclosing the location of
all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys') which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iii) with
respect to each parcel of Real Estate, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Sellers which does not indicate that the Seller and the Real Estate are
not in compliance with any Environmental Law and which shall not disclose or
recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. The Buyers and the
Seller will each pay one-half (1/2) of the costs of these title policies,
Surveys and environmental assessments.
o. Control of Station. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Between the date of this Agreement and
the Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control,
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supervise, or direct, the operation of the Station, and such operation shall be
the sole responsibility of and in the control of the Seller.
p. Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing. In the event
of any such loss, damage, or destruction the Seller will promptly notify the
Buyers of all particulars thereof, stating the cause thereof (if known) and the
extent to which the cost of restoration, replacement and repair of the Acquired
Assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will, at Seller's expense, repair or replace
such Acquired Assets to their former condition as soon as possible after loss,
damage or destruction thereof and shall use its best efforts to restore as
promptly as possible transmissions as authorized in the FCC Licenses. The
Closing Date shall be extended (with FCC consent, if necessary) for up to sixty
(60) days to permit such repair or replacement. If repair or replacement cannot
be accomplished within sixty (60) days of the date of the Seller's notice to the
Buyers and the Buyers reasonably determine that the Seller's failure to repair
or replace would have a material adverse effect on the operation of the Station:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
iii. the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to the
Buyers of all rights under any insurance claims covering the loss, damage
or destruction and payment over to the Buyers of any proceeds under any
such insurance policies, previously received by the Seller with respect
thereto plus an amount equal to the amount of any deductible or
self-insurance maintained by Seller on such Acquired Assets. In the event
the Closing Date is postponed pursuant to this Section 4(p), the parties
hereto will cooperate to extend the time during which this Agreement must
be closed as specified in the consent of the FCC.
q. Station Upgrade. Seller will seek approval from the FCC for an
upgrade to the Station including an antenna installed on the former Channel 32
tower or another tower acceptable to Buyers on lease terms acceptable to Buyers.
Seller will cooperate with Buyers and assist in implementing the move once the
FCC approval is granted. Such move will be at the expense of Buyers.
5. Conditions to Obligation to Close.
a. Conditions to Obligation of the Buyers. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
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i. the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Seller shall have performed and complied with all of
its covenants hereunder in all respects through the Closing;
iii. the Seller shall have procured all of the third party
consents specified in Section 4(d) above and all of the title insurance
commitments (and endorsements)described in Section 4(n) above;
iv. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or impose damages or
penalties upon any of the parties if such transactions are consummated,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
v. the Seller shall have delivered to the Buyers a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Sections 5(a)(i)
through (iv) is satisfied in all respects (including a certificate that
the Acquired Assets are being sold and transferred free and clear of all
liens, encumbrances and claims, and that any such outstanding liens,
encumbrances and claims which exist prior to Closing shall be satisfied
from Closing proceeds);
vi. each of the Assignment Applications shall have been
approved by a Final Order of the FCC all applicable waiting periods (and
any extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or been terminated and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
vii. the Buyers shall have received from counsel to the Seller
an opinion with respect to the matters set forth in Exhibit C attached
hereto, addressed to the Buyers and its lender and dated as of the Closing
Date;
ix. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with an allocation schedule to be delivered at closing;
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x. all actions to be taken by the Seller in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers; and
xi. The FCC shall have granted Seller's upgrade application
described in Section 4(q) above.
b. Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
iii. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
iv. the Buyers shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
v. each of the Assignment Applications shall have been
approved by a Final Order of the FCC and the Buyers shall have received
all governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
vi. all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
6. Post-Closing Covenants.
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The Parties agree as follows with respect to the period following
the Closing:
a. General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
b. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Station, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
c. Adjustments. Operation of the Station and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated and adjusted between the Seller and the Buyers as of
the Closing Date in accordance with the foregoing principle. In addition, all
commissions payable with respect to the accounts receivable of the Seller
(whether due before or after Closing) shall be solely for the account and
responsibility of the Seller. Contractual arrangements that do not reflect an
equal rate of compensation to the Station over the term of the agreement shall
be equitably adjusted as of the Closing Date. The prorations and adjustments
hereunder shall be made and paid insofar as feasible on the Closing Date, with a
final settlement sixty (60) days after the Closing Date. In the event of any
disputes between the Parties as to such adjustments, the amounts not in dispute
shall nonetheless be paid at such time and such disputes shall be determined by
an independent accounting firm mutually acceptable to both parties and the fees
and expenses of such accounting firm shall be paid one-half (1/2) by the Seller
and one-half (1/2) by the Buyer.
d. Collection of Accounts Receivable. At the Closing, the Seller
will turn over to the Buyers, for collection only, the accounts receivable of
the Station owing to the Seller as of the close of business on the day before
the Closing Date. A schedule of such accounts receivable will be delivered by
the Seller to the Buyers on the Closing Date or as soon thereafter as possible.
The Buyers agree to use commercially reasonable efforts in the ordinary course
of business (but without
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responsibility to institute legal or collection proceedings) to bill for and
collect such accounts receivable during the 120-day period following the Closing
Date, and will remit all payments received on such accounts during this 120-day
period on a monthly basis together with an accounting of all payments received
within such period. The Buyers shall have the sole right to collect such
accounts receivable during such one hundred twenty (120) day period. In the
event the Buyers receive monies during the 120-day period following the Closing
Date from an advertiser who, after the Closing Date, is advertising on the
Station, and that advertiser was included among the accounts receivable as of
the Closing Date, the Buyers shall apply said monies to the oldest outstanding
balance due on the particular account, except in the case of a "disputed"
account receivable. For purposes of this Section 6(d), a "disputed" account
receivable means one which the account debtor refuses to pay because he asserts
that the money is not owed or the amount is incorrect. In the case of such a
disputed account, the Buyers shall immediately return the account to the Seller
prior to expiration of the 120-day period following the Closing Date. If the
Buyers return a disputed account to the Seller, the Buyers shall have no further
responsibility for its collection and may accept payment from the account debtor
for advertising carried on the Station after the Closing Date. At the end of the
120-day period following the Closing Date, the Buyers will turn back to the
Seller all of the accounts receivable of the Station as of the Closing Date
owing to the Seller which have not yet been collected, and the Buyers will
thereafter have no further responsibility with respect to the collection of such
receivables. During the 120-day period following the Closing Date, the Buyers
shall afford the Seller reasonable access to the accounts receivable "aging
list." The Seller acknowledges and agrees that the Buyers are acting as
collection agent hereunder for the sole benefit of the Seller and that Buyers
have accepted such responsibility for the accommodation of the Seller. The
Buyers shall not have any duty to inquire as to the form, manner of execution or
validity of any item, document, instrument or notice deposited, received or
delivered in connection with such collection efforts, nor shall the Buyers have
any duty to inquire as to the identity, authority or rights of the persons who
executed the same, but shall remit the same to Seller under the procedures
outlined in this Section.
f. Consents. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
g. Sublease of Studio Space by Buyers. At Closing, Seller and Buyers
shall enter into a sublease for the Seller's studio space identified in Section
2(g) of the Disclosure Schedule, which shall provide that Buyers shall be
responsible for one-half the rental payment due on the lease for a period of
three years from the Closing Date.
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h. Call Signs. In the event that Buyers notify Seller in writing
that they are discontinuing use of the call signs WEZR, Buyers and Seller agree
to enter into a license agreement under which Buyers will authorize the use of
WEZR by Seller for the purposes identified in the license agreement.
7. Remedies for Breaches of this Agreement.
a. Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), and 2(d) hereof
or relating to the Seller's title to the Acquired Assets) shall survive the
Closing and continue in full force and effect for a period until 90 days after
the applicable statute of limitations has expired with respect to any claim by
the Buyers based on a claim or action by a third party and for a period of three
(3) years following Closing with respect to any claim by the Buyers not based on
a claim or action by a third party. All of the other representations and
warranties (including the representations and warranties Seller contained in
Sections 2(a), 2(b), 2(c), and 2(d) hereof or relating to the Seller's title to
the Acquired Assets) and all covenants of the Buyers and the Seller contained in
this Agreement shall survive the Closing and continue in full force and effect
forever thereafter.
b. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in Section 7(d) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement
or in any Ancillary Agreement executed and/or delivered by the Seller (so
long as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant
of the Seller contained herein or in any Ancillary Agreement;
iii. any Liability of the Seller which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
c. Indemnification Provisions for the Benefit of the Seller. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers
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(so long as the Seller makes a written claim for indemnification within the
applicable survival period) or (ii) any breach or nonfulfillment of any
agreement or covenant of the Buyers contained herein or in any Ancillary
Agreement, or (iii) any Assumed Liability.
d. Specific Performance. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(n) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in Section
7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for Buyers for a breach of any provision of this
Agreement.
e. Liquidated Damages. The Buyers and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(c), the Seller
shall be entitled to receive from the defaulting Party for such default the
Earnest Money Deposit as liquidated damages without the need for proof of
damages, subject only to successfully proving in a court of competent
jurisdiction that the Buyer materially breached this Agreement and that the
transactions contemplated thereby have not occurred. The Seller shall proceed
against the Earnest Money Deposit as full satisfaction of liquidated damages
owed by the Buyers and as its sole remedy for a failure of the transactions
contemplated hereby to occur as a result of a material breach of the terms of
this Agreement by the Buyers.
f. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnifica tion against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv)
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the Indemnifying Party will not consent to the entry of any judgment with
respect to the matter, or enter into any settlement which does not include a
provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
g. Limitation of Liability. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Identified Party, in
the aggregate from all indemnifiable events shall exceed Ten Thousand Dollars
($10,000) and indemnification shall be made by the indemnifying party only to
the extent of such excess over Ten Thousand Dollars ($10,000); provided however
that the foregoing limitation shall not be applicable to: (i) the obligations of
the Buyer to pay and discharge any Liability of the Seller to third parties from
and after the Closing Date assumed by the Buyer under the terms of this
Agreement; (ii) the obligation of the Seller to pay and discharge any Liability
to third parties not assumed by the Buyer under the terms of this Agreement, or
(iii) the Seller's obligation to deliver clear title to the Acquired Assets.
8. Definitions.
"Acquired Assets" means (a) leaseholds and other interests of any kind
therein, improvements, fixtures, and fittings thereon (such as towers and
antennae), and easements, rights-of-way, and other appurtenances thereto)
described in Section 2(g) of the Disclosure Schedule; (b) the tangible assets
described in Section 2(f) of the Disclosure Schedule and all assignable
warranties with respect thereto; (c) Intellectual Property and goodwill
associated therewith; (d) rights under orders and agreements (including those
Barter Agreements and Advertising Contracts identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Station; (e) Assumed Contracts and rights
thereunder; (f) call letters of the Station, jingles, logos, slogans, and
business goodwill of the Station; (f) Licenses and similar rights obtained from
governments and governmental agencies; (g) FCC logs and records and all other
books, records, ledgers, logs, files, documents, correspondence, advertiser
lists, all other lists, plats, architectural plans, drawings, and
specifications, creative materials, advertising and promotional materials,
program production materials, studies, reports, and other printed or written
materials; and (h) goodwill of the Station.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(q), above.
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"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(h) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"Assumed Liabilities" means obligations of the Seller which accrue after
the Closing Date under the Assumed Contracts either: (i) to furnish services,
and other non-Cash benefits to another party after the Closing; or (ii) to pay
for goods, services, and other non-Cash benefits that another party will furnish
to it after the Closing. The Assumed Liabilities shall not include any Retained
Liabilities.
"Barter Agreements" has the meaning set forth in Section 4(e) above.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 1 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined
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contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multi-employer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Broadcast Asset Management Corporation.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Station.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
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"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(f) above.
"Indemnifying Party" has the meaning set forth in Section 7(f) above.
"Intellectual Property" means, with respect to the Station, all (a)
patents, patent applications, patent disclosures, and improvements thereto, (b)
trademarks, service marks, trade dress, call letters, logos, and trade names,
(c) mask works and registrations and applications for registration thereof, (d)
trade secrets and confidential business information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (e) other
proprietary rights, and (f) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Leases" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites, as described in Section 2(g) of
the Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multi-employer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
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"Purchase Price " has the meaning set forth in Section 1(c) above.
"Real Estate" means the real estate, building, fixtures and improvements
which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Liabilities" means any obligations or Liabilities of the Seller
other than Assumed Liabilities, including but not limited to: (i) any Liability
relating to the ownership or operation of the Station prior to the Closing; (ii)
any Liability of the Seller for income, transfer, sales, use, and other Taxes
arising in connection with the consummation contemplated hereby; (iii) any
Liability of the Seller for costs and expenses incurred in connection with this
Agreement or the consummation of the transactions contemplated hereby (except as
set forth in Section 4(n) relating to Surveys and title commitments and Section
4(b) with regard to the Assignment Application); or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
WEZR-FM, licensed by the FCC to operate in Brillion, Wisconsin.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(n) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
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"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach of any representation, warranty, or covenant contained
in this Agreement; provided, however, that if such breach is capable of
being cured, such breach also remains uncured for twenty (20) days after
notice of breach is received by the Seller from the Buyers;
iii. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable being cured, such breach remains uncured for twenty (20) days
after notice of breach is received by the Buyers from the Seller;
iv. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained
in this Agreement);
v. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant contained in
this Agreement);
vi. the Buyers or the Seller may terminate this Agreement if
any Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. Miscellaneous.
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a. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
b. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Seller the Purchase Price therefor or to any
successor to the Buyers in the event of any sale, merger or consolidation of the
Buyers, (ii) Buyers may assign their indemnification claims and their rights
under the warranties and representations of the Sellers to the financial
institution(s) providing financing to the Buyers in connection with this
transaction, and (iii) Seller may assign this Agreement to an intermediary
solely in order to effect a starker exchange, provided that Seller shall remain
responsible to Buyers for its obligations hereunder.
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
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Mr. Lyle R. Evans
1296 Marian Lane
Green Bay, Wisconsin 54304
Fax: (920) 687-0710
Copy to:
Jeffrey F. Jaekels, S.C.
Wanezek, Umentum and Jaekels, S.C.
417 S. Adams Street
Green Bay, WI 54301
Fax: (920) 437-8101
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Wisconsin.
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<PAGE>
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
k. Expenses. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(n) with respect to Surveys and title commitments. The Seller
will pay all the Seller's income taxes. The Seller and the Buyers will each pay
one-half (1/2) of any transfer or sales taxes and other recording or similar
fees necessary to vest title to each of the Acquired Assets in the Buyers.
l. Construction. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the Disclosure
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
m. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Wisconsin in any action or
proceeding arising out of or relating to this Agreement, agrees that all claims
in respect of the action or proceeding may be heard and
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<PAGE>
determined in any such court, and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Each Party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
CUMULUS LICENSING CORPORATION
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
LYLE EVANS d/b/a/ BRILLION RADIO COMPANY
By:
-------------------------------
(printed)
- ----------------------------------
Title:
----------------------------
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<PAGE>
SCHEDULE A
Purchase Price. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the amount of Two Million Sixty-Five Thousand Dollars
($2,065,000.00), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of One Hundred Three Thousand Two Hundred Fifty
($103,250) (the "Earnest Money Deposit") in the form of an irrevocable letter of
credit from NationsBank; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Two Million Sixty-Five Thousand Dollars ($2,065,000), with adjustments
as provided specifically in this Agreement.
The Earnest Money Deposit referenced in this Schedule A shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), and shall
be disbursed to Seller or returned to Buyer as provided in the Earnest Money
Escrow Agreement.
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of January 14, 1998, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing"), and Savannah
Communications, L.P. (the "Seller"). Broadcasting and Licensing are referred to
collectively herein as the "Buyers." The Buyers and the Seller are referred to
individually as the "Party" or collectively as the "Parties." Capitalized terms
used in this Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
stations WIXV-FM (licensed to Savannah, Georgia), WSGF-FM (licensed to
Springfield, Georgia), and WBMQ-AM (licensed to Savannah, Georgia) (the
"Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
a. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Seller agrees to sell, transfer, convey and
deliver to (i) Licensing, and Licensing agrees to take assignment from the
Seller, all of the FCC Licenses listed in Section 2(k) of the disclosure
schedule ("Disclosure Schedule"); and (ii) Broadcasting, and Broadcasting agrees
to purchase from the Seller, all of the Acquired Assets other than the FCC
Licenses. Both such transactions shall take place at the Closing for the
consideration specified below in this Section 1.
b. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Seller agrees to pay
and discharge all Liabilities and obligations of the Seller other than the
Assumed Liabilities.
c. Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the purchase price (the "Purchase Price")
described in Schedule A to this Agreement, and agree to make the escrow deposit
(the "Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
<PAGE>
d. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a mutually agreed location,
commencing at 9:00 a.m. local time on a date within ten (10) business days after
the FCC approval of the Assignment Application becomes a Final Order, by which
date all other conditions to the obligations of the Parties to consummate the
transactions contemplated hereby will have been satisfied, or such other date as
the Parties may mutually determine (the "Closing Date").
e. Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
bargain and sale deed with covenants in form acceptable to the Buyers, (B) such
affidavits, transfer tax returns, memorandums of lease, and other additional
documents as may be required by the terms of the title insurance commitments
described in Section 4(o) hereof, as necessary to furnish title insurance as
required by such section or as may be necessary to convey title to the Real
Estate to the Buyers in the condition required herein or provide public notice
of existence of the Leases, and (c)such other instruments of sale, transfer,
conveyance, and assignment as the Buyers and their counsel reasonably may
request; (iv) the Buyers will execute, acknowledge (if appropriate), and deliver
to the Seller (A) an assumption in the form attached hereto as Exhibit B and (B)
such other instruments of assumption as the Seller and its counsel reasonably
may request; and (v) the Buyers will deliver to the Seller the consideration
specified in Section 1(c) above.
f. Postclosing Agreement. On the Closing Date, the Seller shall
execute, and shall cause its operating general partner to execute, a Postclosing
Agreement with the Buyers including covenants not to compete with the Buyers in
the markets served by the Stations and agreements to indemnify the Buyers in the
form of Exhibit C attached hereto.
g. Local Marketing Agreement. Concurrent with the execution of this
Agreement, the Seller and Buyers shall execute the Local Marketing Agreement
(the "Local Markerting Agreement") which includes the terms and conditions
pursuant to which Broadcasting will purchase the airtime on the Station. The
accounts receivable of the Station in existence as of the date of this Agreement
(and the Effective Date of the Local Marketing Agreement) shall be collected
pursuant to the terms and conditions of the Local Marketing Agreement.
h. Retainage Agreement. Concurrent with the execution of this
Agreement, the Seller and Buyers shall execute the Retainage Agreement (the
"Retainage Agreement") which includes the terms and conditions pursuant to which
Buyers will deposit the Retainage Amount at Closing.
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<PAGE>
2. Representations and Warranties of the Seller.
The Seller represents and warrants to the Buyers that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
a. Organization of the Seller. The Seller is a partnership duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its formation. The Seller does not have any Subsidiaries. The
Seller has the power and authority to own or lease its properties and to carry
on all business activities now conducted by it. The operating general partner of
the Seller is Point Communications, Inc.
b. Authorization of Transaction. The Seller has full power and
authority (including full partnership power and authority) to execute and
deliver this Agreement and all agreements and instruments to be executed and
delivered by Seller pursuant to this Agreement (collectively, the "Ancillary
Agreements") and to perform its obligations hereunder and thereunder. This
Agreement and the Ancillary Agreements constitute the valid and legally binding
obligation of the Seller, enforceable in accordance with their respective terms
and conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will materially (i) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge, or
other restriction of any government, governmental agency, or court to which the
Seller is subject or any provision of the charter or bylaws of the Seller; or
(ii) subject to obtaining any required consents under Assumed Contracts,
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other agreement, arrangement to which the Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
d. Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) or as otherwise set forth on the Disclosure Schedule, the
Seller has good and marketable title to all of the Acquired Assets, free and
clear of any Security Interest or restriction on transfer.
e. Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (of which (ii) and (iii) are
collectively "Financial Statements"):
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<PAGE>
(i) unaudited balance sheets and statements of income as of and for the fiscal
years ended December 31, 1993 and December 31, 1994 and December 31, 1995 for
Radio Southeast, L.P., prior owners of two of the Stations; and (ii) unaudited
income statements for the three months ended December 31, 1995, for the fiscal
year ended December 31, 1996 and each month to date in 1997 for the Seller. The
Financial Statements have been prepared in conformity with the Seller's normal
accounting policies, practices and procedures applied on a consistent basis,
throughout the periods covered thereby, are correct and complete, fairly present
the financial condition of the Seller and the results of operations of Seller at
the dates and for the periods indicated, and are consistent with the books and
records of the Seller (which books and records are correct and complete). The
Financial Statements accurately state the revenues of the Stations for the
period indicated therein and include an accurate breakout of cash and trade
revenues.
f. Events Subsequent to November 1, 1997. From November 1, 1997,
until the Effective Date of the Local Marketing Agreement (or until the Closing
Date with respect to Subsection 2(f)(vii) below), except as set forth in Section
2(f) of the Disclosure Schedule, there has not been any material adverse change
in the assets, Liabilities, business, financial condition, operations, results
of operations, or future prospects of the Seller with respect to the operation
of the Stations. Except as set forth in Section 2(f) of the Disclosure Schedule,
without limiting the generality of the foregoing and with respect to the
operation of the Stations from November 1, 1997 until the Effective Date of the
Local Marketing Agreement (or until the Closing Date with respect to Subsection
2(f)(vii) below):
i. other than this Agreement, the Seller has not entered into
any agreement, contract, lease, sublease, license, or sublicense (or
series of related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
ii. the Seller has not delayed or postponed (beyond its normal
practice in the Ordinary Course of Business) the payment of accounts
payable and other Liabilities;
iii. the Seller has not altered its credit and collection
policies or its accounting policies;
iv. there have been no material changes and, to Seller's
Knowledge, no threatened material changes in employment terms for any of
its directors, officers, and principal employees;
v. there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Seller;
vi. the Seller has not materially altered the programming,
format or call letters of the Stations, or its promotional and marketing
activities;
vii. the Seller has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has
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<PAGE>
operated the Stations in material compliance therewith and with all FCC
rules and regulations;
viii. the Seller has not terminated or received notice of
termination for any syndicated programming; and
ix. the Seller has not committed to any of the foregoing
(except to Buyers).
g. Tax Matters. The Seller has timely and properly filed all Tax
Returns that it was required to file with respect to the Seller's operations.
All such Tax Returns were correct and complete and properly reflect the tax
liability of the Seller. To Seller's Knowledge, no Tax deficiencies have been
proposed or assessed against the Seller. All Taxes currently or previously
payable by the Seller with respect to its operations (whether or not shown on
any Tax Return) have been paid. The Seller has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other third party. No
claim has ever been made by any authority in any jurisdiction where the Seller
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
h. Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing of all material transmitter and station equipment, vehicles and
other tangible personal property used in conducting the operation and business
of the Stations. The Seller owns or leases all tangible assets necessary for the
conduct of the operation and business of the Stations as presently conducted and
all leased assets are specifically identified as such in Section 2(h) of the
Disclosure Schedule.
i Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Owned
Real Estate). The Seller has delivered to the Buyers correct and complete copies
of the Leases. With respect to the Real Estate, to the Seller's Knowledge:
i. the Seller has good and marketable title as described in
that certain title policy dated November 5, 1996, by Old Republic National
Title Insurance Company (the "Title") to all of the Owned Real Estate free
and clear of all liens, charges, mortgages, security interests, easements,
restrictions or other encumbrances of any nature whatsoever except as
described in the Title and except for real estate taxes not yet due and
payable and municipal and zoning ordinances, and recorded utility
easements (collectively, the "Permitted Real Estate Encumbrances");
ii. the Leases are and, at the Closing will be (with respect
to the Seller and, to Seller's Knowledge, with respect to the Parties),
legal, valid, binding, enforceable, and in full force and effect;
iii. no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would
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<PAGE>
constitute a breach or default thereunder or permit termination,
modification, or acceleration thereunder;
iv. there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
v. none of the Owned Real Estate and to the Seller's
Knowledge, none of the properties subject to the Leases is subject to any
lease (other than Leases), option to purchase or rights of first refusal;
vi. except for Permitted Real Estate Encumbrances, or as
described in Section 2(i) of the Disclosure Schedule, there are no (i)
actual or, to the Seller's Knowledge, proposed special assessments with
respect to any of the Real Estate; (ii) pending or, to the Seller's
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the
buildings or improvements located on the Real Estate; (iv) any pending or,
to the Seller's Knowledge, threatened changed in any zoning laws or
ordinances which may materially adversely affect any of the Real Estate or
Seller's use thereof;
vii. the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder; and
viii. Seller has received no notice that all facilities on the
Real Estate do not have all approvals of governmental authorities
(including licenses, permits and zoning approvals) required in connection
with the operation thereof and or have not been operated and maintained in
accordance with applicable laws, rules, and regulations.
j. Contracts. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $15,000 or not entered into in the Ordinary Course of Business. The
Seller has delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(j) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed which constitutes an
Assumed Contract: (A) subject to obtaining any required consents under Assumed
Contracts, the written arrangement is, and immediately after the Closing will
be, legal, valid, binding, enforceable, and in full force and effect; (B) to
Seller's Knowledge, no party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration, under the written
arrangement; and (c) no party has repudiated any provision of the written
arrangement. The Seller is not a party to any verbal contract, agreement, or
other arrangement which, if reduced to written form, would be required to be
listed in Section 2(j) of the Disclosure Schedule under the terms of this
Section 2(j). Except for the Assumed Contracts, the Buyers shall not have any
Liability or obligations for or in respect of any of the contracts set forth in
Section 2(j) of the Disclosure Schedule or any other contracts or agreements of
the Seller. The contracts referred to in this Section 2(j) shall be as of the
Effective Date of the Local Marketing Agreement.
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<PAGE>
k. Commission Licenses and Compliance with Commission Requirements.
i. Except as described in Section 2(k) of the Disclosure
Schedule, all licenses, permits, authorizations, franchises, certificates
of compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or useful in the operation of the
Stations as they are now being operated are (A) in full force and effect,
(B) unimpaired by any acts or omissions of the Seller or the Seller's
employees or agents, (C) free and clear of any restrictions which might
limit the full operation of the Stations, and (D) with respect to the FCC
Licenses, detailed in Section 2(k) of the Disclosure Schedule. With
respect to the licenses, permits, authorizations, franchises, certificates
of compliance and consents referenced in the preceding sentence, Section
2(k) of the Disclosure Schedule also sets forth, without limitation, the
date of the last renewal, the expiration date thereof, and any conditions
or contingencies related thereto. Except as set forth in Section 2(k) of
the Disclosure Schedule, no condition exists or event has occurred that
permits, or after notice or lapse of time, or both, would permit, the
revocation or termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Stations as now conducted. Except as set forth in Section
2(k) of the Disclosure Schedule, the Seller is not aware of any reason why
the FCC licenses might not be renewed in the ordinary course or revoked.
ii. The Stations are in compliance with the FCC's policy on
exposure to radio frequency radiation. Access to the Station's
transmission facilities is restricted in accordance with the policies of
the FCC.
iii. Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Seller's Knowledge, the Seller is not the subject of any
FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(k) of the Disclosure Schedule.
iv. The Seller has filed with the FCC and all other
governmental authorities having jurisdiction over the Stations all
material reports, applications, documents, instruments, and other
information required to be filed, and will continue to make such filings
through the Closing Date.
v. The Seller is not aware of any information concerning the
Stations that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary
for the consummation of the transactions contemplated hereunder or the
Buyer's operation and/or ownership of the Stations.
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<PAGE>
l. Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use the by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
To Seller's Knowledge, the Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and the Seller has never received any charge,
complaint, or notice alleging any such interference, infringement,
misappropriation, or violation. To the Knowledge of the Seller, no third party
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of the Seller.
m. Insurance. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Seller's insurance coverage. With
respect to each such insurance policy (except for policy coverage to be obtained
by the Programmer after the Effective Date of the LMA), (A) the policy is legal,
valid, binding, and enforceable and in full force and effect; (B) the Seller has
no Basis to believe that the policy will not continue to be legal, valid,
binding, and enforceable and in full force and effect on identical terms through
the Closing Date.
n. Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(n) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no Knowledge of any Basis for any such charge, complaint, action,
suit, proceeding, hearing, or investigation against the Seller being likely to
occur.
o. Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee as of
the date hereof. To the Knowledge of the Seller, no key employee or group of
employees has any plans to terminate employment with the Seller. The Seller is
not a party to or bound by any collective bargaining or similar agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to the employees of the Seller. The Seller has no
Knowledge of any Basis for any claim by past or current employees of the Seller
or applicants for employment that the Seller or its management has discriminated
based on each individuals race, sex, national origin, religion, ethnicity,
handicap or any other protected characteristic under applicable law.
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p. Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered or made available to the Buyers. Each Employee
Benefit Plan (and each related trust or insurance contract) complies and at all
times has complied in form and in operation in all material respects with the
applicable requirements of ERISA and the Code. The Seller does not have any
commitment to create any additional Employee Benefit Plan or modify or change
any existing Employee Benefit Plan that would affect any employee or terminated
employee of the Seller, except to the extent required by applicable law. There
are no pending or, to the Knowledge of the Seller, threatened material claims
under, by or on behalf of any of the Employee Benefit Plans, by any employee or
beneficiary covered by any such Employee Benefit Plan, or otherwise involving
any such Employee Benefit Plan (other than routine claims for benefits), nor
have there been any Reportable Events or Prohibited Transactions with respect to
any Employee Benefit Plan.
q. Environment, Health, and Safety.
Except as a result of any actions of the Programmer under the Local
Marketing Agreement:
i. With respect to the operation of the Stations and the Real
Estate, the Seller is, and at all times in the past has been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and the Seller has no Liability (and to Seller's Knowledge
there is no Basis related to the past or present operations of the Seller
or its predecessors for any present or future Liability) under any
Environmental Law. The Seller has no Liability (and to Seller's Knowledge
there is no Basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand against the
Seller giving rise to any Liability) under the Occupational Safety and
Health Act, as amended, or any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign government (or agency
thereof) concerning employee health and safety, or for any illness of or
personal injury to any employee.
ii. The Seller has obtained and at all times has been in
compliance in all material respects with all of the terms and conditions
of all permits, licenses, and other authorizations which are required
under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of
any federal, state, or local or foreign government relating to worker
health and safety.
iii. All properties and equipment used in the Stations and the
Acquired Assets during Seller's period of ownership or occupancy have been
free of asbestos, PCB's, methylene chloride, trichloroethylene, 1,
2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances. To Seller's Knowledge, no pollutant, contaminant, or chemical,
industrial, hazardous, or toxic material or waste ever has been buried,
stored,
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spilled, leaked, discharged, emitted, or released on any of the Real
Estate. To Seller's Knowledge, no above ground or underground storage
tanks have ever been located at, on or under the Real Estate. The Seller
has delivered to the Buyers a complete copy of all environmental claims,
reports, studies, compliance actions or the like of the Seller or which
are available to the Seller with respect to any of the Real Estate or any
of the Acquired Assets.
r. Legal Compliance. The Seller has complied in all material
respects with all laws (including rules and regulations thereunder) of federal,
state, local and foreign governments and all agencies thereof. The Seller has
filed in a timely manner all material reports, documents, and other materials it
was required to file (and the information contained therein was correct and
complete in all material respects) under all applicable laws.
s. Advertising Contracts. Section 2(s) of the Disclosure Schedule
lists as of the date hereof all arrangements for the sale of air time or
advertising on the Stations in excess of $10,000, and the amount to be paid to
the Seller therefor. The Seller has no reason to believe and has not received a
notice or indication of the intention of any of the advertisers or third parties
to material contracts of the Seller to cease doing business or to reduce in any
material respect the business transacted with the Seller or to terminate or
modify any agreements with the Seller (whether as a result of consummation of
the transactions contemplated hereby or otherwise).
t. Brokers' Fees. Other than the fee payable to Media Venture
Partners, which shall be the responsibility of Seller to the extent it exceeds
Fifty Thousand Dollars ($50,000), the Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
u. Undisclosed Commitments or Liabilities. There are no material
commitments, liabilities or obligations relating to the Stations, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Seller of the liabilities of third parties, for which specific
and adequate provisions have not been made on the Financial Statements except
those incurred in or as a result of the Ordinary Course of Business since
November 1, 1997, or as a result of actions by Buyers under the Local Marketing
Agreement.
v. Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer.
Buyers represent and warrant to the Seller that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
a. Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
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b. Authorization of Transaction. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will materially (i) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge, or
other restriction of any government, governmental agency, or court to which the
Buyers are subject or any provision of their articles of organization or other
charter documents, or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
d. Brokers' Fees. Except for the obligation to pay up to Fifty
Thousand Dollars ($50,000) payable to Media Venture Partners, the Buyers have no
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
e. Conditions Affecting Regulatory Approval. The Buyer is not aware
of any information concerning its qualifications that could cause the FCC or any
other regulatory authority not to issue to the Buyers all regulatory
certificates and approvals necessary for the consummation of the transactions
contemplated hereunder or the Buyer's operation and/or ownership of the
Stations.
4. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing (which agreements shall supplement
the agreements in the Local Marketing Agreement):
a. General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
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b. Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Seller to Licensing (the
"Assignment Application"). Each party shall bear its own costs and attorneys'
fees. The Seller and the Buyers shall thereafter prosecute the Assignment
Application with all reasonable diligence and otherwise use commercially
reasonable efforts to obtain the grant of the Assignment Application as
expeditiously as practicable (but neither the Seller nor the Buyers shall have
any obligation to satisfy complainants or the FCC by taking any steps which
would have a material adverse effect upon the Stations or impose significant
costs on such party). If the FCC imposes any condition on either party to the
Assignment Application, such party shall use commercially reasonable efforts to
comply with such condition, provided, that neither party shall be required
hereunder to comply with any condition that would have a material adverse effect
upon the Stations or any Affiliate. The Seller and the Buyers shall jointly
oppose any requests for reconsideration or judicial review of FCC approval of
the Assignment Application and shall jointly request from the FCC extension of
the effective period of FCC approval of the Assignment Application if the
Closing shall not have occurred prior to the expiration of the original
effective period of the FCC Consent. Nothing in this Section 4(b) shall be
construed to limit either party's right to terminate this Agreement pursuant to
Section 9 of this Agreement.
c. Notices and Consents. The Seller will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request. Each of the Parties will file any notification and
report forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its best efforts
to obtain an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary, proper or advisable.
Each of the Parties will take any additional action that may be necessary,
proper, or advisable in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental agencies,
and third parties that it may be required to give, make, or obtain.
d. Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Stations for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Effective Date of
the Local Marketing Agreement shall not exceed Ten Thousand Dollars ($10,000.00)
worth of air time without the Buyers' consent.
e. Contracts. The Seller will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(k) of the Disclosure Schedule in any material respect. The Seller will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Ten Thousand Dollars
($10,000).
f. Operation of Stations. The Seller will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. The Seller shall operate the Stations in compliance with the
FCC Licenses and the rules and regulations of the FCC,
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and the FCC Licenses shall at all times remain in full force and effect. The
Seller shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
g. Preservation of Stations and the Acquired Assets. To the extent
consistent with the Local Marketing Agreement, the Seller will keep its Stations
and the Acquired Assets and properties substantially intact, including its
present operations, physical facilities, working conditions, relationships with
lessors, licensors, advertisers, suppliers, customers, and employees, all of the
Confidential Information, call letters and trade secrets of the Stations, and
the FCC Licenses.
h. Full Access and Consultation. The Seller will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Stations, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Seller. The Seller will consult with the
Buyers' management with a view to informing Buyers' management as to the
operations, management and business of the Stations.
i. Notice of Developments. The Seller will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Stations or the Acquired Assets until the Effective Date of
the Local Marketing Agreement or the ability of the Seller to perform hereunder.
j. Exclusivity. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets other than in the Ordinary Course of Business, or (C) similar transaction
or business combination involving the Seller, or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Seller will notify
the Buyers immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
k. Title Insurance, Surveys and Environmental Assessments. The
Buyers will obtain (i) with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring leasehold
title to such Real Estate in the Buyers as of the Closing subject only to the
Permitted Real Estate Encumbrances, together with such endorsements for zoning,
contiguity, public access and extended coverage as the Buyers or their lender
reasonably request, (ii) with respect to each parcel of Owned Real Estate, an
owner's policy of title insurance by a title insurer reasonably satisfactory to
the Buyers, in an amount equal to the fair market value of such Real Estate
(including all improvements located thereon), insuring title to the Owned Real
Estate to be vested in the Buyers as of the Closing free and clear of all liens
and encumbrances except Permitted Real Estate Encumbrances, together with such
endorsements for zoning, contiguity, public access and extended coverage as the
Buyers or its lender reasonably request, (iii) a current survey of each parcel
of Real Estate certified to the
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Buyers and its lender, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys") which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iv) with
respect to each parcel of Real Estate, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Sellers which does not indicate that the Seller and the Real Estate are
not in compliance with any Environmental Law and which shall not disclose or
recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. The Buyers will pay the
costs of these title policies, Surveys and environmental assessments.
l. Control of Stations. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Between the date of this Agreement and
the Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
m. Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing, except and
to the extent provided in the Local Marketing Agreement.. In the event of any
such loss, damage, or destruction the Seller will promptly notify the Buyers of
all particulars thereof, stating the cause thereof (if known) and the extent to
which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will, at Seller's expense, repair or replace such
Acquired Assets to their former condition as soon as possible after loss, damage
or destruction thereof and shall use its best efforts to restore as promptly as
possible transmissions as authorized in the FCC Licenses. The Closing Date shall
be extended (with FCC consent, if necessary) for up to sixty (60) days to permit
such repair or replacement. If repair or replacement cannot be accomplished
within sixty (60) days of the date of the Seller's notice to the Buyers and the
Buyers determine that the Seller's failure to repair or replace would have a
material adverse effect on the operation of the Stations:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
iii. the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to the
Buyers of all rights under any insurance claims covering the loss, damage
or destruction and payment over to the Buyers of any proceeds under any
such insurance policies, previously received by the Seller with
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respect thereto plus an amount equal to the amount of any deductible or
self-insurance maintained by Seller on such Acquired Assets. In the event
the Closing Date is postponed pursuant to this Section 4(m), the parties
hereto will cooperate to extend the time during which this Agreement must
be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
a. Conditions to Obligation of the Buyers. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Seller shall have performed and complied with all of
its covenants hereunder in all respects through the Closing;
iii. the Seller shall have procured all of the third party
consents specified in Section 4(c) above, and all of the title insurance
commitments (and endorsements), Surveys and environmental site assessments
described in Section 4(k) above shall have been procured to the
satisfaction of Buyers;
iv. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or impose damages or
penalties upon any of the parties if such transactions are consummated,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
v. the Seller shall have delivered to the Buyers a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Sections 5(a)(i)
through (iv) is satisfied in all respects;
vi. each of the Assignment Applications shall have been
approved by a Final Order of the FCC, all applicable waiting periods (and
any extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or been terminated, and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
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vii. the relevant parties shall have entered into the
Postclosing Agreement;
viii. the Buyers shall have received from counsel to the
Seller opinions with respect to the matters set forth in Exhibits E-1, E-2
and E-3 attached hereto, addressed to the Buyers and its lender and dated
as of the Closing Date;
ix. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with an allocation schedule to be delivered at closing; and
x. all actions to be taken by the Seller in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
b. Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
iii. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
iv. the Buyers shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
v. each of the Assignment Applications shall have been
approved by a Final Order of the FCC, all applicable waiting periods (and
any extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or been terminated, and the Buyers shall have
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received all governmental approvals required to transfer all other
authorizations, consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
vi. the relevant parties shall have entered into the
Postclosing Agreement; and
vii. the Seller shall have received from counsel to the Buyers
an opinion with respect to the matters set forth in Exhibit F attached
hereto, addressed to the Seller and dated as of the Closing Date;
viii. all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
6. Post-Closing Covenants.
The Parties agree as follows with respect to the period following
the Closing:
a. General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
b. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
c. Adjustments. To the extent not provided for in the Local
Marketing Agreement, operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. The prorations and adjustments hereunder shall be made
and paid insofar as feasible on the Closing Date, with a final settlement sixty
(60) days after the Closing Date. In the event of any disputes between the
Parties as to such adjustments, the amounts
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not in dispute shall nonetheless be paid at such time and such disputes shall be
determined by an independent accounting firm mutually acceptable to both parties
and the fees and expenses of such accounting firm shall be paid one-half (1/2)
by the Seller and one-half (1/2) by the Buyer; provided, however, that if the
amount in dispute is Five Thousand Dollars ($5,000) or less, the Parties shall
split the difference without being required to retain an independent accounting
firm.
d. Collection of Accounts Receivable. At the Closing, the Seller
will retain any remaining accounts receivable of the Stations owing to the
Seller as of the close of business on the Effective Date of the Local Marketing
Agreement and not previously collected and remitted by Buyers to the Seller.
e. Consents. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
7. Remedies for Breaches of this Agreement.
a. Survival. All of the representations and warranties of the Seller
and Buyers contained in Section 2 of this Agreement shall survive the Closing
and continue in full force and effect for a period of one (1) year following
Closing.
b. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement
or in any Ancillary Agreement executed and/or delivered by the Seller
(provided that Buyers make a written claim for indemnification within the
applicable survival period and provided further that the maximum recovery
by Buyers for such misrepresentation or breach in the aggregate shall be
the Retainage Amount);
ii. any breach or nonfulfillment of any agreement or covenant
of the Seller contained herein or in any Ancillary Agreement;
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iii. any Liability of the Seller which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
c. Indemnification Provisions for the Benefit of the Seller. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers ( provided that Seller makes a written claim for
indemnification within the applicable survival period and provided further that
the maximum recovery by Seller for such misrepresentation or breach in the
aggregate shall be Two Hundred Sixty Two Thousand Five Hundred Dollars) or (ii)
any breach or nonfulfillment of any agreement or covenant of the Buyers
contained herein or in any Ancillary Agreement, or (iii) any Assumed Liability.
d. Specific Performance. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(o) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in Section
7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for Buyers for a breach of any provision of this
Agreement.
e. Liquidated Damages. The Buyers and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(c), the Seller
shall be entitled to receive from the defaulting Party for such default the
Earnest Money Deposit as liquidated damages without the need for proof of
damages. The Seller shall proceed against the Earnest Money Deposit as full
satisfaction of liquidated damages owed by the Buyers and as its sole remedy for
a failure of the transactions contemplated hereby to occur as a result of a
material breach of the terms of this Agreement by the Buyers.
f. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
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part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
g. Limitation of Liability. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Indemnified Party, in
the aggregate from all indemnifiable events shall exceed Ten Thousand Dollars
($10,000) and shall be below Two Hundred Sixty-Two Thousand, Five Hundred
Dollars ($262,500), and indemnification shall be made by the indemnifying party
only to the extent of such excess over Ten Thousand Dollars ($10,000) and
subject to the maximum limit of Two Hundred Sixty-Two Thousand Dollars
($262,500); provided, however, that the foregoing limitation shall not be
applicable to: (i) the obligations of the Buyer to pay and discharge any
Liability of the Seller to third parties from and after the Closing Date assumed
by the Buyer under the terms of this Agreement; (ii) the obligation of the
Seller to pay and discharge any Liability to third parties not assumed by the
Buyer under the terms of this Agreement, or (iii) the Seller's obligation to
deliver clear title to the Acquired Assets, subject to the Permitted Real Estate
Encumbrances.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets that are used or useful in
the operation of the Stations, wherever located, including but not limited to
all of its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities,
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furniture, furnishings, inventories of compact disks, records, tapes and other
supplies, vehicles) and all assignable warranties with respect thereto; (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions; (d) rights under orders and agreements
(including those Barter Agreements and Advertising Contracts identified on the
Disclosure Schedule) now existing or entered into in the Ordinary Course of
Business for the sale of advertising time on the Stations; (e) Assumed
Contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the Stations, jingles,
logos, slogans, and business goodwill of the Stations; (g) claims, deposits,
prepayments, refunds, causes of action, chooses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment; (h) Licenses and similar rights obtained from governments and
governmental agencies; and (i) FCC logs and records and all other books,
records, ledgers, logs, files, documents, correspondence, advertiser lists, all
other lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, program production materials,
studies, reports, and other printed or written materials; and (j) goodwill of
the Stations.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(k) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"Assumed Liabilities" means obligations of the Seller which accrue after
the Closing Date under the Assumed Contracts either: (i) to furnish services,
and other non-Cash benefits to another party after the Closing; or (ii) to pay
for goods, services, and other non-Cash benefits that another party will furnish
to it after the Closing. The Assumed Liabilities shall not include any Retained
Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
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"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 1 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, or the Emergency Planning and Community Right-to-Know Act of 1986 (each
as amended), or any other law of any federal, state, local, or foreign
government or agency thereof (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges thereunder)
relating to public health and safety, or pollution or protection of the
environment, including, without limitation, laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"Escrow Agent" means Media Venture Partners.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
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"Knowledge" means actual knowledge after reasonable investigation.
"Leases" means those real estate leases to which Seller is a party
governing Seller's studios and tower sites, as described in Section 2(i) of the
Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multi-employer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Seller as
described in Section 2(i) hereof and Section 2(i) of the Disclosure Schedule and
all buildings, fixtures, and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller's
operating general partner in the form attached hereto as Exhibit C.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975, but does not include any transaction covered by a
statutory or administrative exemption.
"Purchase Price " has the meaning set forth in Section 1(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043, but
does not include any event with respect to which the reporting requirement is
waived pursuant to the regulations promulgated thereunder.
"Retainage Agent" means Bank One Trust Company, NA.
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"Retainage Agreement" has the meaning set forth in Schedule A below.
"Retainage Amount" has the meaning set forth in Schedule A below.
"Retained Assets" means (i) the certificate of limited partnership,
partnership agreement, qualifications to conduct business as a foreign limited
partnership, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of the Seller; (ii) any of the
rights of the Seller under this Agreement (or under any side agreement between
the Seller on the one hand and the Buyers on the other hand entered into on or
after the date of this Agreement); (iii) accounts, notes and other receivables
of the Seller; (iv) Cash; (v) personal property owned by employees of the
Stations and stored by them at the Seller's facilities; and (vi) a Lincoln
Continental.
"Retained Liabilities" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application); or (iv) any Liability
or obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WIXV-FM (licensed to Savannah, Georgia) WSGF-AM (licensed to Springfield,
Georgia), and WBMQ-AM (licensed to Savannah, Georgia).
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(n) above.
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"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Title" has the meaning set forth in Section 2(i) above.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach of any representation, warranty, or covenant contained
in this Agreement; provided, however, that if such breach is capable of
being cured, such breach also remains uncured for thirty (30) days after
notice of breach is received by the Seller from the Buyers;
iii. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable being cured, such breach remains uncured for thirty (30) days
after notice of breach is received by the Buyers from the Seller;
iv. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained
in this Agreement);
v. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant contained in
this Agreement);
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vi. the Buyers or the Seller may terminate this Agreement if
any Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach), and the Earnest Money Escrow Deposit
shall be paid to Buyers or Seller as provided in the Earnest Money Escrow
Agreement.
10. Miscellaneous.
a. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
b. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Seller the Purchase Price therefor or to any
successor to the Buyers in the event of any sale, merger or consolidation of the
Buyers, and (ii) Buyers may assign their indemnification claims and their rights
under the warranties and representations of the Sellers to the financial
institution(s) providing financing to the Buyers in connection with this
transaction.
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
Mr. Richard Verne
c/o Point Communications, Inc.
P.O. Box 1094
Montauk, New York 11954
Copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attn: Melvin Epstein
Fax: (212) 806-6653
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
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Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Georgia.
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
k. Expenses. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(n) with respect to Surveys, title commitments and
environmental audits. The Seller will pay all income taxes. The Seller and the
Buyers will each pay one-half (1/2) of any transfer or sales taxes and other
recording or similar fees necessary to vest title to each of the Acquired Assets
in the Buyers.
l. Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail, or if a reasonable person
would be on notice as to the applicability of the exception. The Parties intend
that
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each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
m. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Savannah, Georgia in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
--------------------------------
(printed)
- -----------------------------------
Title:
-----------------------------
CUMULUS LICENSING CORPORATION
By:
--------------------------------
(printed)
- -----------------------------------
Title:
-----------------------------
SAVANNAH COMMUNICATIONS, L.P.
By:
--------------------------------
(printed)
- -----------------------------------
Title:
-----------------------------
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<PAGE>
SCHEDULE A
Purchase Price. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the amount of Five Million Two Hundred Fifty Thousand
Dollars ($5,250,000.00), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Seven Hundred Fifty Thousand Dollars ($750,000.00)
(the "Earnest Money Deposit") in the form of an irrevocable letter of credit
from NationsBank;
(ii) on the Closing Date, the Buyers will deposit with the Retainage
Agent the amount of Two Hundred Sixty-Two Thousand Five Hundred Dollars
($262,500.00) (the "Retainage Amount") by wire transfer of immediately available
U.S. dollars; and
(iii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Four Million Nine Hundred Eighty-Nine Thousand Five Hundred Dollars
($4,987,500.00), with adjustments as provided specifically in this Agreement.
The Earnest Money Deposit referenced in this Schedule A shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), and shall
be disbursed to Seller or returned to Buyers as provided in the Earnest Money
Escrow Agreement. The Retainage Amount referenced in this Schedule A shall be
placed with the Retainage Agent pursuant to a retainage agreement in the form
attached hereto as Exhibit B (the "Retainage Agreement") and shall be disbursed
to Seller or to Buyers as provided in the Retainage Agreement.
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of December 23, 1997, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing), and Lewis
Broadcasting Corporation, a Georgia corporation (the "Seller"). Broadcasting and
Licensing are referred to collectively herein as the "Buyers." The Buyers and
the Seller are referred to individually as the "Party" or collectively as the
"Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (except for certain assets to
be leased) and to assume certain of the liabilities, of the Seller that are used
or useful in the operation of radio station WJCL-FM, licensed to Savannah,
Georgia (the "Station") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
a. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Seller agrees to sell, transfer, convey and
deliver to (i) Licensing, and Licensing agrees to purchase from the Seller, all
of the FCC Licenses listed in Section 2(k) of the disclosure schedule
("Disclosure Schedule"); and (ii) Broadcasting, and Broadcasting agrees to
purchase from the Seller, all of the Acquired Assets other than the FCC
Licenses. Both such sales shall take place at the Closing for the consideration
specified below in this Section 1.
b. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Seller agrees to pay
and discharge all Liabilities and obligations of the Seller other than the
Assumed Liabilities.
c. Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the Purchase Price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
(the "Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
d. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Station in
Savannah, Georgia, commencing at 9:00 a.m. local time promptly after the FCC
approval of the Assignment Application becomes a Final
<PAGE>
Order, by which date all other conditions to the obligations of the Parties to
consummate the transactions contemplated hereby will have been satisfied, or
such other date as the Parties may mutually determine (the "Closing Date").
e. Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds in form acceptable to the Buyers, (B) such affidavits, transfer
tax returns, memorandums of lease, and other additional documents as may be
required by the terms of the title insurance commitments described in Section
4(o) hereof, as necessary to furnish title insurance as required by such section
or as may be necessary to convey title to the Real Estate to the Buyers in the
condition required herein or provide public notice of existence of the Leases,
and (C) such other instruments of sale, transfer, conveyance, and assignment as
the Buyers and their counsel reasonably may request; (iv) the Buyers will
execute, acknowledge (if appropriate), and deliver to the Seller (A) an
assumption in the form attached hereto as Exhibit B and (B) such other
instruments of assumption as the Seller and its counsel reasonably may request;
and (v) the Buyers will deliver to the Seller the consideration specified in
Section 1(c) above.
f. Postclosing Agreement. On the Closing Date, the Seller shall
execute, and shall cause each of its shareholders to execute, a Postclosing
Agreement with the Buyers with the Buyers in the markets served by the Station
and agreements to indemnify the Buyers in the form of Exhibit C attached hereto.
A portion of the Purchase Price equal to Fifty Thousand Dollars ($50,000) shall
be paid to the Seller by the Buyers on the Closing Date as consideration for the
agreements set forth in the Postclosing Agreement.
g. Time Brokerage Agreement. Concurrently with the execution of this
Agreement, the Seller and Broadcasting are entering into a Time Brokerage
Agreement under which Broadcasting will purchase airtime from Seller pending the
Closing.
2. Representations and Warranties of the Seller.
The Seller represents and warrants to the Buyers that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
a. Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The Seller has the power and authority to own or lease its properties and to
carry on all business activities now conducted by it. The shareholders of the
Seller are J.C. Lewis, Jr.; Nancy N. Lewis; Nancy V. Lewis; J. Curtis Lewis,
III; Walter N. Lewis; D. Scott Lewis; J. Christian Lewis; S. Wistar Lewis; and
the following minors (through their custodian UGM); Julian A. Tison, III; W.
Nelson Lewis, Jr.; Virginia C. Lewis; Caroline M. Lewis; J. Curtis
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<PAGE>
Lewis, IV; H. Smith Lewis; Samuel W. Lewis, Jr.; Joseph B. Lewis; Erika A.
Lewis; and Mary R. Lewis.
b. Authorization of Transaction. The Seller has full power and
authority to execute and deliver this Agreement and all agreements and
instruments to be executed and delivered by Seller pursuant to this Agreement
(collectively, the "Ancillary Agreements") and to perform its obligations
hereunder and thereunder. Without limiting the generality of the foregoing, the
Board of Directors of the Seller has duly authorized the execution, delivery,
and performance of this Agreement and the Ancillary Agreements by the Seller.
This Agreement and the Ancillary Agreements constitute the valid and legally
binding obligation of the Seller, enforceable in accordance with their
respective terms and conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the charter or bylaws of the Seller; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other agreement, arrangement to which the Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
d. Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Seller has good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
e. Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited statements of income as of and for the fiscal years
ended December 31, 1993, December 31, 1994, and December 31, 1995 for the
Seller; and (ii) unaudited statements of income, as of and for each month during
1996 and each month to date in 1997 for the Seller. The Financial Statements
have been prepared in conformity with the Seller's normal accounting policies,
practices and procedures applied on a consistent basis, throughout the periods
covered thereby, are correct and complete, fairly present the financial
condition of the Seller and the results of operation of Seller at the dates and
for the periods indicated, and are consistent with the books and records of the
Seller (which books and records are correct and complete in all material
respects). The Financial Statements
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<PAGE>
accurately state the revenues of the Station for the period indicated therein
and include an accurate breakout of cash and trade revenues.
f. Events Subsequent to January 1, 1997. Since January 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule, there has not
been any material adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations, or future prospects of the Seller
with respect to the operation of the Station. Without limiting the generality of
the foregoing and with respect to the operation of the Station since January 1,
1997:
i. other than this Agreement, the Seller has not entered into
any agreement, contract, lease, sublease, license, or sublicense (or
series of related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
ii. the Seller has not delayed or postponed (beyond its normal
practice in the Ordinary Course of Business) the payment of accounts
payable and other Liabilities;
iii. the Seller has not altered its credit and collection
policies or its accounting policies;
iv. the Seller has not entered into or terminated any
employment arrangement, employment contract, consulting contract or
severance agreement or collective bargaining agreement, written or oral,
or modified the terms of any existing such contract or agreement;
v. there have been no changes and, to Seller's knowledge, any
threatened changes in employment terms for any of its directors, officers,
and employees;
vi. there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Seller with respect to the Station;
vii. the Seller has not materially altered the programming,
format or call letters of the Station, or its promotional and marketing
activities;
viii. the Seller has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Station in compliance
therewith and with all FCC rules and regulations in all material respects;
ix. the Seller has not terminated or received notice of
termination for any syndicated programming; and
x. the Seller has not committed to any of the foregoing.
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<PAGE>
g. Tax Matters. The Seller has timely and properly filed all Tax
Returns that it was required to file with respect to the Seller's operations.
All such Tax Returns were correct and complete and properly reflect the tax
liability of the Seller. No Tax deficiencies have been proposed or assessed
against the Seller. All Taxes owed by the Seller with respect to its operations
(whether or not shown on any Tax Return) have been paid. The Seller has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. No claim has ever been made by any authority in any
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
h. Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Station. The Seller owns or leases all tangible assets necessary for the conduct
of the operation and business of the Station as presently conducted and as
presently proposed to be conducted and all leased assets are specifically
identified as such in Section 2(h) of the Disclosure Schedule.
i. Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Seller has delivered to the Buyers correct and complete copies of
the Leases. With respect to the Real Estate:
i. the Seller has good and marketable title to all of the
Owned Real Estate free and clear of all liens, charges, mortgages,
security interests, easements, restrictions or other encumbrances of any
nature whatsoever except real estate taxes for the year of Closing and
municipal and zoning ordinances and recorded utility easements which do
not impair the current use, occupancy or value or the marketability of
title of the property and which are disclosed in Section 2(i) of the
Disclosure Schedule (collectively, the "Permitted Real Estate
Encumbrances");
ii. the Leases are and, following the Closing will continue to
be, legal, valid, binding, enforceable, and in full force and effect;
iii. no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default thereunder
or permit termination, modification, or acceleration thereunder;
iv. there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
v. none of the Owned Real Estate and to the Seller's
Knowledge, none of the properties subject to the Leases is subject to any
lease (other than Leases), option to purchase or rights of first refusal;
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<PAGE>
vi. except for Permitted Real Estate Encumbrances, there are
no (i) actual or, to the Seller's Knowledge, proposed special assessments
with respect to any of the Real Estate; (ii) pending or, to the Seller's
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the
buildings or improvements located on the Real Estate; (iv) any pending or,
to the Seller's Knowledge, threatened changed in any zoning laws or
ordinances which may materially adversely affect any of the Real Estate or
Seller's use thereof;
vii. the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder;
viii. to the Seller's Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; and
ix. to the Seller's Knowledge, the owner of each leased
facility has good and marketable title to the underlying parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for Permitted Real Estate Encumbrances and
Seller's leasehold interest in each Lease has priority over any other
interest except for the fee interest therein and Permitted Real Estate
Encumbrances.
j. Contracts. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not entered into in the Ordinary Course of Business. The
Seller has delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(j) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed which constitutes an
Assumed Contract: (A) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect; (B) the written arrangement will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(j) of the Disclosure Schedule under the terms
of this Section 2(j). Except for the Assumed Contracts, the Buyers shall not
have any Liability or obligations for or in respect of any of the contracts set
forth in Section 2(j) of the Disclosure Schedule or any other contracts or
agreements of the Seller.
k. Commission Licenses and Compliance with Commission Requirements.
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Station as they are now being operated are (A) in full
force and effect, (B) unimpaired by any acts or omissions of the Seller or
the
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<PAGE>
Seller's employees or agents, (C) free and clear of any restrictions which
might limit the full operation of the Station, and (D) detailed in Section
2(k) of the Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and consents
referenced in the preceding sentence, Section 2(k) of the Disclosure
Schedule also sets forth, without limitation, the date of the last
renewal, the expiration date thereof, and any conditions or contingencies
related thereto. Except as set forth in Section 2(k) of the Disclosure
Schedule, no condition exists or event has occurred that permits, or after
notice or lapse of time, or both, would permit, the revocation or
termination of any such license, permit, consent, franchise, or
authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Station as now conducted. Except as set forth in Section
2(k) of the Disclosure Schedule, the Seller is not aware of any reason why
the FCC licenses might not be renewed in the ordinary course or revoked.
ii. To Seller's Knowledge, the Station is in compliance with
the FCC's policy on exposure to radio frequency radiation in all material
respects. No renewal of any FCC License would constitute a major
environmental action under the FCC's rules or policies. Access to the
Station's transmission facilities is restricted in accordance with the
policies of the FCC.
iii. Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Seller's Knowledge, the Seller is not the subject of any
FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Station, and to Seller's Knowledge there are no proceedings (other than
rule making proceedings of general applicability) before the FCC or any
other governmental authority that could adversely affect any of the FCC
Licenses or the authorizations listed in Section 2(k) of the Disclosure
Schedule.
iv. The Seller has filed with the FCC and all other
governmental authorities having jurisdiction over the Station all material
reports, applications, documents, instruments, and other information
required to be filed, and will continue to make such filings through the
Closing Date.
v. The Seller is not aware of any information concerning the
Station that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary
for the consummation of the transactions contemplated hereunder or the
Buyer's operation and/or ownership of the Station. Seller is not aware of
any pending FCC applications which, if approved, would allow for the
operation of a new radio station with a signal reaching the signal area of
the Station and, in addition, Seller is not aware of any plans or
proposals by any existing radio Station with a signal reaching the signal
area of the Station to alter or change their format to a format similar to
that of the Station.
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<PAGE>
l. Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use the by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, or notice
alleging any such interference, infringement, misappropriation, or violation. To
the Knowledge of the Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Seller.
m. Insurance. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Seller's insurance coverage. With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
and enforceable and in full force and effect; (B) the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect on identical
terms through the Closing Date.
n. Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(n) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station taken as a whole.
The Seller has no Knowledge of any Basis for any such charge, complaint, action,
suit, proceeding, hearing, or investigation against the Seller.
o. Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Station of each employee. To
the Knowledge of the Seller, no key employee or group of employees has any plans
to terminate employment with the Seller. The Seller is not a party to or bound
by any collective bargaining or similar agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to the employees of the Seller. The Seller has no Knowledge of any Basis
for any claim by past or current employees of the Seller or applicants for
employment that the Seller or its management has discriminated based on each
individuals race, sex, national origin, religion, ethnicity, handicap or any
other protected characteristic under applicable law.
p. Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan
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<PAGE>
(and each related trust or insurance contract) complies and at all times has
complied in form and in operation in all material respects with the applicable
requirements of ERISA and the Code. The Seller does not have any commitment to
create any additional Employee Benefit Plan or modify or change any existing
Employee Benefit Plan that would affect any employee or terminated employee of
the Seller. There are no pending or, to the Knowledge of the Seller, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
q. Environment, Health, and Safety.
To Seller's Knowledge (without independent investigation or inquiry
outside the Ordinary Course of Business):
i. With respect to the operation of the Station and the Real
Estate, the Seller is, and at all times in the past has been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and the Seller has no Liability (and to Seller's Knowledge
there is no Basis related to the past or present operations of the Seller
or its predecessors for any present or future Liability) under any
Environmental Law. The Seller has no Liability (and to Seller's Knowledge
there is no Basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand against the
Seller giving rise to any Liability) under the Occupational Safety and
Health Act, as amended, or any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign government (or agency
thereof) concerning employee health and safety, or for any illness of or
personal injury to any employee.
ii. The Seller has obtained and at all times has been in
compliance in all material respects with all of the terms and conditions
of all permits, licenses, and other authorizations which are required
under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of
any federal, state, or local or foreign government relating to worker
health and safety.
iii. All properties and equipment used in the Station and the
Acquired Assets have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances. No pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste ever has been
buried, stored, spilled, leaked, discharged, emitted, or released on any
of the Real Estate. No above ground or underground storage tanks have ever
been located at, on or under the Real Estate. The Seller has delivered to
the Buyers a complete copy of all environmental claims, reports, studies,
compliance actions or the like of the Seller or which
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are available to the Seller with respect to any of the Real Estate or any
of the Acquired Assets.
r. Legal Compliance. The Seller has complied in all material
respects with all laws (including rules and regulations thereunder) of federal,
state, local and foreign governments (and all agencies thereof. The Seller has
filed in a timely manner all reports, documents, and other materials it was
required to file (and the information contained therein was correct and complete
in all material respects) under all applicable laws.
s. Advertising Contracts. Section 2(s) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Station in
excess of $1000, and the amount to be paid to the Seller therefor. The Seller
has no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Seller to cease doing business or to reduce in any material respect the
business transacted with the Seller or to terminate or modify any agreements
with the Seller (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
t. Brokers' Fees. Other than the fee payable to NationsBank, which
shall be the exclusive responsibility of Seller, the Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
u. Undisclosed Commitments or Liabilities. There are no material
commitments, liabilities or obligations relating to the Station, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Seller of the liabilities of third parties, for which specific
and adequate provisions have not been made on the Financial Statements except
those incurred in or as a result of the Ordinary Course of Business since
January 1, 1997.
v. Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. Representations and Warranties of the Buyer.
Buyers represent and warrant to the Seller that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
a. Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
b. Authorization of Transaction. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding
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obligations of the Buyers, enforceable against the Buyers in accordance with
their respective terms and conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
d. Brokers' Fees. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
4. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing (provided, however, that if and to
the extent that these provisions may be inconsistent with those in the Time
Brokerage Agreement, the Time Brokerage Agreement shall control):
a. General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
b. Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have
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a material adverse effect upon the Station or impose significant costs on such
party). If the FCC imposes any condition on either party to the Assignment
Application, such party shall use commercially reasonable efforts to comply with
such condition, provided, that neither party shall be required hereunder to
comply with any condition that would have a material adverse effect upon the
Station or any Affiliate. The Seller and the Buyers shall jointly oppose any
requests for reconsideration or judicial review of FCC approval of the
Assignment Application and shall jointly request from the FCC extension of the
effective period of FCC approval of the Assignment Application if the Closing
shall not have occurred prior to the expiration of the original effective period
of the FCC Consent. Nothing in this Section 4(b) shall be construed to limit
either party's right to terminate this Agreement pursuant to Section 9 of this
Agreement.
c. Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at their option, extend offers of
employment to all or any of the Seller's employees effective on the Closing
Date. From and after the execution of this Agreement, the Seller shall use its
best efforts to assist Buyers in retaining those employees of the Station which
the Buyers wish to hire in connection with the operation of the Station by the
Buyers subsequent to the Closing, and the Seller will not take any action to
preclude or discourage any of the Seller's employees from accepting any offer of
employment extended by the Buyers.
d. Notices and Consents. The Seller will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request. Each of the Parties will file any notification and
report forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its best efforts
to obtain an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary, proper or advisable.
Each of the Parties will take any additional action that may be necessary,
proper, or advisable in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental agencies,
and third parties that it may be required to give, make, or obtain.
e. Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Fifteen Thousand Dollars ($15,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
f. Operating Statements. The Seller shall deliver to the Buyers, for
the Buyers' informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Station within ten (10) days
after each such statement is prepared by or for the Seller.
g. Contracts. The Seller will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(k) of the Disclosure Schedule in
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any material respect. The Seller will not without prior written consent of the
Buyers enter into any contract outside the Ordinary Course of Business which
involves more than Five Thousand Dollars ($5,000).
h. Operation of Station. The Seller will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. The Seller shall operate the Station in compliance with the FCC
Licenses and the rules and regulations of the FCC, and the FCC Licenses shall at
all times remain in full force and effect. The Seller shall file with the FCC
all material reports, applications, documents, instruments and other information
required to be filed in connection with the operation of the Station.
i. Credit and Receivables. The Seller will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Station and with respect to collecting accounts receivable
arising from such extension of credit.
j. Preservation of Station and the Acquired Assets. The Seller will
keep its Station and the Acquired Assets and properties substantially intact,
including its present operations, physical facilities, working conditions,
relationships with lessors, licensors, advertisers, suppliers, customers, and
employees, all of the Confidential Information, call letters and trade secrets
of the Station, and the FCC Licenses.
k. Full Access and Consultation. The Seller will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Station, to all premises, properties, books, records, contracts, and documents
of or pertaining to the Station. The Seller will consult with the Buyers'
management with a view to informing Buyers' management as to the operations,
management and business of the Station. Without limiting the foregoing, Seller
acknowledges and agrees that it will provide the Buyers and their
representatives with such access to the properties, books, records, documents
and operations of the Seller as contemplated herein in a manner which will
permit the Buyers to fully complete their due diligence review within the thirty
(30) day period reference in Section 5(a)(ix), below.
l. Notice of Developments. The Seller will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Station or the Acquired Assets or the ability of the Seller
to perform hereunder.
m. Exclusivity. With respect to the Station, the Seller will not (i)
solicit, initiate, or encourage the submission of any proposal or offer from any
person relating to any (A) merger or consolidation, (B) acquisition or purchase
of securities or assets, or (C) similar transaction or business combination
involving the Station, or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any person to do or seek
any of the foregoing. The Seller will notify the Buyers immediately if any
person makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
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n. Title Insurance, Surveys and Environmental Assessments. The
Buyers will obtain with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request,
(ii) with respect to each parcel of Owned Real Estate, an owner's policy of
title insurance by a title insurer reasonably satisfactory to the Buyers, in an
amount equal to the fair market value of such Real Estate (including all
improvements located thereon), insuring over the standard pre-printed exceptions
and insuring title to the Owned Real Estate to be vested in the Buyers as of the
Closing free and clear of all liens and encumbrances except Permitted Real
Estate Encumbrances, together with such endorsements for zoning, contiguity,
public access and extended coverage as the Buyers or its lender reasonably
request, (iii) a current survey of each parcel of Real Estate certified to the
Buyers and its lender, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys') which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iv) with
respect to each parcel of Real Estate, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Sellers which does not indicate that the Seller and the Real Estate are
not in compliance with any Environmental Law and which shall not disclose or
recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. The Buyers and the
Seller will each pay one-half (1/2) of the costs of these title policies,
Surveys and environmental assessments.
o. Control of Station. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Between the date of this Agreement and
the Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Station, and such operation shall be the sole
responsibility of and in the control of the Seller.
p. Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing. In the event
of any such loss, damage, or destruction the Seller will promptly notify the
Buyers of all particulars thereof, stating the cause thereof (if known) and the
extent to which the cost of restoration, replacement and repair of the Acquired
Assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will, at Seller's expense, repair or replace
such Acquired Assets to their former condition as soon as possible after loss,
damage or destruction thereof and shall use its best efforts to restore as
promptly as possible transmissions as authorized in the FCC Licenses. The
Closing Date shall be extended (with FCC consent, if necessary) for up to sixty
(60) days to permit such repair or replacement. If repair or replacement cannot
be accomplished within sixty (60) days
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of the date of the Seller's notice to the Buyers and the Buyers determine that
the Seller's failure to repair or replace would have a material adverse effect
on the operation of the Station:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
iii. the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to the
Buyers of all rights under any insurance claims covering the loss, damage
or destruction and payment over to the Buyers of any proceeds under any
such insurance policies, previously received by the Seller with respect
thereto plus an amount equal to the amount of any deductible or
self-insurance maintained by Seller on such Acquired Assets. In the event
the Closing Date is postponed pursuant to this Section 4(p), the parties
hereto will cooperate to extend the time during which this Agreement must
be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
a. Conditions to Obligation of the Buyers. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Seller shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
iii. the Seller shall have procured all of the third party
consents specified in Section 4(d) above and all of the title insurance
commitments (and endorsements), Surveys and environmental site assessments
described in Section 4(o) above;
iv. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or impose damages or
penalties upon any of the parties if such transactions are consummated,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
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Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
v. the Seller shall have delivered to the Buyers a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Sections 5(a)(i)
through (iv) is satisfied in all respects;
vi. each of the Assignment Applications shall have been
approved by a Final Order of the FCC all applicable waiting periods (and
any extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or been terminated and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
vii. the relevant parties shall have entered into the
Postclosing Agreement;
viii. the Buyers shall have received from counsel to the
Seller an opinion with respect to the matters set forth in Exhibit F
attached hereto, addressed to the Buyers and its lender and dated as of
the Closing Date;
ix. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with an allocation schedule to be delivered at closing; and
x. all actions to be taken by the Seller in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
b. Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
iii. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions
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contemplated by this Agreement or impose damages or penalties upon any of
the Parties if such transactions are consummated, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
iv. the Buyers shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
v. each of the Assignment Applications shall have been
approved by a Final Order of the FCC and the Buyers shall have received
all governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
vi. the relevant parties shall have entered into the
Postclosing Agreement; and
vii. all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
6. Post-Closing Covenants.
The Parties agree as follows with respect to the period following
the Closing:
a. General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
b. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Station, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless
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the contesting or defending Party is entitled to indemnification therefor under
Section 7 below); provided, however, that such access and cooperation does not
unreasonably disrupt the normal operations of the cooperating party.
c. Adjustments. Operation of the Station and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Buyers as of the Closing
Date in accordance with the foregoing principle. In addition, all commissions
payable with respect to the accounts receivable of the Seller (whether due
before or after Closing) shall be solely for the account and responsibility of
the Seller. Contractual arrangements that do not reflect an equal rate of
compensation to a Station over the term of the agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by an
independent accounting firm mutually acceptable to both parties and the fees and
expenses of such accounting firm shall be paid one-half (1/2) by the Seller and
one-half (1/2) by the Buyer.
d. Collection of Accounts Receivable. The Seller shall collect its
own accounts receivable following the Closing Date. Seller shall reasonably
cooperate with Buyers to facilitate collection of their respective accounts
receivable from accounts shared by Seller and Buyers.
e. Consents. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
f. Transition. Neither the Seller, its Shareholders, nor any of
their respective Affiliates will take any action that primarily is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Seller from maintaining the same
business relationships with the Buyers after the Closing as it maintained with
the Seller prior to the Closing. The Seller will refer all customer inquiries
relating to the Station to the Buyers from and after the Closing. Except with
the Buyers' prior written consent (which will not be unreasonably withheld),
neither the Seller's Owners nor any of his respective Affiliates will
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employ or offer to employ any employee of the Station for a period of two (2)
years after the Closing Date.
g. Confidentiality. The Seller and its Affiliates will treat and
hold as such all of the Confidential Information relating to the Station, and
refrain from using such Confidential Information except in connection with this
Agreement; provided, however, that Seller and its professional advisers may have
access to such Confidential Information as may be necessary to satisfy any
statutory reporting or filing responsibilities. In the event that the Seller or
any Affiliate is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that person will notify the Buyers promptly of the request or
requirement so that the Buyers may seek an appropriate protective order or waive
compliance with the provisions of this Section 2(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, the Seller or any
Affiliate is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, that person may
disclose the Confiden tial Information to the tribunal; provided, however, that
the disclosing Person shall use his or its reasonable efforts to obtain, at the
reasonable request and cost of the Buyers, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyers shall designate. The
foregoing provisions shall not apply to any Confidential Information which is
generally available to the public immediately prior to the time of disclosure.
h. Nonsolicitation. Neither the Seller nor any of its Affiliates
will take any action that primarily is designed or intended to have the effect
of discouraging any lessor, licensor, customer, supplier, or other business
associate of the Seller from maintaining the same business relationships with
the Buyers after the Closing as it maintained with the Seller prior to the
Closing. The Seller will refer all customer inquiries relating to the Station to
the Buyers from and after the Closing. Except with the Buyers' prior written
consent (which will not be unreasonably withheld), neither the Seller nor any of
its respective Affiliates will employ or offer to employ any employee of the
Station for a period of two (2) years after the Closing Date.
7. Remedies for Breaches of this Agreement.
a. Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), and 2(d) hereof
or relating to the Seller's title to the Acquired Assets) shall survive the
Closing and continue in full force and effect for a period until 90 days after
the applicable statute of limitations has expired with respect to any claim by
the Buyers based on a claim or action by a third party and for a period of three
(3) years following Closing with respect to any claim by the Buyers not based on
a claim or action by a third party. All of the other representations and
warranties (including the representations and warranties Seller contained in
Sections 2(a), 2(b), 2(c), and 2(d) hereof or relating to the Seller's title to
the Acquired Assets) and all covenants of the Buyers and the Seller contained in
this Agreement shall survive the Closing and continue in full force and effect
forever thereafter.
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b. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement
or in any Ancillary Agreement executed and/or delivered by the Seller (so
long as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant
of the Seller contained herein or in any Ancillary Agreement;
iii. any Liability of the Seller which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
c. Indemnification Provisions for the Benefit of the Seller. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
d. Specific Performance. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(o) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in Section
7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for Buyers for a breach of any provision of this
Agreement.
e. Liquidated Damages. The Buyers and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are not closed
because of a default by
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the Buyers, the Adverse Consequences to the Seller as a result of such default
may be difficult, if not impossible, to ascertain. Accordingly, in lieu of
indemnification pursuant to Section 7(c), the Seller shall be entitled to
receive from the defaulting Party for such default the Earnest Money Deposit as
liquidated damages without the need for proof of damages, subject only to
successfully proving in a court of competent jurisdiction that the Buyer
materially breached this Agreement and that the transactions contemplated
thereby have not occurred. The Seller shall proceed against the Earnest Money
Deposit as full satisfaction of liquidated damages owed by the Buyers and as its
sole remedy for a failure of the transactions contemplated hereby to occur as a
result of a material breach of the terms of this Agreement by the Buyers.
f. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnifica tion against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
g. Limitation of Liability. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Indemnified Party, in
the aggregate from all indemnifiable events shall exceed Ten Thousand Dollars
($10,000) and indemnification shall be made by the indemnifying party only to
the extent of such excess over Ten Thousand Dollars ($10,000); provided however
that the foregoing limitation shall not be applicable to: (i) the obligations of
the Buyer to pay and discharge any Liability of the Seller to third parties from
and after the Closing Date assumed by the Buyer under the terms of this
Agreement; (ii) the obligation of the Seller to pay and discharge any Liability
to third parties not
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assumed by the Buyer under the terms of this Agreement, or (iii) the Seller's
obligation to deliver clear title to the Acquired Assets.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets that are used or useful in
the operation of the Station, wherever located, including but not limited to all
of its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles; provided, however, that the computer equipment used for traffic and
accounting purposes shall be retained by Seller) and all assignable warranties
with respect thereto; (c) Intellectual Property, goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions; (d) rights under orders
and agreements (including those Barter Agreements and Advertising Contracts
identified on the Disclosure Schedule) now existing or entered into in the
Ordinary Course of Business for the sale of advertising time on the Station; (e)
Assumed Contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the Station, jingles,
logos, slogans, and business goodwill of the Station; (g) claims, deposits,
prepayments, refunds, causes of action, chooses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment; (h) Licenses and similar rights obtained from governments and
governmental agencies; and (i) FCC logs and records and all other books,
records, ledgers, logs, files, documents, correspondence, advertiser lists, all
other lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, program production materials,
studies, reports, and other printed or written materials; and (j) goodwill of
the Station.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(k) of the
Disclosure Schedule as those to be assumed by Broadcasting.
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"Assumed Liabilities" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 1 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the
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Toxic Substances Control Act of 1976, the Refuse Act of 1899, or the Emergency
Planning and Community Right-to-Know Act of 1986 (each as amended), or any other
law of any federal, state, local, or foreign government or agency thereof
(including rules, regulations, codes, plans, judgments, orders, decrees,
stipulations, injunctions, and charges thereunder) relating to public health and
safety, or pollution or protection of the environment, including, without
limitation, laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means NationsBank.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Station.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
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"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation in the
ordinary course of Seller's business.
"Leases" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower site, as described in Section 2(i) of
the Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multi-employer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller's
owners in the form attached hereto as Exhibit C.
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"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price " has the meaning set forth in Section 1(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, original
financial records, and other documents relating to the organization,
maintenance, and existence of the Seller as a corporation; (ii) any of the
rights of the Seller under this Agreement (or under any side agreement between
the Seller on the one hand and the Buyers on the other hand entered into on or
after the date of this Agreement); (iii) accounts, notes and other receivables
of the Seller; (iv) financial records of Seller as may be required to make
proper tax and regulatory filings (which shall, if necessary, be provided to
Buyers upon reasonable notice); (iv) the computer equipment used for traffic and
accounting purposes; and (v) Cash.
"Retained Liabilities" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Station prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
WJCL-FM, licensed by the FCC to operate in Savannah, Georgia.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation,
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(ii) the interest in the profits of such partnership or joint venture, or (iii)
the beneficial interest of such trust or estate are at such time directly or
indirectly owned by such person or one or more of such person's Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Time Brokerage Agreement" has the meaning set forth in Section 1(g)
above.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in material breach of any representation, warranty, or covenant
contained in this Agreement; provided, however, that if such breach is
capable of being cured, such breach also remains uncured for twenty (20)
days after notice of breach is received by the Seller from the Buyers;
iii. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in material breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable being cured, such breach remains uncured for twenty (20) days
after notice of breach is received by the Buyers from the Seller;
iv. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the first anniversary of the Closing Date
by reason of the failure of any condition precedent under Section 5(a)
hereof (unless the failure results primarily from the Buyers themselves
breaching any representation, warranty, or covenant contained in this
Agreement);
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v. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the first anniversary of the Closing Date
by reason of the failure of any condition precedent under Section 5(b)
hereof (unless the failure results primarily from the Seller itself
breaching any representation, warranty, or covenant contained in this
Agreement);
vi. the Buyers or the Seller may terminate this Agreement if
any Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. Miscellaneous.
a. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
b. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Seller the Purchase Price therefor or to any
successor to the Buyers in the event of any sale, merger or consolidation of the
Buyers (provided, however, that such assignment shall not be permitted if it
should trigger a requirement to file an additional long-form transfer
application under Form 314 before the FCC with consequent delay), and (ii)
Buyers may assign their indemnification claims and their rights under the
warranties and representations of the Sellers to the financial institution(s)
providing financing to the Buyers in connection with this transaction.
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e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
Lewis Broadcasting Corporation
9505 Abercorn Street
Savannah, Georgia 31406
Attn: J.C. Lewis, Jr., President
Fax: (912) 927-2885
Copy to:
Hunter, Lewis & Brannon, LLP
P.O. Box 9745 (31412)
123 W. Oglethorpe Avenue
Savannah, Georgia 31401
Attn.: J. Curtis Lewis, III
Fax: (912) 232-0512
(which copy shall not constitute notice to Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
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Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Georgia.
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
k. Expenses. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(o) with respect to Surveys, title commitments and
environmental audits. The Seller will pay all income taxes. The Seller and the
Buyers will each pay one-half (1/2) of any transfer or sales taxes and other
recording or similar fees necessary to vest title to each of the Acquired Assets
in the Buyers.
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l. Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
m. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Savannah, Georgia in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
----------------------------
(printed)
- -------------------------------
Title:
-------------------------
CUMULUS LICENSING CORPORATION
By:
----------------------------
(printed)
- -------------------------------
Title:
-------------------------
LEWIS BROADCASTING CORPORATION
By:
----------------------------
(printed)
- -------------------------------
Title:
-------------------------
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SCHEDULE A
Purchase Price. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the amount of Seven Million Two Hundred Fifty Thousand
Dollars ($7,250,000), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Five Hundred Thousand Dollars ($500,000) (the
"Earnest Money Deposit") in the form of an irrevocable letter of credit from
NationsBank; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Seven Million Two Hundred Fifty Thousand Dollars ($7,250,000), with
adjustments as provided specifically in this Agreement.
The Earnest Money Deposit referenced in this Schedule A shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), and shall
be disbursed to Seller or returned to Buyer as provided in the Earnest Money
Escrow Agreement.
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of February 12, 1998, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing), Jon A. LeDuc
("LeDuc") and American Communications Company, Inc. ("American"). Broadcasting
and Licensing are referred to collectively herein as the "Buyers." LeDuc and
American are referred to collectively herein as the "Sellers." The Buyers and
the Sellers are referred to individually as the "Party" or collectively as the
"Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Sellers that are used or useful in the operation of radio
station WJLW-FM, licensed to LeDuc (the "Station") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
a. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, (i) LeDuc agrees to sell, transfer, convey and
deliver to Licensing, and Licensing agrees to purchase from LeDuc, all of the
FCC Licenses listed in Section 2(i) of the disclosure schedule ("Disclosure
Schedule"); and (ii) Sellers agree to sell, transfer, convey and deliver to
Broadcasting, and Broadcasting agrees to purchase from Sellers, all of the
Acquired Assets other than the FCC Licenses. Both such sales shall take place at
the Closing for the consideration specified below in this Section 1.
b. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Sellers not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Sellers agree to pay
and discharge all Liabilities and obligations of American other than the Assumed
Liabilities.
c. Purchase Price. The Buyers agree to pay to the Sellers, as
consideration for the Acquired Assets, the purchase price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
(the "Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
d. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a mutually agreed location,
commencing at 9:00 a.m. local time
<PAGE>
promptly (but in any event no more than ten (10) business days) after the FCC
approval of the Assignment Application becomes a Final Order, by which date all
other conditions to the obligations of the Parties to consummate the
transactions contemplated hereby will have been satisfied, or such other date as
the Parties may mutually determine (the "Closing Date").
e. Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Sellers will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds in form acceptable to the Buyers, and (B) such other instruments
of sale, transfer, conveyance, and assignment as the Buyers and their counsel
reasonably may request; (iv) the Buyers will execute, acknowledge (if
appropriate), and deliver to the Sellers (A) an assumption in the form attached
hereto as Exhibit B and (B) such other instruments of assumption as the Sellers
and its counsel reasonably may request; and (v) the Buyers will deliver to the
Sellers the consideration specified in Section 1(c) above.
2. Representations and Warranties of the Seller.
The Sellers represent and warrant to the Buyers that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
a. Authority of LeDuc. LeDuc is an individual citizen of the state
of Wisconsin. LeDuc has full power and authority to own or lease his properties;
to carry on all business activities now conducted by him; to execute and deliver
this Agreement and all agreements and instruments to be executed and delivered
by LeDuc pursuant to this Agreement (collectively, the "Ancillary Agreements");
and to perform his obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute the valid and legally binding obligation of
LeDuc, enforceable in accordance with their respective terms and conditions.
b. Organization of American and Authorization of Transaction.
American is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation. American does not have
any Subsidiaries. American has the power and authority to own or lease its
properties and to carry on all business activities now conducted by it. American
has full corporate power and authority to execute and deliver this Agreement and
all agreements and instruments to be executed and delivered by American pursuant
to this Agreement (collectively, the "Ancillary Agreements") and to perform its
obligations hereunder and thereunder. Without limiting the generality of the
foregoing, the Board of Directors of American has duly authorized the execution,
delivery, and performance of this Agreement and the Ancillary Agreements by
American. This Agreement and the Ancillary Agreements constitute the valid and
legally binding obligation of American, enforceable in accordance with their
respective terms and conditions
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and
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<PAGE>
thereby (including the assignments and assumptions referred to in Section 1(e)
above), will in any material way (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court to which the Sellers are
subject; or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent (other than as described in the Disclosure Schedule) under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other agreement, arrangement to which the Sellers are a party or by which they
are bound or to which any of their assets is subject (or result in the
imposition of any Security Interest upon any of their assets). Other than with
respect to the Assignment Application described in Section 4(b), the Sellers do
not need to give any notice to, make any filing with, or obtain any Licenses,
consent, or approval of any court or government or governmental agency in order
for the Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
d. Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Sellers have good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
e. Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): unaudited balance sheets and statements of income, and cash flow
as of and for the fiscal years ended for each month during 1997 for the Sellers
with respect to the Station. The Financial Statements have been prepared in
conformity with the Sellers' normal accounting policies, practices and
procedures applied on a consistent basis, throughout the periods covered
thereby, are correct and complete, fairly present the financial condition of the
Sellers and the results of operation of Sellers at the dates and for the periods
indicated, and are consistent with the books and records of the Sellers (which
books and records are correct and complete). The Financial Statements accurately
state the revenues of the Station for the period indicated therein and include
an accurate breakout of cash and trade revenues.
f. Events Subsequent to January 1, 1997. Since January 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule, there has not
been any material adverse change in the assets of the Station.Since January 1,
1997, except as set forth in Section 2(f) of the Disclosure Schedule, there has
not been any material adverse change in the assets, Liabilities, business,
financial condition, operations, results of operations, or future prospects of
the Seller with respect to the operation of the Station. Without limiting the
generality of the foregoing and with respect to the operation of the Station
since January 1, 1997:
i. other than this Agreement, the Sellers have not entered
into any agreement, contract, lease, sublease, license, or sublicense (or
series of related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
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<PAGE>
ii. the Sellers have not delayed or postponed (beyond its
normal practice in the Ordinary Course of Business) the payment of
accounts payable and other Liabilities;
iii. the Sellers have not altered its credit and collection
policies or its accounting policies;
iv. the Sellers have not entered into or terminated any
employment arrangement, employment contract, consulting contract or
severance agreement or collective bargaining agreement, written or oral,
or modified the terms of any existing such contract or agreement;
v. there have been no changes and, to Sellers' knowledge, any
threatened changes in employment terms for any of its directors, officers,
and employees;
vi. there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Sellers;
vii. the Sellers have not materially altered the programming,
format or call letters of the Station, or its promotional and marketing
activities;
viii. the Sellers have not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Station in compliance
therewith and with all FCC rules and regulations;
ix. the Sellers have not terminated or received notice of
termination for any syndicated programming; and
x. the Sellers have not committed to any of the foregoing.
g. Tax Matters. Except as set forth in Section 2(g) of the
Disclosure Schedule, the Sellers have timely and properly filed all Tax Returns
that they were required to file with respect to the Sellers' operations. All
such Tax Returns were correct and complete and properly reflect the tax
liability of the Sellers. No Tax deficiencies have been proposed or assessed
against the Sellers. All Taxes owed by the Sellers with respect to their
operations (whether or not shown on any Tax Return) have been paid. The Sellers
have withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party. No claim has ever been made by any authority
in any jurisdiction where the Sellers do not file Tax Returns that they are or
may be subject to taxation by that jurisdiction.
h. Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Station. The Sellers own or lease all tangible assets necessary for the conduct
of the operation and business of the Station as presently conducted and as
presently proposed to be conducted and all leased assets are specifically
identified as such in Section
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<PAGE>
2(h) of the Disclosure Schedule. Section 2(h) of the Disclosure Schedule sets
forth a listing of all equipment to be transferred to Buyers under this
Agreement.
i. Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Sellers
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Sellers have delivered to the Buyers correct and complete copies of
the Leases. With respect to the Real Estate:
i. LeDuc has good and marketable title to all of the Owned
Real Estate free and clear of all liens, charges, mortgages, security
interests, easements, restrictions or other encumbrances of any nature
whatsoever except real estate taxes for the year of Closing and municipal
and zoning ordinances and recorded utility easements which do not impair
the current use, occupancy or value or the marketability of title of the
property and which are disclosed in Section 2(i) of the Disclosure
Schedule (collectively, the "Permitted Real Estate Encumbrances");
ii. the Leases are and, following the Closing will continue to
be, legal, valid, binding, enforceable, and in full force and effect;
iii. no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default thereunder
or permit termination, modification, or acceleration thereunder;
iv. there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
v. none of the Owned Real Estate and to the Sellers'
Knowledge, none of the properties subject to the Leases is subject to any
lease (other than Leases), option to purchase or rights of first refusal;
vi. except for Permitted Real Estate Encumbrances, there are
no (i) actual or, to the Sellers' Knowledge, proposed special assessments
with respect to any of the Real Estate; (ii) pending or, to the Sellers'
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the
buildings or improvements located on the Real Estate; (iv) any pending or,
to the Sellers' Knowledge, threatened changed in any zoning laws or
ordinances which may materially adversely affect any of the Real Estate or
Sellers' use thereof;
vii. the Sellers have not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder;
viii. to the Sellers' Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning
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<PAGE>
approvals) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules, and
regulations; and
ix. to the Sellers' Knowledge, the owner of each leased
facility has good and marketable title to the underlying parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for Permitted Real Estate Encumbrances and
Sellers' leasehold interest in each Lease has priority over any other
interest except for the fee interest therein and Permitted Real Estate
Encumbrances.
j. Contracts. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not entered into in the Ordinary Course of Business. The
Sellers have delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(j) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed which constitutes an
Assumed Contract: (A) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect; (B) the written arrangement will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Sellers are not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(j) of the Disclosure Schedule under the terms
of this Section 2(j). Except for the Assumed Contracts, the Buyers shall not
have any Liability or obligations for or in respect of any of the contracts set
forth in Section 2(j) of the Disclosure Schedule or any other contracts or
agreements of the Sellers.
k. Commission Licenses and Compliance with Commission Requirements.
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Station as they are now being operated are (A) in full
force and effect, (B) unimpaired by any acts or omissions of the Sellers
or the Sellers' employees or agents, (C) free and clear of any
restrictions which might limit the full operation of the Station, and (D)
detailed in Section 2(k) of the Disclosure Schedule. With respect to the
licenses, permits, authorizations, franchises, certificates of compliance
and consents referenced in the preceding sentence, Section 2(k) of the
Disclosure Schedule also sets forth, without limitation, the date of the
last renewal, the expiration date thereof, and any conditions or
contingencies related thereto. Except as set forth in Section 2(k) of the
Disclosure Schedule, no condition exists or event has occurred that
permits, or after notice or lapse of time, or both, would permit, the
revocation or termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Station as now conducted. Except as set forth in Section
2(k) of the Disclosure Schedule, the Sellers are not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or
revoked.
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<PAGE>
ii. The Station is in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Station's transmission facilities is restricted in
accordance with the policies of the FCC.
iii. Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Sellers' Knowledge, the Seller is not the subject of any
FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Station, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(k) of the Disclosure Schedule.
iv. The Sellers have filed with the FCC and all other
governmental authorities having jurisdiction over the Station all material
reports, applications, documents, instruments, and other information
required to be filed, and will continue to make such filings through the
Closing Date.
v. The Sellers are not aware of any information concerning the
Station that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary
for the consummation of the transactions contemplated hereunder or the
Buyers' operation and/or ownership of the Station.
l. Intellectual Property. The Sellers own or have the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Sellers as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Sellers immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use the by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Sellers have not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and the Sellers have never received any charge, complaint, or notice
alleging any such interference, infringement, misappropriation, or violation. To
the Knowledge of the Sellers, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Sellers.
m. Insurance. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Sellers' insurance coverage. With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
and enforceable and in full force and effect; (B) the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect on identical
terms through the Closing Date.
n. Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Sellers: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction,
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<PAGE>
or charge; or (ii) is a party or, to the Knowledge of the Sellers, is threatened
to be made a party to any charge, complaint, action, suit, proceeding, hearing,
or investigation of or in any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any arbitrator.
None of the charges, complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 2(n) of the Disclosure Schedule could result
in any adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the Sellers or the
Station taken as a whole. The Sellers have no Knowledge of any Basis for any
such charge, complaint, action, suit, proceeding, hearing, or investigation
against the Sellers.
o. Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Station of each employee. To
the Knowledge of the Sellers, no key employee or group of employees has any
plans to terminate employment with the Seller. The Sellers are not a party to or
bound by any collective bargaining or similar agreement, nor has it experienced
any strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Sellers have no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to the employees of the Seller. The Sellers have no Knowledge of any
Basis for any claim by past or current employees of the Sellers or applicants
for employment that the Sellers or its management have discriminated based on
each individual's race, sex, national origin, religion, ethnicity, handicap or
any other protected characteristic under applicable law.
p. Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Sellers maintain or to which the Sellers
contribute or are required to contribute for the benefit of any current or
former employee of the Sellers and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Sellers do not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Sellers. There are no pending or, to the Knowledge of the Sellers, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
q. Environment, Health, and Safety.
i. With respect to the operation of the Station, the Sellers
are, and at all times in the past has been, in compliance in all material
respects with all Environmental Laws and all laws (including rules and
regulations thereunder) of federal, state, and local governments (and all
agencies thereof) concerning employee health and safety, and the Sellers
have no Liability (and to Sellers' Knowledge there is no Basis related to
the past or present operations of the Sellers or its predecessors for any
present or future Liability) under any Environmental Law. The Sellers have
no Liability (and to Sellers' Knowledge there is
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<PAGE>
no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Sellers
giving rise to any Liability) under the Occupational Safety and Health
Act, as amended, or any other law (or rule or regulation thereunder) of
any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal
injury to any employee.
ii. The Sellers have obtained and at all times has been in
compliance in all material respects with all of the terms and conditions
of all permits, licenses, and other authorizations which are required
under, and have complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of
any federal, state, or local or foreign government relating to worker
health and safety.
iii. All properties and equipment used in the Station and the
Acquired Assets have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances. No pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste ever has been
buried, stored, spilled, leaked, discharged, emitted, or released on any
of the Real Estate. To Sellers' Knowledge, no above ground or underground
storage tanks have ever been located at, on or under the Real Estate. The
Sellers have delivered to the Buyers a complete copy of all environmental
claims, reports, studies, compliance actions or the like of the Sellers or
which are available to the Sellers with respect to any of the Real Estate
or any of the Acquired Assets.
r. Legal Compliance. The Sellers have complied in all material
respects with all laws (including rules and regulations thereunder) of federal,
state, local and foreign governments (and all agencies thereof. The Sellers have
filed in a timely manner all reports, documents, and other materials it was
required to file (and the information contained therein was correct and complete
in all material respects) under all applicable laws.
s. Advertising Contracts. Section 2(s) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Station in
excess of $1000, and the amount to be paid to the Sellers therefor. The Sellers
have no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Sellers to cease doing business or to reduce in any material respect the
business transacted with the Sellers or to terminate or modify any agreements
with the Sellers (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
t. Brokers' Fees. Other than the fee payable to Broadcasting Asset
Management Corporation, which shall be the exclusive responsibility of Sellers,
the Sellers have no Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement.
u. Undisclosed Commitments or Liabilities. There are no material
commitments, liabilities or obligations relating to the Station, whether
accrued, absolute, contingent
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or otherwise including, without limitation, guaranties by the Sellers of the
liabilities of third parties, for which specific and adequate provisions have
not been made on the Financial Statements except those incurred in or as a
result of the Ordinary Course of Business since January 1, 1997.
v. Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. Representations and Warranties of the Buyer.
Buyers represent and warrant to the Sellers that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
a. Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
b. Authorization of Transaction. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder, and are financially
capable of doing so. This Agreement and the Ancillary Agreements constitute
legally binding obligations of the Buyers, enforceable against the Buyers in
accordance with their respective terms and conditions.
c. Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
d. Brokers' Fees. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
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e. Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
4. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
a. General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
b. Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Sellers and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Sellers to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Sellers and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Sellers
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon the Station or
impose significant costs on such party). If the FCC imposes any condition on
either party to the Assignment Application, such party shall use commercially
reasonable efforts to comply with such condition, provided, that neither party
shall be required hereunder to comply with any condition that would have a
material adverse effect upon the Station or any Affiliate. The Sellers and the
Buyers shall jointly oppose any requests for reconsideration or judicial review
of FCC approval of the Assignment Application and shall jointly request from the
FCC extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
c. Employment Offers. Upon notice to the Sellers, and at mutually
agreeable times, the Sellers will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at their option, extend offers of
employment to all or any of the Sellers' employees effective on the Closing
Date. From and after the execution of this Agreement, the Sellers shall use
their best efforts to assist Buyers in retaining those employees of the Station
which the Buyers wish to hire in connection with the operation of the Station by
the Buyers subsequent to the Closing, and the Sellers will not take any action
to preclude or discourage any of the Sellers' employees from accepting any offer
of employment extended by the Buyers.
d. Notices and Consents. The Sellers will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request. Each of the
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Parties will file any notification and report forms and related material that it
may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the Hart-Scott-Rodino
Act, will use its best efforts to obtain an early termination of the applicable
waiting period, and will make any further filings pursuant thereto that may be
necessary, proper or advisable. Each of the Parties will take any additional
action that may be necessary, proper, or advisable in connection with any other
notices to, filings with, and authorizations, consents, and approvals of
governments, governmental agencies, and third parties that it may be required to
give, make, or obtain, and Buyers will reasonably cooperate in obtaining
consents, including providing financial information that may be required by
third parties.
e. Advertising Obligations. The Sellers shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Ten Thousand Dollars ($10,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Sellers shall deliver to the Buyers a
schedule, certified by an officer of the Sellers, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
f. Contracts. The Sellers will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(j) of the Disclosure Schedule in any material respect. The Sellers will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Five Thousand Dollars
($5,000).
h. Operation of Station. The Sellers will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. The Sellers shall operate the Station in compliance with the
FCC Licenses and the rules and regulations of the FCC, and the FCC Licenses
shall at all times remain in full force and effect. The Sellers shall file with
the FCC all material reports, applications, documents, instruments and other
information required to be filed in connection with the operation of the
Station.
i. Credit and Receivables. The Sellers will follow their usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Station and with respect to collecting accounts receivable
arising from such extension of credit.
j. Preservation of Station and the Acquired Assets. The Sellers will
keep their Station and the Acquired Assets and properties substantially intact,
including its present operations, physical facilities, working conditions,
relationships with lessors, licensors, advertisers, suppliers, customers, and
employees, all of the Confidential Information, call letters and trade secrets
of the Station, and the FCC Licenses.
k. Full Access and Consultation. The Sellers will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Station, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Sellers. Buyers agree to keep such
information
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confidential. The Sellers will consult with the Buyers' management with a view
to informing Buyers' management as to the operations, management and business of
the Station.
l. Notice of Developments. The Sellers will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Station or the Acquired Assets or the ability of the Sellers
to perform hereunder.
m. Exclusivity. The Sellers will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the
Sellers, or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any person to do or seek any of the
foregoing. The Sellers will notify the Buyers immediately if any person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.
n. Title Insurance, Surveys and Environmental Assessments. The
Buyers will obtain (i) with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request,
(ii) with respect to each parcel of Owned Real Estate, an owner's policy of
title insurance by a title insurer reasonably satisfactory to the Buyers, in an
amount equal to the fair market value of such Real Estate (including all
improvements located thereon), insuring over the standard pre-printed exceptions
and insuring title to the Owned Real Estate to be vested in the Buyers as of the
Closing free and clear of all liens and encumbrances except Permitted Real
Estate Encumbrances, together with such endorsements for zoning, contiguity,
public access and extended coverage as the Buyers or its lender reasonably
request, (iii) a current survey of each parcel of Real Estate certified to the
Buyers and its lender, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys') which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iv) with
respect to each parcel of Real Estate, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Buyers which does not indicate that the Seller and the Real Estate are
not in compliance with any Environmental Law and which shall not disclose or
recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. The Buyers and the
Seller will each pay one-half (1/2) of the costs of these title policies,
Surveys and environmental assessments.
o. Control of Station. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment
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Application. Between the date of this Agreement and the Closing Date, the Buyers
and their employees or agents shall not directly or indirectly control,
supervise, or direct, or attempt to control, supervise, or direct, the operation
of the Station, and such operation shall be the sole responsibility of and in
the control of the Sellers.
p. Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Sellers until the Closing. In the
event of any such loss, damage, or destruction the Sellers will promptly notify
the Buyers of all particulars thereof, stating the cause thereof (if known) and
the extent to which the cost of restoration, replacement and repair of the
Acquired Assets lost, damaged or destroyed will be reimbursed under any
insurance policy with respect thereto. The Sellers will, at Sellers' expense,
repair or replace such Acquired Assets to their former condition as soon as
possible after loss, damage or destruction thereof and shall use their best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Sellers' notice to the Buyers and the Buyers reasonably determine that
the Sellers' failure to repair or replace would have a material adverse effect
on the operation of the Station:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
iii. the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Sellers' assignment to the
Buyers of all rights under any insurance claims covering the loss, damage
or destruction and payment over to the Buyers of any proceeds under any
such insurance policies, previously received by the Sellers with respect
thereto plus an amount equal to the amount of any deductible or
self-insurance maintained by Sellers on such Acquired Assets. In the event
the Closing Date is postponed pursuant to this Section 4(p), the parties
hereto will cooperate to extend the time during which this Agreement must
be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
a. Conditions to Obligation of the Buyers. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
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ii. the Sellers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
iii. the Sellers shall have procured all of the third party
consents specified in Section 4(d) above and all of the title insurance
commitments (and endorsements), surveys and environmental assessments
described in Section 4(n) above;
iv. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or impose damages or
penalties upon any of the parties if such transactions are consummated,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
v. the Sellers shall have delivered to the Buyers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Sections 5(a)(i) through (iv) is satisfied in all respects;
vi. each of the Assignment Applications shall have been
approved by a Final Order of the FCC all applicable waiting periods (and
any extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or been terminated and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
vii. the Buyers shall have received from counsel to the
Sellers an opinion with respect to the matters set forth in Exhibit C
attached hereto, addressed to the Buyers and its lender and dated as of
the Closing Date;
ix. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with an allocation schedule to be delivered at closing; and
x. all actions to be taken by the Sellers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
b. Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
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i. the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
iii. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
iv. the Buyers shall have delivered to the Sellers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
v. each of the Assignment Applications shall have been
approved by a Final Order of the FCC and the Buyers shall have received
all governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
vi. all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
6. Post-Closing Covenants.
The Parties agree as follows with respect to the period following
the Closing:
a. General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
b. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this
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Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving the Station, each of
the other Parties will reasonably cooperate with the contesting or defending
Party and its counsel in the contest or defense, make available his or its
personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 7 below);
provided, however, that such access and cooperation does not unreasonably
disrupt the normal operations of the cooperating party.
c. Adjustments. Operation of the Station and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Sellers and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated and adjusted between the Sellers and the Buyers as
of the Closing Date in accordance with the foregoing principle. In addition, all
commissions payable with respect to the accounts receivable of the Sellers
(whether due before or after Closing) shall be solely for the account and
responsibility of the Sellers. Contractual arrangements that do not reflect an
equal rate of compensation to the Station over the term of the agreement shall
be equitably adjusted as of the Closing Date. The prorations and adjustments
hereunder shall be made and paid insofar as feasible on the Closing Date, with a
final settlement sixty (60) days after the Closing Date. In the event of any
disputes between the Parties as to such adjustments, the amounts not in dispute
shall nonetheless be paid at such time and such disputes shall be determined by
an independent accounting firm mutually acceptable to both parties and the fees
and expenses of such accounting firm shall be paid one-half (1/2) by the Seller
and one-half (1/2) by the Buyer.
d. Collection of Accounts Receivable. At the Closing, the Sellers
will turn over to the Buyers, for collection only, the accounts receivable of
the Station owing to the Sellers as of the close of business on the day before
the Closing Date. A schedule of such accounts receivable will be delivered by
the Seller to the Buyers on the Closing Date or as soon thereafter as possible.
The Buyers agree to use commercially reasonable efforts in the ordinary course
of business (but without responsibility to institute legal or collection
proceedings) to bill for and collect such accounts receivable at the end of each
month within the 120-day period following the Closing Date, and will remit all
payments received on such accounts during this 120-day period on a monthly basis
together with an accounting of all payments received within such period. The
Buyers shall have the sole right to collect such accounts receivable during such
one hundred twenty (120) day period. In the event the Buyers receive monies
during the 120-day period following the Closing Date from an advertiser who,
after the Closing Date, is advertising on the Station, and that advertiser was
included among the accounts receivable as of the Closing Date, the Buyers shall
apply said monies to the oldest outstanding balance due on the particular
account, except in the case of a "disputed" account receivable. For purposes of
this Section 6(d), a "disputed" account receivable means one which the account
debtor refuses to pay because he asserts that the money is not owed or the
amount is
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incorrect. In the case of such a disputed account, the Buyers shall immediately
return the account to the Sellers prior to expiration of the 120-day period
following the Closing Date. If the Buyers return a disputed account to the
Sellers, the Buyers shall have no further responsibility for its collection and
may accept payment from the account debtor for advertising carried on the
Station after the Closing Date. At the end of the 120-day period following the
Closing Date, the Buyers will turn back to the Sellers all of the accounts
receivable of the Station as of the Closing Date owing to the Seller which have
not yet been collected, and the Buyers will thereafter have no further
responsibility with respect to the collection of such receivables. During the
120-day period following the Closing Date, the Buyers shall afford the Sellers
reasonable access to the accounts receivable "aging list." The Sellers
acknowledges and agrees that the Buyers are acting as collection agent hereunder
for the sole benefit of the Sellers and that Buyers have accepted such
responsibility for the accommodation of the Sellers. The Buyers shall not have
any duty to inquire as to the form, manner of execution or validity of any item,
document, instrument or notice deposited, received or delivered in connection
with such collection efforts, nor shall the Buyers have any duty to inquire as
to the identity, authority or rights of the persons who executed the same, but
shall remit the same to Sellers under the procedures outlined in this Section.
f. Consents. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Sellers
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Sellers will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Sellers' interest in the benefits under any such Assumed Contract,
including performance by the Sellers as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
h. Call Signs. In the event that Buyers notify Seller in writing
that they are discontinuing use of the call signs WJLW, Buyers and Seller agree
to enter into a license agreement under which Buyers will authorize the use of
WJLW by Seller for the purposes identified in the license agreement.
7. Remedies for Breaches of this Agreement.
a. Survival. All of the representations and warranties of the
Sellers contained in Section 2 of this Agreement (other than the representations
and warranties of the Sellers contained in Sections 2(a), 2(b), 2(c), and 2(d)
hereof or relating to the Sellers' title to the Acquired Assets) shall survive
the Closing and continue in full force and effect for a period until 90 days
after the applicable statute of limitations has expired with respect to any
claim by the Buyers based on a claim or action by a third party and for a period
of three (3) years following Closing with respect to any claim by the Buyers not
based on a claim or action by a third party. All of the other representations
and warranties (including the representations and warranties Sellers contained
in Sections 2(a), 2(b), 2(c), and 2(d) hereof or relating to the Sellers' title
to the Acquired Assets) and all covenants of the
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Buyers and the Sellers contained in this Agreement shall survive the Closing and
continue in full force and effect forever thereafter.
b. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in Section 7(d) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Sellers agree to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Sellers'
representations or warranties, and covenants contained in this Agreement
or in any Ancillary Agreement executed and/or delivered by the Sellers (so
long as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant
of the Sellers contained herein or in any Ancillary Agreement;
iii. any Liability of the Sellers which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
c. Indemnification Provisions for the Benefit of the Sellers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Sellers
from and against the entirety of any Adverse Consequences the Sellers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Sellers make a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
d. Specific Performance. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(n) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in Section
7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for Buyers for a breach of any provision of this
Agreement.
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e. Liquidated Damages. The Buyers and the Sellers acknowledge that
in the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(c), the Sellers
shall be entitled to receive from the defaulting Party for such default the
Earnest Money Deposit as liquidated damages without the need for proof of
damages, subject only to successfully proving in a court of competent
jurisdiction that the Buyer materially breached this Agreement and that the
transactions contemplated thereby have not occurred. The Sellers shall proceed
against the Earnest Money Deposit as full satisfaction of liquidated damages
owed by the Buyers and as their sole remedy for a failure of the transactions
contemplated hereby to occur as a result of a material breach of the terms of
this Agreement by the Buyers.
f. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnifica tion against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
g. Limitation of Liability. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Identified Party, in
the aggregate from all indemnifiable events shall exceed Ten Thousand Dollars
($10,000) and indemnification shall be made by the indemnifying party only to
the extent of such excess over Ten Thousand Dollars ($10,000); provided however
that the foregoing limitation shall not be applicable to: (i) the obligations of
the Buyer to pay and discharge any Liability of the Sellers
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to third parties from and after the Closing Date assumed by the Buyer under the
terms of this Agreement; (ii) the obligation of the Sellers to pay and discharge
any Liability to third parties not assumed by the Buyer under the terms of this
Agreement, or (iii) the Sellers' obligation to deliver clear title to the
Acquired Assets.
8. Definitions.
"Acquired Assets" means (a) leaseholds and other interests of any kind
therein, improvements, fixtures, and fittings thereon (such as towers and
antennae), and easements, rights-of-way, and other appurtenances thereto)
described in Section 2(g) of the Disclosure Schedule; (b) the tangible assets
described in Section 2(f) of the Disclosure Schedule and all assignable
warranties with respect thereto; (c) Intellectual Property and goodwill
associated therewith; (d) rights under orders and agreements (including those
Barter Agreements and Advertising Contracts identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Station; (e) Assumed Contracts and rights
thereunder; (f) call letters of the Station, jingles, logos, slogans, and
business goodwill of the Station; (f) Licenses and similar rights obtained from
governments and governmental agencies; (g) FCC logs and records and all other
books, records, ledgers, logs, files, documents, correspondence, advertiser
lists, all other lists, plats, architectural plans, drawings, and
specifications, creative materials, advertising and promotional materials,
program production materials, studies, reports, and other printed or written
materials; and (h) goodwill of the Station.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(q), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(h) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"Assumed Liabilities" means obligations of the Sellers which accrue after
the Closing Date under the Assumed Contracts either: (i) to furnish services,
and other non-Cash benefits to another party after the Closing; or (ii) to pay
for goods, services, and other non-Cash benefits that another party will furnish
to it after the Closing. The Assumed Liabilities shall not include any Retained
Liabilities.
"Barter Agreements" has the meaning set forth in Section 4(e) above.
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"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 1 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical,
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industrial, hazardous or toxic materials or wastes into ambient air, surface
water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Broadcast Asset Management Corporation.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Sellers in connection with the conduct of the business and operation
of the Station.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(f) above.
"Indemnifying Party" has the meaning set forth in Section 7(f) above.
"Intellectual Property" means, with respect to the Station, all (a)
patents, patent applications, patent disclosures, and improvements thereto, (b)
trademarks, service marks, trade dress, call letters, logos, and trade names,
(c) mask works and registrations and applications for registration thereof, (d)
trade secrets and confidential business information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and
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information), (e) other proprietary rights, and (f) copies and tangible
embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Leases" means those real estate leases to which Sellers is a party
governing Seller's studios and FM tower sites, as described in Section 2(i) of
the Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Sellers with respect
to the operations of the Station and all applications therefor, together with
any renewals, extension or modifications thereof and additions thereto.
"Multi-employer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price " has the meaning set forth in Section 1(c) above.
"Real Estate" means the real estate, building, fixtures and improvements
which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Liabilities" means any obligations or Liabilities of the Sellers
other than Assumed Liabilities, including but not limited to: (i) any Liability
relating to the ownership or operation of the Station prior to the Closing; (ii)
any Liability of the Seller for income, transfer, sales, use, and other Taxes
arising in connection with the consummation contemplated hereby; (iii) any
Liability of the Seller for costs and expenses incurred in connection with this
Agreement or the consummation of the transactions contemplated hereby (except as
set forth in Section 4(n) relating to Surveys and title commitments and Section
4(b) with regard to the Assignment Application); or (iv) any Liability or
obligation of the Sellers under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
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"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
WJLW-FM, licensed by the FCC in Allouez, Wisconsin.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(n) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing in the event the
Sellers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however, that if such breach is
capable of being cured, such breach also remains uncured for twenty (20)
days after notice of breach is received by the Sellers from the Buyers;
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<PAGE>
iii. the Sellers may terminate this Agreement by giving
written notice to the Buyers at any time prior to the Closing in the event
the Buyers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable being cured, such breach remains uncured for twenty (20) days
after notice of breach is received by the Buyers from the Sellers;
iv. the Buyers may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing if the Closing
shall not have occurred on or before the 270th day following the date of
this Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained
in this Agreement);
v. the Sellers may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Sellers
itself breaching any representation, warranty, or covenant contained in
this Agreement);
vi. the Buyers or the Sellers may terminate this Agreement if
any Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. Miscellaneous.
a. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
b. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No
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Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other Party,
provided that (i) the Buyers may assign all of their right, title and interest
in, to and under this Agreement to one or more Affiliates, who shall then,
subject to the terms and conditions of this Agreement, have the right to receive
the Acquired Assets, assume the Assumed Liabilities, and to pay to the Seller
the Purchase Price therefor or to any successor to the Buyers in the event of
any sale, merger or consolidation of the Buyers, (ii) Buyers may assign their
indemnification claims and their rights under the warranties and representations
of the Sellers to the financial institution(s) providing financing to the Buyers
in connection with this transaction, and (iii) Sellers may assign this Agreement
to an intermediary solely in order to effect a starker exchange, provided that
Sellers shall remain responsible to Buyers for its obligations hereunder.
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Seller:
Mr. Jon LeDuc
909 Kepler Drive
Green Bay, Wisconsin 54311
Copy to:
Jeffrey F. Jaekels, S.C.
Wanezek, Umentum and Jaekels, S.C.
417 S. Adams Street
Green Bay, WI 54301
Fax: (920) 437-8101
(which copy shall not constitute notice to Seller)
If to the Buyers:
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Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Wisconsin.
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or
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unenforceable term or provision, and this Agreement shall be enforceable as so
modified after the expiration of the time within which the judgment may be
appealed.
k. Expenses. The Buyers and the Sellers will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(n) with respect to Surveys and title commitments. The Sellers
will pay all the Seller's income taxes. The Sellers and the Buyers will each pay
one-half (1/2) of any transfer or sales taxes and other recording or similar
fees necessary to vest title to each of the Acquired Assets in the Buyers.
l. Construction. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the Disclosure
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
m. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Wisconsin in any action or
proceeding arising out of or relating to this Agreement, agrees that all claims
in respect of the action or proceeding may be heard and determined in any such
court, and agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Each Party agrees that a final judgment in
any action or proceeding so brought shall be conclusive and may be enforced by
suit on the judgment or in any other manner provided by law.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
----------------------------
(printed)
- -------------------------------
Title:
-------------------------
CUMULUS LICENSING CORPORATION
By:
----------------------------
(printed)
- -------------------------------
Title:
-------------------------
AMERICAN COMMUNICATIONS COMPANY, INC.
By:
----------------------------
(printed)
- -------------------------------
Title:
-------------------------
JON LEDUC
By:
----------------------------
(printed)
- -------------------------------
Title:
-------------------------
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SCHEDULE A
Purchase Price. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the amount of Two Million Five Hundred Thousand Dollars
($2,500,000.00), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of One Hundred Twenty-Five Thousand and no/100 Dollars
($125,000.00) (the "Earnest Money Deposit") in the form of an irrevocable letter
of credit from NationsBank; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00), with
adjustments as provided specifically in this Agreement.
The Earnest Money Deposit referenced in this Schedule A shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), and shall
be disbursed to Seller or returned to Buyer as provided in the Earnest Money
Escrow Agreement.
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of January __, 1998, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing), Lesnick
Communications, Inc., a Michigan corporation ("Lesnick"), and Mrs. Betty Carey
("Carey") (solely with respect to the sale of land identified in Schedule 2(i)
of the Disclosure Schedule). Broadcasting and Licensing are referred to
collectively herein as the "Buyers." Lesnick and Carey are referred to
collectively herein as the "Sellers." The Buyers and the Sellers are referred to
individually as the "Party" or collectively as the "Parties." Capitalized terms
used in this Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Sellers that are used or useful in the operation of radio
station WTWR-FM, licensed to Monroe, Michigan (the "Station") in return for
cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
a. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement (i) Lesnick agrees to sell, transfer, convey and
deliver to Licensing, and Licensing agrees to purchase from the Sellers, the FCC
License listed in Section 2(k) of the disclosure schedule ("Disclosure
Schedule"), which schedule shall be provided to Buyers by Sellers within thirty
(30) days of this Agreement; and (ii) Sellers agree to sell, transfer, convey
and deliver to Broadcasting, and Broadcasting agrees to purchase from the
Sellers, all of the Acquired Assets other than the FCC License. Both such sales
shall take place at the Closing for the consideration specified below in this
Section 1.
b. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, and subject to the prior approval of the Federal
Communications Commission ("FCC"), Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Sellers not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Sellers agree to pay
and discharge all Liabilities and obligations of the Sellers other than the
Assumed Liabilities.
c. Purchase Price. The Buyers agree to pay to the Sellers, as
consideration for the Acquired Assets, the Purchase Price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
("Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
<PAGE>
d. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Station in
Monroe, Michigan, commencing at 9:00 a.m. local time promptly after the FCC
approval of the Assignment Application becomes a Final Order, by which date all
other conditions to the obligations of the Parties to consummate the
transactions contemplated hereby will have been satisfied, or such other date as
the Parties may mutually determine (the "Closing Date").
e. Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Sellers will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds in form acceptable to the Buyers, (B) such affidavits, transfer
tax returns, memorandums of lease, and other additional documents as may be
required by the terms of the title insurance commitments described in Section
4(m) hereof, as necessary to furnish title insurance as required by such section
or as may be necessary to convey title to the Real Estate to the Buyers in the
condition required herein or provide public notice of existence of the Leases,
and (C) such other instruments of sale, transfer, conveyance, and assignment as
the Buyers and their counsel reasonably may request; (iv) the Buyers will
execute, acknowledge (if appropriate), and deliver to the Sellers (A) an
assumption in the form attached hereto as Exhibit C and (B) such other
instruments of assumption as the Sellers and its counsel reasonably may request;
and (v) the Buyers will deliver to the Sellers the consideration specified in
Section 1(c) above.
f. Postclosing Agreement. On the Closing Date, Mrs. Betty Carey
shall execute a Postclosing Agreement with the Buyers including covenants not to
compete with the Buyers in the markets served by the Station and agreements to
indemnify the Buyers in the form of Exhibit D attached hereto. A portion of the
Purchase Price equal to Fifty Thousand Dollars ($50,000) shall be paid to Mrs.
Betty Carey by the Buyers on the Closing Date as consideration for the
agreements set forth in the Postclosing Agreement.
2. Representations and Warranties of the Sellers.
The Sellers represent and warrant to the Buyers that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
a. Organization of the Sellers. Lesnick is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Lesnick does not have any Subsidiaries.
Lesnick has the power and authority to own or lease its properties and to carry
on all business activities now conducted by it. The shareholders of Lesnick are
Betty Carey and Theresa Lesnick as conservator for Katherine Lesnick. Carey owns
the assets identified in Section 2(i) of the Disclosure Schedule to be conveyed
to Buyers.
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<PAGE>
b. Authorization of Transaction. To Sellers' Knowledge, the Sellers
have full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and all agreements and instruments to be
executed and delivered by Sellers pursuant to this Agreement (collectively, the
"Ancillary Agreements") and to perform their obligations hereunder and
thereunder. Without limiting the generality of the foregoing, the Board of
Directors of Lesnick has duly authorized the execution, delivery, and
performance of this Agreement and the Ancillary Agreements by the Sellers. This
Agreement and the Ancillary Agreements constitute the valid and legally binding
obligation of the Sellers, enforceable in accordance with their respective terms
and conditions.
c. Noncontravention. To Sellers' Knowledge, neither the execution
and the delivery of this Agreement or the Ancillary Agreements, nor the
consummation of the transactions contemplated hereby and thereby (including the
assignments and assumptions referred to in Section 1(e) above), will (i) violate
any statute, regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or court to
which the Sellers are subject or any provision of the charter or bylaws of the
Sellers; or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other agreement, arrangement to which the
Sellers are a party or by which it is bound or to which any of their assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). Other than with respect to the Assignment Application described in
Section 4(b) the Sellers do not need to give any notice to, make any filing
with, or obtain any Licenses, consent, or approval of any court or government or
governmental agency in order for the Parties to enter into this agreement or the
Ancillary Agreements or to consummate the transactions contemplated by this
Agreement or the Ancillary Agreements (including the assignments and assumptions
referred to in Section 1(e) above).
d. Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Sellers have good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
e. Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): unaudited balance sheets and statements of income, and cash flow
as of and for the fiscal years ended December 31, 1994, December 31, 1995, and
December 31, 1996 for Lesnick. To Sellers' Knowledge, the Financial Statements
have been prepared in conformity with the Lesnick's normal accounting policies,
practices and procedures applied on a consistent basis, throughout the periods
covered thereby, are correct and complete, fairly present the financial
condition of Lesnick and the results of operation of Lesnick at the dates and
for the periods indicated, and are consistent with the books and records of
Lesnick (which books and records are correct and complete). The Financial
Statements accurately state the revenues of the Station for the period indicated
therein and include an accurate breakout of cash and trade revenues.
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f. Events Subsequent to January 1, 1997. Since January 1, 1997, to
Sellers' Knowledge, except as set forth in Section 2(f) of the Disclosure
Schedule, there has not been any material adverse change in the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of Lesnick with respect to the operation of the Station.
Without limiting the generality of the foregoing and with respect to the
operation of the Station since January 1, 1997:
i. other than this Agreement, Lesnick has not entered into any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
ii. Lesnick has not delayed or postponed (beyond its normal
practice in the Ordinary Course of Business) the payment of accounts
payable and other Liabilities;
iii. Lesnick has not altered its credit and collection
policies or its accounting policies;
iv. there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving Lesnick;
v. Except as described in the Disclosure Schedule, Lesnick has
not materially altered the programming, format or call letters of the
Station, or its promotional and marketing activities;
vi. Lesnick has not applied to the FCC for any modification of
the FCC License or failed to take any action necessary to preserve the FCC
License and has operated the Station in compliance therewith and with all
FCC rules and regulations;
vii. Except as described in Section 2(f) of the Disclosure
Schedule, Lesnick has not terminated or received notice of termination for
any syndicated programming; and
x. Lesnick has not committed to any of the foregoing.
g. Tax Matters. To Sellers' Knowledge, Lesnick has timely and
properly filed all Tax Returns that it was required to file with respect to its
operations. All such Tax Returns were correct and complete and properly reflect
the tax liability of Lesnick. No Tax deficiencies have been proposed or assessed
against Lesnick. All Taxes owed by Lesnick with respect to its operations
(whether or not shown on any Tax Return) have been paid. Lesnick has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. No claim has ever been made by any authority in any
jurisdiction where Lesnick does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
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h. Tangible Assets. To Sellers' Knowledge, Section 2(h) of the
Disclosure Schedule sets forth a listing of all transmitter and station
equipment, vehicles and other tangible personal property used in conducting the
operation and business of the Station. Lesnick owns or leases all tangible
assets necessary for the conduct of the operation and business of the Station as
presently conducted and as presently proposed to be conducted and all leased
assets are specifically identified as such in Section 2(h) of the Disclosure
Schedule.
i. Real Property. To Sellers' Knowledge, Section 2(i) of the
Disclosure Schedule lists and describes briefly all Owned Real Estate and real
property leased to the Sellers (including, without limitation, complete legal
descriptions for all of the Real Estate). The Sellers have delivered to the
Buyers correct and complete copies of the Leases. With respect to the Real
Estate:
i. the Sellers have good and marketable title to all of the
Owned Real Estate free and clear of all liens, charges, mortgages,
security interests, easements, restrictions or other encumbrances of any
nature whatsoever except real estate taxes for the year of Closing and
municipal and zoning ordinances and recorded utility easements which do
not impair the current use, occupancy or value or the marketability of
title of the property and which are disclosed in Section 2(i) of the
Disclosure Schedule (collectively, the "Permitted Real Estate
Encumbrances");
ii. the Leases are and, following the Closing will continue to
be, legal, valid, binding, enforceable, and in full force and effect;
iii. no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default thereunder
or permit termination, modification, or acceleration thereunder;
iv. there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
v. none of the Owned Real Estate and to the Sellers'
Knowledge, none of the properties subject to the Leases is subject to any
lease (other than Leases), option to purchase or rights of first refusal;
vi. except for Permitted Real Estate Encumbrances, there are
no (i) actual or, to the Sellers' Knowledge, proposed special assessments
with respect to any of the Real Estate; (ii) pending or, to the Sellers'
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the
buildings or improvements located on the Real Estate; (iv) any pending or,
to the Sellers' Knowledge, threatened changed in any zoning laws or
ordinances which may materially adversely affect any of the Real Estate or
Sellers' use thereof;
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vii. the Sellers have not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder;
viii. to the Sellers' Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; and
ix. to the Sellers' Knowledge, the owner of each leased
facility has good and marketable title to the underlying parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for Permitted Real Estate Encumbrances and
Sellers' leasehold interest in each Lease has priority over any other
interest except for the fee interest therein and Permitted Real Estate
Encumbrances.
j. Contracts. To Sellers' Knowledge, Section 2(j) of the Disclosure
Schedule lists any written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business. The Sellers have delivered to the Buyers a correct
and complete copy of each written arrangement listed in Section 2(j) of the
Disclosure Schedule (as amended to date). With respect to each written
arrangement so listed which constitutes an Assumed Contract: (A) the written
arrangement is legal, valid, binding, enforceable, and in full force and effect;
(B) the written arrangement will continue to be legal, valid, binding, and
enforceable and in full force and effect on identical terms following the
Closing (if the arrangement has not expired according to its terms); (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default or permit termination,
modification, or acceleration, under the written arrangement; and (D) no party
has repudiated any provision of the written arrangement. The Sellers are not a
party to any verbal contract, agreement, or other arrangement which, if reduced
to written form, would be required to be listed in Section 2(j) of the
Disclosure Schedule under the terms of this Section 2(j). Except for the Assumed
Contracts, the Buyers shall not have any Liability or obligations for or in
respect of any of the contracts set forth in Section 2(j) of the Disclosure
Schedule or any other contracts or agreements of the Sellers.
k. Commission Licenses and Compliance with Commission Requirements.
To Sellers' Knowledge:
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC License, used or useful in the
operation of the Station as they are now being operated are (A) in full
force and effect, (B) unimpaired by any acts or omissions of Lesnick or
Lesnick's employees or agents, (C) free and clear of any restrictions
which might limit the full operation of the Station, and (D) detailed in
Section 2(k) of the Disclosure Schedule. With respect to the licenses,
permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(k) of the
Disclosure Schedule also sets forth, without limitation, the date of the
last renewal, the expiration date thereof, and any
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conditions or contingencies related thereto. Except as set forth in
Section 2(k) of the Disclosure Schedule, no condition exists or event has
occurred that permits, or after notice or lapse of time, or both, would
permit, the revocation or termination of any such license, permit,
consent, franchise, or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction or
limitation upon the operation of the Station as now conducted. Except as
set forth in Section 2(k) of the Disclosure Schedule, the Sellers are not
aware of any reason why the FCC License might not be renewed in the
ordinary course or revoked.
ii. The Station is in compliance with the FCC's policy on
exposure to radio frequency radiation. Access to the Station's
transmission facilities is restricted in accordance with the current
policies of the FCC.
iii. Except as set forth in Section 2(k) of the Disclosure
Schedule, to Lesnick's Knowledge, Lesnick is not the subject of any FCC or
other governmental investigation or any notice of violation or order, or
any material complaint, objection, petition to deny, or opposition issued
by or filed with the FCC or any other governmental authority in connection
with the operation of or authorization for the Station, and there are no
proceedings (other than rule making proceedings of general applicability)
before the FCC or any other governmental authority that could adversely
affect the FCC License or the authorizations listed in Section 2(k) of the
Disclosure Schedule.
iv. Lesnick has filed with the FCC and all other governmental
authorities having jurisdiction over the Station all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
v. Lesnick is not aware of any information concerning the
Station that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary
for the consummation of the transactions contemplated hereunder or the
Buyer's operation and/or ownership of the Station.
l. Intellectual Property. To Sellers' Knowledge, Lesnick owns or has
the right to use pursuant to license, sublicense, agreement or permission all
Intellectual Property necessary for the operation of the businesses of Lesnick
as presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by Lesnick immediately prior to the Closing
hereunder is set forth on Section 2(l) of the Disclosure Schedule and each item
listed will be owned or available for use the by the Buyers on identical terms
and conditions immediately subsequent to the Closing hereunder. Lesnick has not
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and Lesnick has
never received any charge, complaint, or notice alleging any such interference,
infringement, misappropriation, or violation. To the Knowledge of Lesnick, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of Lesnick.
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m. Insurance. To Sellers' Knowledge, Section 2(m) of the Disclosure
Schedule sets forth a complete and accurate description of all Lesnick's
insurance coverage. With respect to each such insurance policy: (A) the policy
is legal, valid, binding, and enforceable and in full force and effect; (B) the
policy will continue to be legal, valid, binding, and enforceable and in full
force and effect on identical terms through the Closing Date.
n. Litigation. To Sellers' Knowledge, Section 2(n) of the Disclosure
Schedule sets forth each instance in which the Sellers: (i) are subject to any
unsatisfied judgment, order, decree, stipulation, injunction, or charge; or (ii)
is a party or, to the Knowledge of the Sellers, is threatened to be made a party
to any charge, complaint, action, suit, proceeding, hearing, or investigation of
or in any court or quasijudicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(n) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Sellers or the Station taken as a whole.
The Sellers have no Knowledge of any Basis for any such charge, complaint,
action, suit, proceeding, hearing, or investigation against the Sellers.
o. Employees. To Sellers' Knowledge, Section 2(o) of the Disclosure
Schedule sets forth a listing of the names, positions, job descriptions, salary
or wage rates and all other forms of compensation paid for work at the Station
of each employee. To the Knowledge of Lesnick, no key employee or group of
employees has any plans to terminate employment with Lesnick. Lesnick is not a
party to or bound by any collective bargaining or similar agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. Lesnick has no Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to the employees of Lesnick.
p. Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that Lesnick maintains or to which Lesnick
contributes or is required to contribute for the benefit of any current or
former employee of Lesnick and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. To Sellers' Knowledge, each
Employee Benefit Plan (and each related trust or insurance contract) complies
and at all times has complied in form and in operation in all respects with the
applicable requirements of ERISA and the Code. Lesnick does not have any
commitment to create any additional Employee Benefit Plan or modify or change
any existing Employee Benefit Plan that would affect any employee or terminated
employee of the Sellers. There are no pending or, to the Knowledge of Lesnick,
threatened claims under, by or on behalf of any of the Employee Benefit Plans,
by any employee or beneficiary covered by any such Employee Benefit Plan, or
otherwise involving any such Employee Benefit Plan (other than routine claims
for benefits), nor have there been any Reportable Events or Prohibited
Transactions with respect to any Employee Benefit Plan.
q. Environment, Health, and Safety.
To Sellers' Knowledge:
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i. With respect to the operation of the Station and the Real
Estate, the Sellers are, and at all times in the past have been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and the Sellers have no Liability (and to Sellers' Knowledge
there is no Basis related to the past or present operations of the Sellers
or their predecessors for any present or future Liability) under any
Environmental Law. The Sellers have no Liability (and to Sellers'
Knowledge there is no Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against
the Sellers giving rise to any Liability) under the Occupational Safety
and Health Act, as amended, or any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign government (or agency
thereof) concerning employee health and safety, or for any illness of or
personal injury to any employee.
ii. The Sellers have obtained and at all times has been in
compliance in all material respects with all of the terms and conditions
of all permits, licenses, and other authorizations which are required
under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of
any federal, state, or local or foreign government relating to worker
health and safety.
iii. All properties and equipment used in the Station and the
Acquired Assets have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances. No pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste ever has been
buried, stored, spilled, leaked, discharged, emitted, or released on any
of the Real Estate. No above ground or underground storage tanks have ever
been located at, on or under the Real Estate. The Sellers have delivered
to the Buyers a complete copy of all environmental claims, reports,
studies, compliance actions or the like of the Sellers or which are
available to the Sellers with respect to any of the Real Estate or any of
the Acquired Assets.
r. Legal Compliance. To Sellers' Knowledge, the Sellers have
complied in all material respects with all laws (including rules and regulations
thereunder) of federal, state, local and foreign governments (and all agencies
thereof. The Sellers have filed in a timely manner all reports, documents, and
other materials they were required to file (and the information contained
therein was correct and complete in all material respects) under all applicable
laws.
s. Advertising Contracts. To Sellers' Knowledge, Section 2(s) of the
Disclosure Schedule lists all arrangements for the sale of air time or
advertising on the Station in excess of $1000, and the amount to be paid to
Lesnick therefor. Lesnick has no reason to believe and has not received a notice
or indication of the intention of any of the advertisers or third parties to
material contracts of Lesnick to cease doing business or to reduce in any
material respect the business transacted with Lesnick or to terminate or modify
any agreements with Lesnick (whether as a result of consummation of the
transactions contemplated hereby or otherwise).
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t. Brokers' Fees. To Sellers' Knowledge, the Sellers have no
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
u. Undisclosed Commitments or Liabilities. To Sellers' Knowledge,
there are no material commitments, liabilities or obligations relating to the
Station, whether accrued, absolute, contingent or otherwise including, without
limitation, guaranties by the Sellers of the liabilities of third parties, for
which specific and adequate provisions have not been made on the Financial
Statements except those incurred in or as a result of the Ordinary Course of
Business since January 1, 1997.
v. Disclosure. To Sellers' Knowledge, the representations and
warranties contained in this Section 2 do not contain any untrue statement of a
fact or omit to state any fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. Representations and Warranties of the Buyer.
Buyers represent and warrants to the Sellers that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
a. Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of the jurisdiction of Nevada. Buyers have the power and authority to own
or lease their properties and to carry on all business activities now conducted
by them. The sole shareholder of Licensing is Broadcasting; the sole shareholder
of Broadcasting is Cumulus Holdings, Inc.
b. Authorization of Transaction. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
c. Noncontravention. To Buyers' Knowledge, neither the execution and
the delivery of this Agreement or the Ancillary Agreements, nor the consummation
of the transactions contemplated hereby and thereby (including the assignments
and assumptions referred to in Section 1(e) above), will (i) violate any
statute, regulation, rule, judgment, order, decree, stipulation, injunction,
charge, or other restriction of any government, governmental agency, or court to
which the Buyers are subject or any provision of their articles of organization
or other charter documents, or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice or
third party consent under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest, or other arrangement to which the
Buyers are a party or by which they are bound or to which any of their
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assets is subject. Other than the Assignment Application described in Section
4(b), the Buyers do not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any court or government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement or the Ancillary Agreements (including the
assignments and assumptions referred to in Section 1(e) above).
d. Brokers' Fees. To Buyers' Knowledge, the Buyers have no Liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which the
Sellers could become liable or obligated.
4. Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
a. General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
b. Assignment Applications. Within ten (10) business days after the
execution of this Agreement, Lesnick and the Buyers shall jointly file with the
FCC an application for assignment of the FCC License, permits and authorizations
pertaining to the Station from Lesnick to Licensing (the "Assignment
Application"). The costs of the FCC filing and attorney's fees in connection
with the Assignment Application shall be borne by the Buyers. Lesnick and the
Buyers shall thereafter prosecute the Assignment Application with all reasonable
diligence and otherwise use commercially reasonable efforts to obtain the grant
of the Assignment Application as expeditiously as practicable (but neither
Lesnick nor the Buyers shall have any obligation to satisfy complainants or the
FCC by taking any steps which would have a material adverse effect upon the
Station or impose significant costs on such party). If the FCC imposes any
condition on either party to the Assignment Application, such party shall use
commercially reasonable efforts to comply with such condition, provided, that
neither party shall be required hereunder to comply with any condition that
would have a material adverse effect upon the Station or any Affiliate. Lesnick
and the Buyers shall jointly oppose any requests for reconsideration or judicial
review of FCC approval of the Assignment Application and shall jointly request
from the FCC extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
c. Employment Offers. Upon notice to Lesnick, and at mutually
agreeable times, Lesnick will permit the Buyers to meet with its employees prior
to the Closing Date. The Buyers may, at their option, extend offers of
employment to all or any of Lesnick's employees effective on the Closing Date.
From and after the execution of this Agreement, Lesnick shall use its best
efforts to assist Buyers in retaining those employees of the Station which the
Buyers wish to
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hire in connection with the operation of the Station by the Buyers subsequent to
the Closing, and Lesnick will not take any action to preclude or discourage any
of Lesnick's employees from accepting any offer of employment extended by the
Buyers. In addition, in the event this Agreement is terminated for any reason
other than default by the Sellers, neither the Buyers nor any of their
respective Affiliates will employ or offer to employ any employee of the Sellers
for a period of three (3) years after the termination of this Agreement, except
with the Sellers' prior written consent.
d. Notices and Consents. The Sellers will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request. Each of the Parties will file any notification and
report forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its best efforts
to obtain an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary, proper or advisable.
Each of the Parties will take any additional action that may be necessary,
proper, or advisable in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental agencies,
and third parties that it may be required to give, make, or obtain.
e. Advertising Obligations. Lesnick shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time without the
Buyers' consent. On the Closing Date, Lesnick shall deliver to the Buyers a
schedule, certified by an officer of Lesnick, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
f. Contracts. Lesnick will not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on Section 2(k)
of the Disclosure Schedule in any material respect. Lesnick will not without
prior written consent of the Buyers enter into any contract outside the Ordinary
Course of Business which involves more than Five Thousand Dollars ($5,000).
g. Operation of Station. Lesnick will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business. Lesnick shall operate the Station in compliance with the FCC License
and the rules and regulations of the FCC, and the FCC License shall at all times
remain in full force and effect. Lesnick shall file with the FCC all material
reports, applications, documents, instruments and other information required to
be filed in connection with the operation of the Station.
h. Credit and Receivables. Lesnick will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Station and with respect to collecting accounts receivable
arising from such extension of credit.
i. Preservation of Station and the Acquired Assets. Lesnick will
keep its Station and the Acquired Assets and properties substantially intact,
including its present operations,
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physical facilities, working conditions, relationships with lessors, licensors,
advertisers, suppliers, customers, and employees, all of the Confidential
Information, call letters and trade secrets of the Station, and the FCC License.
j. Full Access and Consultation. Sellers will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Station, to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to the Sellers. The Sellers will consult with the Buyers'
management with a view to informing Buyers' management as to the operations,
management and business of the Station. Without limiting the foregoing, Sellers
acknowledge and agree that they will provide the Buyers and their
representatives with such access to the properties, books, records, documents
and operations of the Sellers as contemplated herein in a manner which will
permit the Buyers to fully complete their due diligence review within the sixty
(60) day period referenced in Section 5(a)(vi), below.
k. Notice of Developments. The Sellers will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Station or the Acquired Assets or the ability of the Sellers
to perform hereunder.
l. Exclusivity. The Sellers will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the
Sellers, or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any person to do or seek any of the
foregoing. The Sellers will notify the Buyers immediately if any person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.
m. Title Insurance, Surveys and Environmental Assessments. The
Buyers will obtain with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request,
(ii) with respect to each parcel of Owned Real Estate, an owner's policy of
title insurance by a title insurer reasonably satisfactory to the Buyers, in an
amount equal to the fair market value of such Real Estate (including all
improvements located thereon), insuring over the standard pre-printed exceptions
and insuring title to the Owned Real Estate to be vested in the Buyers as of the
Closing free and clear of all liens and encumbrances except Permitted Real
Estate Encumbrances, together with such endorsements for zoning, contiguity,
public access and extended coverage as the Buyers or its lender reasonably
request, (iii) a current survey of each parcel of Real Estate certified to the
Buyers and its lender, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown
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customarily on such surveys, and showing access affirmatively to public streets
and roads (the "Surveys') which shall not disclose any survey defect or
encroachment from or onto any of the Real Estate which has not been cured or
insured over prior to the Closing; and (iv) with respect to each parcel of Real
Estate, a current Phase I environmental site assessment from an environmental
consultant or engineer reasonably satisfactory to the Sellers which does not
indicate that the Sellers and the Real Estate are not in compliance with any
Environmental Law and which shall not disclose or recommend any action with
respect to any condition to be remediated or investigated or any contamination
on the site assessed. The Buyers will pay the costs of these Surveys and
environmental assessments, and the Buyers and Sellers will each pay one-half the
cost of obtaining title insurance, and the cost of revenue stamps for recording
the deed.
n. Control of Station. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Between the date of this Agreement and
the Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Station, and such operation shall be the sole
responsibility of and in the control of Lesnick.
o. Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Sellers until the Closing. In the
event of any such loss, damage, or destruction the Sellers will promptly notify
the Buyers of all particulars thereof, stating the cause thereof (if known) and
the extent to which the cost of restoration, replacement and repair of the
Acquired Assets lost, damaged or destroyed will be reimbursed under any
insurance policy with respect thereto. The Sellers will, at Sellers' expense,
repair or replace such Acquired Assets to their former condition as soon as
possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC License. The Closing Date shall be extended (with FCC consent, if necessary)
for up to sixty (60) days to permit such repair or replacement. If repair or
replacement cannot be accomplished within sixty (60) days of the date of the
Sellers' notice to the Buyers and the Buyers determine that the Sellers' failure
to repair or replace would have a material adverse effect on the operation of
the Station:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Sellers'
notice to the Buyers, in which case either party may terminate this
Agreement; or
iii. the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Sellers' assignment to the
Buyers of all rights under any insurance claims covering the loss, damage
or destruction and payment over to the Buyers of any proceeds under any
such insurance policies, previously received by the Sellers with respect
thereto plus an amount equal to the amount of any deductible or
self-insurance maintained by Sellers on such Acquired Assets. In the event
the Closing Date is postponed
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pursuant to this Section 4(o), the parties hereto will cooperate to extend
the time during which this Agreement must be closed as specified in the
consent of the FCC.
5. Conditions to Obligation to Close.
a. Conditions to Obligation of the Buyers. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Sellers shall have performed and complied with all of
its covenants hereunder in all respects through the Closing;
iii. all of the third party consents specified in Section 4(d)
above and all of the title insurance commitments (and endorsements),
Surveys and environmental site assessments described in Section 4(o) above
shall have been procured by Buyers;
iv. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or impose damages or
penalties upon any of the parties if such transactions are consummated,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
v. the Sellers shall have delivered to the Buyers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Sections 5(a)(i) through (iv) is satisfied in all respects;
vi. the Buyers shall, within sixty (60) days of the date
hereof, be satisfied with their examination and due diligence review
referred to in Section 4(j) above. If, within sixty (60) days after the
date hereof, Buyers do not deliver a written notice terminating this
Agreement in regard to the contingency described in this Section 5(a)(vi),
then the contingency set forth in this Section 5(a)(vi) shall be deemed
waived by Buyers;
vii. the Assignment Application shall have been approved by a
Final Order of the FCC, all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or been
terminated, and the Buyers shall have received all
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governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
viii. the relevant parties shall have entered into the
Postclosing Agreement;
ix. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with a formula which allocates approximately ninety percent
(90%) of the Purchase Price to intangible assets, including the broadcast
license, and the remainder to the tangible assets associated with the
Station; and
x. all actions to be taken by the Sellers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
b. Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
iii. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
iv. the Buyers shall have delivered to the Sellers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
v. the Assignment Application shall have been approved by a
Final Order of the FCC and the Buyers shall have received all governmental
approvals required to
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transfer all other authorizations, consents, and approvals of governments
and governmental agencies set forth in the Disclosure Schedule;
vi. the relevant parties shall have entered into the
Postclosing Agreement; and
vii. all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
6. Post-Closing Covenants.
The Parties agree as follows with respect to the period following
the Closing:
a. General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
b. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Station, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
c. Adjustments. Operation of the Station and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Sellers and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Sellers and the Buyers as of the Closing
Date in accordance with the foregoing principle. In addition, all commissions
payable with respect to the accounts receivable of the Sellers (whether due
before or after Closing) shall be solely for the account and responsibility of
the Sellers. Contractual arrangements that do not reflect an equal rate of
compensation to a Station over the term of the agreement shall be equitably
adjusted
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as of the Closing Date. The prorations and adjustments hereunder shall be made
and paid insofar as feasible on the Closing Date, with a final settlement sixty
(60) days after the Closing Date. In the event of any disputes between the
Parties as to such adjustments, the amounts not in dispute shall nonetheless be
paid at such time and such disputes shall be determined by an independent
accounting firm mutually acceptable to both parties and the fees and expenses of
such accounting firm shall be paid one-half (1/2) by the Sellers and one-half
(1/2) by the Buyers.
d. Collection of Accounts Receivable. At the Closing, the Sellers
will turn over to the Buyers, for collection only, the accounts receivable of
the Station owing to the Sellers as of the close of business on the day before
the Closing Date. A schedule of such accounts receivable will be delivered by
the Sellers to the Buyers on the Closing Date or as soon thereafter as possible.
The Buyers agree to use commercially reasonable efforts in the ordinary course
of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 180-day period
following the Closing Date, and will remit all payments received on such
accounts on a monthly basis during this 180-day period together with an
accounting of all payments received within such period. The Buyers shall have
the sole right to collect such accounts receivable during such one hundred
eighty (180) day period. In the event the Buyers receive monies during the
180-day period following the Closing Date from an advertiser who, after the
Closing Date, is advertising on the Station, and that advertiser was included
among the accounts receivable as of the Closing Date, the Buyers shall apply
said monies to the oldest outstanding balance due on the particular account,
except in the case of a "disputed" account receivable. For purposes of this
Section 6(d), a "disputed" account receivable means one which the account debtor
refuses to pay because he asserts that the money is not owed or the amount is
incorrect. In the case of such a disputed account, the Buyers shall immediately
return the account to the Sellers prior to expiration of the 180-day period
following the Closing Date. If the Buyers return a disputed account to the
Sellers, the Buyers shall have no further responsibility for its collection and
may accept payment from the account debtor for advertising carried on the
Station after the Closing Date. At the end of the 180-day period following the
Closing Date, the Buyers will turn back to the Sellers all of the accounts
receivable of the Station as of the Closing Date owing to the Sellers which have
not yet been collected, and the Buyers will thereafter have no further
responsibility with respect to the collection of such receivables. During the
180-day period following the Closing Date, the Buyers shall afford the Sellers
reasonable access to the accounts receivable "aging list." The Sellers
acknowledge and agrees that the Buyers are acting as collection agent hereunder
for the sole benefit of the Sellers and that Buyers have accepted such
responsibility for the accommodation of the Sellers. The Buyers shall not have
any duty to inquire as to the form, manner of execution or validity of any item,
document, instrument or notice deposited, received or delivered in connection
with such collection efforts, nor shall the Buyers have any duty to inquire as
to the identity, authority or rights of the persons who executed the same.
e. Consents. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Sellers
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Sellers will cooperate with Buyers in any
lawful and economically feasible
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arrangement to provide that the Buyers shall receive the Sellers' interest in
the benefits under any such Assumed Contract, including performance by the
Sellers as agent, if economically feasible; provided, however, that the Buyers
shall undertake to pay or satisfy the corresponding liabilities for the
enjoyment of such benefit to the extent that Buyers would have been responsible
therefor if such consent or assignment had been obtained.
g. Nonsolicitation. If this Agreement is terminated for any reason
other than default by Sellers, neither Buyers nor their respective Affiliates
will take any action that primarily is designed or intended to have the effect
of discouraging any lessor, licensor, customer, supplier, or other business
associate of the Sellers from maintaining the same business relationships with
the Sellers after the Closing as it maintained with the Sellers prior to the
Closing. Except with the Sellers' prior written consent, neither the Buyers nor
any of their respective Affiliates will employ or offer to employ any employee
of the Sellers for a period of three (3) years after the termination of this
Agreement.
7. Remedies for Breaches of this Agreement.
a. Survival. The representations and warranties of the Sellers
contained in Sections 2(a), 2(b), 2(c), and 2(d) hereof or relating to the
Sellers' title to the Acquired Assets, and the representations and warranties of
the Buyers contained in Sections 3(a), 3(b), 3(c), and 3(d) hereof shall survive
the Closing and continue in full force and effect for a period of two (2) years
following Closing. All of the other representations and warranties and all
covenants of the Buyers and the Sellers other than the post-closing covenants in
Section 6 above shall terminate at Closing.
b. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Sellers agree to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Sellers'
representations or warranties, and covenants contained in this Agreement
or in any Ancillary Agreement executed and/or delivered by the Sellers (so
long as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant
of the Sellers contained herein or in any Ancillary Agreement;
iii. any Liability of the Sellers which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
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c. Indemnification Provisions for the Benefit of the Sellers. Except
as described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Sellers
from and against the entirety of any Adverse Consequences the Sellers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Sellers makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
d. Specific Performance. Each of the Parties acknowledges and agrees
that each Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that not withstanding the provision in
Section 7(e) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for the other Party for a breach of any provision of
this Agreement.
e. Liquidated Damages. The Buyers and the Sellers acknowledge that
in the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Sellers as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(c), the Sellers
shall be entitled to receive from the defaulting Party for such default the
Earnest Money Deposit as liquidated damages without the need for proof of
damages, subject only to successfully proving in a court of competent
jurisdiction that the Buyer materially breached this Agreement and that the
transactions contemplated thereby have not occurred.
f. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnifica tion against any other Party (the "Indemnifying
Party",) under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that
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the counsel the Indemnifying Party has selected has a conflict of interest),
(iii) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the matter without the written consent
of the Indemnifying Party (not to be withheld unreasonably), and (iv) the
Indemnifying Party will not consent to the entry of any judgment with respect to
the matter, or enter into any settlement which does not include a provision
whereby the plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, without the written consent of the
Indemnified Party (not to be withheld unreasonably). In the event the
Indemnifying Party does not notify the Indemnified Party within 15 days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
is assuming the defense thereof, however, and/or in the event the Indemnifying
Party shall fail to defend such claim actively and in good faith, then the
Indemnified Party may defend against, or enter into any settlement with respect
to, the matter in any manner it reasonably may deem appropriate.
g. Limitation of Liability. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Identified Party, in
the aggregate from all indemnifiable events shall exceed Twenty-Five Thousand
Dollars ($25,000) and indemnification shall be made by the indemnifying party
only to the extent of such excess over Twenty-Five Thousand Dollars ($25,000);
provided however that the foregoing limitation shall not be applicable to: (i)
the obligations of the Buyer to pay and discharge any Liability of the Sellers
to third parties from and after the Closing Date assumed by the Buyer under the
terms of this Agreement; (ii) the obligation of the Sellers to pay and discharge
any Liability to third parties not assumed by the Buyer under the terms of this
Agreement, or (iii) the Sellers' obligation to deliver clear title to the
Acquired Assets.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of Lesnick, and all right, title and interest in and to all real
estate listed in Section 2(i) of the Disclosure Schedule and to be conveyed by
Carey, other than Retained Assets that are used or useful in the operation of
the Station, wherever located, including but not limited to all of its (a)
leaseholds and other interests of any kind therein, improvements, fixtures, and
fittings thereon (such as towers and antennae), and easements, rights-of-way,
and other appurtenances thereto); (b) tangible personal property (such as fixed
assets, computers, data processing equipment, electrical devices, monitoring
equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles) and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those Barter Agreements and Advertising Contracts identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Station; (e) Assumed Contracts, indentures,
Security Interests, guaranties, other similar arrangements, and rights
thereunder; (f) call letters of the Station, jingles, logos, slogans, and
business goodwill of the Station; (g) claims, causes of action, chooses in
action, rights of recovery (including rights under policies of
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insurance), rights of set off, and rights of recoupment; (h) Licenses and
similar rights obtained from governments and governmental agencies; and (i) FCC
logs and records and all other books, records, ledgers, logs, files, documents,
correspondence, advertiser lists, all other lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, program production materials, studies, reports, and other printed or
written materials; and (j) goodwill of the Station.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(k) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"Assumed Liabilities" means (a) obligations of Lesnick which accrue after
the Closing Date under the Assumed Contract either: (i) to furnish services, and
other non-Cash benefits to another party after the Closing; or (ii) to pay for
goods, services, and other non-Cash benefits that another party will furnish to
it after the Closing. The Assumed Liabilities shall not include any Retained
Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Confidential Information" means any information concerning the businesses
and affairs of the Sellers.
"Disclosure Schedule" has the meaning set forth in Section 1 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Philip R. Seaver Title Company, Inc., Bloomfield
Hills, Michigan.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
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"FCC License" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Sellers in connection with the conduct of the business and operation
of the Station.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means to the best of Sellers' actual knowledge.
"Leases" means those real estate leases to which Sellers are a party
governing Sellers' studios and FM tower sites, as described in Section 2(i) of
the Disclosure Schedule.
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<PAGE>
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Sellers with respect
to the operations of the Station and all applications therefor, together with
any renewals, extension or modifications thereof and additions thereto.
"Multi-employer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by Carey as described in
Section 2(i) of the Disclosure Schedule and all buildings, fixtures, and
improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Post-Closing Agreement" means the Post-Closing Agreement with Sellers'
owners in the form attached hereto as Exhibit D.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price " has the meaning set forth in Schedule A below.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of Lesnick as
a corporation; (ii) any of the rights of the Sellers under this Agreement (or
under any side agreement between the Sellers on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Sellers; (iv) deposits,
prepayments, and refunds; and (v) Cash.
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<PAGE>
"Retained Liabilities" means any other obligations or Liabilities of the
Sellers, including but not limited to: (i) any Liability relating to the
ownership or operation of the Station prior to the Closing; (ii) any Liability
of the Sellers for income, transfer (excluding recording charges and transfer
taxes), sales, use, and other Taxes arising in connection with the consummation
contemplated hereby; (iii) any Liability of the Sellers for costs and expenses
incurred in connection with this Agreement or the consummation of the
transactions contemplated hereby (except as set forth in Section 4(i) relating
to Surveys, title commitments and environmental audits and Section 4(b) with
regard to the Assignment Application); or (iv) any Liability or obligation of
the Sellers under this Agreement (or under any side agreement between the
Sellers on the one hand and the Buyers on the other hand entered into on or
after the date of this Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Sellers" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
WTWR-FM, licensed by the FCC to operate in Monroe, Michigan.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property and personal property (on a
due date basis as applicable), sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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<PAGE>
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing in the event the
Sellers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however, that if such breach is
capable of being cured, such breach also remains uncured for twenty (20)
days after notice of breach is received by the Sellers from the Buyers;
iii. the Sellers may terminate this Agreement by giving
written notice to the Buyers at any time prior to the Closing in the event
the Buyers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable being cured, such breach remains uncured for twenty (20) days
after notice of breach is received by the Buyers from the Sellers;
iv. the Buyers may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing if the Closing
shall not have occurred on or before the 270th day following the date of
this Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained
in this Agreement);
v. the Sellers may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Sellers
themselves breaching any representation, warranty, or covenant contained
in this Agreement);
vi. the Buyers shall, within sixty (60) days after the date
hereof, be satisfied in their sole discretion as to the results of their
examination and due diligence review referred to in Section 4(l) hereof.
If, within sixty (60) days after the date hereof, Buyers do not deliver to
Sellers a written notice terminating this Agreement in regard to the
contingency in this Section 5(a)(vi), then the contingency set forth in
this Section 5(a)(vi) shall be deemed waived by Buyers; or
vii. the Buyers or the Sellers may terminate this Agreement if
any Assignment Application is denied by Final Order.
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<PAGE>
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach and except that Buyer will pay up to
$10,000 to Sellers as reimbursement for actual attorneys' fees if the Agreement
is terminated for any reason other than default by Sellers).
10. Miscellaneous.
a. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
b. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Sellers the Purchase Price therefor or to any
successor to the Buyers in the event of any sale, merger or consolidation of the
Buyers, and (ii) Buyers may assign their indemnification claims and their rights
under the warranties and representations of the Sellers to the financial
institution(s) providing financing to the Buyers in connection with this
transaction.
e. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by
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<PAGE>
facsimile transmission actually received by the receiving equipment or three (3)
days after deposited in the United States mail, certified mail, postage prepaid,
return receipt requested, in each case addressed to the intended recipient as
set forth below:
If to the Sellers:
Mrs. Betty Carey
8736 Loire Valley Drive
Tecumseh, Michigan 49286
Ms. Theresa Lesnick as conservator for Katherine Lesnick
Lesnick Communications, Inc.
7 South Monroe Street
Monroe, Michigan 48161
Copy to:
David A. Kaplan, Esquire
Suite 204
30833 Northwestern Highway
Farmington Hills, Michigan 48334
Fax: (248) 932-4006
(which copy shall not constitute notice to Sellers)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
-29-
<PAGE>
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Michigan.
i. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
j. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
k. Expenses. The Buyers and the Sellers, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(n) with respect to Surveys, title commitments and
environmental audits. The Sellers will pay all income taxes of Sellers. The
Sellers and the Buyers will each pay one-half (1/2) of any transfer or sales
taxes and other recording or similar fees necessary to vest title to each of the
Acquired Assets in the Buyers. In the event this Agreement is terminated for any
reason other than default by Sellers, the Buyers will reimburse Sellers for up
to Ten Thousand Dollars ($10,000) of actual legal expenses incurred by Sellers.
l. Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the
-30-
<PAGE>
exception with reasonable particularity and describes the relevant facts in
reasonable detail. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
m. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Ann Arbor, Michigan in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
----------------------------
(printed)
- -------------------------------
Title:
-------------------------
CUMULUS LICENSING CORPORATION
By:
----------------------------
(printed)
- -------------------------------
Title:
-------------------------
LESNICK COMMUNICATIONS, INC.
By:
----------------------------
(printed)
- -------------------------------
Title:
-------------------------
MRS. BETTY CAREY
- ----------------------------------
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<PAGE>
SCHEDULE A
Purchase Price. The Buyers agree to pay to Lesnick, as consideration for
the Acquired Assets, the amount of Two Million Eight Hundred Thousand Dollars
($2,800,000.00), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of One Hundred Forty Thousand Dollars ($140,000.00)
(collectively with the escrow amount described below, the "Earnest Money
Deposit") in cash; and
(ii) on the Closing Date, the Buyers shall pay to Lesnick the amount
of Two Million Six Hundred Ten Thousand Dollars ($2,610,000.00) in cash; and
(iii) on the Closing Date, the Buyer shall pay to Mrs. Betty Carey,
on behalf of all parties to the Postclosing Agreement, the amount of Fifty
Thousand Dollars ($50,000) in cash.
In addition, the Buyers agree to pay to Carey, as consideration for the
real estate to be transferred to Broadcasting by Carey, the amount of Five
Hundred Thousand Dollars ($500,000.00), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Twenty-Five Thousand Dollars ($25,000.00) in cash;
and
(ii) on the Closing Date, the Buyers shall pay Carey the amount of
Four Hundred Seventy-Five Thousand Dollars ($475,000.00) in cash.
These amounts shall be referred to collectively as the "Purchase Price." The
Earnest Money Deposit referenced in this Section l(c) shall be placed in escrow
with the Escrow Agent pursuant to an escrow agreement in the form attached
hereto as Exhibit A (the "Earnest Money Escrow Agreement") and shall be
disbursed to Sellers or returned to Buyers as provided in the Earnest Money
Escrow Agreement.
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<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
BIG COUNTRY BROADCASTING, INC.
AND
TYE BROADCASTING, INC.
AND
CUMULUS BROADCASTING, INC.
AND
CUMULUS LICENSING CORP.
October 29, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction..................................................1
(a) Purchase and Sale of Assets.................................1
(b) Assumption of Liabilities...................................1
(c) Purchase Price..............................................1
(d) The Closing.................................................2
(e) Deliveries at the Closing...................................2
(f) Postclosing Agreement.......................................2
(g) Allocation..................................................3
2. Representations and Warranties of the Sellers......................3
(a) Organization of the Sellers.................................3
(b) Authorization of Transaction................................3
(c) Noncontravention............................................3
(d) Title to Acquired Assets....................................4
(e) Financial Statements........................................4
(f) Events Subsequent to .......................................4
(g) Tax Matters.................................................6
(h) Tangible Assets.............................................6
(i) Owned Real Property.........................................6
(j) Real Property Leases........................................7
(k) Intellectual Property.......................................7
(l) Contracts...................................................9
(m) Commission Licenses and Compliance with
Commission Requirements..................................10
(n) Insurance..................................................11
(o) Litigation.................................................11
(p) Employees..................................................11
(q) Employee Benefits..........................................12
(r) Environment, Health, and Safety............................12
(s) Legal Compliance...........................................13
(t) Brokers' Fees..............................................14
(u) Advertising Contracts......................................14
(v) Enforceability of Purchase Option..........................14
(w) Disclosure.................................................14
3. Representations and Warranties of the Buyers......................14
(a) Organization of the Buyers.................................15
(b) Authorization of Transaction...............................15
(c) Noncontravention...........................................15
(d) Brokers' Fees..............................................15
<PAGE>
4. Pre-Closing Covenants.............................................15
(a) General....................................................15
(b) Assignment Applications....................................15
(c) Employment Offers..........................................16
(d) Notices and Consents.......................................16
(e) Operation of Business......................................16
(f) Advertising Obligations....................................17
(g) Operating Statements.......................................17
(h) Contracts..................................................17
(i) Operation of Station.......................................17
(j) Credit and Receivables.....................................17
(k) Preservation of Business...................................17
(l) Full Access................................................17
(m) Notice of Developments.....................................18
(n) Exclusivity................................................18
(o) Title Insurance............................................18
(p) Surveys....................................................18
(q) Environmental Assessments..................................19
(r) Control of Stations........................................19
(s) Risk of Loss...............................................19
(t) Continuation of Time Brokerage Agreement...................20
5. Conditions to Obligation to Close.................................20
(a) Conditions to Obligation of the Buyers.....................20
(b) Conditions to Obligation of the Seller.....................21
6. Post-Closing Covenants............................................22
(a) General....................................................22
(b) Litigation Support.........................................22
(c) Adjustments................................................22
(d) Collection of Accounts Receivable..........................23
(e) Severance Obligations......................................23
7. Remedies for Breaches of this Agreement...........................24
(a) Survival...................................................24
(b) Indemnification Provisions for the Benefit of the Buyers...24
(c) Indemnification Provisions for the Benefit of the Seller...24
(d) Specific Performance.......................................25
(e) Liquidated Damages.........................................25
(f) Matters Involving Third Parties............................25
(h) Other Indemnification Provisions...........................26
8. Definitions.......................................................26
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<PAGE>
9. Termination.......................................................31
(a) Termination of Agreement...................................31
(b) Effect of Termination......................................32
10. Miscellaneous....................................................32
(a) Press Releases and Announcements...........................32
(b) No Third Party Beneficiaries...............................32
(c) Entire Agreement...........................................32
(d) Succession and Assignment..................................32
(e) Counterparts...............................................32
(f) Headings...................................................33
(g) Notices....................................................33
(h) Governing Law..............................................33
(i) Amendments and Waivers.....................................34
(j) Severability...............................................34
(k) Expenses...................................................34
(l) Construction...............................................34
(m) Incorporation of Exhibits and Schedules....................34
(n) Submission to Jurisdiction.................................34
(o) Bulk Transfer Laws.........................................35
-iii-
<PAGE>
EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Forms of Assignments
Exhibit C--Form of Assumption
Exhibit D--Form of Postclosing Agreement
Exhibit E--Allocation Schedule
Exhibit F--Form of Opinion of Counsel to the Seller
Exhibit G--Purchase Option
SCHEDULES
Description of Schedule Section
----------------------- -------
Financial Statements 2(e)
Events Subsequent to January 1, 1997 2(f)
Tangible Assets 2(h)
Real Property Leases 2(j)
Intellectual Property 2(k)
Contracts 2(l)
Commission Licenses and Compliance with Commission Requirements 2(m)
Insurance 2(n)
Litigation 2(o)
Employees 2(p)
Employee Benefits 2(q)
Advertising Contracts 2(u)
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of October 29, 1997, by
and among Big Country Broadcasting, Inc, a Texas corporation ("Big Country") and
Tye Broadcasting, Inc., a Texas corporation ("Tye"), Cumulus Broadcasting, Inc.,
a Nevada corporation (the "Operating Company"), and Cumulus Licensing Corp., a
Nevada corporation (the "Licensing Company"). Big Country and Tye are
collectively referred to herein as the "Sellers". The Operating Company and the
Licensing Company are collective referred to herein as the "Buyers." The Buyers
and the Sellers are collectively referred to herein as the "Parties."
Capitalized terms used in this Agreement are defined in Section 8 hereof.
This Agreement contemplates a transaction in which the Buyers, in return
for Cash, will purchase substantially all of the assets (and assume certain of
the liabilities) of the Sellers that are used or useful in the operation of
radio stations KCDD-FM, licensed to operate in Hamlin, Texas and KBCY-FM,
licensed to operate in Tye, Texas and receive from the Sellers an assignment of
an option to purchase substantially all of the assets (and assume certain of the
liabilities) of IQ Radio, Inc. that are used or useful in the operation of radio
station KHXS-FM, licensed to operate in Abilene, Texas.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyers agree to purchase from the Sellers, and
the Sellers agree to sell, transfer, convey, and deliver to the Buyers, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyers agree to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyers will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Sellers not included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller One Million
Eight Hundred and Twelve Thousand and 00/100 Dollars ($1,812,000.00) (the
"Purchase Price") payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Eighty-seven Thousand Five Hundred and 00/100
Dollars ($87,500.00) (the "Earnest Money Deposit") by delivery of either
(A) Cash payable by wire transfer or delivery of other immediately
available funds or, (B) a clean and irrevocable letter of credit issued by
NationsBank of Texas, N.A. naming Escrow Agent as beneficiary; and
<PAGE>
(ii) on the Closing Date, the Buyers shall pay to the Sellers the
amount of One Million Five Hundred and Forty-nine Thousand Five Hundred
and 00/100 Dollars ($1,549,500.00) by delivery of Cash payable by wire
transfer or delivery of other immediately available funds; and
(iii) on the Closing Date, the Buyers shall pay to the Sellers, on
behalf of all parties to the Postclosing Agreement, the amount of One
Hundred Seventy-five Thousand and 00/100 Dollars ($175,000.00) by delivery
of Cash payable by wire transfer or delivery of other immediately
available funds.
The Earnest Money Deposit referenced in this Section 1(c) shall be placed
in escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), which
requires that such Earnest Money Deposit shall, if in a form other than pursuant
to Section 1(c)(B), be deposited by the Escrow Agent with a federally insured
financial institution in an interest bearing account. Interest earned on the
Earnest Money Deposit, if any, shall accrue to the benefit of the Buyers, and,
together with the principal amount of the Earnest Money Deposit, shall be
payable to the Sellers and credited against the Purchase Price on the Closing
Date. If this Agreement is terminated without Closing of the transaction
contemplated herein, the Earnest Money and any accrued interest shall be paid to
the Buyers or the Sellers as provided in the Earnest Money Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Stations in
Abilene, Texas, commencing at 9:00 a.m. local time on the date set by the Buyers
not earlier than the fifth business day or later than the tenth business day
after the FCC approval of the Assignment Application becomes a Final Order, by
which date all other conditions to the obligations of the Parties to consummate
the transactions contemplated hereby will have been satisfied or waived or such
other date as the Parties may mutually determine (the "Closing Date"); provided,
however, that the Closing Date shall be no later than two hundred seventy (270)
days from the date of this Agreement.
(e) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Sellers will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including real property and Intellectual Property
transfer documents) in the forms attached hereto as Exhibit B and (B) such other
instruments of sale, transfer, conveyance, and assignment as the Buyers and
Buyers' counsel reasonably may request; (iv) the Buyers will execute,
acknowledge (if appropriate), and deliver to the Sellers (A) an assumption in
the form attached hereto as Exhibit C and (B) such other instruments of
assumption as the Sellers and their counsel reasonably may request; and (v) the
Buyers will deliver to the Sellers the consideration specified in Section 1(c)
above.
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(f) Postclosing Agreement. On the Closing Date, the Sellers shall cause
the Seller Shareholders to execute, a Postclosing Agreement with the Buyers
including covenants not to compete with the Buyers in the markets served by the
Stations and to indemnify the Buyers in the form of Exhibit D attached hereto. A
portion of the Purchase Price, equal to One Hundred Seventy-five Thousand and
00/100 Dollars ($175,000.00) shall be paid on the Closing Date to the Sellers,
on behalf of all parties (other than the Buyers), as consideration for the
agreements set forth in the Postclosing Agreement.
(g) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with an allocation schedule
to be attached hereto at Closing as Exhibit E.
2. Representations and Warranties of the Sellers. The Sellers jointly and
severally represent and warrant to the Buyers that the statements contained in
this Section 2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 2), except as set forth in the lettered and numbered
paragraphs contained in the disclosure schedule accompanying this Agreement and
initialed by the Parties (the "Disclosure Schedule") corresponding to the
lettered and numbered sections of this Section 2.
(a) Organization of the Sellers. Each of the Sellers is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of Texas. Neither Seller has any Subsidiaries.
(b) Authorization of Transaction. Each of the Sellers has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors and stockholders of each of
the Sellers have duly authorized the execution, delivery, and performance of
this Agreement by that Seller. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms and
conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which either Seller is subject or any provision of the charter or
bylaws of either Seller; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
Security Interest, or other arrangement to which either Seller is a party or by
which either of them is bound or to which any of their respective assets is
subject (or result in the imposition of any Security Interest upon any of their
respective assets). Other than with respect to the transfer of the FCC Licenses,
neither Seller needs to give any notice to, make any filing with, or obtain any
Licenses, consent, or approval of any government or
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governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in Section 1 above).
(d) Title to Acquired Assets. The Sellers have, or will have prior to the
Closing Date, good and marketable title to all of the Acquired Assets, free and
clear of any Security Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedules are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, changes in
stockholders' equity, and Cash flow as of and for the fiscal years ended
December 31, 1993, December 31, 1994, December 31, 1995 and December 31, 1996,
for each of the Sellers; and (ii) unaudited statements of income and Cash flow,
as of and for each month during 1995 and 1996 and the months ended January 31,
February 28, March 31, April 30, and May 31, June 30, and July 31, 1997 for each
of the Sellers (the "Most Recent Financial Statements"). Except to the extent
disclosed in the footnotes attached to the Financial Statements the Financial
Statements have been prepared in all Material respects in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby, are
correct and complete, and are consistent with the books and records of the
Seller (which books and records are correct and complete). Without limiting the
generality of the foregoing, all Material revenues and expenses of each Seller
and the Stations (A) are properly reflected in the Financial Statements, (B)
have arisen in the Ordinary Course of Business, (C) are valid and subject to no
counterclaims, and (D) will be or have been collected or paid at their recorded
amounts subject only to the reserve for bad debts set forth on the face of the
Most Recent Financial Statements.
(f) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(f) of the Disclosure Schedule, there has not been any
Material adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations, or future prospects of either
Seller with respect to the operation of the Stations. Without limiting the
generality of the foregoing with respect to the operation of the Stations and
except as set forth in Section 2(f) of the Disclosure Schedule, since January 1,
1997:
(i) the Sellers have not sold, leased, transferred, or assigned any
of its Material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Sellers have not entered into any contract, lease,
sublease, license, or sublicense (or series of related contracts, leases,
subleases, licenses, and sublicenses) outside the Ordinary Course of
Business;
(iii) no party has accelerated, terminated, modified, or cancelled
any contract, lease, sublease, license, or sublicense (or series of
related contracts, leases, subleases, licenses, and sublicenses) involving
more than $5,000 to which either Seller is a party or by which either of
them is bound;
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(iv) neither Seller has made any capital investment in, any loan to,
or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions) outside
the Ordinary Course of Business;
(v) neither Seller has created, incurred, assumed, or guaranteed any
indebtedness (including capitalized lease obligations) outside the
Ordinary Course of Business;
(vi) neither Seller has delayed or postponed (beyond its normal
practice) the payment of accounts payable and other Liabilities;
(vii) neither Seller has cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(viii) neither Seller has granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(ix) neither Seller has experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property or any action
adversely affecting the FCC Licenses or the Stations;
(x) neither Seller has made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business giving rise to any claim or right on its
part against the person or on the part of the person against it;
(xi) neither Seller has entered into any employment contract,
consulting contract or severance agreement or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement;
(xii) neither Seller has granted any increase outside the Ordinary
Course of Business in the base compensation of any of its directors,
officers, and employees;
(xiii) neither Seller has adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other
plan, contract, or commitment for any of its directors, officers, and
employees, or, except in the Ordinary Course of Business, modified or
terminated any existing such plan, contract, or commitment;
(xiv) neither Seller has made any other change in employment terms
for any of its directors, officers, and employees except in the Ordinary
Course of Business;
(xv) neither Seller has made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
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(xvi) there has not been any other Material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving either Seller;
(xvii) neither Seller has Materially altered its credit and
collection policies or its accounting policies;
(xviii) neither Seller has Materially altered the programming,
format or call letters of the Stations, or its promotional and marketing
activities;
(xix) neither Seller has applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to preserve the
FCC Licenses and has operated the Stations in compliance therewith and
with all FCC rules and regulations;
(xx) there has been no Material adverse change in the market share
or, other than normal seasonality and the absence of political advertising
during this non-election year, Cash flow of the Stations; and
(xxi) neither Seller has committed to any of the foregoing.
(g) Tax Matters. The Sellers have each filed and will file all Tax Returns
that they were was required to file and may be required to file. All such Tax
Returns that were filed were correct and complete in all respects, and all such
Tax Returns that will be filed will be correct and complete in all respects. All
Taxes owed by the Sellers (whether or not shown on any Tax Return) have been
paid. Each Seller has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. The Sellers have not waived any
statute of limitations with respect to Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency. Neither Seller is a party to a
pending Tax audit and is aware of no threatened Tax audit. No claim has ever
been made by an authority in a jurisdiction where the Sellers do not file Tax
Returns that they are or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the assets of either Seller that arose in
connection with any failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Stations.
The Sellers own or lease all tangible assets necessary for the conduct of the
operation and business of the Stations as presently conducted and as presently
proposed to be conducted by Seller. Each such tangible asset has been maintained
in accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear) and is suitable for the purpose for
which it is presently used.
(i) Owned Real Property. The Sellers do not own any real property that is
used or useful in the operation of the Stations.
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(j) Real Property Leases. Section 2(j) of the Disclosure Schedule lists
and describes briefly all real property leased or subleased to the Sellers.
Section 2(j) of the Disclosure Schedule also identifies the leased or subleased
properties for which title insurance policies are to be procured in accordance
with Section 4(i) below. The Sellers have delivered to the Buyers correct and
complete copies of the leases and subleases listed in Section 2(j) of the
Disclosure Schedule (as amended to date). With respect to each lease and
sublease listed in Section 2(j) of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing will
continue to be, legal, valid, binding, enforceable, and in full force and
effect;
(ii) to the Sellers' Knowledge, no party to the lease or sublease is
in breach or default (or has repudiated any provision thereof), 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;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above are true and
correct with respect to the underlying lease;
(v) the Sellers have not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vi) all facilities leased or subleased thereunder have received all
approvals of governmental authorities (including licenses, permits and
zoning approvals) required in connection with the operation thereof and
have been operated and maintained in accordance with applicable laws,
rules, and regulations;
(vii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities; and
(viii) the owner of the facility leased or subleased has good and
marketable title to the parcel of real property, free and clear of any
easement, covenant, or other restriction, except for recorded easements,
covenants, and other restrictions that do not impair the current use or
occupancy of the property subject thereto.
(k) Intellectual Property. To the Knowledge of the Sellers, each of the
Sellers owns or has the right to use pursuant to license, sublicense, agreement,
or permission all Intellectual Property necessary for the operation of the
businesses of the Sellers as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by the Sellers
immediately prior to the Closing hereunder will be owned or available for use by
the Buyers on identical terms and conditions immediately subsequent to the
Closing hereunder. Each Seller has
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taken all necessary or desirable action to protect each item of Intellectual
Property that it owns or uses.
(i) To the Knowledge of the Sellers, neither Seller has Materially
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and
neither Seller has ever received any charge, complaint, claim, or notice
alleging any such interference, infringement, misappropriation, or
violation. To the Knowledge of the Sellers, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of the Sellers .
(ii) Section 2(k) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Sellers
with respect to any of their Intellectual Property, identifies each
pending patent, trademark or copyright application for registration which
the Sellers have made with respect to any of their Intellectual Property,
and identifies each license, agreement, or other permission which the
Sellers have granted to any third party with respect to any of their
Intellectual Property (together with any exceptions). The Sellers have
delivered to the Buyers correct and complete copies of all such patents,
trademarks or copyright registrations, applications, licenses, agreements,
and permissions (as amended to date) and have made available to the Buyers
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. With respect
to each item of Intellectual Property that the Sellers own:
(A) the Sellers possess all right, title, and interest in and
to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of
the Sellers, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) neither Seller has ever agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iii) Section 2(k) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the
Sellers use pursuant to license, sublicense, agreement, or permission
including, but not limited to the call letters of the Stations. The
Sellers have supplied the Buyers with correct and complete copies of all
such licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each such item of used Intellectual Property:
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(A) the license, sublicense, agreement, or permission covering
the item is, and following the Closing will continue to be on
identical terms, legal, valid, binding, enforceable, and in full
force and effect;
(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated any provision
thereof), and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and
correct with respect to the underlying license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation,
injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of
the Sellers, is threatened which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property;
(F) To the Knowledge of the Sellers, neither Seller has agreed
to indemnify any person or entity for or against any interference,
infringement, misappropriation, or other conflict with respect to
the underlying item of Intellectual Property; and
(G) neither Seller has granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(l) Contracts. Other than Advertising Contracts, Section 2(l) of the
Disclosure Schedule lists all of the contracts, agreements, and other written or
oral arrangements that are necessary for the conduct of the operation and
business of the Stations as presently conducted and either involving payment in
excess of One Thousand Dollars ($1,000) per year or not entered into in the
Ordinary Course of Business. All such agreements listed in Section 2(l) of the
Disclosure Schedule and marked by an asterisks shall be assigned by the Sellers
to and assumed by the Buyers as Acquired Assets, and the Sellers shall terminate
as of the Closing Date with no Liability to the Buyers any other agreement
listed and not so marked. The Sellers have delivered to the Buyers a correct and
complete copy of each written arrangement listed in Section 2(l) of the
Disclosure Schedule (as amended to date). With respect to each arrangement
listed in Section (l) of the Disclosure Schedule and marked by an asterisks:
(i) the arrangement is legal, valid, binding, enforceable, and in
full force and effect;
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(ii) the arrangement will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing;
(iii) no party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration under the arrangement;
and
(iv) no party has repudiated any provision of the arrangement.
Except as identified in Section 2(l) of the Disclosure Schedule, no agreement
listed in Schedule 2(l) of the Disclosure Schedule involves any transaction with
any officer, director or employee of the Sellers. Neither Seller is a party to
any verbal contract, agreement, or other arrangement which, if reduced to
written form, would be required to be listed in Section 2(l) of the Disclosure
Schedule under the terms of this Section 2(l).
(m) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates
of compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or useful in the operation of the
Stations as they are now being operated (A) are in full force and effect,
(B) are unimpaired by any acts or omissions of the Sellers or the Sellers'
employees or agents, (C) are free and clear of any restrictions which
might limit the full operation of the Stations, and (D) are detailed in
Section 2(m) of the Disclosure Schedules. With respect to the licenses,
permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(m) of the
Disclosure Schedules also sets forth, without limitation, the date of the
last renewal, the expiration date thereof, and any conditions or
contingencies related thereto. Except as set forth in Section 2(m) of the
Disclosure Schedules, no condition exists or event has occurred that
permits, or after notice or lapse of time, or both, would permit, the
revocation or termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express expiration date) or
the imposition of any Material restriction or limitation upon the
operation of the Stations as now conducted. Except as set forth in Section
2(m) of the Disclosure Schedules, neither Seller is aware of any reason
why the FCC licenses might not be renewed in the ordinary course or
revoked.
(ii) To the Sellers' Knowledge, the Stations are each in compliance
with the FCC's policy on exposure to radio frequency radiation. No renewal
of any FCC License would constitute a major environmental action under the
FCC's rules or policies. Access to the Station's transmission facilities
is restricted in accordance with the policies of the FCC.
(iii) Except as set forth in Section 2(m) of the Disclosure
Schedules, to the best of the Sellers' Knowledge, neither Seller is the
subject of any FCC or other governmental investigation or any notice of
violation or order, or any Material complaint, objection, petition to
deny, or opposition issued by or filed with the FCC or any other
governmental
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authority in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rulemaking proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(m) of the Disclosures Schedules.
(iv) Each Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all Material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(n) Insurance. Section 2(n) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which either Seller is a party, a named
insured, or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage; and
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage.
Each insurance policy listed in Section 2(n) of the Disclosure Schedule shall be
and remain enforceable in full force and effect until the Closing. Section 2(n)
of the Disclosure Schedule also describes any self-insurance arrangements
affecting the Sellers.
(o) Litigation. Section 2(o) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgement,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(o) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(p) Employees. Section 2(p) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work
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at the Stations of each employee of Seller. To the Knowledge of the Seller, no
key employee or group of employees has any plans to terminate employment with
the Seller. The Seller is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strikes, grievances, claims of unfair
labor practices, or other collective bargaining disputes. The Seller has not
committed any unfair labor practice. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Seller.
(q) Employee Benefits. Section 2(q) of the Disclosure Schedule lists all
Employee Benefit Plans and other executive compensation plans that the Seller
maintains or to which the Seller contributes for the benefit of any current or
former employee of the Seller. Each Employee Benefit Plan (and each related
trust or insurance contract) complies in form and in operation in all respects
with the applicable requirements of ERISA and the Code. The Seller does not
contribute to, ever has contributed to, or ever has been required to contribute
to any Multiemployer Plan. The Seller has not incurred and has no reason to
expect that it will incur any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
liability) or under the Code with respect to any Employee Pension Benefit Plan
that the Seller maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to contribute. The Seller does
not maintain and has not maintained, contributed or been required to contribute
to any Employee Welfare Benefit Plan providing health, accident, or life
insurance benefits to former employees, their spouses, or their dependents
(other than in accordance with Code Sec. 4980B).
(r) Environment, Health, and Safety.
(i) To the Knowledge of the Sellers, the Sellers have complied in
all Material respects with all laws (including rules and regulations
thereunder) of federal, state, and local governments (and all agencies
thereof) concerning the environment, public health and safety, and
employee health and safety, and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced against any of them alleging any failure to comply with
any such law or regulation.
(ii) To the Knowledge of the Sellers, the Sellers have no Liability
(and to the Knowledge of the Sellers there is no Basis related to the past
or present operations, and their respective predecessors for any present
or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Sellers giving rise to any
Liability) under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Resource Conservation and Recovery Act of
1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control
Act of 1976, the Refuse Act of 1899, or the Emergency Planning and
Community Right-to-Know Act of 1986 (each as amended), or any other law
(or rule or regulation thereunder) of any federal, state, local, or
foreign government (or agency thereof), concerning release or threatened
release of hazardous substances, public health and safety, or pollution or
protection of the environment, or for damage to any site, location, or
body of water (surface or subsurface) or for illness or personal injury.
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(iii) To the Knowledge of the Sellers, the Sellers have no Liability
(and there is no Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against
the Sellers giving rise to any Liability) under the Occupational Safety
and Health Act, as amended, or by any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign government (or agency
thereof) concerning employee health and safety, or for any illness of or
personal injury to any employee.
(iv) To the Knowledge of the Sellers, the Sellers have obtained and
have been in compliance with all of the terms and conditions of all
Material permits, licenses, and other authorizations which are required
under, and have complied in all Material respects with all other Material
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all federal, state, local, and foreign laws (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety,
worker health and safety, and pollution or protection of the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes.
(v) To the Knowledge of the Sellers, all properties and equipment
used in the business of the Sellers have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1, 2 trans dichloroethylene,
dioxins, dibensofurans, and Extremely Hazardous Substances.
(vi) To the Knowledge of the Sellers, no pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste ever has been
buried, stored, spilled, leaked, discharged, emitted, or released on any
real property that the Sellers own or ever have owned or that the Sellers
ever have leased with respect to the Stations.
(s) Legal Compliance.
(i) To the Knowledge of the Sellers, each Seller has complied in all
Material respects with all laws (including rules and regulations
thereunder) of federal, state, and local governments (and all agencies
thereof) and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced
against either Seller alleging any failure to comply with any such law or
regulation, including those relating to the employment of labor, employee
civil rights, and equal employment opportunities and relating to antitrust
matters.
(ii) To the Knowledge of the Sellers, each Seller has filed in a
timely manner all reports, documents, and other materials it was required
to file (and the information contained
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therein was correct and complete in all respects) under all applicable
laws (including rules and regulations thereunder), other than omissions
that will not have a Material adverse effect. Each Seller has possession
of all records and documents it was required to retain under all
applicable laws (including rules and regulations thereunder).
(t) Brokers' Fees. Except with respect to the brokerage fees owed to
Norman Fisher & Associates, Inc., the Sellers have no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(u) Advertising Contracts. Section 2(u) of the Disclosure Schedule lists
those Advertising Contracts and the daily value of such Advertising in Contracts
as of the date of this Agreement. Other than to employees of the Sellers or the
Stations or as disclosed in Section 2(u) of the Disclosure Schedule, no
commission or other form of renumeration is paid by the Sellers with respect to
Advertising Contracts and any renumeration so listed shall be paid by Sellers at
or prior to Closing.
(v) Enforceability of Purchase Option. The Sellers have delivered to the
Buyers a correct and complete copy of the Purchase Option (as amended to date).
With respect to thereto, to the Knowledge of the Sellers:
(i) the Purchase Option is legal, valid, binding enforceable, and in
full force and effect;
(ii) the Purchase Option will continue to be legal, valid, binding
enforceable and in full force and effect on identical terms following the
Closing;
(iii) no party to the Purchase Option is in breach or default, and
no event has occurred which with notice or lapse of time would constitute
a breach or default or permit termination, modification, or acceleration
under the Purchase Option;
(iv) no party has repudiated any provision of the Purchase Option;
(v) the Sellers have received the assignment of, have assumed, and
currently hold all rights ever held by Taylor County Broadcasting, Inc.
under the Purchase Option; and
(vi) prior to the Closing the Sellers will have, pursuant to Section
XVIII of the Purchase Option, duly exercised the option to purchase
substantially all of the assets used or useful in the operation of radio
station KHXS-FM (Abilene, Texas).
(w) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
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3. Representations and Warranties of the Buyers. The Buyers represent and
warrant to the Sellers that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. The Operating Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of Nevada. The Licensing Company is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Nevada.
(b) Authorization of Transaction. The Buyers have full power and authority
to execute and deliver this Agreement and to perform the Buyers' obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of each the Buyers, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which either of the Buyers are subject or any provision of either of
the Buyers' articles of organization or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which either of the
Buyers are a party or by which either of the Buyers are bound or to which any of
the Buyers' assets are subject. The Buyers do not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 1 above).
(d) Brokers' Fees. The Buyers have no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
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(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Sellers and the Licensing Company shall jointly
file with the FCC an application for assignment of (i) the FCC Licenses, permits
and authorizations pertaining to the Stations from the Sellers to the Licensing
Company (ii) the FCC licenses, permits and authorizations pertaining to radio
station KHXS-FM (Abilene, Texas) from IQ Radio, Inc. to the Licensing Company
(the "Assignment Application"). The costs of the FCC filing fees in connection
with the Assignment Application shall be divided equally between the Sellers and
the Licensing Company. The Sellers and the Licensing Company shall each pay its
own attorneys' fees. The Sellers and the Licensing Company shall thereafter
prosecute the Assignment Application with all reasonable diligence and otherwise
use the commercially reasonable efforts to obtain the grant of the Assignment
Application as expeditiously as practicable (but neither the Sellers nor the
Licensing Company shall have any obligation to satisfy complainants or the FCC
by taking any steps which would have Material adverse effect upon the Stations
or upon any Affiliate). If the FCC imposes any condition on either Party to the
Assignment Application, such party shall use commercially reasonable efforts to
comply with such condition, provided, that neither Party shall be required
hereunder to comply with any condition that would have a Material adverse effect
upon the Stations or any Affiliate. The Sellers and the Licensing Company shall
jointly oppose any petitions to deny requests for reconsideration or judicial
review of FCC approval of the Assignment Application and shall jointly request
from the FCC extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either the Sellers' or the Buyer's right to
terminate this Agreement pursuant to Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Sellers, and at mutually
agreeable times, the Sellers will permit the Buyers to meet with Station
employees prior to the Closing Date. The Sellers will terminate all of their
employees effective on the Closing Date, and pay to those employees all amounts
due through the Closing Date as salary, vacation, sick leave, personal time,
fringe benefits or otherwise under Sellers' policies and as required by law. The
Buyers may, at the Buyers' option and upon the Buyers' terms and conditions,
extend offers of employment to all or any of the Sellers' employees effective on
the Closing Date. The Sellers will not take any action to preclude or discourage
any of the Sellers' employees from accepting any offer of employment extended by
the Buyers.
(d) Notices and Consents. The Sellers will give any notices to third
parties, and the Sellers will use its commercially reasonable efforts to obtain
any third party consents, that the Buyers reasonably may request in connection
with the matters pertaining to the Sellers disclosed or required to be disclosed
in the Disclosure Schedule. Each of the Parties will take any additional action
that may be necessary, proper, or advisable in connection with any other notices
to, filings with, and authorizations, consents, and approvals of governments,
governmental agencies, and third parties that it may be required to give, make,
or obtain.
(e) Operation of Business. The Sellers will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Sellers will not engage in any
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practice, take any action, embark on any course of inaction, or enter into any
transaction of the sort described in Section 2(f) above.
(f) Advertising Obligations. The Sellers shall satisfy air time
obligations for goods or services under Advertising Contracts such that the
outstanding aggregate balance owing under all such Advertising Contracts as of
the Closing Date shall not exceed Five Thousand Dollars ($5,000.00) worth of air
time. On the Closing Date, the Sellers shall deliver to the Operating Company a
schedule, certified by an officer of the Sellers, reflecting all such
Advertising Contracts and the daily value thereof and outstanding balances
thereunder in existence as of the Closing Date.
(g) Operating Statements. The Sellers shall deliver to Buyers, for Buyers'
informational purposes only, monthly unaudited statements of operating revenues
and operating expenses of the Stations within ten (10) days after each such
statement is prepared by or for the Sellers.
(h) Contracts. The Sellers will not without the prior written consent of
the Operating Company amend, change, or modify any of the contracts listed on
Section 2(l) of the Disclosure Schedule in any Material respect. The Sellers
will not without prior written consent of the Operating Company enter into any
new contracts respecting the Stations or their properties, except (i) contracts
for the sale of time on the Stations for Cash, goods or services which comply
with the representations and warranties pertaining to such contracts set forth
in Section 2(l) above, (ii) contracts entered into in the Ordinary Course of
Business which are cancelable on not more than thirty-one (31) days' notice
without penalty or premium, or (iii) contracts entered into in the Ordinary
Course of Business which are cancelable on not more than thirty-one (31) days'
notice without penalty or premium each of which does not involve more than One
Thousand Dollars ($1,000) or all of which do not involve more than Five Thousand
Dollars ($5,000) in the aggregate.
(i) Operation of Stations. The Sellers shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Sellers
shall file with the FCC all Material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
(j) Credit and Receivables. The Sellers will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Stations and with respect to collecting accounts receivable
arising from such extension of credit.
(k) Preservation of Business. The Sellers will keep their respective
business and properties substantially intact, including their present
operations, physical facilities, working conditions, relationships with lessors
and licensers, all of the confidential information, call letters and trade
secrets of the Stations, and the FCC Licenses and will use their best efforts to
keep intact their relationships with their advertisers, suppliers, customers and
employees. The Sellers will continue to make expenditures for advertising,
programming, sales, technical and administrative support at a level consistent
with the past practices of the Sellers.
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(l) Full Access and Consultation. The Sellers will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Stations, to all
premises, properties, assets, books, records, contracts, Tax records, and
documents of or pertaining to the Acquired Assets or the Sellers. The Sellers
will consult with the Buyers' management with a view to informing Buyers'
management as to the operations, management and business of the Stations.
(m) Notice of Developments. The Sellers will give prompt written notice to
the Buyers of any Material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of either Seller. Each Party will give prompt written notice to the
other of any Material development affecting the ability of the Parties to
consummate the transactions contemplated by this Agreement. No disclosure by any
party pursuant to this Section 4(m), however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
(n) Exclusivity. The Sellers will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Sellers or the Stations; or (ii) participate
in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any person to do or seek any of the foregoing. The Sellers
will notify the Buyers immediately if any person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
(o) Title Insurance. The Operating Company may obtain with respect to the
twenty (20) acre parcel of real estate in Jones County, Texas, that the Seller
leases in connection with the operation of a transmission tower for radio
station KCDD-FM, a leaseholders policy issued by a title insurer reasonably
satisfactory to the Operating Company, in an amount equal to the fair market
value of such real property (including all improvements located thereon),
insuring title to such real property in the Operating Company as of the Closing
subject only to the title exceptions which do not impair the current use,
occupancy or value or the marketability of title of the property, together with
such endorsements for zoning, contiguity, public access and extended coverage as
the Operating Company reasonably requests. The Sellers shall pay the cost and
expense associated with any such title insurance procured pursuant to this
Section 4(o). With respect to the parcel of real estate located at 2525 South
Danville Road, Abilene, Taylor County, Texas that is used for the conduct of the
studio and office operations of the Stations, the Sellers will provide to the
Operating Company a copy of the title policy issued to Glen A. Hine by Alamo
Title Insurance of Texas (Policy No. RO-286557) together with an estoppel
certificate executed by the appropriate landlord in a form reasonably
satisfactory to the Operating Company confirming that the leasehold interest in
such real estate has not been encumbered by any additional liens since the date
of the title policy and a non-disturbance agreement from any lienholder
indicating that the Buyers' possession and use of the real estate shall not be
disturbed after Closing.
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(p) Surveys. With respect to each parcel of real estate that either Seller
owns or leases and as to which a title insurance policy is to be procured
pursuant to Section 4(o) above, the Operating Company may obtain in preparation
for the Closing a current survey of the real estate certified to the Operating
Company, prepared by a licensed surveyor and conforming to current ALTA Minimum
Detail Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other masters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey shall not
disclose any survey defect or encroachment from or onto the real estate which
has not been cured or insured over prior to the Closing. The Sellers shall pay
the cost and expense associated with any Survey initiated pursuant to this
Section 4(p).
(q) Environmental Assessments. The Operating Company may obtain with
respect to each parcel of real estate that either Seller owns or leases and as
to which a title insurance policy is to be procured pursuant to Section 4(o)
above, a current Phase I environmental site assessment from an environmental
consultant or engineer which shall not disclose or recommend any action with
respect to any condition to be remediated or investigated or any contamination
on the site assessed. The Sellers shall pay the cost and expense associated with
any Phase I environmental site assessment initiated pursuant to this Section
4(q).
(r) Control of Stations. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Operating Company and its employees or agents shall not
directly or indirectly control, supervise, or direct, or attempt to control,
supervise, or direct, the operation of the Stations, and such operation shall be
the sole responsibility of and in the control of the Sellers.
(s) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Sellers until the Closing. In the event of
any such loss, damage, or destruction the Sellers will promptly notify the
Buyers of all particulars thereof, stating the cause thereof (if known) and the
extent to which the cost of restoration, replacement and repair of the Acquired
Assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Sellers will repair or replace such Acquired Assets as
soon as possible after loss, damage or destruction thereof and shall use its
best efforts to restore as promptly as possible transmissions as authorized in
the FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Sellers' notice to the Buyers, and the Buyers determine that the Sellers'
failure to repair or replace, alone or in the aggregate, would have a Material
adverse effect on the operation of the Stations:
(a) the Buyers may elect to terminate this Agreement; or
(b) the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the
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Buyers, unless the same cannot be reasonably effected within ninety (90) days of
the date of the Sellers' notice to Buyers, in which case either party may
terminate this Agreement; or
(c) the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Sellers' assignment to Buyers all
rights under any insurance claims covering the loss, damage or destruction and
payment over to Buyers any proceeds under any such insurance policies,
previously received by the Sellers with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(s),
the Parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
(t) Continuation of Time Brokerage Agreement. Through the Closing, the
Sellers shall continue to operate radio station KHXS-FM (Abilene, Texas)
pursuant to the terms and conditions of the Purchase Option and subject to this
Agreement.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by the Buyers in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above
shall be true and correct in all Material respects at and as of the
Closing Date;
(ii) the Sellers shall have performed and complied with all of its
covenants hereunder in all Material respects through the Closing;
(iii) the Sellers shall have procured all of the third party
consents specified in Section 4(d) above, including but not limited to
those relating to transmitter and studio leases, all of the title
insurance commitments, and endorsements specified in Section 4(o) above,
and all Surveys specified in section 4(p) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
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(v) each Seller shall have delivered to the Buyers a certificate
(without qualification as to knowledge or Materiality or otherwise) to the
effect that each of the conditions specified above in Section 5(a)(i)-(iv)
is satisfied in all respects;
(vi) the Assignment Application shall have been approved by a Final
Order of the FCC, and the Sellers and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Postclosing
Agreement;
(viii) the Sellers shall have assigned to the Buyers (and IQ Radio,
Inc. shall have consented in writing to such assignment), all of the
Sellers' right, title and interest in, to and under the Purchase Option;
(ix) the Buyers shall have received from counsel to the Sellers an
opinion with respect to the matters set forth in Exhibit F attached
hereto, addressed to the Buyers and dated as of the Closing Date; and
(x) all actions consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
The Buyers may waive any condition specified in this Section 5(a) if the Buyers
execute a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the Sellers
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all Material respects at and as of the
Closing Date;
(ii) the Buyers shall have performed and complied with all of the
Buyers' covenants hereunder in all Material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
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(iv) the Buyers shall have delivered to the Sellers a certificate
(without qualification as to knowledge or Materiality or otherwise) to the
effect that each of the conditions specified above in Section
5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Assignment Applications shall have been approved by
a Final Order of the FCC, and the Seller and the Buyers shall have
received all governmental approvals required to transfer all other
authorizations, consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement;
(vii) the Buyers shall have accepted the assignment and assumed all
of the Seller's right, title, interest and obligation in, to and under the
Purchase Option, including, but not limited to, the obligation to pay the
purchase price in connection with the exercise of the option to purchase
substantially all of the assets used or useful in the operation of radio
station KHXS-FM (Abilene, Texas) provided, that in the event the purchase
and sale of assets contemplated in the Purchase Option is concluded by the
Sellers prior to the Closing Date, the Buyers shall reimburse the Sellers
the purchase price paid thereunder by the Sellers less Sixty Two Thousand
and No/100 Dollars ($62,000.00); and
(viii) all actions to be taken by the Buyers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Sellers may waive any condition specified in this Section 5(b) if it
executes a writing so stating at or prior to the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving either Seller, the other Party will cooperate with the contesting or
defending Party and its counsel in the contest or defense, make available his or
its personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the
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contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 7 below).
(c) Adjustments. Operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Operating Company. Such items as power and utilities charges,
insurance, real and personal property taxes, prepared expenses, deposits, music
license fees, and rents and payments pertaining to the leases and contracts
being assigned hereunder (including any contracts for the sale of time for cash,
trade or barter so assigned) shall be prorated between the Seller and the
Operating Company as of the Closing Date in accordance with the foregoing
principle. Contractual arrangements that do not reflect an equal rate of
compensation to the Stations over the term of the Agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by the
accounting firm of Price Waterhouse LLP and the fees and expenses of such
accounting firm shall be paid one-half (1/2) by the Seller and one-half (1/2) by
the Operating Company.
(d) Collection of Accounts Receivable. At the Closing, the Sellers will
turn over to the Operating Company, for collection only, the accounts receivable
of the Stations owing to the Sellers as of the close of business on the Closing
Date. A schedule of such accounts receivable will be delivered by the Sellers to
the Operating Company on the Closing Date or as soon thereafter as possible. The
Operating Company agrees to use commercially reasonable efforts in the ordinary
course of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Closing Date, and will remit all payments received on such
accounts to Seller at the end of such 120-day period. In the event the Operating
Company receives moneys during the 120-day period following the Closing Date
from an advertiser who, after the Closing Date, is advertising over any of the
Stations, and that advertiser was included among the accounts receivable as of
the Closing Date, the Operating Company shall apply said moneys to the oldest
outstanding balance due on the particular account, except in the case of a
"disputed" account receivable. For purposes of this Section 6(d), a "disputed"
account receivable means one which the account debtor refuses to pay because he
asserts that the money is not owed or the amount is incorrect. In the case of
such a disputed account, the Operating Company shall immediately return the
account to the Sellers prior to expiration of the 120-day period following the
Closing Date. If the Operating Company returns a disputed account to the Seller,
the Operating Company shall have no further responsibility for its collection
and may accept payment from the account debtor for advertising carried on any of
the Stations after the Closing Date. At the end of the 120-day period following
the Closing Date, the Operating Company will turn back to the Sellers all of the
accounts receivable of the Stations as of the Closing Date owing to the Sellers
which have not yet been collected, and the Operating Company will thereafter
have no further responsibility with respect to the collection of such
receivables (except to pay over amounts received). During the 120-day period
following the Closing Date, the Operating Company shall afford the Seller
reasonable access to the accounts receivable "aging list."
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(e) Severance Obligations. In the event an offer of employment is extended
by the Buyers to and accepted by an employee of the Sellers pursuant to Section
4(c) and such subsequent employment by the Buyers is terminated within sixty
(60) days from the Closing Date, the Sellers shall be exclusively responsible
for, and shall pay to such accepting employee, all severance benefits that may
be due and owing such employee by reason of his or her employment with either
the Sellers or the Buyers based on Sellers' severance policies as in effect on
the Closing Date.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Sellers
contained in Section 2 of this Agreement (other than the representations and
warranties of the Sellers contained in Sections 2(a), 2(b) and 2(c) hereof or
relating to the Sellers' title to the Acquired Assets) shall survive the Closing
(even if the Buyers knew or had reason to know of any misrepresentation or
breach of warranty at the time of Closing) and continue in full force and effect
for a period of eighteen (18) months thereafter, except that any representation
or warranty relating to Buyer's freedom from liability to pay a Liability of
Sellers shall continue in full force and effect for the period of the applicable
statute of limitations plus ninety (90) days. All of the other representations,
warranties, and covenants of the Buyers and the Sellers contained in this
Agreement (including the representations and warranties of the Sellers contained
in Sections 2(a), 2(b) and 2(c) hereof or relating to the Sellers' title to the
Acquired Assets) and in this Agreement shall survive the Closing (even if the
damaged party knew or had reason to know of any misrepresentation or breach of
warranty or covenant at the time of Closing) and continue in full force and
effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a breach
of a covenant prior to the Closing Date, each Seller jointly and severally
agrees to indemnify the Buyers from and against the entirety of any Adverse
Consequences the Buyers may suffer resulting from, arising out of, relating to,
in the nature of, or caused by:
(i) any breach of the Sellers' representations, warranties, and
covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the Buyers
make a written claim for indemnification within the applicable survival
period);
(ii) any Liability of the Sellers which is not an Assumed Liability
including but not limited to any Liability arising from occurrences prior
to the Closing for any violation of the laws or rules identified in
Section 2(r) or 2(s);
(iii) any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
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(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a breach of a covenant prior to
the Closing Date, the Buyers agree to indemnify the Sellers from and against the
entirety of any Adverse Consequences the Sellers may suffer resulting from,
arising out of, relating to, in the nature of, or caused by (i) the breach of
any of the Buyers' representations, warranties, and covenants contained in this
Agreement (so long as the particular representation, warranty, or covenant
survives the Closing and the Sellers make a written claim for indemnification
within the applicable survival period) or (ii) any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the Stations to be acquired pursuant to this Agreement are unique and that the
Buyers would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the Buyers shall be
entitled to an injunction or injunctions to prevent such breaches and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 10(o) below), in addition to any other remedy to which it may
be entitled, at law or in equity. Each of the Parties acknowledges and agrees
that not withstanding the provision in Section 7(e) with respect to the remedy
of liquidated damages upon a breach of a covenant of this Agreement prior to the
Closing, money damages would not be an adequate remedy for a breach of any
provision of this Agreement
(e) Liquidated Damages. The Buyers and the Sellers acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a breach by either Party, the Adverse Consequences as a result of
such breach may be difficult, if not impossible, to ascertain. Accordingly, in
the event the transactions contemplated by this Agreement are not consummated
due to a breach of this Agreement by either Party, then the non-breaching Party
shall be entitled to receive from the breaching Party for such breach, in lieu
of indemnification pursuant to Sections 7(b) or 7(c), the sum of Two Hundred
Fifty Thousand and no/100 Dollars ($250,000.00) as liquidated damages without
the need for proof of damages; provided, however, that the Buyers retain the
option to seek, pursuant to Section 7(d), and recover in lieu of the remedy of
liquidated damages pursuant to this Section 7(e), the remedy of specific
performance. Each Party agrees to pay said sum of liquidated damages within ten
(10) days of the date that the non-breaching Party obtains such a judgment.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party
will defend the Indemnified Party
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against the matter with counsel of its choice reasonably satisfactory to the
Indemnified Party, (ii) the Indemnified Party may retain separate co-counsel at
its sole cost and expense (except that the Indemnifying Party will be
responsible for the fees and expenses of the separate co-counsel to the extent
the Indemnified Party concludes reasonably that the counsel the Indemnifying
Party has selected has a conflict of interest), (iii) the Indemnified Party will
not consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Indemnifying Party (not
to be withheld unreasonably), and (iv) the Indemnifying Party will not consent
to the entry of any judgment with respect to the matter, or enter into any
settlement which does not include a provision whereby the plaintiff or claimant
in the matter releases the Indemnified Party from all Liability with respect
thereto, without the written consent of the Indemnified Party (not to be
withheld unreasonably). In the event the Indemnifying Party does not notify the
Indemnified Party within fifteen (15) days after the Indemnified Party has given
notice of the matter that the Indemnifying Party is assuming the defense
thereof, however, the Indemnified Party may defend against, or enter into any
settlement with respect to, the matter in any manner it reasonably may deem
appropriate.
(g) Limitation of Liability. Notwithstanding anything in this Agreement to
the contrary, after the Closing neither Party shall indemnify or otherwise be
liable to the other Party from and after the Closing Date except to the extent
that the Adverse Consequences suffered by the Identified Party, in the aggregate
from all indemnifiable events shall exceed Ten Thousand Dollars ($10,000);
provided however that the foregoing limitation shall not be applicable to: (i)
the obligations of the Buyers to pay and discharge any Assumed Liability from
and after the Closing Date under the terms of this Agreement; (ii) the
obligation of the Sellers to pay and discharge any Retained Liability under the
terms of this Agreement, or (iii) the Sellers' obligation to deliver clear title
to the Acquired Assets.
(h) Other Indemnification Provisions. The indemnification provisions of
Sections 7(a), 7(b), 7(c) and 7(d) are in addition to, and not in derogation of,
any statutory or common law remedy any Party may have after the Closing for
breach of representation, warranty, or covenant. The remedies provided in
Sections 7(f) and 7(g) shall be the exclusive remedies of the Parties prior to
the Closing for any breach or representation, warranty or covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller (other than Retained Assets) that are used or useful in
the operation of the Stations, including but not limited to all of its (a) real
property, leaseholds and other interests of any kind therein, improvements,
fixtures and fittings thereon (such as towers and antennae), and easements,
rights-of-way and other appurtenants thereof; (b) tangible personal property
(such as computers, electrical devices, monitoring equipment, test equipment,
switching, terminal and studio equipment, transmitters, transformers, receivers,
broadcast facilities, inventories of compact disks, records, tapes and other
supplies), vehicles, and all assignable warranties with respect thereto; (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of
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interests therein under the laws of all jurisdictions; (d) rights under orders
and agreements (including those barter agreements identified on the Disclosure
Schedules) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Stations; (e) contracts, indentures,
Security Interests, guaranties, other similar arrangements, and rights
thereunder including but not limited to the Purchase Option; (f) call letters of
the Stations, jingles, logos, slogans, and business goodwill of the Stations;
(g) Licenses and similar rights obtained from governments and governmental
agencies; and (h) FCC logs and records and all other books, records, ledgers,
logs, files, documents, correspondence, lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" means any arrangement with any third party under
which the Seller has created, incurred, assumed or guaranteed an obligation to
provide advertising or air time on the Stations.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means obligations of the Seller under the licenses,
sublicenses, leases, subleases, contracts, and other arrangements referred to in
the definition of Acquired Assets either: (a) to furnish services, and other
non-Cash benefits to another party after the Closing; or (b) to pay for goods,
services, and other non-Cash benefits that another party will furnish to it
after the Closing. The Assumed Liabilities shall not include any Retained
Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 and Section 3
above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or Material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Norman Fisher & Associates, Inc.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
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"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(f) above.
"Indemnifying Party" has the meaning set forth in Section 7(f) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Licensing Company" has the meaning set forth in the preface above.
"Material" means any item, occurrence or event that has an adverse effect
on the business, operations Acquired Assets, Liabilities, operating results or
financial condition of the Stations which is not insubstantial.
"Most Recent Financial Statements" has the meaning set forth in Section
2(e) above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37)
"Operating Company" has the meaning set forth in the preface above.
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller
Stockholders entered into concurrently herewith and attached hereto as Exhibit
D.
"Process Agent" has the meaning set forth in Section 10(o) below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Option" means the Time Brokerage Agreement (together with all
exhibits, attachments and amendments thereto) dated November 1, 1996, by and
between Taylor County Broadcasting, Inc., and IQ Radio, Inc. pursuant to which
the Taylor County Broadcasting, Inc., as predecessors in interest to the
Sellers, has (a) agreed to purchase air time on radio station KHXS-FM, licensed
to operate in Abilene, Texas, and (b) been granted the option to purchase
substantially all of the assets (and assume certain liabilities) of IQ Radio,
Inc. that are used or useful in the operation of radio station KHXS-FM, a copy
of which is attached hereto as Exhibit G.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Retained Assets" means (a) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the
Sellers as a corporation; (b) any of the rights of the Sellers under this
Agreement (or under any side agreement between the Sellers on the one hand and
the Buyers on the other hand entered into on or after the date of this
Agreement); (c) accounts, notes and other receivables; (d) the Sellers' Cash;
(e) the Sellers' insurance policies identified in Section 2(n) of the Disclosure
Schedule; and (f) the owned real estate listed in Section 2(i) of the Disclosure
Schedule.
"Retained Liabilities" means any other obligations or liabilities of
Sellers, including but not limited to: (a) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (b) any Liability
of the Sellers for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (c) any Liability of the
Sellers for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby; or (d) any Liability or
obligation of the Seller under this Agreement (or under any written side
agreement between the Seller on the one hand and the Buyers on the other hand
entered into on or after the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Sellers" has the meaning set forth in the preface above.
"Seller Shareholders" means the holders of all of the outstanding capital
stock of the Sellers which as of the Closing Date includes Virginia Ann Hine,
individually and as community survivor of Glen Hine, deceased, John Flahavin and
Ed Harvey.
"Stations" means the radio broadcast stations having the call letters
KCDD-FM licensed by the FCC to operate in Hamlin, Texas and KBCY-FM licensed by
the FCC to operate in Tye, Texas.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 4(p) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach, and the Seller may terminate this Agreement by giving
written notice to the Buyers at any time prior to the
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Closing in the event the Buyers are in breach, of any Material
representation, warranty, or covenant contained in this Agreement in any
Material respect in each case if such breach remains uncured for ten (10)
days after notice of breach is received from the other party;
(iii) the Buyers may terminate this Agreement by giving written
notice to the Seller on or before the 30th day following the date of this
Agreement if the Buyers are not satisfied in the Buyers' sole discretion
with the results of its continuing business, legal, engineering,
environmental and accounting due diligence regarding the Seller;
(iv) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
breaching any representation, warranty, or covenant contained in this
Agreement);
(v) the Seller may terminate this Agreement by giving written notice
to the Buyers at any time prior to the Closing if the Closing shall not
have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant contained in
this Agreement);or
(vi) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
10. Miscellaneous.
(a) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(b) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
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(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that the Buyers may assign all of the Buyers'
right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Seller the Purchase Price therefor.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: Big Country Broadcasting, Inc.
Tye Broadcasting
113 E. 7th Street
Tyler, TX 75701
Copy to: William Sheehy, Esq.
Wilson Law Firm
315 E. 5th Street
Tyler, TX 75701
If to the Buyers: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Copy to: Cumulus Licensing Corp.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrance J. Leahy
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
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South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Texas.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(k) Expenses. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications. The Seller will pay
all income taxes, transfer or sales taxes and other recording or similar fees
necessary to vest title to each of the Acquired Assets in the Buyers.
(l) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception
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with reasonable particularity and describes the relevant facts in reasonable
detail. The Parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any Party has breached
any representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of specificity) which
the Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(n) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Wichita Falls, Texas in
any action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court, and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Each Party
appoints CT Corporation (the "Process Agent") as its agent to receive on its
behalf service of copies of the summons and complaint and any other process that
might be served in the action or proceeding. Any Party may make service on the
other Party by sending or delivering a copy of the process (i) to the Party to
be served at the address and in the manner provided for the giving of notices in
Section 10(h) above or (ii) to the Party to be served in care of the Process
Agent at the address and in the manner provided for the giving of notices in
Section 10(h) above. Nothing in this Section 10(p), however, shall affect the
right of any Party to serve legal process in any other manner permitted by law.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law.
(o) Bulk Transfer Laws. The Seller has, or will as of the Closing Date,
comply with the provisions of any bulk transfer laws of Texas or any other
jurisdiction applicable to the transactions contemplated by this Agreement.
* * * * *
-35-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
------------------------------------
Title:
------------------------------------
"Operating Company"
CUMULUS LICENSING CORP.
By:
------------------------------------
Title:
---------------------------------
"Licensing Company"
BIG COUNTRY BROADCASTING, INC.
By:
------------------------------------
Title:
---------------------------------
TYE BROADCASTING
By:
------------------------------------
Title:
---------------------------------
"Sellers"
-36-
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of October 29, 1997, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corp., a Nevada corporation ("Licensing"), and Arbor Radio,
L.P., a Delaware limited partnership (the "Seller"). Broadcasting and Licensing
are referred to collectively herein as the "Buyers." The Buyers and the Seller
are referred to collectively herein as the "Parties." Capitalized terms used in
this Agreement are defined in Section 8 hereof.
This Agreement contemplates a transaction in which the Buyers will
purchase substantially all of the assets (and assume certain of the liabilities)
of the Seller that are used or useful in the operation of radio stations
WIQB-FM, WQKL-FM and WTKA-AM, licensed to operate in Ann Arbor, Michigan and
radio station WDEO-AM, licensed to operate in Saline, Michigan (collectively,
the "Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Licensing agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to Licensing, all of
the FCC Licenses listed in Section 2(l) of the Disclosure Schedule. In addition,
Broadcasting agrees to purchase from the Seller, and the Seller agrees to sell,
transfer, convey, and deliver to Broadcasting, all of the Acquired Assets other
than the FCC Licenses. Both such sales shall take place at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyers agree to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyers will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities and the
Seller agrees to pay and discharge all Liabilities and obligations of the Seller
other than the Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the amount of Fourteen Million Nine
Hundred Seventy-Five Thousand Dollars ($14,975,000) (the "Purchase Price"). The
Purchase Price shall be payable as follows:
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(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent an irrevocable letter of credit in favor of the Escrow Agent
in the amount of Seven Hundred Fifty Thousand Dollars ($750,000) (the
"Earnest Money Deposit"); and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Fourteen Million Four Hundred Seventy-Five Thousand Dollars
($14,475,000), less the amount, if any, distributed by the Escrow Agent to
the Seller at the Closing pursuant to Section 3(A) of the Escrow
Agreement, by wire transfer or delivery of other immediately available
funds; and
(iii) on the Closing Date, the Buyers shall deposit with the Escrow
Agent the amount of Four Hundred Thousand Dollars ($400,000) which shall
constitute the Post-Closing Escrow described below; and
(iv) on the Closing Date, the Buyers shall pay to the Seller, on
behalf of all parties to the Post-Closing Agreement, the amount of One
Hundred Thousand Dollars ($100,000).
The Earnest Money Deposit referenced in this Section l(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Escrow Agreement") and shall be disbursed in
accordance with the terms thereof. The Four Hundred Thousand Dollars ($400,000)
deposited by Buyers with the Escrow Agent at the Closing under Section 1(c)(iii)
(the "Post-Closing Escrow") shall be credited against the Purchase Price on the
Closing Date but shall remain in escrow, in whole or in part, from and after the
Closing Date with the Escrow Agent for a period of fourteen (14) months from the
Closing Date (or such longer period as provided in the Escrow Agreement if an
indemnification claim is submitted during such fourteen (14) month period)
pursuant to the Escrow Agreement. The Post-Closing Escrow shall be invested by
Escrow Agent in accordance with the instructions of Seller, and all interest
earned thereon shall be the property of Seller, payable to Seller upon demand.
If this Agreement is terminated without Closing of the transaction contemplated
herein, the Earnest Money Deposit and all accrued interest (if any) shall be
paid to the Buyers or the Seller as provided in the Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a mutually agreeable location
commencing at 9:00 a.m. local time on either (i) a date mutually agreeable to
the Buyers and Seller not earlier than the fifth business day or later than the
tenth business day after the FCC approval of the Assignment Application becomes
a Final Order, by which date all other conditions to the obligations of the
Parties to consummate the transactions contemplated hereby will have been
satisfied, or (ii) such other date as the Parties may mutually determine (with
either date being referred to as the "Closing Date"); provided that in no event
shall the Closing occur before January 5, 1998.
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(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in Section 5(a) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including Lease and other Assumed Contract assignments
and Intellectual Property transfer documents), bills of sale and warranty deeds
in the forms attached hereto as Exhibits B-1 through B-3, (B) such affidavits,
transfer tax returns, memorandums of lease, and other additional documents as
may be required by the terms of the title insurance commitments described in
Section 4(o) hereof, as necessary for Buyer to obtain title insurance as
required by such section or as may be necessary to convey title to the Real
Estate to the Buyers in the condition required herein or provided public notice
of the existence of the Leases, and (C) such other instruments of sale,
transfer, conveyance, and assignment as the Buyers and their counsel reasonably
may request; (iv) the Buyers will execute, acknowledge (if appropriate), and
deliver to the Seller (A) an assumption in the form attached hereto as Exhibit
C, and (B) such other instruments of assumption as the Seller and its counsel
reasonably may request; and (v) the Buyers will deliver to the Seller the
consideration specified in Section 1(c) above.
(f) Post-Closing Agreement. On the Closing Date, the Seller shall execute,
and shall cause Alan Beck and Arthur Kern to execute, a Post-Closing Agreement
with the Buyers including covenants not to compete with the Buyers in the
markets served by the Stations in the form of Exhibit D attached hereto. A
portion of the Purchase Price equal to One Hundred Thousand Dollars ($100,000)
shall be paid to the Seller, on behalf of all parties other than the Buyers, on
the Closing Date as consideration for the agreements set forth in the
Post-Closing Agreement.
(g) Allocation. The Parties agree to jointly complete and separately file
Form 8594 with their federal income tax return for the tax year in which the
Closing occurs. If after good faith negotiations, the Parties cannot reach
agreement on the allocation in connection with jointly completing Form 8594, the
Parties agree that there will be no further obligation on the part of either
party to jointly complete the application and the Parties may file Form 8594
without any input from the other Party.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2 and except for the last sentence of Section 2(s) which is
being given only as of the date of this Agreement.
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<PAGE>
(a) Organization of the Seller. The Seller is a limited partnership duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller has the power and authority to own
or lease its properties and to carry on the business operations of the Stations
as now conducted by it. The Seller does not have any Subsidiaries. The general
partner of the Seller is American Media Management, Inc., and the limited
partners of the Seller are Alan Beck, Arthur Kern, Gary Kughn and Richard Kughn.
(b) Authorization of Transaction. The Seller has full power and authority
(including full partnership power and authority) to execute and deliver this
Agreement and all agreements and instruments to be executed and delivered by
such Party pursuant to this Agreement (collectively, the "Ancillary Agreements")
and to perform its obligations hereunder and thereunder. Without limiting the
generality of the foregoing, the partners of the Seller have or shall have at or
before Closing duly authorized the execution, delivery, and performance of this
Agreement and the Ancillary Agreements by the Seller. This Agreement and the
Ancillary Agreements constitute the valid and legally binding obligation of the
Seller, enforceable against the Seller in accordance with their respective terms
and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the partnership agreement or other charter
documents of the Seller; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice or
third party consent under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest, or other agreement or arrangement
to which the Seller is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest upon any
of its assets) other than Seller's agreements with its lenders holding Security
Interests set forth in Section 2(d) of the Disclosure Schedule (which agreements
are not Assumed Contracts and will be terminated at or before Closing). Other
than with respect to the Assignment Application described in Section 4(b) and
filings, consents or approvals required as a result of matters specific to
Buyer's status, the Seller does not need to give any notice to, make any filing
with, or obtain any Licenses, consent, or approval of any court or government or
governmental agency in order for the Parties to enter into this Agreement or the
Ancillary Agreements or to consummate the transactions contemplated by this
Agreement or the Ancillary Agreements (including the assignments and assumptions
referred to in Section 1(e) above).
(d) Title to Acquired Assets. Other than the Security Interests set forth
on Section 2(d) of the Disclosure Schedule (which shall be released at or before
the Closing) the Seller has good and
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<PAGE>
marketable title to all of the Acquired Assets, free and clear of any Security
Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively, the "Financial
Statements"): (i) audited balance sheets and statements of income and cash flow
as of and for the fiscal years ended December 31, 1995 and December 31, 1996,
for the Seller; and (ii) unaudited balance sheets and statements of income, as
of and for each month during 1997 through September 1997 for the Seller. The
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, are correct and
complete, fairly represent the financial condition of the Seller on such dates
and the results of operations for the periods designated therein and are
consistent with the books and records of the Seller (which books and records are
correct and complete).
(f) Events Subsequent to September 30, 1997. Since September 30, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule, there has not
been any Material adverse change in the assets, Liabilities, business, financial
condition or operations of the Seller with respect to the operation of the
Stations taken as a whole. Without limiting the generality of the foregoing and
with respect to the operation of the Stations since that date:
(i) the Seller has not sold, leased, transferred, or assigned, or
agreed to sell, lease, transfer or assign, any of its Material assets,
tangible or intangible;
(ii) other than this Agreement, the Seller has not entered into any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled
any Assumed Contract involving more than $5,000 which would have a
Material effect on Buyer;
(iv) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations) outside the
Ordinary Course of Business which would have a Material effect on Buyer;
(v) the Seller has not delayed or postponed or agreed to delay or
postpone (beyond its normal practice in the Ordinary Course of Business)
the payment of accounts payable or other Liabilities outside the Ordinary
Course of Business such that such delay or postponement would have a
Material effect on Buyer;
(vi) the Seller has not granted or agreed to grant any license or
sublicense of any rights under or with respect to any Intellectual
Property;
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(vii) the Seller has not made or agreed to make any loan to, or
entered or agreed to enter into any other transaction (other than for
employment) with any of its employees giving rise to any claim or right on
its part against the person or on the part of the person against it;
(viii) the Seller has not (a) entered into any employment contract,
consulting contract or severance agreement or collective bargaining
agreement, written or oral, outside the Ordinary Course of Business or
which would constitute an Assumed Contract hereunder, or (b) modified the
terms of any existing such contract or agreement which constitutes an
Assumed Contract hereunder;
(ix) except as disclosed in Section 2(f) of the Disclosure Schedule,
the Seller has not granted any increase (outside routine salary and wage
increases in the Ordinary Course of Business) in the rate of compensation,
commissions, bonus or other remuneration payable, or granted any severance
or termination pay to, any of its directors, officers, and employees;
(x) except as disclosed in Section 2(f) of the Disclosure Schedule,
the Seller has not adopted any (A) bonus, (B) profit-sharing, (C)
incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other
plan, contract, or commitment for any of its directors, officers, and
employees, or modified or terminated any existing such plan, contract, or
commitment;
(xi) except as disclosed in Section 2(f) of the Disclosure Schedule,
the Seller has not made any other change in employment terms for any of
its directors, officers, and employees;
(xii) the Seller has not Materially altered its credit and
collection policies or its accounting policies;
(xiii) the Seller has not Materially altered the programming, format
or call letters of the Stations; or
(xiv) the Seller has not applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to preserve the
FCC Licenses and has operated the Stations in Material compliance
therewith and with all FCC rules and regulations.
Nothing contained in this Section 2(f) shall be deemed a warranty or
representation by the Seller with respect to trends or conditions affecting the
radio industry generally or the Ann Arbor, Michigan radio market generally and
Seller shall not be in breach of the provisions of this Section 2(f) as a result
of such general trends or conditions.
(g) [Intentionally omitted.]
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(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all or substantially all transmitter and station equipment, vehicles
and other tangible personal property used in conducting the operation and
business of the Stations. The Seller owns or leases all tangible assets
necessary for the conduct of the operation and business of the Stations as
presently conducted and as presently proposed to be conducted and all leased
assets are specifically identified as such in Section 2(h) of the Disclosure
Schedule. Except as otherwise set forth in this Agreement, all of the tangible
personal property included in the Acquired Assets are sold to Buyers WHERE IS
AND AS IS, without any implied warranty of merchantability or fitness for a
particular purpose. The equipment included in the Acquired Assets permits the
Stations to be operated in Material compliance with all FCC and FAA
requirements. No partner of the Seller has any interest in any right, property
or asset used or required by the Seller in the operation of the Stations.
(i) Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and all real property leased to the
Seller (including, without limitation, complete legal descriptions for all of
the Real Estate). The Seller has delivered to the Buyers correct and complete
copies of the Leases. With respect to the Real Estate:
(i) the Seller has or will have at or before Closing good and
marketable title to all of the Owned Real Estate free and clear of all
liens, charges, mortgages, security interests, easements, restrictions,
options to purchase, rights of first refusal or other encumbrances of any
nature whatsoever except real estate taxes for the year of Closing and
municipal and zoning ordinances and easements which do not impair the
current use, occupancy or value or the marketability of title of the
property and which are disclosed in Section 2(i) of the Disclosure
Schedule (collectively, the "Permitted Real Estate Encumbrances");
(ii) the Leases are and, following the Closing, to the Seller's
Knowledge, will continue to be, legal, valid, binding, enforceable, and in
full force and effect;
(iii) the Seller is not in breach or default of any Lease (or has
repudiated any provision thereof), and to the Seller's Knowledge, no event
has occurred which, with notice or lapse of time, would constitute a
breach or default thereunder or permit termination, modification, or
acceleration thereunder;
(iv) to the Seller's Knowledge, there are no disputes, oral
agreements, or forbearance programs in effect as to any Lease;
(v) except for Permitted Real Estate Encumbrances, there are no (i)
actual or, to the Seller's Knowledge, proposed special assessments with
respect to any of the Real Estate; (ii) pending or, to the Seller's
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) pending or, to the Seller's Knowledge, threatened
litigation or administrative actions with respect to any of the Real
Estate; (iv) mechanic's or
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materialmens' liens with respect to the Owned Real Estate; (v) to the
Seller's Knowledge, structural or mechanical defects in any of the
buildings or improvements located in the Real Estate; (vi) to Seller's
Knowledge, planned or commenced improvements which will result in an
assessment or otherwise affect the Real Estate; (vii) governmental agency
or court orders requiring the repair, alteration or correction of any
existing condition with respect to the Real Estate or any portion thereof;
or (viii) any pending or, to the Seller's Knowledge, threatened changes in
any zoning laws or ordinances which may affect any of the Real Estate or
Seller's use thereof;
(vi) to the Seller's Knowledge, all buildings and improvements on
the Real Estate are in good condition and repair, normal wear and tear
excepted;
(vii) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the Leases or its rights
thereunder; and
(viii) to the Seller's Knowledge, the owner of each leased facility
has good and marketable title to the underlying parcel of real property,
free and clear of any Security Interest, easement, covenant, or other
restriction, except for Permitted Real Estate Encumbrances and Seller's
leasehold interest in each Lease has priority over any other interest
except for the fee interest therein and Permitted Real Estate
Encumbrances.
(j) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for or currently used in the operation of the business of the
Seller as presently conducted and as presently proposed to be conducted. Each
item of Intellectual Property owned or used by the Seller immediately prior to
the Closing hereunder will be owned or available for use by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has taken all necessary or desirable action to protect each item of
Intellectual Property that it owns or uses. With respect to such Intellectual
Property:
(i) The Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Seller has never received any
charge, complaint, claim, or notice alleging any such interference,
infringement, misappropriation, or violation. To the Knowledge of the
Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Seller.
(ii) Section 2(j) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller
with respect to any of its Intellectual Property and the call letters
(current and past) of the Stations, identifies each pending patent,
trademark or copyright application for registration which the Seller has
made
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with respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission which the Seller has granted to
any third party with respect to any of its Intellectual Property (together
with any exceptions). The Seller has delivered to the Buyers correct and
complete copies of all such patents, trademarks or copyright
registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyers correct and complete
copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. With respect to each item
of Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in and
to the item and all registrations and applications are in full force
and effect;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the
Seller uses pursuant to license, sublicense, agreement, or permission
including, but not limited to the call letters of the Stations. The Seller
has supplied the Buyers with correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date).
With respect to each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission covering
the item is, and following the Closing will continue to be on
identical terms, legal, valid, binding, enforceable, and in full
force and effect;
(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated any provision
thereof), and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
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(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and
correct with respect to the underlying license;
(D) to the Seller's Knowledge, the underlying item of
Intellectual Property is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(E) to the Seller's Knowledge, no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand is
pending, or, to the Knowledge of the Seller, is threatened which
challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the underlying
item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(k) Contracts. Section 2(k) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time which are listed in Section 2(s) of the
Disclosure Schedule) to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under which
it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
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(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, compensation
agreement, employment agreement, commission agreement or severance
agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations;
(viii) any written arrangement concerning a guaranty by the Seller
of the obligations of any other party;
(ix) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business; and
(x) any written arrangement involving the lease of furniture or
equipment.
The Seller has delivered to the Buyers a correct and complete copy of each
written arrangement listed in Section 2(k) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect; (B) the written arrangement
will, assuming any necessary consents to assignment have been obtained, continue
to be legal, valid, binding, and enforceable and in full force and effect on
identical terms following the Closing; (C) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration, under
the written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not bound by any verbal contract, agreement,
or other arrangement which, if reduced to written form, would be required to be
listed in Section 2(k) of the Disclosure Schedule under the terms of this
Section 2(k). Except for the Assumed Contracts, the Buyers shall not have any
Liability or obligations for or in respect of any of the contracts set forth in
Section 2(k) of the Disclosure Schedule or any other contracts or agreements of
the Seller.
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(l) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates
of compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or useful in the operation of the
Stations as they are now being operated are (A) in full force and effect,
(B) unimpaired by any acts or omissions of the Seller or the Seller's
employees or agents, (C) free and clear of any restrictions which might
limit the full operation of the Stations, and (D) detailed in Section 2(1)
of the Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and consents
referenced in the preceding sentence, Section 2(1) of the Disclosure
Schedule also sets forth, without limitation, the date of the last
renewal, the expiration date thereof, and any conditions or contingencies
related thereto. Except as set forth in Section 2(1) of the Disclosure
Schedule, no condition exists or event has occurred that permits, or after
notice or lapse of time, or both, would permit, the revocation or
termination of any such license, permit, consent, franchise, or
authorization (other than pursuant to their express expiration date) or
the imposition of any Material restriction or limitation upon the
operation of the Stations as now conducted. Except as set forth in Section
2(1) of the Disclosure Schedule, the Seller is not aware of any reason why
the FCC licenses might not be renewed in the ordinary course or revoked.
(ii) The Stations are each in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Stations' transmission facilities is restricted in
accordance with the policies of the FCC.
(iii) Except as set forth in Section 2(1) of the Disclosure
Schedule, to the Seller's Knowledge, the Seller is not the subject of any
FCC or other governmental investigation or any notice of violation or
order, or any Material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(1) of the Disclosure Schedule.
(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all Material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(v) The Seller is not aware of any information concerning the
Stations that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory
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certificates and approvals necessary for the consummation of the
transactions contemplated hereunder or the Buyers' operation and/or
ownership of the Stations. Seller is not aware of any pending FCC
applications which, if approved, would allow for the operation of a new
radio station with a signal reaching the signal area of the Stations and,
in addition, Seller is not aware of any plans or proposals by existing
radio stations with a signal reaching the signal area of the Stations to
alter or change their format to a format similar to that of the Stations.
(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) to which
the Seller is a party, a named insured, or otherwise the beneficiary of
coverage.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator.
(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates,
severance benefits and all other forms of compensation paid for work at the
Stations of each employee of the Seller. Section 2(o) of the Disclosure Schedule
also sets forth a list of all employee handbooks and/or manuals relating to the
employees of the Seller, true and correct copies of which have been delivered to
the Buyers. To the Knowledge of the Seller, no key employee or group of
employees has any plans to terminate employment with the Seller. The Seller is
not a party to or bound by any understanding (whether written or oral),
agreement or contract with any union, labor organization, employee group or
other entity or individual which affects the employment of employees of the
Seller including, but not limited to, any collective bargaining agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of any of the Seller. The Seller has not
been subject to a strike, slow down or other work stoppage during its operation
of the Stations and, to the Seller's Knowledge, there are no strikes, slow downs
or work stoppages threatened against the Seller. No proceedings are pending
before any court, governmental agency or instrumentality or arbitrator relating
to labor matters, and there is no pending investigation by any governmental
agency or, to the Knowledge of the Seller, threatened claim by any such agency
or other person relating to labor or employment matters.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists all
Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the
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benefit of any current or former employee of the Seller and true and correct
copies of each such Employee Benefit Plan have been delivered to the Buyers.
Each Employee Benefit Plan (and each related trust or insurance contract)
complies and at all times has complied in form and in operation in all respects
with the applicable requirements of ERISA and the Code. The Seller does not have
any commitment to create any additional Employee Benefit Plan or modify or
change any existing the Employee Benefit Plan that would affect any employee or
terminated employee of the Seller. There are no pending or, to the Knowledge of
the Seller, threatened claims under, by or on behalf of any of the Employee
Benefit Plans, by any employee or beneficiary covered by any such Employee
Benefit Plan, or otherwise involving any such Employee Benefit Plan (other than
routine claims for benefits), nor have there been any Reportable Events or
Prohibited Transactions with respect to any Employee Benefit Plan.
(q) Environment, Health, and Safety. Except as identified in the
environmental reports set forth in Section 2(q) of the Disclosure Schedule:
(i) To Seller's Knowledge, with respect to the operation of the
Stations and the Real Estate, the Seller is, and at all times in the past
has been, in compliance with all Environmental Laws and all laws
(including rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof) concerning employee health and
safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has ever been filed or commenced
or, is threatened, against the Seller alleging any failure to comply with
any such Environmental Law or laws concerning employee health and safety.
(ii) To Seller's Knowledge, with respect to the operation of the
Stations and the Real Estate, the Seller has no Liability (and there is no
Basis related to the past or present operations of the Seller or its
predecessors for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Federal Water Pollution Control
Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of
1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899, or
the Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), or any other law of any federal, state, local, or foreign
government or agency thereof (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, or pollution or
protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal,
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transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes ("Environmental
Laws").
(iii) To the Seller's Knowledge, the Seller has no Liability (and
there is no Basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand against the
Seller giving rise to any Liability) under the Occupational Safety and
Health Act, as amended, or any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign government (or agency
thereof) concerning employee health and safety, or for any illness of or
personal injury to any employee.
(iv) To the Seller's Knowledge, the Seller has obtained and at all
times has been in compliance with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and
has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental Laws or laws of any
federal, state, or local or foreign government relating to worker health
and safety.
(v) To the Seller's Knowledge, all properties and equipment used in
the business of the Seller have been free of asbestos, PCB's, methylene
chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(vi) To the Seller's Knowledge, no pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste ever has been
buried, stored, spilled, leaked, discharged, emitted, or released on any
of the Real Estate.
(vii) To the Seller's Knowledge, none of the Acquired Assets are
required to be upgraded, modified or replaced to be in compliance with
Environmental Laws. (viii) Section 2(q) of the Disclosure Schedule
contains a copy of all environmental claims, reports, studies, compliance
actions or the like of the Seller or which are available to the Seller
with respect to any of the Real Estate or any of the Acquired Assets.
(ix) To the Seller's Knowledge, no septic systems or wells exist on,
in or under any of the Real Estate. To the Seller's Knowledge, no above
ground or underground storage tanks have ever been located at, on or under
the Real Estate. To the Seller's Knowledge, none of the Real Estate is
contaminated by hazardous or toxic substances or waste, as defined under
Environmental Laws, originating from off-site sources.
(r) Legal Compliance. The Seller has complied with all laws (including
rules and regulations thereunder) of federal, state, local and foreign
governments (and all agencies thereof), and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice
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has been filed or commenced or, to the Seller's Knowledge, is threatened,
against the Seller alleging any failure to comply with any such law or
regulation, including those relating to the employment of labor, employee civil
rights, and equal employment opportunities and relating to antitrust matters.
(s) Advertising Contracts. The Seller has no reason to believe and has not
received a notice or indication of the intention of any third parties to
Material contracts of the Seller to cease doing business or to reduce in any
Material respect the business transacted with the Seller or to terminate or
modify any agreements with the Seller (whether as a result of consummation of
the transactions contemplated hereby or otherwise). As of the date of this
Agreement, Seller has no reason to believe and has not received a notice or
indication of the intention of any advertiser of the Seller to cease doing
business or to reduce in any respect the business transacted with the Seller
which would have a Material Adverse Effect.
(t) Brokers' Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(u) Undisclosed Commitments or Liabilities. There are no commitments,
liabilities or obligations relating to any of the Stations, whether accrued,
absolute, contingent or otherwise including, without limitation, guaranties by
the Seller of the liabilities of third parties, for which specific and adequate
provisions have not been made on the Financial Statements except those incurred
in or as a result of the Ordinary Course of Business on or after October 1, 1997
(none of which Ordinary Course of Business obligations are Material).
(v) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyers. The Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
(b) Authorization of Transaction. Buyers have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
their obligations hereunder and thereunder. Without limiting the generality of
the foregoing, the Buyers have or will have at or before Closing duly authorized
the execution, delivery and performance of this Agreement and the
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Ancillary Agreements by the Buyers. This Agreement and the Ancillary Agreements
constitute the valid and legally binding obligation of the Buyers, enforceable
against the Buyers in accordance with their respective terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
(d) Brokers' Fees. Except for the broker's fee to be paid by the Buyers as
set forth in Section 10(1) below, the Buyers have no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses from the Seller to the
Buyers (the "Assignment Application"). The costs of the FCC filing fees in
connection with the Assignment Application shall be divided equally between the
Parties. Each party shall pay its own attorneys' fees. The Seller and the Buyers
shall thereafter prosecute the Assignment Application with all reasonable
diligence and otherwise use commercially reasonable efforts to obtain the grant
of the Assignment Application as expeditiously as practicable
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(but neither the Seller nor the Buyers shall have any obligation to satisfy
complainants or the FCC by taking any steps which would have Material effect
upon the Stations or any Affiliate or impose significant costs on such party).
If the FCC imposes any condition on either party to the Assignment Application,
such party shall use commercially reasonable efforts to comply with such
condition, provided, that neither party shall be required hereunder to comply
with any condition that would have a Material effect upon the Stations or any
Affiliate or impose significant costs on such party. The Seller and the Buyers
shall jointly oppose any requests for reconsideration or judicial review of FCC
approval of the Assignment Application and shall jointly request from the FCC
extension of the effective period of FCC approval of the Assignment Application
if the Closing shall not have occurred prior to the expiration of the original
effective period of the FCC Consent. Nothing in this Section 4(b) shall be
construed to limit either party's right to terminate this Agreement pursuant to
Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyers will extend offers of employment to all of the Seller's employees
effective on the Closing Date on substantially the same employment terms with
respect to job descriptions, positions, salaries and wage rates as specified in
Section 2(o) of the Disclosure Schedule. From and after the execution of this
Agreement, the Seller shall use its best efforts to assist Buyers in retaining
all employees of the Stations and Seller will not take any action to preclude or
discourage any of the Seller's employees from accepting any offer of employment
extended by the Buyers.
(d) Notices and Consents. The Seller will use its reasonable best efforts
to obtain the consents necessary to assign the Assumed Contracts to the Buyers.
The absence of any such consent shall not be a breach hereof unless the contract
is designated as "material" on Section 4(d) of the Disclosure Schedule. Each of
the Parties will use its reasonable best efforts to take any additional action
that may be necessary, proper, or advisable in connection with any other notices
to, filings with, and authorizations, consents, and approvals of governments or
governmental agencies that it may be required to give, make, or obtain.
(e) Operation of Business. Except as described in Section 4(e) of the
Disclosure Schedule, the Seller will not engage in any practice, take any
action, embark on any course of inaction, or enter into any transaction outside
the Ordinary Course of Business.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Stations in exchange for goods or services ("Barter Agreements") in a manner
consistent with its past practices and procedures. On the Closing Date, the
Seller shall deliver to the Buyers a schedule, certified by an officer of the
Seller, reflecting the aggregate outstanding balances of the air time owed by
the Seller and the goods and services owed to the Seller under the Barter
Agreements in existence as of the Closing Date. If the net
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aggregate balance owed by or to the Seller under the Barter Agreements as of the
Closing Date exceeds Twenty-Five Thousand Dollars ($25,000), the Purchase Price
hereunder shall, as the case may be, be reduced by the amount by which the net
aggregate balance owed by the Seller under the Barter Agreements exceeds
Twenty-Five Thousand Dollars ($25,000) or increased by the amount by which the
net aggregate balance owed to the Seller under the Barter Agreements exceeds
Twenty-Five Thousand Dollars ($25,000).
(g) Operating Statements. The Seller shall deliver to the Buyers, for the
Buyers' informational purposes only, monthly unaudited statements of operating
revenues and operating expenses of the Stations within fifteen (15) days after
each such statement is prepared by or for the Seller.
(h) Contracts. The Seller will not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on Section 2(k)
of the Disclosure Schedule in any Material respect other than amendments,
changes, and modifications entered into in the Ordinary Course of Business.
Notwithstanding the foregoing sentence, the Seller will not without the prior
written consent of the Buyers amend, change, or modify any of the Assumed
Contracts in any Material respect. The Seller will not without prior written
consent of the Buyers enter into any new contracts respecting the Stations or
their properties, except (i) contracts for the sale of time on the Stations for
cash, goods or services which are entered into in the Ordinary Course of
Business and comply with Sections 4(f) and 4(j) hereof, (ii) contracts entered
into in the Ordinary Course of Business which are cancelable on not more than
thirty-one (31) days' notice without penalty or premium, and (iii) contracts
entered into in the Ordinary Course of Business each of which does not involve
more than Twenty Thousand Dollars ($20,000) or all of which do not involve more
than Sixty-Three Thousand Dollars ($63,000) in the aggregate. Seller shall
promptly provide Buyer with copies of all amendments, modifications, changes and
new contracts entered into in accordance with this Section 4(h).
(i) Operation of Stations. The Seller shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all Material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
(j) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Stations and with respect to collecting accounts receivable arising from
such extension of credit.
(k) Preservation of Business. The Seller will use commercially reasonable
efforts to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, relationships with
lessors, licensers, advertisers, suppliers, customers, and
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employees, all of the Confidential Information, call letters and trade secrets
of the Stations, and the FCC Licenses; provided, however, that the foregoing
shall not be deemed to constitute an assurance by the Seller of the future
performance of the Stations.
(l) Full Access and Consultation. The Seller will permit representatives
of the Buyers to have full access at all reasonable times (which times shall be
mutually agreed upon in advance), and in a manner so as not to interfere with
the normal business operations of the Stations, to all premises, properties,
books, records, contracts, Tax records, and documents of or pertaining to the
Seller for the purpose of permitting the Buyers to, among other things: (a)
conduct its due diligence review, (b) review financial statements of the Seller,
(c) verify the accuracy of representations and warranties of the Seller
contained in this Agreement, and (d) prepare for the consummation of the
transactions contemplated by this Agreement. The Seller will consult with the
Buyers' management with a view to informing Buyers' management as to the
operations, management and business of the Stations. Without limiting the
foregoing, the Seller will permit the Buyers and its accountants to have access
during normal business hours to examine and make copies of all work papers and
schedules of the Seller and its accountants relating to the Stations and to
discuss the business affairs and financial statements of the Seller relating to
the Stations with the Seller's accountants. Without limiting the foregoing,
Seller acknowledges and agrees that it will provide the Buyers and its
representatives with such access to the properties, books, records, documents
and operations of the Seller as contemplated herein in a manner which will
permit the Buyers to fully complete its due diligence review within the thirty
(30) day period referenced in Section 5(a)(ix), below.
(m) Notice of Developments; Effect of Supplemental Disclosure. The Seller
will (i) give prompt written notice to the Buyers of any Material development
affecting the Stations, and (ii) any matter arising or discovered after the date
of this Agreement which, if existing or known on the date of this Agreement,
would have been required to be disclosed in the Disclosure Schedule or this
Agreement. Each Party will give prompt written notice to the other of any
Material development affecting the ability of the Parties to consummate the
transactions contemplated by this Agreement. No disclosure by any Party pursuant
to this Section 4(m), however, shall be deemed to amend or supplement the
Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant or limit a Party's right to seek indemnification
for such misrepresentation or breach; provided, however, that a Party's right to
terminate this Agreement as a result of such breach or misrepresentation shall
be governed by Section 9 hereof.
(n) Exclusivity. The Seller will notify the Buyers immediately if any
person or entity makes any proposal, offer, inquiry, or contact regarding a
merger, business combination, purchase of assets or securities, or similar
transaction involving the Seller.
(o) Title Insurance and Surveys. The Buyers will have received (i) with
respect to each parcel of Real Estate subject to the Leases, a leasehold owner's
policy issued by a title insurer reasonably satisfactory to the Buyers, in an
amount equal to the fair market value of such Real Estate
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(including all improvements located thereon), insuring over the standard
pre-printed exceptions and insuring leasehold title to such Real Estate in the
Buyers as of the Closing subject only to the Permitted Real Estate Encumbrances,
together with such endorsements for zoning, contiguity, public access and
extended coverage as the Buyers or its lender reasonably requests, (ii) with
respect to each parcel of Owned Real Estate, an owner's policy of title
insurance by a title insurer reasonably satisfactory to the Buyers, in an amount
equal to the fair market value of such Real Estate (including all improvements
located thereon), insuring over the standard pre-printed exceptions and insuring
title to the Owned Real Estate to be vested in the Buyers as of the Closing free
and clear of all liens and encumbrances except Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or its lender reasonably requests,
and (iii) a current survey of each parcel of Real Estate certified to the Buyers
and its lender, prepared by a licensed surveyor and conforming to current ALTA
Minimum Detail Requirements for Land Title Surveys, disclosing the location of
all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys") which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing. The Buyers and
the Seller will each pay one-half (1/2) of the costs of these title policies and
Surveys, provided that Seller's responsibility for such costs shall not exceed
Five Thousand Dollars ($5,000).
(p) Control of Stations. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyers
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will, at Seller's expense, repair or replace such
Acquired Assets to their former condition as soon as possible after loss, damage
or destruction thereof and shall use its best efforts to restore as promptly as
possible transmissions as authorized in the FCC Licenses. The Closing Date shall
be extended (with FCC consent, if necessary) for up to sixty (60) days to permit
such repair or replacement. If repair or replacement cannot be accomplished
within sixty (60) days of the date of the Seller's notice to the Buyers, and the
Buyers determine that the Seller's failure to repair or replace, alone or in the
aggregate with any other then existing factors, would have a Material effect on
the operation of the Stations:
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(a) the Buyers may elect to terminate this Agreement; or
(b) the Buyers may postpone the Closing Date until such time as the
property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
(c) the Buyers may choose to accept the Acquired Asset in their
"then" condition, together with the Seller's assignment to the Buyers of
all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers of any proceeds under any such
insurance policies previously received by the Seller with respect thereto
plus an amount equal to the amount of any deductible or self-insurance
maintained by Seller on such Acquired Assets.
In the event the Closing Date is postponed pursuant to this Section 4(q), the
parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
(r) Environmental Assessments. Provided that the Buyer is provided with
adequate access to each parcel of Real Estate and permitted to conduct all
requested testing, the Buyers will provide to the Seller, within forty-five (45)
days hereof, the results of its environmental assessments for each such parcel
of Real Estate. Buyer acknowledges that Seller's obligation to provide access to
each leased parcel of Real Estate is limited to its reasonable efforts to obtain
Landlord's consent and cooperation with respect to such access. The results
submitted to Seller under this Section 4(r) shall identify any violations of
Environmental Law and any condition to be remedied and the actions or
remediation required to bring the property into compliance with Environmental
Laws. If the Buyers' Phase I environmental assessment recommends additional
testing and Buyer begins such testing but such testing cannot be completed and
reported to Seller within the forty-five (45) day period provided for herein,
the period shall be extended as reasonably required to complete such additional
testing and reporting to the Seller. The Seller will have ten (10) days after
the Buyers notify the Seller that it has received all of the environmental
assessments and that such assessments indicate that the property is not in
compliance with Environmental Laws to determine and notify the Buyers in writing
if it elects to immediately terminate this Agreement or take any and all actions
at its sole expense to remedy the violations identified with respect to an
assessed site; provided, however, that the Seller may not terminate this
Agreement and must take any and all actions to remedy the violations identified
if the aggregate cost of such actions would not exceed Seventy-Five Thousand
Dollars ($75,000). If aggregate cost of such actions would exceed Seventy-Five
Thousand Dollars ($75,000) and the Seller does not provide timely notice
hereunder, stating its intent to remedy all such violations, Buyers may elect to
(i) terminate this Agreement, (ii) extend the time in which the Seller must
respond in writing, or (iii) elect to accept the environmental conditions and
consummate
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the transaction contemplated hereby; provided, however, that the Buyers shall
forfeit their right to terminate this Agreement pursuant to this Section 4(r) if
they fail to make an election within ten (10) days of the expiration of the
Seller's ten (10) day election period or within ten (10) days after the
expiration of the Seller's election period as extended by the Buyers hereunder.
If the Seller elects or is required under the terms hereof to take all actions
to remediate each site and Seller does not proceed with reasonable diligence to
take such actions or such actions cannot be or are not fully accomplished on or
before the 270th day following the date of this Agreement, Buyers may elect to
terminate this Agreement or postpone the Closing Date until such time as all of
the actions necessary to remedy the violations identified have been fully
performed in a manner and to the extent necessary to satisfy the Seller's
obligations. In the event the Closing Date is postponed pursuant to this Section
4(r), the Parties will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC. The Buyers may elect to
terminate this Agreement if they or their environmental consultants and agents
are not granted adequate access to each parcel of Real Estate to conduct the
environmental testing contemplated in this Section 4(r); provided, however, that
the Buyers shall forfeit their right to terminate this Agreement as a result of
insufficient access to any parcel of Real Estate if they fail to make such
election within forty-five (45) days after the date hereof. The Buyers shall pay
all of the costs of the environmental assessments performed by the Buyers
pursuant to this Agreement.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above
shall be true and correct in all respects at and as of the Closing Date as
though made on and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
(iii) the Seller shall have procured all of the third party consents
required by Section 4(d), above, and the Buyer shall have received the
title insurance commitments (and endorsements) and Surveys described in
Section 4(o), above;
(iv) no action, suit, investigation, inquiry or other proceeding
shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the parties if
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such transactions are consummated, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or
(C) Materially affect the right of the Buyers to own, operate, or control
the Acquired Assets (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyers a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Sections 5(a)(i) and
5(a)(ii) are satisfied in all respects and the statements contained in
such certificate shall be deemed a warranty of the Seller which shall
survive the Closing;
(vi) each of the Assignment Applications shall have been approved by
a Final Order of the FCC and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Post-Closing
Agreement;
(viii) the Buyers shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit F attached
hereto, addressed to the Buyers and its lender and dated as of the Closing
Date;
(ix) the Buyers shall, within thirty (30) days after the date
hereof, be satisfied that their examination and due diligence review
referred to in Section 4(l) hereof does not reveal any conditions which
were not disclosed in this Agreement and may result in a Material Adverse
Effect. If, within thirty (30) days after the date hereof, Buyers do not
deliver to Seller a written notice terminating this Agreement in regard to
the contingency described in this Section 5(a)(ix), then the contingency
set forth in this Section 5(a)(ix) shall be deemed waived by Buyers;
(x) the Seller shall have delivered to the Buyers all items required
to be delivered thereby under Section 1(e), above; and
(xi) the Buyers shall have received a landlord estoppel, consent and
waiver letter for each parcel of Real Estate subject to a Lease, duly
executed by the owner of the Real Estate, in a form satisfactory to the
Buyers' lenders which are financing the transaction contemplated hereby.
In the event that any of the conditions set forth in subsections 5(a)(i) or (ii)
or (iv), above, are not satisfied and such failure does not or is not reasonably
likely to have a Material Adverse Effect, Buyers acknowledge and agree that,
notwithstanding the introductory sentence of this Section 5(a), they shall be
required to consummate the transactions contemplated herein despite such
failure;
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provided, however, that Buyers may still seek indemnification pursuant to
Section 7, below, as hereinafter described. In the event that (i) any of the
conditions set forth in subsections 5(a)(i) or (ii) or (iv) above, are not
satisfied and such failure has or is reasonably likely to have a Material
Adverse Effect, or (ii) any of the other conditions set forth in this Section
5(a) are not satisfied, the Buyers may elect to (i) terminate this Agreement
without liability to the Buyers, or (ii) consummate the transactions
contemplated herein despite such failure. If any of the conditions to Closing
set forth in this Section 5(a) are not satisfied and the Buyers elect or are
required to consummate the transactions described herein, and if such failure
(regardless of whether such failure is Material or has or is reasonably likely
to have a Material Adverse Effect), shall be as a result of a breach of any
representation, warranty, covenant or provision of this Agreement by the Seller
(including, without limitation, any breach arising as a result of the failure of
the Seller to execute and/or deliver any item described in this Section 5(a)),
the Buyers may seek appropriate remedies for any and all damages, costs and
expenses incurred by the Buyers by reason of such breach, including, without
limitation, indemnification pursuant to Section 7, below. In the event that any
of the conditions set forth in Sections 5(a)(iv), (vi), (ix) or (xi) are not
satisfied and the transactions described herein are consummated, the failure of
such condition shall not give rise to an indemnification claim by Buyer pursuant
to Section 7, below, unless and to the extent that the event or the condition
giving rise to such failure also constitutes a breach of a representation,
warranty or covenant of the Seller set forth in Sections 2 or 4 hereof.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all respects at and as of the Closing Date as
though made on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of their
covenants hereunder in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other proceeding
shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
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(iv) the Buyers shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Sections 5(b)(i) and
5(b)(ii) are satisfied in all respects and the statements contained in
such certificate shall be deemed a warranty of the Buyers which shall
survive the Closing;
(v) each of the Assignment Applications shall have been approved by
a Final Order of the FCC and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Post-Closing
Agreement; and
(vii) the Buyers shall have delivered to the Seller all items
required to be delivered thereby under Section 1(e), above.
In the event that any of the conditions set forth in subsections 5(b)(i) or (ii)
or (iii), above, are not satisfied and such failure does not have or is not
reasonably likely to have a Material Adverse Effect, Seller acknowledges and
agrees that, notwithstanding the introductory sentence of this Section 5(b),
Seller shall be required to consummate the transactions contemplated herein
despite such failure; provided, however, that Seller may still seek
indemnification pursuant to Section 7, below, as hereinafter described. In the
event that (i) any of the conditions set forth in subsections 5(b)(i) or (ii) or
(iii) above, are not satisfied and such failure has or is reasonably likely to
have a Material Adverse Effect, or (ii) any of the other conditions set forth in
this Section 5(b) are not satisfied, the Seller may elect to (i) terminate this
Agreement without liability to the Seller, or (ii) consummate the transactions
contemplated herein despite such failure. If any of the conditions to Closing
set forth in this Section 5(b) are not satisfied and the Seller elects or is
required to consummate the transactions described herein, and if such failure
(regardless of whether such failure is Material or has or is reasonably likely
to have a Material Adverse Effect) shall be as a result of a breach of any
provision of this Agreement by the Buyers (including, without limitation, any
breach arising as a result of the failure of the Buyers to execute and/or
deliver any item described in this Section 5(b)), the Seller may seek
appropriate remedies for any and all damages, costs and expenses incurred by the
Seller by reason of such breach including, without limitation, indemnification
pursuant to Section 7, below. In the event that any of the conditions set forth
in Sections 5(a)(iii) or (v) are not satisfied and the transactions described
herein are consummated, the failure of such condition shall not give rise to an
indemnification claim by Seller pursuant to Section 7, below, unless and to the
extent that the event or condition giving rise to such failure also constitutes
a breach of a representation, warranty or covenant of the Buyers set forth in
Sections 3 or 4 hereof.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing:
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(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
(c) Adjustments.
(i) Operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before
the Closing Date shall be for the account of the Seller and thereafter for
the account of the Buyers. Such items as employee salaries, vacation, sick
day and personal time accruals, and fringe benefits, power and utilities
charges, insurance, real and personal property taxes, prepaid expenses,
deposits, music license fees, and rents and payments pertaining to the
Assumed Contracts (including any contracts for the sale of time for cash,
trade or barter so assigned) shall be prorated between the Seller and the
Buyers as of the Closing Date in accordance with the foregoing principle;
provided, however, that Buyer shall assume those obligations of Seller as
set forth in Section 6(c)(ii), below, and shall reduce the Purchase Price
accordingly. In addition, all commissions payable with respect to the
accounts receivable of Seller (whether due before or after Closing) shall
be solely for the account and responsibility of the Seller. Contractual
arrangements that do not reflect an equal rate of compensation to a
Station over the term of the agreement shall be equitably adjusted as of
the Closing Date. The prorations and adjustments hereunder shall be made
and paid insofar as feasible on the Closing Date, with a final settlement
sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute
shall nonetheless be paid at such time and such disputes shall be
determined by an independent accounting firm mutually acceptable to both
parties and the fees and expenses of such accounting firm shall be paid
one-half (1/2) by the Seller and one-half (1/2) by the Buyers.
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(ii) At the Closing, the Seller will provide a schedule that sets
forth in reasonable detail the amount of (i) accrued vacation time, sick
pay and personal time of all employees of the Seller hired by the Buyers
as of the Closing Date and (ii) real estate taxes, occupancy taxes, water
taxes and other taxes, if any, on or with respect to the Stations (the
"Assumed Accruals"). The prorations of such taxes will be effected with
respect to all of such taxes paid as of the close of business on the
Closing Date to the extent such taxes relate to any time period subsequent
to the Closing Date or, if not paid as of the Closing Date, to the extent
such taxes relate to any time period prior to the Closing Date, which
proration shall be based upon taxes assessed in the most recent year. Upon
the consent of the Buyers, the aggregate amount of the accruals for the
Assumed Accruals shall be deducted from the Purchase Price and the Buyers
shall be responsible for the payment and/or satisfaction of such accruals.
(d) Collection of Accounts Receivable. At the Closing, the Seller will
turn over to the Buyers, for collection only, the accounts receivable of the
Stations owing to the Seller as of the close of business on the Closing Date. A
schedule of such accounts receivable will be delivered by the Seller to the
Buyers on the Closing Date or as soon thereafter as possible. The Buyers agree
to use commercially reasonable efforts in the ordinary course of business (but
without responsibility to institute legal or collection proceedings) to collect
such accounts receivable during the 120-day period following the Closing Date,
and will provide the Seller with a monthly accounting of all payments received
during the previous calendar month and remit all payments received on such
accounts during each calendar month during this 120-day period on the sixtieth
(60th) and one hundred twentieth (120th) day. The Buyers shall have the sole
right to collect such accounts receivable during such one hundred twenty (120)
day period. In the event the Buyers receive monies during the 120-day period
following the Closing Date from an advertiser who, after the Closing Date, is
advertising over any of the Stations, and that advertiser was included among the
accounts receivable as of the Closing Date, the Buyers shall apply said monies
to the oldest outstanding balance due on the particular account, except in the
case of a "disputed" account receivable. For purposes of this Section 6(d), a
"disputed" account receivable means one which the account debtor refuses to pay
because he asserts that the money is not owed or the amount is incorrect. In the
case of such a disputed account, the Buyers shall immediately return the account
to the Seller prior to expiration of the 120-day period following the Closing
Date. If the Buyers return a disputed account to the Seller, the Buyers shall
have no further responsibility for its collection and may accept payment from
the account debtor for advertising carried on any of the Stations after the
Closing Date. At the end of the 120-day period following the Closing Date, the
Buyers will turn back to the Seller all of the accounts receivable of the
Stations as of the Closing Date owing to the Seller which have not yet been
collected, and the Buyers will thereafter have no further responsibility with
respect to the collection of such receivables. During the 120-day period
following the Closing Date, the Buyers shall afford the Seller reasonable access
to the accounts receivable "aging list." The Seller acknowledges and agrees that
the Buyers are acting as its collection agent hereunder for the sole benefit of
the Seller and that Buyers have accepted such responsibility for the
accommodation of the Seller. The Buyers shall not have any duty to inquire as to
the form, manner of execution or validity
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of any item, document, instrument or notice deposited, received or delivered in
connection with such collection efforts, nor shall the Buyers have any duty to
inquire as to the identity, authority or rights of the persons who executed the
same. The Seller shall indemnify Buyers and hold them harmless from and against
any judgments, expenses (including attorneys' fees) costs or liabilities which
the Buyers may incur or sustain as a result of or by reason of such collection
efforts.
(e) Consents. In the event any of the Assumed Contracts are not assignable
or any consent to such assignment is not obtained on or prior to the Closing
Date, and the Buyers elect to consummate the transactions contemplated herein
despite such failure or inability to obtain such consent, the Seller shall
continue to use commercially reasonably efforts to obtain any such assignment or
consent after the Closing Date. Until such time as such assignment or approval
has been obtained, the Seller will cooperate with the Buyers in any lawful and
economically feasible arrangement to provide that the Buyers shall receive the
Seller's interest in the benefits under any such Assumed Contract, including
performance by the Seller as agent, if economically feasible; provided, however,
that the Buyers shall undertake to pay or satisfy the corresponding liabilities
for the enjoyment of such benefit to the extent that Buyers would have been
responsible therefor if such consent or assignment had been obtained.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement and all of the representations and
warranties of the Buyer contained in Section 3 of this Agreement shall survive
the Closing and shall continue in full force and effect for a period of fourteen
(14) months following Closing.
(b) Indemnification Provisions for the Benefit of the Buyers. The Seller
agrees to indemnify the Buyers from and against any Adverse Consequences the
Buyers may suffer resulting from, arising out of, relating to, in the nature of,
or caused by:
(i) any misrepresentation or breach of any of the Seller's
representations or warranties contained in this Agreement or in any
Ancillary Agreement executed and/or delivered by the Seller (so long as
the Buyers make a written claim for indemnification within the applicable
survival period);
(ii) any breach or nonfulfillment of any agreement or covenant of
the Seller contained herein or in any Ancillary Agreement;
(iii) any Liability of the Seller which is not an Assumed Liability;
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(iv) any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability; and/or
(v) any Tax Liabilities of the Seller or its partners with respect
to the operation of the Stations or the business of the Seller at any time
prior to the Closing Date.
The Buyers shall not have the right to assert claims for indemnification under
subsection (i) unless and until the aggregate amount of any Adverse Consequences
that the Buyers in total may suffer or have suffered as a result of such breach
exceeds Seventy-Five Thousand Dollars ($75,000), and then only for the amounts
in excess of such Seventy-Five Thousand Dollar ($75,000) aggregate amount.
Notwithstanding the foregoing, the Seller shall not be liable for
indemnification claims under subsection (i) in excess of an aggregate amount
equal to the Purchase Price; provided, however, that no such limit shall apply
to or include Adverse Consequences based on a claim of fraud.
(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against any Adverse Consequences the Seller may suffer resulting from,
arising out of, relating to, in the nature of, or caused by (i) any
misrepresentation or breach of any of the Buyers' representations or warranties
contained in this Agreement or in any Ancillary Agreement executed and/or
delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period), (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity.
(e) Liquidated Damages. The Buyers and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences as a result of such
default may be difficult, if not impossible, to ascertain. Accordingly, in lieu
of indemnification pursuant to Section 7(c), the Seller shall be entitled to
receive from the Buyers for such default the sum of Seven Hundred Fifty Thousand
Dollars ($750,000) as liquidated damages without the need for proof of damages,
subject only to successfully proving in a court of competent jurisdiction that
the Buyers have materially breached
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this Agreement and that the transactions contemplated thereby have not occurred.
The Buyers and the Seller agree to pay said sum of liquidated damages within ten
(10) days of the date that the non-defaulting party obtains such a judgment.
Notwithstanding anything contained herein to the contrary, the Seller
acknowledges and agrees that in the event this Agreement is terminated by the
Seller prior to the Closing Date as a result of a breach or default by Buyers
under this Agreement, the Seller's sole and exclusive remedy with respect to
such default shall be to proceed against the Earnest Money Deposit as liquidated
damages.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof and/or in the event the Indemnifying Party
shall fail to defend such claim actively and in good faith, then the Indemnified
Party may defend against, or enter into any settlement with respect to, the
matter in any manner it reasonably may deem appropriate.
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8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets, that are used or useful in
the operation of the Stations, wherever located, including but not limited to
all of its (a) real property, leaseholds and other interests of any kind
therein, improvements, fixtures, and fittings thereon (such as towers and
antennae), and easements, rights-of-way, and other appurtenances thereto); (b)
tangible personal property (such as fixed assets, computers, data processing
equipment, electrical devices, monitoring equipment, test equipment, switching,
terminal and studio equipment, transmitters, transformers, receivers, broadcast
facilities, furniture, furnishings, inventories of compact disks, records, tapes
and other supplies, vehicles, and all assignable warranties with respect
thereto; (c) Intellectual Property, goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions; (d) rights under orders and
agreements (including those Barter Agreements and Advertising Contracts
identified on the Disclosure Schedule) now existing or entered into in the
Ordinary Course of Business for the sale of advertising time on the Stations;
(e) Assumed Contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the Stations, jingles,
logos, slogans, and business goodwill of the Stations; (g) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment; (h) Licenses and similar rights obtained from governments and
governmental agencies; and (i) FCC logs and records and all other books,
records, ledgers, logs, files, documents, correspondence, advertiser lists, all
other lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, program production materials,
studies, reports, and other printed or written materials; and (j) goodwill of
the Stations.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Ancillary Agreements" have the meaning set forth in Section 2(b) above.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Accruals" has the meaning set forth in Section 6(c) above.
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"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts listed on Exhibit G attached hereto.
"Assumed Liabilities" means (a) obligations of the Seller under the
Assumed Contracts which accrue after the Closing Date either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing; and (b) the obligations of the Seller
assumed under Section 6(c)(ii). The Assumed Liabilities shall not include (i)
any Retained Liabilities, or (ii) certain obligations under the Employment
Agreements assumed by Buyers which have been retained by Seller as detailed
under the "General Contracts" section of Exhibit G.
"Barter Agreements" has the meaning set forth in Section 4(f) above.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Escrow Agreement" has the meaning set forth in Section 1(c) above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined
33
<PAGE>
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" has the meaning set forth in Section 2(q), above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means First National Bank of Maryland in Washington, D.C.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communication Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
34
<PAGE>
"Intellectual Property" means all of the following used or useful in the
operation of the Stations: (a) patents, patent applications, patent disclosures,
and improvements thereto, (b) trademarks, service marks, trade dress, call
letters, logos, trade names, and corporate names and registrations and
applications for registration thereof, (c) all programs, programming materials,
copyrights and registrations and applications for registration thereof, (d) mask
works and registrations and applications for registration thereof, (e) computer
software, data, and documentation, (f) trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
market and other research information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing, and
business data, pricing and cost information, business and marketing plans, and
customer and supplier lists and information), (g) other proprietary rights, and
(b) copies and tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge of Alan S. Beck after investigation and
inquiry of Station's management.
"Leases" means those real estate leases to which Seller is a party
covering Seller's studios and FM tower sites in Ann Arbor, Michigan, as
described in Section 2(i) of the Disclosure Schedule.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Material" or "Materially" means an event, condition, circumstance, act,
omission or effect which, individually or in the aggregate with other similar
events, conditions, circumstances, acts, omissions or effects, (i) is, in the
opinion of a reasonably prudent buyer, likely to have a material effect on the
transactions contemplated hereby or the operation or condition of the Stations
taken as a whole, or (ii) has or will have a financial consequence of
Seventy-Five Thousand Dollars ($75,000) or more.
"Material Adverse Effect" means an event, condition, circumstance, act,
omission or effect which, individually or in the aggregate with other similar
events, conditions, circumstances, acts, omissions or effects, is, in the
opinion of a reasonably prudent buyer, likely to have a material effect on the
transactions contemplated hereby or the operation or condition of the Stations
taken as a whole; provided, however, that for purposes of Sections 5(b) and
9(a)(iii), "Material Adverse Effect"
35
<PAGE>
means an event, condition, circumstance, act, omission or effect which,
individually or in the aggregate with other similar events, conditions,
circumstances, acts, omissions or effects, is, in the opinion of a reasonably
prudent seller, likely to have a material effect on the transactions
contemplated hereby. Nothing in the definition of "Material" or "Materially"
shall be considered to define the term "Material Adverse Effect."
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Seller in York,
Michigan and Saline, Michigan as described in Section 2(i) of the Disclosure
Schedule and all buildings, fixtures and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i), above.
"Post-Closing Agreement" means the Post-Closing Agreement with Arthur H.
Kern and Alan Beck in the form attached hereto as Exhibit D.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Retained Assets" means (i) the partnership charter, qualifications to
conduct business as a foreign entity, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, and other documents relating to the organization,
maintenance, and existence of the Seller as a limited partnership; (ii) any of
the rights of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement); (iii) accounts, notes and other
receivables of the Seller; and (iv) Cash.
36
<PAGE>
"Retained Liabilities" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(o) and Section 4(r) relating to Surveys, title commitments and
environmental audits and Section 4(b) with regard to the Assignment
Application); or (iv) any Liability or obligation of the Seller under this
Agreement (or under any side agreement between the Seller on the one hand and
the Buyers on the other hand entered into on or after the date of this
Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WIQB-FM, WQKL-FM, and WTKA-AM, licensed by the FCC to operate in Ann Arbor,
Michigan and the radio broadcast station having the call letters WDEO-AM,
licensed by the FCC to operate in Saline, Michigan.
"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
37
<PAGE>
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach of any representation, warranty, or covenant contained
in this Agreement and such breach has or is likely to have a Material
Adverse Effect; provided, however, that if such breach is capable of being
cured, such breach also remains uncured for twenty (20) days after notice
of breach is received by the Seller from the Buyers;
(iii) the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in breach of any representation, warranty, or covenant
contained in this Agreement and such breach has or is likely to have a
Material Adverse Effect; provided, however, that if such breach is capable
of being cured, such breach also remains uncured for ten (10) days after
notice of breach is received by the Buyers from the Seller;
(iv) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof giving the Buyer the right to terminate in accordance
with the provisions of said Section 5(a) (unless the failure results
primarily from the Buyers themselves breaching any representation,
warranty, or covenant contained in this Agreement);
(v) the Seller may terminate this Agreement by giving written notice
to the Buyers at any time prior to the Closing if the Closing shall not
have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof giving the Seller the right to terminate in accordance
with provisions of said Section 5(b) (unless the failure results primarily
from the Seller itself breaching any representation, warranty, or covenant
contained in this Agreement);
(vi) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order; or
38
<PAGE>
(vii) the Buyers may terminate this Agreement as provided in Section
4(r), 4(q) and 5(a)(ix).
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a), above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in Section 7(a) hereof.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
39
<PAGE>
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that (i) the Buyers may assign all of its right,
title and interest in, to and under this Agreement to one or more Affiliates who
shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Seller the Purchase Price therefor or to any successor to the Buyers in
the event of any sale, merger or consolidation of the Buyers, (ii) Buyers may
assign its indemnification claims and its rights under the warranties and
representations of the Seller to the financial institution(s) providing
financing to the Buyers in connection with this transaction; and (iii) the
Seller may assign its rights to receive the Purchase Price hereunder in
accordance with Section 10(p), below.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient at its address set
forth below:
If to the Seller:
Arbor Radio, L.P.
c/o Alan Beck
3 Waterview Drive
Port Jefferson, NY 11777
With a copy to:
Arthur H. Kern
1940 Webster Street
San Francisco, CA 94115
and
40
<PAGE>
Alan S. Beck
3 Waterview Drive
Port Jefferson, NY 11777
and
Latham & Watkins
1001 Pennsylvania Avenue, N.W., Suite 1300
Washington, DC 20004-2505
Attn.: Gary M. Epstein
(which copy shall not constitute notice to the Seller)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corporation
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue, Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
and
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202
Attention: Patricia Leiker
(Neither of which copies shall constitute notice to Buyers)
41
<PAGE>
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Michigan.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyers and the Seller will each bear their own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, other than (i) as set forth
in Section 4(b) with regard to the Assignment Applications, (ii) as set forth in
Section 4(o) with respect to Surveys, title commitments, and (iii) the broker's
fee payable to Bergner & Co. in the amount of One Hundred Seventy-Five Thousand
Dollars ($175,000) which fee shall be paid by the Buyers. The Buyer will pay for
all environmental audits performed under Section 4(r) hereof. The Seller will
pay all income taxes. The Seller and the Buyers will each pay one-half (1/2) of
any transfer or sales taxes and other recording or similar fees necessary to
vest title to each of the Acquired Assets in the Buyers.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied
42
<PAGE>
against any Party. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The Parties
acknowledge and agree that neither Party believes that a filing under the
Hart-Scott-Rodino Act is required in connection with the transactions
contemplated hereby; however, nothing contained in the last sentence of Section
2(c) or the last sentence of Section 3(c) shall be deemed a warranty or
representation by Seller or Buyer regarding consents or approvals that may be
required under such Act. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. The
disclosure of an exception to one representation or warranty shall be deemed to
constitute disclosure with respect to such other representations and warranties
for which the same is fairly applicable. The Disclosure Schedule shall not vary,
change or alter the literal meaning of the representations and warranties of the
Seller contained in this Agreement, other than creating exceptions thereto which
are fairly applicable to the language of the warranty and representation
contained in this Agreement.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state court sitting in Ann Arbor, Michigan and the Federal
District Court for the Eastern District of Michigan, Southern Division, in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(h) above. Nothing in this Section 10(o), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
(p) Like-Kind Exchange. Seller may at any time at or prior to Closing
assign solely its right to collect the Purchase Price (or any portion thereof)
to a "qualified intermediary" as defined in Treasury Reg. Section
1.1031(k)-1(g)(4), provided that such assignment does not affect Seller's and
Buyers' rights and obligations hereunder. Seller shall promptly provide written
notice to Buyers of a proposed assignment along with all agreements and
documents to be executed and/or delivered in connection with the assignment.
Buyers shall cooperate with all reasonable requests of Seller and such qualified
intermediary in arranging and effecting an exchange which qualifies under
Section
43
<PAGE>
1031 of the Code; provided, however, that (i) Buyer shall not incur any
out-of-pocket expense as a result of its cooperation, (ii) such assignment shall
be effected in a manner that does not delay the Closing, and (iii) the
assignment, in the reasonable opinion of Buyers' legal counsel, does not
adversely affect the rights, powers or remedies of the Buyers under this
Agreement.
44
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
--------------------------------
(printed)
----------------------------------------
Title:
-------------------------
CUMULUS LICENSING CORP.
By:
--------------------------------
(printed)
----------------------------------------
Title:
-------------------------
ARBOR RADIO, L.P.
By:
--------------------------------
(printed)
----------------------------------------
Title:
-------------------------
45
<PAGE>
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B-1 Form of Assignment
Exhibit B-2 Form of Warranty Bill of Sale
Exhibit B-3 Form of Warranty Deeds
Exhibit C Form of Assumption Agreement
Exhibit D Form of Post-Closing Agreement
Exhibit E Intentionally Deleted
Exhibit F Form of Opinion
Exhibit G Assumed Contracts
46
<PAGE>
ASSET PURCHASE AGREEMENT
BETWEEN
WILKS BROADCAST ACQUISITIONS, INC.
AND
CUMULUS MEDIA, LLC
March 5, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction.....................................................1
(a) Purchase and Sale of Assets......................................1
(b) Assumption of Liabilities........................................1
(c) Purchase Price...................................................1
(d) The Closing......................................................2
(e) Deliveries at the Closing........................................2
(f) Postclosing Agreement............................................2
(g) Allocation.......................................................2
2. Representations and Warranties of the Seller..........................3
(a) Organization of the Seller.......................................3
(b) Authorization of Transaction.....................................3
(c) Noncontravention.................................................3
(d) Title to Acquired Assets.........................................3
(e) Financial Statements.............................................3
(f) Events Subsequent to January 1, 1997.............................4
(g) Tax Matters......................................................6
(h) Tangible Assets..................................................6
(i) Owned Real Property..............................................6
(j) Real Property Leases.............................................7
(k) Intellectual Property............................................8
(l) Contracts.......................................................10
(m) Commission Licenses and Compliance with Commission
Requirements..................................................11
(n) Insurance.......................................................12
(o) Litigation......................................................13
(p) Employees.......................................................13
(q) Employee Benefits...............................................13
(r) Environment, Health, and Safety.................................13
(s) Legal Compliance................................................15
(t) Advertising Agreements..........................................15
(u) Brokers' Fees...................................................15
(v) Disclosure......................................................15
3. Representations and Warranties of the Buyer..........................15
(a) Organization of the Buyer.......................................15
(b) Authorization of Transaction....................................15
(c) Noncontravention................................................16
(d) Buyer's Qualification...........................................16
(e) Brokers' Fees...................................................16
4. Pre-Closing Covenants................................................16
(a) General.........................................................16
<PAGE>
(b) Assignment Applications.........................................16
(c) Notices and Consents............................................17
(d) Operation of Business...........................................17
(e) Employment Offers...............................................17
(f) Advertising Obligations.........................................17
(g) Operating Statements............................................17
(h) Contracts.......................................................17
(i) Operation of Stations...........................................18
(j) Credit and Receivables..........................................18
(k) Preservation of Business........................................18
(l) Full Access.....................................................18
(m) Notice of Developments..........................................18
(n) Exclusivity.....................................................18
(o) Title Insurance.................................................19
(p) Surveys.........................................................19
(q) Environmental Assessments.......................................19
(r) Control of Stations.............................................19
(s) Risk of Loss....................................................19
5. Conditions to Obligation to Close....................................20
(a) Conditions to Obligation of the Buyer...........................20
(b) Conditions to Obligation of the Seller..........................21
6. Post-Closing Covenants...............................................22
(a) General.........................................................22
(b) Litigation Support..............................................22
(c) Adjustments.....................................................23
(d) Collection of Accounts Receivable...............................23
7. Remedies for Breaches of this Agreement..............................24
(a) Survival........................................................24
(b) Indemnification Provisions for the Benefit
of the Buyer .................................................24
(c) Indemnification Provisions for the Benefit
of the Seller ...............................................24
(d) Matters Involving Third Parties.................................24
(e) Limitation of Liability.........................................25
(f) Specific Performance............................................25
(g) Liquidated Damages..............................................26
(h) Other Indemnification Provisions................................26
8. Definitions..........................................................26
9. Termination..........................................................31
(a) Termination of Agreement........................................31
(b) Effect of Termination...........................................31
-ii-
<PAGE>
10. Miscellaneous.......................................................32
(a) Survival........................................................32
(b) Press Releases and Announcements................................32
(c) No Third Party Beneficiaries....................................32
(d) Entire Agreement................................................32
(e) Succession and Assignment.......................................32
(f) Counterparts....................................................32
(g) Headings........................................................32
(h) Notices.........................................................32
(i) Governing Law...................................................34
(j) Amendments and Waivers..........................................34
(k) Severability....................................................34
(l) Expenses........................................................34
(m) Construction....................................................34
(n) Incorporation of Exhibits and Schedules.........................35
(o) Submission to Jurisdiction......................................35
(p) Bulk Transfer Laws..............................................35
-iii-
<PAGE>
EXHIBITS
Description Section Reference
----------- -----------------
Exhibit A--Form of Earnest Money Escrow Agreement 1(c)
Exhibit B--Forms of Assignments 1(e)
Exhibit C--Form of Assumption 1(e)
Exhibit D--Form of Postclosing Agreement 1(f)
Exhibit E--Form of Opinion of Counsel to the Seller 5(a)(x)
SCHEDULES
Description Section Reference
----------- -----------------
Exceptions To Seller's Good Title 2(d)
Financial Statements 2(e)
Tangible Personal Property 2(h)
Owned Real Property 2(i)
Real Property Leases 2(j)
Intellectual Property 2(k)
Material Contracts 2(l)
FCC Licenses 2(m)
Insurance 2(n)
Litigation 2(o)
Employees 2(p)
Employee Benefit Plans 2(q)
Environmental Matters 2(r)
-iv-
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") entered into as of March 5, 1997, by and
between Cumulus Media, LLC, a Wisconsin limited liability company (the "Buyer"),
and Wilks Broadcast Acquisitions, Inc., a Georgia corporation (the "Seller").
The Buyer and the Seller are referred to collectively herein as the "Parties ."
Capitalized terms used in this Agreement are defined in Section 7 hereof.
This Agreement contemplates a transaction in which the Buyer will purchase
substantially all of the assets (and assume certain of the liabilities) of the
Seller that are used or useful in the operation of radio stations WEKL-FM,
WRXR-FM, WGUS-AM and WUUS-FM, each licensed to operate in Augusta, Georgia and
Aiken, South Carolina (collectively, the "Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyer agrees to pay to the Seller at the Closing
Fifteen Million Five Hundred Thousand Dollars ($15,500,000) (the "Purchase
Price") payable as follows:
(i) on the date of this Agreement, the Buyer will deposit with the
Seller the amount of Twenty-five Thousand Dollars ($25,000),
(ii) on or before March 31, 1997, the Buyer will notify the Seller
that it will within two business days deposit with the Escrow Agent (and
will within two business days thereafter deposit with the Escrow Agent)
the amount of Nine Hundred Seventy-five Thousand Dollars ($975,000)
(together with the amount specified in Clause (i) above, the "Earnest
Money Deposit") by delivery of cash payable by wire transfer or delivery
of other immediately available funds;
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(iii) on the Closing Date, the Buyer shall pay to the Seller the
amount of Fifteen Million Four Hundred Fifty Thousand Dollars
($15,450,000), less the Earnest Money Deposit (and any interest earned
thereon); and
(iv) on the Closing Date, the Buyer shall pay to the Seller, on
behalf of all parties to the Postclosing Agreement, the amount of Fifty
Thousand Dollars ($50,000).
The Earnest Money Deposit referenced in this Section 1(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement to be executed by
the Parties on or prior to the Buyer's deposit of the Earnest Money Deposit in
the form attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"),
and shall be used by the Escrow Agent to purchase securities issued by the
United States Department of Treasury. Within two business days after the Buyer
notifies the Seller that it will deposit the amount specified in Clause (ii),
the Seller will deposit the amount specified in Clause (i) with the Escrow
Agent. In the event that the Buyer fails to give such notice on or before March
31, 1997 (or fails within the two business day period to deposit the amount in
Clause (ii) with the Escrow Agent), the Seller may terminate this Agreement
pursuant to Section 9(a) and then would retain the amount specified in Clause
(i) and this Agreement would terminate without further liability of either Party
to the other Party. Interest earned on the Earnest Money Deposit shall accrue to
the benefit of the Buyer, and, together with the principal amount of the Earnest
Money Deposit, shall be payable to the Seller and credited against the Purchase
Price on the Closing Date. If this Agreement is terminated without Closing of
the transaction contemplated herein, the Earnest Money and all accrued interest
shall be paid to the Buyer or the Seller as provided in the Earnest Money Escrow
Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Attorney Scott
Klosinski, 3525 Walton Way, Augusta, Georgia, commencing at 9:00 a.m. local time
on the date set by the Buyer not earlier than the fifth business day or later
than the tenth business day after the FCC approval of the Assignment Application
becomes a Final Order, by which date all other conditions to the obligations of
the Parties to consummate the transactions contemplated hereby will have been
satisfied or waived or such other date or place as the Parties may mutually
determine (the "Closing Date"); provided, however, that the Closing Date shall
be no earlier than July 14, 1997.
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyer the various certificates, instruments, and documents referred to in
Section 5(a) below; (ii) the Buyer will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyer (A) assignments (including real property and Intellectual Property
transfer documents) in the forms attached hereto as Exhibit B and (B) such other
instruments of sale, transfer, conveyance, and assignment as the Buyer and its
counsel reasonably may request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Seller (A) an assumption in the form attached
hereto as Exhibit C and (B) such other instruments of assumption as the Seller
and its counsel reasonably may request; and (v) the Buyer will deliver to the
Seller the consideration specified in Section 1(c) above.
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(f) Postclosing Agreement. On the Closing Date, the Seller shall execute,
and shall cause Jeff Wilks and Don Wilks to execute, a Postclosing Agreement
with the Buyer including covenants not to compete with the Buyer in the markets
served by the Stations and to indemnify the Buyer in the form of Exhibit D
attached hereto. A portion of the Purchase Price equal to $50,000 shall be paid
to the Seller, on behalf of all parties other than the Buyer, on the Closing
Date as consideration for the agreements set forth in the Postclosing Agreement.
(g) Allocation. The Parties will agree at the Closing to allocate the
Purchase Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes).
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyer that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
(b) Authorization of Transaction. The Seller has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors and stockholders of the
Seller have duly authorized the execution, delivery, and performance of this
Agreement by the Seller. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms and
conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which any of the Seller is subject or any provision of the charter
or bylaws of any of the Seller; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
Security Interest, or other arrangement to which any of the Seller is a party or
by which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). Other than with
respect to the transfer of the FCC Licenses, the Seller does not need to give
any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any government or governmental agency in order for
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the Parties to consummate the transactions contemplated by this Agreement
(including the assignments and assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Except as stated in Schedule 2(d), Seller
has good and marketable title to all of the Acquired Assets, free and clear of
any Security Interest or restriction on transfer. The Acquired Assets include
all assets necessary for the conduct of the operation and business of the
Stations other than the Retained Assets.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements: (i) unaudited balance sheets
and statements of income, changes in stockholders' equity, and cash flow as of
and for the fiscal years ended December 31, 1995 and December 31, 1996, for the
Seller; and (ii) unaudited statements of income, as of and for the month ended
January 31, 1997 for the Seller. The Seller has previously provided to the
Buyer, and the Buyer acknowledges receipt of unaudited statements of income as
of and for each month during 1995 and 1996 (collectively with the financial
statements included in Section 2(e) of the Disclosure Schedule the "Financial
Statements"). Each of the Financial Statements other than statements of cash
flow have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, are correct and complete, and are
consistent with the books and records of the Seller (which books and records are
correct and complete) and (except for non-material matters) accurately represent
the results of the Stations' operation and the condition of the Stations as of
and for the time periods indicated; provided that the Financial Statements (i)
do not include any allowance for uncollectible accounts receivable for
uncollectible items; (ii) include depreciation calculated in conformance with
federal income tax regulations (rather than GAAP); (iii) do not accrue payroll
(and related) expenses for the portion of the final calendar week of the fiscal
year; and, (iv) contain no notes or disclosures which, in each case, are not in
accordance with GAAP.
(f) Events Subsequent to January 1, 1997. Since January 1, 1997, there has
not been any adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations, or future prospects of the Seller
with respect to the operation of the Stations. Without limiting the generality
of the foregoing and with respect to the operation of the Stations since that
date:
(i) the Seller has not sold, leased, transferred, or assigned any of
its material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Seller has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts, leases, subleases,
licenses, and sublicenses) outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled
any contract, lease, sublease, license, or sublicense (or series of
related contracts, leases, subleases, licenses, and sublicenses) involving
more than $5,000 to which the Seller is a party or by which it is bound
other than arrangements for the sale of air time or advertising on the
Stations;
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(iv) no Security Interest has been imposed upon any of its assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions) outside
the Ordinary Course of Business;
(vii) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations) outside the
Ordinary Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(x) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property or any action
adversely affecting the FCC Licenses of the Stations;
(xii) the Seller 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 giving rise to any claim or right on its
part against the person or on the part of the person against it;
(xiii) the Seller has not entered into any employment contract,
consulting contract or severance agreement or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement;
(xiv) the Seller has not granted any increase outside the Ordinary
Course of Business in the base compensation of any of its directors,
officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other
plan, contract, or commitment for any of its directors, officers, and
employees, or modified or terminated any existing such plan, contract, or
commitment;
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(xvi) the Seller has not made any other change in employment terms
for any of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable
contribution outside the Ordinary Course of Business;
(xviii) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Seller;
(xix) the Seller has not altered its credit and collection policies
or its accounting policies;
(xx) the Seller has not materially altered the programming, format
or call letters of the Stations or their promotional and marketing
activities;
(xxi) the Seller has not applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to preserve the
FCC Licenses and has operated the Stations in compliance therewith and
with all FCC rules and regulations; or
(xxii) the Seller has not committed to any of the foregoing.
(g) Tax Matters. The Seller has filed and will file all Tax Returns that
it was required to file and may be required to file. All such Tax Returns were
correct and complete in all respects. All Taxes owed by the Seller (whether or
not shown on any Tax Return) have been paid. The Seller has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor, or other third
party. The Seller has not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency. The Seller is not a party to a pending Tax audit and is aware of no
threatened Tax audit. No claim has ever been made by an authority in a
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security Interests on any
of the assets of the Seller that arose in connection with any failure (or
alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Stations.
The Seller owns or leases all tangible assets necessary for the conduct of the
operation and business of the Stations as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used. No such tangible asset
is in need of replacement.
(i) Owned Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all real property that the Seller owns. With respect to each
such parcel of owned real property:
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(i) Seller has good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, (including but not limited to leases or other
agreements granting to any party the right of use or occupancy of and
options or rights of first refusal to purchase) except for recorded
easements, covenants, and other restrictions which do not impair the
current use, occupancy, or value, or the marketability of title, of the
property subject thereto and Seller's existing secured bank loan (which
shall be discharged at or prior to the Closing);
(ii) there are no (A) pending or, to the Knowledge of the Seller,
threatened condemnation proceedings relating to the property; (B) pending
or, to the Knowledge of the Seller, threatened litigation or
administrative actions relating to the property; or (C) other matters
affecting occupancy, or value thereof;
(iii) the legal description for the parcel contained in the deed
thereof describes such parcel fully and adequately, the buildings, towers,
antennae and improvements are located within the boundary lines of the
described parcels of land, are not in violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties or
buildings or improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications), and do not
encroach on any easement which may burden the land, the land does not
serve any adjoining property for any purpose inconsistent with the use of
the land, the property is not located within any flood plain or subject to
any similar type restriction for which any permits or licenses necessary
to the use thereof have not been obtained, and access to the property is
provided by paved public right-of-way with adequate curb cuts available;
(iv) all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with
the ownership or operation thereof and have been operated and maintained
in accordance with applicable laws, rules, and regulations;
(v) there are no parties (other than the Seller and its
Subsidiaries) in possession of the parcel of real property, other than
tenants under any leases disclosed in Section 2(j) of the Disclosure
Schedule who are in possession of space to which they are entitled;
(vi) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of
such facilities, including gas, electricity, water, telephone, sanitary
sewer, and storm sewer, all of which services are adequate in accordance
with all applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable, appurtenant
easements benefiting the parcel of real property; and
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(vii) each parcel of real property abuts on and has direct vehicular
access to a public road or access to a public road via a permanent,
irrevocable, appurtenant easement benefiting the parcel of real property.
(j) Real Property Leases. Section 2(j) of the Disclosure Schedule lists
and describes briefly all real property leased or subleased to the Seller.
Section 2(j) of the Disclosure Schedule also identifies the leased or subleased
properties for which title insurance policies are to be procured in accordance
with Section 4(i) below. The Seller has delivered to the Buyer correct and
complete copies of the leases and subleases listed in Section 2(j) of the
Disclosure Schedule (as amended to date). The Buyer acknowledges receipt of
copies of such leases and subleases from the Seller. With respect to each lease
and sublease listed in Section 2(j) of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing will
continue to be, legal, valid, binding, enforceable, and in full force and
effect;
(ii) no party to the lease or sublease is in breach or default (or
has repudiated any provision thereof), and no event has occurred which,
with notice or lapse of time, would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above are true and
correct with respect to the underlying lease;
(v) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold except for the leasehold mortgage to Seller's secured bank
lender (which will be released at or prior to the Closing);
(vi) to the Seller's Knowledge, all facilities leased or subleased
thereunder have received all approvals of governmental authorities
(including licenses, permits and zoning approvals) required in connection
with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(vii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities; and
(viii) Seller has no Knowledge that the owner of the facility leased
or subleased does not have good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for recorded easements, covenants, and other
restrictions impair the current use, occupancy, or value, or the
marketability of title, of the property subject thereto.
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(k) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder will be owned or available for use by the Buyer on identical
terms and conditions immediately subsequent to the Closing hereunder. The Seller
has taken all necessary or desirable action to protect each item of Intellectual
Property that it owns or uses.
(i) The Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Seller has never received any
charge, complaint, claim, or notice alleging any such interference,
infringement, misappropriation, or violation. To the Knowledge of the
Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Seller.
(ii) Section 2(k) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller
with respect to any of its Intellectual Property, identifies each pending
patent, trademark or copyright application for registration which the
Seller has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which the Seller
has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Seller has delivered to the
Buyer correct and complete copies of all such patents, trademarks or
copyright registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. With respect
to each item of Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in and
to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iii) Section 2(k) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the
Seller uses pursuant to license, sublicense, agreement, or permission,
including, but not limited to the call letters of the Stations. The Seller
has supplied the Buyer with correct and complete copies of all such
licenses,
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sublicenses, agreements, and permissions (as amended to date). With
respect to each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission covering
the item is, and following the Closing will continue to be on
identical terms, legal, valid, binding, enforceable, and in full
force and effect;
(B) no party (including the Seller) to the license,
sublicense, agreement, or permission is in breach or default (or has
repudiated any provision thereof), and no event has occurred which
with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and
correct with respect to the underlying license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation,
injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the underlying
item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(iv) The Seller has no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or other third
parties have developed which reasonably could be expected to supersede or
make obsolete any product or process of the Seller.
(l) Contracts. Section 2(l) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time) to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
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(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under which
it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, employment
agreement, or severance agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations; or
(viii) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement listed in Section 2(l) of the Disclosure Schedule (as
amended to date). The Buyer acknowledges receipt of copies of such arrangements
from the Seller. With respect to each written arrangement so listed: (A) the
written arrangement is legal, valid, binding, enforceable, and in full force and
effect; (B) through the stated termination date stated therein, the written
arrangement will continue to be legal, valid, binding, and enforceable and in
full force and effect on identical terms following the Closing; (C) no party is
in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination, modification,
or acceleration, under the written arrangement; and (D) no party has repudiated
any provision of the written arrangement. The Seller is not a party to any
verbal contract, agreement, or other arrangement which, if reduced to written
form, would be required to be listed in Section 2(l) of the Disclosure Schedule
under the terms of this Section 2(l).
(m) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates
of compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or
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useful in the operation of the Stations as they are now being operated
are: (A) in full force and effect; (B) unimpaired by any acts or omissions
of the Seller or the Seller's employees or agents; (C) free and clear of
any restrictions which might limit the full operation of the Stations; and
(D) detailed in Section 2(m) of the Disclosure Schedule. Section 2(m) of
the Disclosure Schedules sets forth, for each item identified thereon, the
date of last renewal, expiration date and any conditions or contingencies
related thereto. Except as set forth in Section 2(m) of the Disclosure
Schedules, no condition exists or event has occurred that permits, or
after notice or lapse of time, or both, would permit, the revocation or
termination of any such license, permit, consent, franchise, or
authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Stations as now conducted. Except as set forth in Section
2(m) of the Disclosure Schedules, the Seller is not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or
revoked.
(ii) The Stations are each in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Station's transmission facilities is restricted in
accordance with the policies of the FCC.
(iii) Except as set forth in Section 2(m) of the Disclosure
Schedules, to the Seller's Knowledge, the Seller is not the subject of any
FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rulemaking proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(m) of the Disclosures Schedules.
(iv) Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(n) Insurance. Section 2(n) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
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(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing Date except for possible changes
in the premiums; (C) neither the Seller nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. The Seller has been covered during the
past 3 years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during that three-year period. Section 2(n)
of the Disclosure Schedule describes any self-insurance arrangements affecting
any of the Seller and its Subsidiaries.
(o) Litigation. Section 2(o) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(o) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(p) Employees. Section 2(p) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
Seller. To the Knowledge of the Seller, no key employee or group of employees
has any plans to terminate employment with the Seller except as disclosed in
Schedule 2(p). The Seller is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. The Seller has
not committed any unfair labor practice. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of any of the Seller.
(q) Employee Benefits. Section 2(q) of the Disclosure Schedule lists all
Employee Benefit Plans and other executive compensation plans that the Seller
maintains or to which the Seller contributes for the benefit of any current or
former employee of the Seller. The Seller does not
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contribute to, has never contributed to, and has never been required to
contribute to any Multiemployer Plan and has no Liability under any
Multiemployer Plan. The Seller has not incurred, and has no reason to expect to
incur, any Liability to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdraw of Liability) or under the Code
with respect to any Employee Pension Benefit Plan that the Seller maintains or
ever has maintained or to which it contributes, ever has contributed, or ever
has been required to contribute. The Seller does not maintain and has not
maintained or contributed, or has been required to contribute to any Employee
Welfare Benefit Plan providing health, accident, or life insurance benefits to
former employees, their spouses, or their dependents (other than in accordance
with Code Sec. 4980B). Each Employee Benefit Plan (and each related trust or
insurance contract) complies in form and in operation in all respects with the
applicable requirements of ERISA and the Code.
(r) Environment, Health, and Safety.
(i) The Seller has complied with all laws (including rules and
regulations thereunder) of federal, state, and local governments (and all
agencies thereof) concerning the environment, public health and safety,
and employee health and safety, and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced against any of them alleging any failure to comply with
any such law or regulation.
(ii) The Seller has no Liability (and, to its Knowledge, there is no
Basis related to its past or present operations, and its predecessors for
any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Seller giving rise to
any Liability) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Federal Water Pollution Control Act of 1972, the
Clean Air Act of 1970, the Safe Drinking Water Act of 1974, the Toxic
Substances Control Act of 1976, the Refuse Act of 1899, or the Emergency
Planning and Community Right-to-Know Act of 1986 (each as amended), or any
other law (or rule or regulation thereunder) of any federal, state, local,
or foreign government (or agency thereof, concerning release or threatened
release of hazardous substances, public health and safety, or pollution or
protection of the environment, or for damage to any site, location, or
body of water (surface or subsurface) or for illness or personal injury.
(iii) The Seller has no Liability (and, to the Seller's Knowledge,
there is no Basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand against the
Seller giving rise to any Liability) under the Occupational Safety and
Health Act, as amended, or any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign government (or agency
thereof) concerning employee health and safety, or for any illness of or
personal injury to any employee.
(iv) The Seller has obtained and has been in compliance with all of
the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions,
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requirements, obligations, schedules, and timetables which are contained
in, all federal, state, local, and foreign laws (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety,
worker health and safety, and pollution or protection of the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes.
(v) All properties and equipment used in the business of the Seller
have been free of asbestos, PCB's, methylene chloride, trichloroethylene,
1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
(vi) No pollutant, contaminant, or chemical, industrial, hazardous,
or toxic material or waste ever has been buried, stored, spilled, leaked,
discharged, emitted, or released on any real property that the Seller owns
or that the Seller leases. The Buyer acknowledges receipt from the Seller
of the environmental report listed on Schedule 2(r).
(s) Legal Compliance.
(i) The Seller has complied with all laws (including rules and
regulations thereunder) of federal, state, and local governments (and all
agencies thereof, and no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice has been filed or
commenced against the Seller alleging any failure to comply with any such
law or regulation, including those relating to the employment of labor,
employee civil rights, and equal employment opportunities and relating to
antitrust matters.
(ii) The Seller has filed in a timely manner all reports, documents,
and other materials it was required to file (and the information contained
therein was correct and complete in all respects) under all applicable
laws (including rules and regulations thereunder). The Seller has
possession of all records and documents it was required to retain under
all applicable laws (including rules and regulations thereunder).
(t) Advertising Agreements. Section 2(t) of the Disclosure Schedule lists
all arrangements for the sale of air time or advertising on the Stations and the
amount to be paid to Seller therefor.
(u) Brokers' Fees. Except for fees due to Blackburn & Company, the Seller
has no Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(v) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
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3. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyer. The Buyer is a limited liability company
duly organized, validly existing, and in good standing under the laws of
Wisconsin.
(b) Authorization of Transaction. The Buyer has full power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Buyer is subject or any provision of its articles of
organization or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject. Other than with respect to the
transfer of FCC Licenses, the Buyer does not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 1 above).
(d) Buyer's Qualification. Upon its deposit of the Earnest Money Deposit
with the Escrow Agent, the Buyer will be legally, technically and financially
qualified to become a licensee of the FCC and to complete the transactions
contemplated by this Agreement, and know of no reason why the FCC should not
approve the Assignment Application.
(e) Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions
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contemplated by this Agreement (including satisfying the closing conditions set
forth in Section 5 below).
(b) Assignment Applications. Within seven (7) business days after the
Buyer's deposit of the Earnest Money Deposit with the Escrow Agent, the Seller
and the Buyer shall jointly file with the FCC an application for assignment of
the FCC Licenses, permits and authorizations pertaining to the Stations from the
Seller to the Buyer (the "Assignment Application"). The costs of the FCC filing
fees in connection with the Assignment Application shall be divided equally
between the Parties. Each party shall pay their own attorneys' fees. The Seller
and the Buyer shall thereafter prosecute the Assignment Application with all
reasonable diligence and otherwise use the commercially reasonable efforts to
obtain the grant of the Assignment Application as expeditiously as practicable
(but neither the Seller nor the Buyer shall have any obligation to satisfy
complainants or the FCC by taking any steps which would have material adverse
effect upon the Stations or upon any affiliated entity. If the FCC imposes any
condition on either party to the Assignment Application, such party shall be
required hereunder to comply with any condition that would have a material
adverse effect upon the Stations or any Affiliate. The Seller and the Buyer
shall jointly oppose any requests for reconsideration or judicial review of FCC
approval of the Assignment Application and shall jointly request from the FCC
any extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
(c) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its commercially reasonable efforts to obtain
any third party consents, that the Buyer reasonably may request in connection
with the matters pertaining to the Seller disclosed or required to be disclosed
in the Disclosure Schedule. Each of the Parties will take any additional action
that may be necessary, proper, or advisable in connection with any other notices
to, filings with, and authorizations, consents, and approvals of governments,
governmental agencies, and third parties that it may be required to give, make,
or obtain (including but not limited to any filings pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended).
(d) Operation of Business. Without the Buyer's written consent, the Seller
will not engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, the Seller will not engage in
any practice, take any action, embark on any course of inaction, or enter into
any transaction of the sort described in Section 2(f) above.
(e) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyer to meet with its employees
prior to the Closing Date. Upon the Seller's request, the Seller's President may
attend any meeting between the Buyer and any employee of the Stations. The Buyer
may, at its option and on its terms and conditions, extend offers of employment
to all of the Seller's employees effective on the Closing Date. The Seller will
not take any action to preclude or discourage any of the Seller's employees from
accepting any offer of employment extended by the Buyer. The Seller shall
reimburse the Buyer for severance and other obligations
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with respect to any employee of the Seller who becomes an employee of the Buyer
and whose employment with the Buyer terminates within sixty (60) days after the
Closing Date.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Stations for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Twelve Thousand Dollars ($12,000) worth of air time with respect to
any single Station. On the Closing Date, the Seller shall deliver to the Buyer a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
(g) Operating Statements. The Seller shall deliver to Buyer, for Buyer's
informational purposes only, monthly unaudited statements of operating revenues
and operating expenses of the Stations with ten (10) days after each such
statement is prepared by or for the Seller.
(h) Contracts. Seller will not without the prior written consent of Buyer
amend, change, or modify any of the contracts listed on Section 2(1) of the
Disclosure Schedule in any material respect. The Seller will not without prior
written consent of the Buyer enter into any new contracts respecting the
Stations or their properties, except (i) contracts for the sale of air time or
advertising on the Stations for cash, goods or services which comply with the
representations and warranties pertaining to such contracts set forth in Section
2(1) above; (ii) contracts entered into in the Ordinary Course of Business which
are cancelable on not more than thirty (30) days' notice without penalty or
premium; or (iii) contracts entered into in the Ordinary Course of Business each
of which does not involve more than One Thousand Dollars ($1,000) or all of
which do not involve more than Five Thousand Dollars ($5,000) in the aggregate.
(i) Operation of Stations. The Seller shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
(j) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Stations and with respect to collecting accounts receivable arising from
such extension of credit.
(k) Preservation of Business. Except for events caused by casualty and
Acts of God, the Seller will keep its business and properties substantially
intact, including its present operations, physical facilities, working
conditions, relationships with lessors, licensers, advertisers, suppliers,
customers, and employees, all of the confidential information and trade secrets
of the Stations, and the FCC Licenses. Without limiting the generality of the
foregoing, the Seller will use its best efforts to continue prosecuting its
pending FCC application to upgrade WEKL-FM.
(l) Full Access and Consultation. The Seller will permit representatives
of the Buyer to have full access at all reasonable times, and in a manner so as
not to interfere with the normal
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business operations of the Seller, to all premises, properties, books, records,
contracts, Tax records, and documents of or pertaining to the Seller. The Seller
will consult with the Buyer's management with a view to informing Buyer's
management as to the operations, management and business of the Stations.
(m) Notice of Developments. The Seller will give prompt written notice to
the Buyer of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller. Each Party will give prompt written notice to the other
of any material development affecting the ability of the Parties to consummate
the transactions contemplated by this Agreement. No disclosure by any Party
pursuant to this Section 4(m), however, shall be deemed to amend or supplement
the Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (and the Seller will not cause or
permit any of its Subsidiaries to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving any of the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Seller will notify
the Buyer immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(o) Title Insurance. The Buyer will obtain with respect to each parcel of
real estate that the Seller owns or leases, an owner's or leasehold owner's
policy (as appropriate) issued by a title insurer reasonably satisfactory to the
Seller, in an amount equal to the fair market value of such real property
(including all improvements located thereon), insuring title to such real
property in the Buyer as of the Closing subject only to the title exceptions
which do not impair the current use, occupancy or value or the marketability of
title of the property and are disclosed in Section 2(i) of the Disclosure
Schedule, together with endorsements for zoning, contingency, public access and
extended coverage as the Buyer reasonably requests. The Buyer will use
reasonable efforts to obtain commitments to issue such policies within
forty-five (45) days after the date of this Agreement and will promptly
thereafter provide a copy of such commitments to the Seller. The Buyer and the
Seller will each pay one-half (1/2) of the cost of these title insurance
policies.
(p) Surveys. With respect to each parcel of real property that the Seller
owns, leases, or subleases, and as to which a title insurance policy is to be
procured pursuant to Section 4(o) above, the Buyer will procure in preparation
for the Closing a current survey of the real property certified to the Buyer,
prepared by a licensed surveyor and conforming to current ALTA Minimum Detail
Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey shall not
disclose any survey defect or encroachment from or onto the real property which
has not been cured or insured over prior to the Closing. The Buyer will use
reasonable efforts to obtain the Surveys within forty-five (45) days after the
date of this Agreement and will promptly thereafter provide a copy of
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the Surveys to the Seller. The Seller and the Buyer will each pay one-half (1/2)
of the cost of the Surveys. The Seller will use its best efforts to obtain
necessary consents. In the event a lessor withholds its consent, the Buyer may
at its option terminate this Agreement pursuant to Section 9(a) hereof.
(q) Environmental Assessments. The Buyer will obtain with respect to each
parcel of real estate that Seller owns, leases or subleases and as to which a
title insurance policy is to be procured pursuant to Section 4(o) above, a
current Phase I environmental site assessment from an environmental consultant
or engineer reasonably satisfactory to the Seller which shall not disclose or
recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. The Buyer will use
reasonable efforts to obtain site assessment reports within forty-five (45) days
after the date of this Agreement and will promptly thereafter provide a copy of
site assessment reports to the Seller. The Seller and the Buyer will each pay
one-half (1/2) of the cost of these site assessments. The Seller will cause any
contamination or other condition identified in such assessments to be remediated
in accordance with state and federal laws, to the reasonable satisfaction of the
consultant or engineer that has assessed the site; provided that the Seller will
not be obligated to expend in excess of $100,000, in the aggregate, to so
remediate all sites (or, alternatively to relocate its operations to another
site acceptable to the Buyer or make other alternative arrangements acceptable
to the Buyer). In the event that the Seller would be required to expend in
excess of that amount to remediate conditions identified by the environmental
consultant (or provide other acceptable alternative arrangements), and is
unwilling to do so, then the Buyer may, at its option, either (i) agree to waive
the Seller's obligation to remediate to the extent it exceeds such amount, or
(ii) fund any remediation in excess of such amount, or (iii) terminate this
Agreement pursuant to Section 9(i) hereof. The Buyer and the Seller acknowledge
that the consent of the Seller's lessor(s) may be required to perform
environmental assessments or to remediate conditions identified in assessment
reports. The Seller will use its best efforts to obtain necessary consents. In
the event a lessor withholds its consent, the Buyer may at its option terminate
this Agreement pursuant to Section 9(a) hereof.
(r) Control of Stations. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Buyer and its employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
(s) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyer
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will repair or replace such Acquired Assets as soon
as possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement
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cannot be accomplished within sixty (60) days of the date of the Seller's notice
to the Buyer, and the Buyer reasonably determines that the Seller's failure to
repair or replace, alone or in the aggregate, would have a material adverse
effect on the operation of the Stations:
(a) the Buyer may elect to terminate this Agreement; or
(b) the Buyer may postpone the Closing Date until such time as
the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyer, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's notice
to Buyer, in which case either party may terminate this Agreement; or
(c) the Buyer may choose to accept the Acquired Asset in their
"then" condition, together with the Seller's assignment to Buyer all rights
under any insurance claims covering the loss, damage or destruction and payment
over to Buyer any proceeds under any such insurance policies, previously
received by the Seller with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(m),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(c) above, which the Buyer identifies by March 31,
1997 as being material (including but not limited to all studio and
transmitter site leases) and the Buyer shall have received all of the
title insurance commitments, and endorsements specified in Section 4(o)
above, all of the surveys specified in Section 4(p) above; and all the
Phase I environmental site assessments described in Section 4(q) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyer to own, operate, or control the
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Acquired Assets (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section 5(a)(i)-(iv)
is satisfied in all respects;
(vi) each of the Assignment Applications shall have been approved by
a Final Order of the FCC, and the Buyer shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Postclosing
Agreement;
(viii) the Buyer shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit E attached
hereto, addressed to the Buyer and dated as of the Closing Date or, in
lieu thereof, opinions from Seller's corporate, FCC and local counsel
which, in the aggregate, are the equivalent of Exhibit E;
(ix) all actions in consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 5(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
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(iv) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section
5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Assignment Applications shall have been approved by
a Final Order of the FCC and the Buyer shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement;
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby (including, without
limitation, full payment of the Purchase Price) and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Seller may waive any condition specified in this Section 5(b) if it executes
a writing so stating at or prior to the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Seller, each of the other Parties will cooperate with the
contesting or defending Party and its counsel in the contest or defense, make
available his or its personnel, and provide such testimony and access to its
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below).
(c) Adjustments. Operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyer. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance real and personal property taxes, prepared expenses, deposits, music
license fees, and rents and payments
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pertaining to the leases and contracts being assigned hereunder (inducing any
contracts for the sale of time for cash, trade or barter so assigned) shall be
prorated between the Seller and the Buyer as of the Closing Date in accordance
with the foregoing principle. Contractual arrangements that do not reflect an
equal rate of compensation to the station over the term of the Agreement shall
be equitably adjusted as of the Closing Date. The prorations and adjustments
hereunder shall be made and paid insofar as feasible on the Closing Date, with a
final settlement sixty (60) days after the Closing Date. In the event of any
disputes between the Parties as to such adjustments, the amounts not in dispute
shall nonetheless be paid at such time and such disputes shall be determined by
an accounting firm to be mutually agreed upon on or before the Closing Date and
the fees and expenses of such accounting firm shall be paid one-half (1/2) by
the Seller and one-half (1/2) by the Buyer.
(d) Collection of Accounts Receivable. At the Closing, the Seller will
turn over to the Buyer, for collection only, the accounts receivable of the
Stations owing to the Seller as of the close of business on the Closing Date. A
schedule of such accounts receivable will be delivered by the Seller to the
Buyer on the Closing Date or as soon thereafter as possible. The Buyer agrees to
use commercially reasonable efforts in the ordinary course of business (but
without responsibility to institute legal or collection proceedings) to collect
such accounts receivable during the 90-day period following the Closing Date,
and will remit all payments received on such accounts to Seller weekly during
the collection period. The Buyer shall provide the Seller with a monthly
accounting of all payments received on such accounts within fifteen (15)
business days after the end of each calendar month during the 90-day collection
period. In the event the Buyer receives money during the 90-day period following
the Closing Date from an advertiser who, after the Closing Date, is advertising
over any of the Stations, and that advertiser was included among the accounts
receivable as of the Closing Date, the Buyer shall apply said money to the
oldest outstanding balance due on the particular account, except in the case of
a "disputed" account receivable. For purposes of this Section 6(d), a "disputed"
account receivable means one which the account debtor refuses to pay because he
asserts that the money is not owed or the amount is incorrect. In the case of
such a disputed account, the Buyer shall immediately return the account to the
Seller prior to expiration of the 90-day period following the Closing Date. If
the Buyer returns a disputed account to the Seller, the Buyer shall have no
further responsibility for its collection and may accept payment from the
account debtor for advertising carried on any of the Stations after the Closing
Date. At the end of the 90-day period following the Closing Date, the Buyer will
turn back to the Seller all of the accounts receivable of the Station as of the
Closing Date owing to the Seller which have not yet been collected, and the
Buyer will thereafter have no further responsibility with respect to the
collection of such receivables. During the 90-day period following the Closing
Date, the Buyer shall afford the Seller reasonable access to the accounts
receivable "aging list."
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), 2(g) and 2(u)
hereof or relating to the Seller's title to the Acquired Assets) shall survive
the Closing (even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of the Closing) and continue
in full force and effect for a period of one (1) year thereafter, except that
any representation or warranty relating to Buyer's freedom from
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liability to pay a Liability of Seller shall continue in full force and effect
for the period of the applicable statute of limitations plus ninety (90) days.
The representations and warranties of the Seller contained in Sections 2(a),
2(b), 2(c) and 2(u) hereof or relating to the Seller's title to the Acquired
Assets and all of the Seller's covenants contained herein and all of the Buyer's
representations, warranties and covenants contained herein shall survive the
Closing (even if the damaged Party knew or had reason to know of any
misrepresentations or breach of warranty or covenant at the time of the Closing)
and continuing in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyer. The Seller
agrees to indemnify the Buyer from and after the Closing Date from and against
the entirety of any Adverse Consequences the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by:
(i) any breach of any of the Seller's representations, warranties,
and covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the Buyer makes a
written claim for indemnification within the applicable survival period);
(ii) any Liability of the Seller which is not an Assumed Liability;
or
(iii) any Liability of the Buyer arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any common
law doctrine of defacto merger or successor liability) which is not an Assumed
Liability.
(c) Indemnification Provisions for the Benefit of the Seller. The Buyer
agrees to indemnify the Seller from and after the Closing Date from and against
the entirety of any Adverse Consequences the Seller may suffer resulting from,
arising out of, relating to, in the nature of, or caused by (i) the breach of
any of the Buyer's representations, warranties, and covenants contained in this
Agreement (so long as the particular representation, warranty, or covenant
survives the Closing and the Seller makes a written claim for indemnification
within the applicable survival period) or (ii) any Assumed Liability.
(d) Matters Involving Third Parties. If, within the applicable survival
period, any third party shall notify any Party (the "Indemnified Party") with
respect to any matter which may give rise to a claim for indemnification against
any other Party (the "Indemnifying Party") under this Section 7, then the
Indemnified Party shall notify the Indemnifying Party thereof promptly;
provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party from any
liability or obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is damaged. In the event any Indemnifying Party
notifies the Indemnified Party within 15 days after the Indemnified Party has
given notice of the matter that the Indemnifying Party is assuming the defense
thereof, (i) the Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice reasonably satisfactory to the Indemnified
Party, (ii) the Indemnified Party may retain separate co-counsel at its sole
cost and expense (except that the Indemnifying Party will be responsible for the
fees and expenses of the separate co-counsel to the extent the Indemnified Party
concludes reasonably that the counsel the
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Indemnifying Party has selected has a conflict of interest), (iii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iv) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
Liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event the Indemnifying Party
does not notify the Indemnified Party within 15 days after the Indemnified Party
has given notice of the matter that the Indemnifying Party is assuming the
defense thereof, however, the Indemnified Party may defend against, or enter
into any settlement with respect to, the matter in any manner it reasonably may
deem appropriate.
(e) Limitation of Liability. Notwithstanding anything in this Agreement to
the contrary, after the Closing neither Party shall indemnify or otherwise be
liable to the other Party from and after the Closing Date except to the extent
that the Adverse Consequences suffered by the Indemnified Party, in the
aggregate from all indemnifiable events shall exceed Fifty Thousand Dollars
($50,000) and indemnification shall be made by the Indemnifying Party only to
the extent of such excess over Fifty Thousand Dollars ($50,000); provided
however that the foregoing limitation shall not be applicable to: (i) the
obligations of the Buyer to pay and discharge any Liability of the Seller to
third parties from and after the Closing Date assumed by the Buyer under the
terms of this Agreement; (ii) the obligation of the Seller to pay and discharge
any Liability to third parties not assumed by the Buyer under the terms of this
Agreement, or (iii) the Seller's obligation to deliver clear title to the
Acquired Assets.
(f) Specific Performance. Each of the Parties acknowledges and agrees that
the Buyer would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyer
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 10(p) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that notwithstanding the provision in Section
7(g) with respect to liquidated damages upon a breach of a covenant of this
Agreement prior to the Closing, money damages would not be an adequate remedy
for the Buyer for a breach of any provision of this Agreement.
(g) Liquidated Damages. The Buyer and the Seller acknowledge that in the
event that the Closing does not occur because of a default by either Party, the
Adverse Consequences as a result of such default may be difficult, if not
impossible, to ascertain. Accordingly, in lieu of indemnification pursuant to
Section 7(b) or 7(c) of this Agreement and as its sole and exclusive remedy, the
non-defaulting Party shall be entitled to receive from the defaulting Party the
sum of One Million Dollars ($1,000,000) as liquidated damage for such default
without the need for proof of damages, subject only to successfully proving in a
court of competent jurisdiction that the other Party has materially breached
this Agreement and that the Closing has not occurred if those issues
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are disputed or demanding payment, if those issues are not disputed; provided
however, that the Buyer shall retain the option to receive, pursuant to Section
7(f) and in lieu of receiving the liquidated damages provided in this Section
7(g), the remedy of specific performance with respect to a breach of this
Agreement prior to the Closing. The Buyer and the Seller agree to pay said sum
of liquidated damages within ten (10) days of the date that the non-defaulting
party obtains such a judgment.
(h) Other Indemnification Provisions. The indemnification provisions of
Sections 7(a), 7(b), 7(c) and 7(d) are in addition to, and not in derogation of,
any statutory or common law remedy any Party may have after the Closing for
breach of representation, warranty, or covenant. The remedies provided in
Sections 7(f) and 7(g) shall be the exclusive remedies of the Parties prior to
the Closing for any breach or representation, warranty or covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets that are used or useful in
the operation of the Stations, including but not limited to all of its (a) real
property, leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as computers, electrical devices, monitoring equipment, test equipment,
switching, terminal and studio equipment, transmitters, transformers, receivers,
broadcast facilities, inventories of compact disks, records, tapes and other
supplies, vehicles, and all assignable warranties with respect thereto; (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions; (d) rights under orders and agreements
(including those barter agreements identified on the Disclosure Schedules) now
existing or entered into in the Ordinary Course of Business for the sale of
advertising time on the Stations; (e) contracts, indentures, Security Interests,
guaranties, other similar arrangements, and rights thereunder; (f) call letters
of the Stations, jingles, logos, slogans, and business goodwill of the Stations;
(g) claims, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of set off, and rights of recoupment relating to the
Acquired Assets (including but not limited to rights under product warranties
with respect to tangible personal property and rights under policies of
insurance for pre-Closing Date occurrences to the extent of any Adverse
Consequences suffered by the Buyer); (h) Licenses and similar rights obtained
from governments and governmental agencies; and (i) FCC logs and records and all
other books, records, ledgers, logs, files, documents, correspondence, lists,
plats, architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
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"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means obligations of the Seller under the licenses,
sublicenses, leases, subleases, contracts, and other arrangements referred to in
the definition of Acquired Assets (other than any Retained Assets) either: (i)
to furnish services, and other non-Cash benefits to another party after the
Closing; or (ii) to pay for goods, services, and other non-Cash benefits that
another party will furnish to it after the Closing. The Assumed Liabilities
shall not include any Retained Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or fringe benefit plan
or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Blackburn & Company.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and copyright registrations and applications for copyright
registration, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
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"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post-Closing Agreement With Seller Stockholders" means the Post-Closing
Agreement with Seller Stockholders entered into concurrently herewith and
attached hereto as Exhibit A.
"Post-Closing Escrow" has the meaning set forth in Section 1(c) above.
"Process Agent" has the meaning set forth in Section 8(p) below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyer on the
other hand entered into on or after the date of this Agreement); (iii) accounts,
notes and other receivables; (iv) Cash, money market funds and other cash
equivalents; (v) membership in Secession Country Club; (vi) the leased vehicle
primarily used by Jeffrey Wilks; and (vii) those contracts and agreements
identified in Section 2(1) of the Disclosure Schedule as a Retained Asset.
"Retained Liabilities" means any other obligations or liabilities of
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
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connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby; (iv) any Liability under
the agreements with Joseph A. Renke and Camellia City Communications being
assigned to the Buyer set forth on Section 2(1) of the Disclosure Schedule; and
(v) any Liability or obligation of the Seller under this Agreement (or under any
side agreement between the Seller on the one hand and the Buyer on the other
hand entered into on or after the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WEKL-FM, WRXR-FM, WGUS-AM and WUUS-FM licensed by the FCC to Augusta, Georgia
and Aiken, South Carolina.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 4(j) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
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(i) the Buyer and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to the Seller at any time prior to the Closing in the event the Seller is
in breach, and the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing in the event the
Buyer is in breach, of any material representation, warranty, or covenant
contained in this Agreement in any material respect, in each case if such
breach remains uncured for ten (10) days after notice of breach is
received from the other party or if the breach cannot be completely cured
within that 10 day period, the party in breach has not taken prompt
appropriate steps to cure the breach and/or is not appropriately
continuing its efforts to completely cure the breach;
(iii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyer
itself breaching any representation, warranty, or covenant contained in
this Agreement);
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant contained in
this Agreement);
(v) the Buyer or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order;
(vi) the Buyer may terminate this Agreement if either (A) any lessor
of real property to the Seller withholds any consent necessary to conduct
either surveys or environmental site assessments or to remediate
conditions noted in any environmental site assessment report or (B) the
cost to remediate such conditions (or provide alternative arrangements
acceptable to the Buyer) exceeds $100,000 and the Seller is not willing to
expend over $100,000; or,
(vii) the Seller may terminate this Agreement if the Buyer has not
given the notice and made the deposit with the Escrow Agent as and when
required by Section 1(c) above.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
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10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in the Post-Closing Agreement with Seller Stockholders.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that the Buyer may assign all of its right, title
and interest in, to and under this Agreement to one or more affiliated entities,
who shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Seller the Purchase Price therefor. No assignment of this Agreement by
Buyer to one of its affiliates shall relieve Buyer of its responsibility to
perform its obligations under this Agreement including without limitation the
obligation to assume the Assumed Liabilities and to pay the Purchase Price to
the Seller.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller before the closing:
Wilks Broadcast Acquisitions, Inc.
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<PAGE>
500 Carolina Springs Road
North Augusta, South Carolina 29841
Attn: Jeffrey Wilks
If to the Seller after the closing:
Wilks Broadcast Acquisitions, Inc.
c/o Mr. Jeffrey Wilks
62 Conifer Circle
Augusta, GA 30909
Copies to:
Rogin, Nassau, Caplan, Lassman & Hirtle, LLC
City Place I, 22nd Floor
Hartford, CT 06103-3460
Attn: Attorney Jerome E. Caplan
Mr. Donald L. Wilks
6811 South East Harbor Circle
Stuart, FL 34996
(Neither of which shall constitute notice.)
If to the Buyer: Cumulus Media, LLC
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrence Leahy
Copy to: Cumulus Media, LLC
c/o Century Broadcasting
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
(Neither of which shall constitute notice.)
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other
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<PAGE>
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Georgia.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyer and the Seller, will each bear own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, other than as set forth in
Section 4(b) with regard to the Assignment Applications and in Sections 4(o),
4(p) and 4(q) with regard to certain real estate related expenses. The Seller
will pay all income taxes, transfer or sales taxes and other recording or
similar fees necessary to vest title to each of the Acquired Assets in the
Buyer.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached
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<PAGE>
shall not detract from or mitigate the fact that the Party is in breach of the
first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Augusta, Georgia in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Each Party appoints CT Corporation (the
"Process Agent") as its agent to receive on its behalf service of copies of the
summons and complaint and any other process that might be served in the action
or proceeding. Any Party may make service on the other Party by sending or
delivering a copy of the process (i) to the Party to be served at the address
and in the manner provided for the giving of notices in Section 10(h) above or
(ii) to the Party to be served in care of the Process Agent at the address and
in the manner provided for the giving of notices in Section 10(h) above. Nothing
in this Section 10(p), however, shall affect the right of any Party to serve
legal process in any other manner permitted by law. Each Party agrees that a
final judgment in any action or proceeding so brought shall be conclusive and
may be enforced by suit on the judgment or in any other manner provided by law.
(p) Bulk Transfer Laws. The Seller has, or will as of the Closing Date,
comply with the provisions of any bulk transfer laws of Georgia or any other
jurisdiction applicable to the transactions contemplated by this Agreement.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS MEDIA, LLC
By:
-------------------------------------
Richard Weening, Manager
WILKS BROADCASTING ACQUISITIONS, INC.
By:
-------------------------------------
Jeffrey Wilks, President
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<PAGE>
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
This Amendment No. 1 to Asset Purchase Agreement ("Amendment") is
entered into as of the 17th day of April, 1997 by and between Cumulus Media,
L.L.C., (the "Buyer") and Wilks Broadcasting Acquisition, Inc. (the "Seller").
The Buyer and the Seller are referred to collectively herein as the "Parties."
WITNESSETH:
WHEREAS, the Parties entered into an Asset Purchase Agreement dated
as of March 4, 1997 (the "Asset Agreement"); and
WHEREAS, the Parties acknowledge that upon execution of the Asset
Agreement, the Buyer did deposit with the Seller the amount of Twenty-five
Thousand Dollars ($25,000).
WHEREAS, the Parties wish to amend certain terms and conditions of
the Asset Agreement pursuant to the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the above premises and the
mutual promises herein made, the sufficiency of which is hereby acknowledged,
the Parties agree as follows:
1. Purchase Price. Section 1(c) of the Asset Agreement is hereby deleted
in its entirety and replaced by the following:
(c) Purchase Price. The Buyer agrees to pay to the Seller at the
Closing Fifteen Million Five Hundred Thousand Dollars ($15,500,000) (the
"Purchase Price") payable as follows:
(i) on or before April 17, 1997, the Buyer will deposit with
the Seller the amount of One Hundred Thousand Dollars ($100,000);
(ii) on or before April 30, 1997, the Buyer will deposit with
the Escrow Agent the amount of Nine Hundred Thousand
<PAGE>
Dollars ($900,000) (together with the amount specified in Clause (i)
above, the "Earnest Money Deposit") by delivery of cash payable by
wire transfer or delivery of other immediately available funds;
(iii) on the Closing Date, the Buyer shall pay to the Seller
the amount of Fifteen Million Four Hundred Fifty Thousand Dollars
($15,450,000), less the Earnest Money Deposit (and any interest
earned thereon); and
(iv) on the Closing Date, the Buyer shall pay to the Seller,
on behalf of all parties to the Postclosing Agreement, the amount of
Fifty Thousand Dollars ($50,000).
The Earnest Money Deposit referenced in this Section 1(c) shall be placed
in escrow with the Escrow Agent pursuant to an escrow agreement to be
executed by the Parties on or prior to the Buyer's deposit of the Earnest
Money Deposit in the form attached hereto as Exhibit A (the "Earnest Money
Escrow Agreement"), and shall be used by the Escrow Agent to purchase
securities issued by the United States Department of Treasury. Immediately
after the Buyer deposits the amount specified in Clause (ii), the Seller
will deposit the amount specified in Clause (i) with the Escrow Agent. In
the event that the Buyer fails to deposit the amount in Clause (ii) with
the Escrow Agent on or before April 30, 1997, the Seller may terminate
this Agreement pursuant to Section 9(a) and then would retain the amount
specified in Clause (i) and this Agreement would terminate without further
liability of either Party to the other Party. Interest earned on the
Earnest Money Deposit shall accrue to the benefit of the Buyer, and,
together with the principal amount of the Earnest Money Deposit, shall be
payable to the Seller and credited against the Purchase Price on the
Closing Date. If this Agreement is terminated without Closing of the
transaction contemplated herein (except if terminated by the Seller in the
event the Buyer fails to make the deposit specified in Clause (ii), the
Earnest Money and all accrued interest shall be paid to the Buyer or the
Seller as provided in the Earnest Money Escrow Agreement.
2. Conditions to Obligation of the Buyer. Section 5(a)(iii) of the Asset
Agreement is hereby deleted in its entirety and replaced by the following:
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(c) above, which the Buyer identifies by April 30,
1997 as being material (including but not limited to all studio and
transmitter site leases) and the Buyer shall have received all of the
title insurance commitments, and endorsements specified in Section 4(o)
above, all of the surveys specified in Section 4(p) above; and all the
Phase I environmental site assessments described in Section 4(q) above;
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<PAGE>
3. Affirmation. The remaining terms and conditions of the Asset Agreement
are hereby affirmed by the Parties without further amendment.
4. Counterparts. This Amendment 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 instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first written above.
CUMULUS MEDIA, L.L.C.
By:
---------------------------
(printed)
---------------------------
Its:
---------------------------
WILKS BROADCASTING ACQUISITION, INC.
By:
---------------------------
(printed)
---------------------------
Its:
---------------------------
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<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
M & M PARTNERS
AND
CUMULUS BROADCASTING, INC.
AND
CUMULUS LICENSING CORP.
August 15, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction..................................................1
(a) Purchase and Sale of Assets.................................1
(b) Assumption of Liabilities...................................1
(c) Purchase Price..............................................1
(d) The Closing.................................................2
(e) Deliveries at the Closing...................................2
(f) Allocation..................................................2
2. Representations and Warranties of the Seller and the
Seller Partners ................................................3
(a) Organization of the Seller..................................3
(b) Authorization of Transaction................................3
(c) Noncontravention............................................3
(d) Title to Acquired Assets....................................3
(e) Financial Statements........................................3
(f) Events Subsequent to .......................................4
(g) Tax Matters.................................................6
(h) Tangible Assets.............................................6
(i) Owned Real Property.........................................6
(j) Real Property Leases........................................6
(k) Intellectual Property.......................................7
(l) Contracts...................................................9
(m) Commission Licenses and Compliance with Commission
Requirements..............................................9
(n) Insurance..................................................10
(o) Litigation.................................................11
(p) Employees..................................................11
(q) Employee Benefits..........................................12
(r) Environment, Health, and Safety............................12
(s) Legal Compliance...........................................13
(t) Brokers' Fees..............................................13
(u) Advertising Contracts......................................13
(v) Disclosure.................................................14
3. Representations and Warranties of the Buyers......................14
(a) Organization of the Buyers.................................14
(b) Authorization of Transaction...............................14
(c) Noncontravention...........................................14
(d) Brokers' Fees..............................................15
4. Pre-Closing Covenants.............................................15
(a) General....................................................15
(b) Assignment Applications....................................15
(c) Transfer Applications......................................15
<PAGE>
(d) Employment Offers..........................................15
(e) Notices and Consents.......................................16
(f) Operation of Business......................................16
(g) Advertising Obligations....................................16
(h) Operating Statements.......................................16
(i) Contracts..................................................16
(j) Operation of Stations......................................17
(k) Credit and Receivables.....................................17
(l) Preservation of Business...................................17
(m) Full Access................................................17
(n) Notice of Developments.....................................17
(o) Exclusivity................................................17
(p) Title Insurance............................................18
(q) Surveys....................................................18
(r) Environmental Assessments..................................18
(s) Control of Stations........................................18
(t) Risk of Loss...............................................18
(u) Guaranty Obligation of Seller..............................19
5. Conditions to Obligation to Close.................................19
(a) Conditions to Obligation of the Buyers.....................19
(b) Conditions to Obligation of the Seller.....................21
6. Post-Closing Covenants............................................21
(a) General....................................................21
(b) Litigation Support.........................................22
(c) Adjustments................................................22
(d) Collection of Accounts Receivable..........................22
(e) Severance Obligations......................................23
7. Remedies for Breaches of this Agreement...........................24
(a) Survival...................................................24
(b) Indemnification Provisions for the Benefit of the Buyers...24
(c) Indemnification Provisions for the Benefit of the Seller...25
(d) Specific Performance.......................................25
(e) Default Fee................................................25
(f) Matters Involving Third Parties............................25
(g) Other Indemnification Provisions...........................26
8. Definitions.......................................................26
9. Termination.......................................................31
(a) Termination of Agreement...................................31
(b) Effect of Termination......................................32
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<PAGE>
10. Miscellaneous....................................................32
(a) Survival...................................................32
(b) Press Releases and Announcements...........................32
(c) No Third Party Beneficiaries...............................32
(d) Entire Agreement...........................................32
(e) Succession and Assignment..................................32
(f) Counterparts...............................................33
(g) Headings...................................................33
(h) Notices....................................................33
(i) Governing Law..............................................34
(j) Amendments and Waivers.....................................34
(k) Severability...............................................34
(l) Expenses...................................................34
(m) Construction...............................................34
(n) Incorporation of Exhibits and Schedules....................35
(o) Submission to Jurisdiction.................................35
(p) Bulk Transfer Laws.........................................35
-iii-
<PAGE>
EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Forms of Assignments
Exhibit C--Form of Assumption
Exhibit D--Allocation Schedule
Exhibit E--Form of Opinion of Counsel to the Seller
Exhibit F--Form of Lease Agreements
Exhibit G--Form of Option Agreement
Exhibit H--Form of Noncompete Agreement
Exhibit I--Assignment of Purchase Rights
SCHEDULES
Description of Schedule Section
----------------------- -------
Financial Statements 2(e)
Events Subsequent to January 1, 1997 2(f)
Tangible Assets 2(h)
Owned Real Property 2(i)
Real Property Leases 2(j)
Intellectual Property 2(k)
Contracts 2(l)
Commission Licenses and Compliance with Commission Requirements 2(m)
Insurance 2(n)
Litigation 2(o)
Employees 2(p)
Employee Benefits 2(q)
Advertising Contracts 2(u)
-iv-
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of August 15, 1997, by and
between M & M Partners, a Georgia partnership (the "Seller"); James Thomas
Milligan, an individual currently residing in _______, Florida, and Martha
Blackmon Milligan, an individual currently residing in _______, Florida; Cumulus
Broadcasting, Inc., a Nevada corporation (the "Operating Company"); and Cumulus
Licensing Corp., a Nevada corporation (the "Licensing Company"). James Thomas
Milligan and Martha Blackmon Milligan are collectively referred to herein as the
"Seller Partners." The Operating Company and the Licensing Company are
collective referred to herein as the "Buyers." The Buyers, the Seller Partners
and the Seller are collectively referred to herein as the "Parties." Capitalized
terms used in this Agreement are defined in Section 8 hereof.
This Agreement contemplates a transaction in which the Buyers will
purchase substantially all of the assets other than any fee interest in real
property (and assume certain of the liabilities) of the Seller that are used or
useful in the operation of radio stations WVRK-FM and WMLF-AM, each licensed to
operate in Columbus, Georgia, WGSY-FM, licensed to operate in Phenix City,
Alabama, and WPNX-AM, licensed to operate in both Columbus, Georgia and Phenix
City, Alabama in return for Cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyers agree to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyers, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyers agree to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyers will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller Eleven Million
Seven Hundred Fifty Thousand and no/100 Dollars ($11,750,000.00) (the "Purchase
Price") payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Six Hundred Thirty-seven Thousand Five Hundred
and no/100 Dollars ($637,500.00) (the "Earnest Money Deposit") by delivery
of Cash payable by wire transfer or delivery of other immediately
available funds; and
<PAGE>
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Eleven Million One Hundred Twelve Thousand Five Hundred and
00/100 Dollars ($11,112,500.00) by delivery of Cash payable by wire
transfer or delivery of other immediately available funds.
The Earnest Money Deposit referenced in this Section 1(c) shall be placed
in escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), which
requires that such Earnest Money Deposit shall be deposited by the Escrow Agent
with a federally insured financial institution in an interest bearing account.
Interest earned on the Earnest Money Deposit shall accrue to the benefit of the
Buyers, and, together with the principal amount of the Earnest Money Deposit,
shall be payable to the Seller and credited against the Purchase Price on the
Closing Date. If this Agreement is terminated without Closing of the transaction
contemplated herein, the Earnest Money and all accrued interest shall be paid to
the Buyers or the Seller as provided in the Earnest Money Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Stations in
Columbus, Georgia, commencing at 9:00 a.m. local time on the date set by the
Buyers not earlier than the fifth business day or later than the tenth business
day after the FCC approval of the Assignment Application becomes a Final Order,
by which date all other conditions to the obligations of the Parties to
consummate the transactions contemplated hereby will have been satisfied or
waived or such other date as the Parties may mutually determine (the "Closing
Date"); provided, however, that the Closing Date shall be no earlier than
January 6, 1998 and no later than two hundred seventy (270) days from the date
of this Agreement.
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in Section 5(a) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including Intellectual Property transfer documents) in
the form attached hereto as Exhibit B and (B) such other instruments of sale,
transfer, conveyance, and assignment as the Buyers and Buyers' counsel
reasonably may request; (iv) the Buyers will execute, acknowledge (if
appropriate), and deliver to the Seller (A) an assumption in the form attached
hereto as Exhibit C and (B) such other instruments of assumption as the Seller
and its counsel reasonably may request; and (v) the Buyers will deliver to the
Seller the consideration specified in Section 1(c) above.
(f) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with an allocation schedule
to be attached hereto as Exhibit D.
2. Representations and Warranties of the Seller and the Seller Partners.
The Seller and each of the Seller Partners jointly and severally represent and
warrant to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
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<PAGE>
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Organization of the Seller. The Seller is a partnership duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of Georgia. The Seller does not have any Subsidiaries.
(b) Authorization of Transaction. The Seller has full power and authority
(including full partnership power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the partners of the Seller have duly authorized the
execution, delivery, and performance of this Agreement by the Seller. This
Agreement constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Seller or any Seller Partner is subject or any provision
of the charter or partnership agreement of the Seller; or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest, or other arrangement to which the
Seller or any Seller Partner is a party or by which any of them is bound or to
which any of their respective assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to the
transfer of the FCC Licenses, neither the Seller nor any Seller Partner needs to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Seller has good and marketable title to all
of the Acquired Assets, free and clear of any Security Interest or restriction
on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedules are the following financial statements (collectively the "Financial
Statements"): (i) unaudited statements of income and cash flow for the fiscal
years ended December 31, 1993, December 31, 1994, December 31, 1995 and December
31, 1996, for the Seller; and (ii) unaudited statements of income for each month
during 1995 and 1996 and the months ended January 31 and February 28, March 31,
April 30, and May 31, 1997 for the Seller (the "Most Recent Financial
Statements"). The Financial Statements have been prepared on a consistent basis
throughout the periods covered thereby, are correct and complete, fairly present
the financial condition and results of operations of the Seller at
-3-
<PAGE>
and for the periods indicated, and are consistent with the books and records of
the Seller (which books and records are correct and complete). Without limiting
the generality of the foregoing, all material revenues and expenses of the
Seller and the Stations (A) are properly reflected in the Financial Statements,
(B) have arisen in the Ordinary Course of Business, (C) are valid and subject to
no counterclaims, and (D) will be or have been collected or paid at their
recorded amounts subject only to the reserve for bad debts set forth on the face
of the Most Recent Financial Statements.
(f) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(f) of the Disclosure Schedules, there has not been any
adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the Seller with
respect to the operation of the Stations. Without limiting the generality of the
foregoing and with respect to the operation of the Stations since that date:
(i) the Seller has not sold, leased, transferred, or assigned any of
its material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Seller has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts, leases, subleases,
licenses, and sublicenses) outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or cancelled
any contract, lease, sublease, license, or sublicense (or series of
related contracts, leases, subleases, licenses, and sublicenses) involving
more than $5,000 to which the Seller is a party or by which it is bound;
(iv) no Security Interest has been imposed upon any of its assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions) outside
the Ordinary Course of Business;
(vii) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations) outside the
Ordinary Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other Liabilities;
(ix) the Seller has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
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(x) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property or any action
adversely affecting the FCC Licenses or the Stations;
(xii) the Seller 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 giving rise to any claim or right on its
part against the person or on the part of the person against it;
(xiii) the Seller has not entered into any employment contract,
consulting contract or severance agreement or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement;
(xiv) the Seller has not granted any increase outside the Ordinary
Course of Business in the base compensation of any of its directors,
officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other
plan, contract, or commitment for any of its directors, officers, and
employees, or modified or terminated any existing such plan, contract, or
commitment;
(xvi) the Seller has not made any other change in employment terms
for any of its partners, and management employees;
(xvii) the Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xviii) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Seller;
(xix) the Seller has not altered its credit and collection policies
or its accounting policies;
(xx) the Seller has not materially altered the programming, format
or call letters of the Stations, or its promotional and marketing
activities;
(xxi) the Seller has not applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to preserve the
FCC Licenses and has operated the Stations in compliance therewith and
with all FCC rules and regulations; and
(xxii) the Seller has not committed to any of the foregoing.
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(g) Tax Matters. The Seller has filed and will file all Tax Returns that
it was required to file and may be required to file. All such Tax Returns that
were filed were correct and complete in all respects, and all such Tax Returns
that will be filed will be correct and complete in all respects. All Taxes owed
by the Seller (whether or not shown on any Tax Return) have been paid. The
Seller has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party. The Sellers have not waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency. The Seller is not a party to a
pending Tax audit and is aware of no threatened Tax audit. No claim has ever
been made by an authority in a jurisdiction where the Seller does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the assets of the Seller that arose in
connection with any failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Stations.
The Seller owns or leases all tangible assets necessary for the conduct of the
operation and business of the Stations as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear) and is
suitable for the purpose for which it is presently used. No such tangible asset
is in need of replacement.
(i) Owned Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly the real property owned by Seller which is to be leased to the
Buyers pursuant to the Lease Agreements or may be sold by the Seller to the
Buyers pursuant to the Option Agreement.
(j) Real Property Leases. Section 2(j) of the Disclosure Schedule lists
and describes briefly all real property leased or subleased to the Sellers. The
Sellers have delivered to the Buyers correct and complete copies of the leases
and subleases listed in Section 2(j) of the Disclosure Schedule (as amended to
date). With respect to each lease and sublease listed in Section 2(j) of the
Disclosure Schedule:
(i) the lease or sublease is and, following the Closing will
continue to be, legal, valid, binding, enforceable, and in full force and
effect;
(ii) to the Seller's Knowledge, no party to the lease or sublease is
in breach or default (or has repudiated any provision thereof), 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;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
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(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above are true and
correct with respect to the underlying lease;
(v) the Sellers have not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vi) to the Seller's Knowledge, all facilities leased or subleased
thereunder have received all approvals of governmental authorities
(including licenses, permits and zoning approvals) required in connection
with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(vii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities; and
(viii) to the Seller's Knowledge the owner of the facility leased or
subleased has good and marketable title to the parcel of real property,
free and clear of any easement, covenant, or other restriction, except for
recorded easements, covenants, and other restrictions that do not impair
the current use, occupancy, or value, or the marketability of title, of
the property subject thereto.
(k) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder will be owned or available for use by the Buyers on identical
terms and conditions immediately subsequent to the Closing hereunder. The Seller
has taken all necessary or desirable action to protect each item of Intellectual
Property that it owns or uses.
(i) The Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Seller has never received any
charge, complaint, claim, or notice alleging any such interference,
infringement, misappropriation, or violation. To the Knowledge of the
Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Seller.
(ii) Section 2(k) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller
with respect to any of its Intellectual Property, identifies each pending
patent, trademark or copyright application for registration which the
Seller has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which the Seller
has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Seller has delivered to the
Buyers correct and complete copies of all such patents, trademarks or
copyright registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyers
correct and complete copies of all other written
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documentation evidencing ownership and prosecution (if applicable) of each
such item. With respect to each item of Intellectual Property that the
Seller owns:
(A) the Seller possesses all right, title, and interest in and
to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iii) Section 2(k) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the
Seller uses pursuant to license, sublicense, agreement, or permission
including, but not limited to the call letters of the Stations. The Seller
has supplied the Buyers with correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date).
With respect to each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission covering
the item is, and following the Closing will continue to be on
identical terms, legal, valid, binding, enforceable, and in full
force and effect;
(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated any provision
thereof), and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and
correct with respect to the underlying license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation,
injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property;
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(F) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the underlying
item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(iv) The Seller has no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or other third
parties have developed which reasonably could be expected to supersede or
make obsolete any product or process of the Seller.
(l) Contracts. Other than Advertising Contracts, Section 2(l) of the
Disclosure Schedule lists the contracts, agreements, and other written
arrangements to which the Seller is a party and either involving payment in
excess of One Thousand Dollars ($1,000) per year or not entered into in the
Ordinary Course of Business. The Seller has delivered to the Buyers a correct
and complete copy of each written arrangement listed in Section 2(l) of the
Disclosure Schedule (as amended to date). With respect to each written
arrangement so listed:
(i) the written arrangement is legal, valid, binding, enforceable,
and in full force and effect;
(ii) the written arrangement will continue to be legal, valid,
binding, and enforceable and in full force and effect on identical terms
following the Closing;
(iii) no party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration, under the written
arrangement; and
(iv) no party has repudiated any provision of the written
arrangement.
The written arrangement listed in Section 2(l) of the Disclosure Schedule are
all of the written arrangements necessary for the conduct of the operation and
business of the Stations as presently conducted and proposed to be conducted and
are included within the definition of Acquired Assets. The Seller is not a party
to any verbal contract, agreement, or other arrangement which, if reduced to
written form, would be required to be listed in Section 2(l) of the Disclosure
Schedule under the terms of this Section 2(l).
(m) Commission Licenses and Compliance with Commission Requirements.
(i) Except as set forth in Section 2(m) of the Disclosure Schedules,
all licenses, permits, authorizations, franchises, certificates of
compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or useful in the operation of the
Stations as they are now being operated (A) are in full force and effect,
(B) are
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unimpaired by any acts or omissions of the Seller or the Seller's
employees or agents, (C) are free and clear of any restrictions which
might limit the full operation of the Stations, and (D) are detailed in
Section 2(m) of the Disclosure Schedules. With respect to the licenses,
permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(m) of the
Disclosure Schedules also sets forth, without limitation, the date of the
last renewal, the expiration date thereof, and any conditions or
contingencies related thereto. Except as set forth in Section 2(m) of the
Disclosure Schedules, no condition exists or event has occurred that
permits, or after notice or lapse of time, or both, would permit, the
revocation or termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Stations as now conducted. Except as set forth in Section
2(m) of the Disclosure Schedules, the Seller is not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or
revoked.
(ii) The Stations are each in compliance with the FCC's policy as in
effect on the date hereof on exposure to radio frequency radiation. No
renewal of any FCC License would constitute a major environmental action
under the FCC's rules or policies. Access to the Station's transmission
facilities is restricted in accordance with the policies of the FCC.
(iii) Except as set forth in Section 2(m) of the Disclosure
Schedules, to the best of the Seller's Knowledge, the Seller is not the
subject of any FCC or other governmental investigation or any notice of
violation or order, or any material complaint, objection, petition to
deny, or opposition issued by or filed with the FCC or any other
governmental authority in connection with the operation of or
authorization for the Stations, and there are no proceedings (other than
rulemaking proceedings of general applicability) before the FCC or any
other governmental authority that could adversely affect any of the FCC
Licenses or the authorizations listed in Section 2(m) of the Disclosures
Schedules.
(iv) Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(n) Insurance. Section 2(n) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
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(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) neither the Seller
nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination, modification, or acceleration, under the
policy; and (C) no party to the policy has repudiated any provision thereof. The
Seller has been covered during the past three (3) years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during that three-year period. Section 2(n) of the Disclosure Schedule describes
any self-insurance arrangements affecting the Seller.
(o) Litigation. Section 2(o) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgement,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(o) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(p) Employees. Section 2(p) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
Seller. To the Knowledge of the Seller, no key employee or group of employees
has any plans to terminate employment with the Seller. The Seller is not a party
to or bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Seller has not committed any unfair labor practice. The
Seller has no Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of the
Seller.
(q) Employee Benefits. Section 2(q) of the Disclosure Schedule lists all
Employee Benefit Plans and other executive compensation plans that the Seller
maintains or to which the Seller contributes for the benefit of any current or
former employee of the Seller. Each Employee Benefit Plan (and each related
trust or insurance contract) complies in form and in operation in all respects
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with the applicable requirements of ERISA and the Code. The Seller does not
contribute to, ever has contributed to, or ever has been required to contribute
to any Multiemployer Plan. The Seller has not incurred and has no reason to
expect that it will incur any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
liability) or under the Code with respect to any Employee Pension Benefit Plan
that the Seller maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to contribute. The Seller does
not maintain and has not maintained, contributed or been required to contribute
to any Employee Welfare Benefit Plan providing health, accident, or life
insurance benefits to former employees, their spouses, or their dependents
(other than in accordance with Code Sec. 4980B).
(r) Environment, Health, and Safety.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof) concerning the environment, public
health and safety, and employee health and safety. No charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand, or notice
has been filed or commenced against the Seller alleging any failure to
comply with any such law or regulation.
(ii) The Seller has no Liability (and there is no Basis related to
the past or present operations, and its respective predecessors for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Seller giving rise to any
Liability) under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Resource Conservation and Recovery Act of
1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control
Act of 1976, the Refuse Act of 1899, or the Emergency Planning and
Community Right-to-Know Act of 1986 (each as amended), or any other law
(or rule or regulation thereunder) of any federal, state, local, or
foreign government (or agency thereof), concerning release or threatened
release of hazardous substances, public health and safety, or pollution or
protection of the environment, or for damage to any site, location, or
body of water (surface or subsurface) or for illness or personal injury.
(iii) The Seller has no Liability (and there is no Basis for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Seller giving rise to any
Liability) under the Occupational Safety and Health Act, as amended, or
any other law (or rule or regulation thereunder) of any federal, state,
local, or foreign government (or agency thereof) concerning employee
health and safety, or for any illness of or personal injury to any
employee.
(iv) The Seller has obtained and has been in compliance in all
material respects with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has
complied in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and
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timetables which are contained in, all federal, state, local, and foreign
laws (including rules, regulations, codes, plans, judgments, orders,
decrees, stipulations, injunctions, and charges thereunder) relating to
public health and safety, worker health and safety, and pollution or
protection of the environment, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
(v) To the Seller's knowledge, all properties and equipment used in
the business of the Seller have been free of asbestos, PCB's, methylene
chloride, trichloroethylene, 1, 2 trans dichloroethylene, dioxins,
dibensofurans, and Extremely Hazardous Substances.
(vi) To the Seller's knowledge, no pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste ever has been
buried, stored, spilled, leaked, discharged, emitted, or released on any
real property that the Seller owns or ever has owned or that the Seller
ever has leased with respect to the Stations.
(s) Legal Compliance.
(i) The Seller has complied with all laws (including rules and
regulations thereunder) of federal, state, and local governments (and all
agencies thereof, and no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice has been filed or
commenced against the Seller alleging any failure to comply with any such
law or regulation, including those relating to the employment of labor,
employee civil rights, and equal employment opportunities and relating to
antitrust matters.
(ii) The Seller has filed in a timely manner all reports, documents,
and other materials it was required to file (and the information contained
therein was correct and complete in all respects) under all applicable
laws (including rules and regulations thereunder). The Seller has
possession of all records and documents it was required to retain under
all applicable laws (including rules and regulations thereunder).
(t) Brokers' Fees. Except with respect to the fees owned to Sailors &
Associates which shall be paid by the Seller, the Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(u) Advertising Contracts. Section 2(u) of the Disclosure Schedule lists
those Advertising Contracts and the daily value of such Advertising in Contracts
as of August 11, 1997. Other than to employees of the Seller or the Stations or
as disclosed in Section 2(u) of the Disclosure Schedule, no commission or other
form of renumeration is paid by the Seller with respect to Advertising Contracts
and any renumeration so listed shall be paid by Seller.
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(v) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyers. The Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. The Operating Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of Nevada. The Licensing Company is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Nevada.
(b) Authorization of Transaction. The Buyers have full power and authority
to execute and deliver this Agreement and to perform the Buyers' obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of each the Buyers, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which either of the Buyers are subject or any provision of either of
the Buyers' articles of organization or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which either of the
Buyers are a party or by which either of the Buyers are bound or to which any of
the Buyers' assets are subject, other than with respect to the transfer of the
FCC Licenses. The Buyers do not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in Section 1 above).
(d) Brokers' Fees. The Buyers have no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
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(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Licensing Company shall jointly
file with the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Seller to the Licensing
Company (the "Assignment Application"). The costs of the FCC filing fees in
connection with the Assignment Application shall be divided equally between the
Seller and the Licensing Company. The Seller and the Licensing Company shall
each pay its own attorneys' fees. The Seller and the Licensing Company shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use the commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Licensing Company shall have any obligation to satisfy complainants or
the FCC by taking any steps which would have material adverse effect upon the
Stations or upon any Affiliate). If the FCC imposes any condition on either
party to the Assignment Application, such party shall use commercially
reasonable efforts to comply with such condition, provided, that neither party
shall be required hereunder to comply with any condition that would have a
material adverse effect upon the Stations or any Affiliate. The Seller and the
Licensing Company shall jointly oppose any requests for reconsideration or
judicial review of FCC approval of the Assignment Application and shall jointly
request from the FCC extension of the effective period of FCC approval of the
Assignment Application if the Closing shall not have occurred prior to the
expiration of the original effective period of the FCC Consent. Nothing in this
Section 4(b) shall be construed to limit either the Seller's or the Buyer's
right to terminate this Agreement pursuant to Section 9 of this Agreement.
(c) Transfer Applications. Seller will not file any application for
transfer of ownership with the FCC of WAGH-FM, including its FCC Licenses,
permits and authorizations pertaining to WAGH-FM, licensed to operate in Fort
Mitchell, Alabama to Seller. Furthermore, Seller will use all commercially
reasonable efforts to cooperate with Cumulus Licensing to file an application
for transfer of control, including its FCC Licenses, permits and authorizations
pertaining to WAGH-FM with the FCC on behalf of Cumulus Licensing.
(d) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at the Buyers' option and upon the
Buyers' terms and conditions, extend offers of employment to all or any of the
Seller's employees effective on the Closing Date. The Seller will not take any
action to preclude or discourage any of the Seller's employees from accepting
any offer of employment extended by the Buyers.
(e) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its commercially reasonable efforts to obtain
any third party consents, that the Buyers reasonably may request in connection
with the matters pertaining to the Seller disclosed or required to be disclosed
in the Disclosure Schedule. Each of the Parties will file any notification and
report
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forms and related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the Hart-Scott-Rodino Act, will use its best efforts to obtain an
early termination of the applicable waiting period, and will make any further
filings pursuant thereto that may be necessary, proper, or advisable. Each of
the Parties will take any additional action that may be necessary, proper, or
advisable in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental agencies,
and third parties that it may be required to give, make, or obtain.
(f) Operation of Business. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 2(f) above.
(g) Advertising Obligations. The Seller shall satisfy its air time
obligations for goods or services received by the Stations under its Advertising
Contracts such that the outstanding aggregate balance owing under all such
Advertising Contracts as of the Closing Date, net of any goods or services
received by the Buyer after the Closing Date, shall not exceed Fifteen Thousand
Dollars ($15,000.00) worth of air time. On the Closing Date, the Seller shall
deliver to the Operating Company a schedule, certified by an officer of the
Seller, reflecting all such Advertising Contracts and the daily value thereof
and outstanding balances thereunder in existence as of the Closing Date.
(h) Operating Statements. The Seller shall deliver to Buyers, for Buyers'
informational purposes only, monthly unaudited statements of operating revenues
and operating expenses of the Stations within ten (10) days after each such
statement is prepared by or for the Seller.
(i) Contracts. Seller will not without the prior written consent of the
Operating Company amend, change, or modify any of the contracts listed on
Section 2(l) of the Disclosure Schedule in any material respect. The Seller will
not without prior written consent of the Operating Company enter into any new
contracts respecting the Stations or their properties, except (i) contracts for
the sale of time on the Stations for cash, goods or services which comply with
the representations and warranties pertaining to such contracts set forth in
Section 2(l) above, (ii) contracts entered into in the Ordinary Course of
Business which are cancelable on not more than thirty-one (31) days' notice
without penalty or premium, and (iii) contracts entered into in the Ordinary
Course of Business each of which does not involve more than One Thousand Dollars
($1,000) or all of which do not involve more than Five Thousand Dollars ($5,000)
in the aggregate.
(j) Operation of Stations. The Seller shall operate the Stations in
material compliance with the FCC Licenses and the rules and regulations of the
FCC, and the FCC Licenses shall at all times remain in full force and effect.
The Seller shall file with the FCC all material reports, applications,
documents, instruments and other information required to be filed in connection
with the operation of the Stations.
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(k) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Stations and with respect to collecting accounts receivable arising from
such extension of credit.
(l) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensers,
advertisers, suppliers, customers, and employees, all of the confidential
information, call letters and trade secrets of the Stations, and the FCC
Licenses. The Seller will continue to make expenditures for advertising,
programming, sales, technical and administrative support at a level consistent
with the past practices of the Seller.
(m) Full Access and Consultation. The Seller will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Stations, to all
premises, properties, assets, books, records, contracts, Tax records, and
documents of or pertaining to the Acquired Assets or the Seller. The Seller will
consult with the Buyers' management with a view to informing Buyers' management
as to the operations, management and business of the Stations.
(n) Notice of Developments. The Seller will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller. Each Party will give prompt written notice to the other
of any material development affecting the ability of the Parties to consummate
the transactions contemplated by this Agreement. No disclosure by any party
pursuant to this Section 4(n), however, shall be deemed to amend or supplement
the Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
(o) Exclusivity. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Seller or the Stations; or (ii) participate
in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any person to do or seek any of the foregoing. The Seller
will notify the Buyers immediately if any person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
(p) Title Insurance. The Operating Company will obtain with respect to
each parcel of real estate that the Seller owns and which will be leased to the
Buyers for use as an AM transmitter site, a leaseholder's policy issued by a
title insurer selected by the Operating Company, in an amount equal to the fair
market value of such real property (including all improvements located thereon),
insuring title to such real property in the Seller as of the Closing subject
only to the title exceptions which do not impair the current use, occupancy or
value or the marketability of title of the property and are disclosed in
Sections 2(i) or 2(j) of the Disclosure Schedule, together with such
endorsements for zoning, contiguity, public access and extended coverage as the
Operating
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Company reasonably requests. The Buyer shall pay the cost and expense associated
with any such title insurance procured pursuant to this Section 4(p).
(q) Surveys. With respect to each parcel of real estate as to which a
title insurance policy is to be procured pursuant to Section 4(p) above, the
Operating Company may obtain in preparation for the Closing a current survey of
the real property certified to the Operating Company, prepared by a licensed
surveyor and conforming to current ALTA Minimum Detail Requirements for Land
Title Surveys, disclosing the location of all improvements, easements, party
walls, sidewalks, roadways, utility lines, and other masters shown customarily
on such surveys, and showing access affirmatively to public streets and roads
(the "Survey"). The Survey shall not disclose any survey defect or encroachment
from or onto the real property which has not been cured or insured over prior to
the Closing. The Buyer shall pay the cost and expense associated with any Survey
initiated pursuant to this Section 4(q).
(r) Environmental Assessments. The Operating Company may, obtain with
respect to each parcel of real estate as to which a title insurance policy is to
be procured pursuant to Section 4(p) above, a current Phase I environmental site
assessment from an environmental consultant or engineer which shall not disclose
or recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed that the Seller is
unwilling to remedy consistent with such recommendation. The Buyer shall pay the
cost and expense associated with any environmental assessment initiated pursuant
to this Section 4(r).
(s) Control of Stations. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Operating Company and its employees or agents shall not
directly or indirectly control, supervise, or direct, or attempt to control,
supervise, or direct, the operation of the Stations, and such operation shall be
the sole responsibility of and in the control of the Seller.
(t) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyers
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will repair or replace such Acquired Assets as soon
as possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Seller's notice to the Buyers, and the Buyers determine that the Seller's
failure to repair or replace, alone or in the aggregate, would have a material
adverse effect on the operation of the Stations:
(i) the Buyers may elect to terminate this Agreement; or
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(ii) the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's notice
to Buyers, in which case either party may terminate this Agreement; or
(iii) the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to Buyers all
rights under any insurance claims covering the loss, damage or destruction and
payment over to Buyers any proceeds under any such insurance policies,
previously received by the Seller with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(t),
the Parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
(u) Guaranty Obligation of Seller. The Buyers will use all commercially
reasonable efforts to relieve any guaranty obligation of Seller under the Stock
Purchase Agreement.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by the Buyers in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(e) above, including but not limited to those
relating to transmitter and studio leases, all of the title insurance
commitments, and endorsements specified in Section 4(p) above, and all
Surveys specified in section 4(q) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
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(v) the Seller shall have delivered to the Buyers a certificate
(without further qualification as to knowledge or materiality or otherwise
except to the extent qualified in the representations and warranties of
the Seller in Section 2) to the effect that each of the conditions
specified above in Section 5(a)(i)-(iv) is satisfied in all respects;
(vi) the Assignment Application shall have been approved by a Final
Order of the FCC, and the Seller and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Lease
Agreements;
(viii) the relevant parties shall have entered into the Option
Agreement;
(ix) the Buyers shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit E attached
hereto, addressed to the Buyers and dated as of the Closing Date;
(x) Mr. James Martin shall have entered into the Noncompetition
Agreement;
(xi) all actions consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers;
(xii) in the event that the transactions contemplated by the Stock
Purchase Agreement have closed prior to Closing, Seller shall have
transferred the stock acquired thereunder and assigned any and all rights
acquired pursuant to the Stock Purchase Agreement; and
(xiii) in the event that the transactions contemplated by the Stock
Purchase Agreement have not closed prior to Closing, Seller shall have
executed the Assignment of Purchase Rights in the form attached hereto as
Exhibit I.
The Buyers may waive any condition specified in this Section 5(a) if the Buyers
execute a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the
Closing Date;
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(ii) the Buyers shall have performed and complied with all of the
Buyers' covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Seller a certificate
(without further qualification as to knowledge or materiality or otherwise
except to the extent so qualified in the representations and warranties of
the Buyers in Section 3) to the effect that each of the conditions
specified above in Section 5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Assignment Applications shall have been approved by
a Final Order of the FCC, and the Seller and the Buyers shall have
received all governmental approvals required to transfer all other
authorizations, consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Lease
Agreements;
(vii) the relevant parties shall have entered into the Option
Agreement; and
(viii) all actions to be taken by the Buyers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
(ix) in the event that the transactions contemplated by the Stock
Purchase Agreement have closed prior to Closing, Buyer shall have (A)
tendered to Seller in Cash, payable by wire transfer or delivery of other
immediately available funds, the aggregate of (1) the purchase price paid
under the Stock Purchase Agreement (i.e., One Million Four Hundred
Thousand Dollars ($1,400,000.00)), (2) the expenses reasonably incurred
(including attorney fees) by Seller in connection with negotiation,
preparation and closing of the Stock Purchase Agreement and associated
"due diligence" inquiry not to exceed Twelve Thousand Five Hundred Dollars
($12,500.00), and (3) the expenses reasonably incurred in relocating the
WAGH studio facilities to the premises, not to exceed Seven Thousand Five
Hundred Dollars ($7,500.00), which are the subject of the form Lease
Agreement attached hereto as Exhibit F-2, and (B) explicitly assumed, by
execution of the form Instrument of Assumption attached hereto as Exhibit
C, all remaining obligations to Arthur and Margaret Angell under the Stock
Purchase Agreement; and
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(x) in the event that the transactions contemplated by the Stock
Purchase Agreement have not closed prior to Closing, Buyer shall have (A)
accepted the Assignment of Purchase Rights in the form attached hereto as
Exhibit I; (B) tendered in Cash, payable by wire transfer or delivery of
other immediately available funds, the aggregate or (1) the amount being
held in escrow (i.e., One Hundred Thousand Dollars ($100,000.00) plus
accrued interest) pursuant to the Escrow Agreement included as Schedule C
of the Stock Purchase Agreement, (2) the expenses reasonably incurred
(including attorney fees) by Seller in connection with the negotiation and
preparation of the Stock Purchase Agreement and associated due diligence
inquiry, not to exceed Twelve Thousand Five Hundred Dollars ($12,500.00),
and (3) the expenses reasonably incurred in relocating the WAGH studio
facilities to the premises, not to exceed Seven Thousand Five Hundred
Dollars ($7,500.00), which are the subject of the form Lease Agreement
attached hereto as Exhibit F-2, and (C) explicitly assumed, by execution
of the form Instrument of Assumption attached hereto as Exhibit C, all
obligations to Arthur and Margaret Angell under the Stock Purchase
Agreement.
The Seller may waive any condition specified in this Section 5(b) if it executes
a writing so stating at or prior to the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Seller, the other Party will cooperate with the contesting or
defending Party and its counsel in the contest or defense, make available his or
its personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 7 below).
(c) Adjustments. Operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Operating Company. Such items as employee salaries, vacation,
sick day and personal time accruals, and fringe benefits, power and utilities
charges, insurance, real and personal property taxes, prepared expenses,
deposits, music license fees, and
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rents and payments pertaining to the leases and contracts being assigned
hereunder (including any contracts for the sale of time for cash, trade or
barter so assigned) shall be prorated between the Seller and the Operating
Company as of the Closing Date in accordance with the foregoing principle.
Contractual arrangements that do not reflect an equal rate of compensation to
the Stations over the term of the Agreement shall be equitably adjusted as of
the Closing Date. The prorations and adjustments hereunder shall be made and
paid insofar as feasible on the Closing Date, with a final settlement sixty (60)
days after the Closing Date. In the event of any disputes between the Parties as
to such adjustments, the amounts not in dispute shall nonetheless be paid at
such time and such disputes shall be determined by the accounting firm of Price
Waterhouse, LLP and the fees and expenses of such accounting firm shall be paid
one-half (1/2) by the Seller and one-half (1/2) by the Operating Company.
(d) Collection of Accounts Receivable. At the Closing, the Seller will
turn over to the Operating Company, for collection only, the accounts receivable
of the Stations owing to the Seller as of the close of business on the Closing
Date. A schedule of such accounts receivable will be delivered by the Seller to
the Operating Company on the Closing Date or as soon thereafter as possible. The
Operating Company agrees to use commercially reasonable efforts in the ordinary
course of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Closing Date, and will remit all payments received on such
accounts to Seller at the end of such 120-day period. In the event the Operating
Company receives moneys during the 120-day period following the Closing Date
from an advertiser who, after the Closing Date, is advertising over any of the
Stations, and that advertiser was included among the accounts receivable as of
the Closing Date, the Operating Company shall apply said moneys to the oldest
outstanding balance due on the particular account, except in the case of a
"disputed" account receivable. For purposes of this Section 6(d), a "disputed"
account receivable means one which the account debtor refuses to pay because he
asserts that the money is not owed or the amount is incorrect. In the case of
such a disputed account, the Operating Company shall immediately return the
account to the Seller prior to expiration of the 120-day period following the
Closing Date. If the Operating Company returns a disputed account to the Seller,
the Operating Company shall have no further responsibility for its collection
and may accept payment from the account debtor for advertising carried on any of
the Stations after the Closing Date. At the end of the 120-day period following
the Closing Date, the Operating Company will turn back to the Seller all of the
accounts receivable of the Stations as of the Closing Date owing to the Seller
which have not yet been collected, and the Operating Company will thereafter
have no further responsibility with respect to the collection of such
receivables. During the 120-day period following the Closing Date, the Operating
Company shall afford the Seller reasonable access to the accounts receivable
"aging list."
(e) Severance Obligations. In the event an offer of employment is extended
by the Buyers to and accepted by an employee of the Seller pursuant to Section
4(c) and such subsequent employment by the Buyers is terminated within sixty
(60) days from the Closing Date, the Seller shall be exclusively responsible
for, and shall pay to such accepting employee, all severance benefits that may
be due and owing such employee by reason of his or her employment with either
the Seller or the Buyers based on Seller's severance policies as in effect on
the Closing Date.
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(f) Covenant Not to Compete. For a period of three (3) years from and
after the Closing Date, neither the Seller Partners nor any of their respective
Affiliates will engage directly or indirectly in radio broadcasting or the
promotion or sale of radio broadcasting time as of the Closing Date in any
geographic area in which the Stations broadcast as of the Closing Date,
provided, however, that no owner of less than one percent (1%) of the
outstanding stock of any publicly traded corporation shall be deemed to engage
solely by reason thereof in any of its business.
(g) Confidentiality. Each of the Seller and the Seller Partners and their
respective Affiliates will treat and hold as such all of the Confidential
Information, refrain from using any of the Confidential Information except in
connection with this Agreement, and deliver promptly to the Buyers or destroy,
at the request and option of the Buyers, all tangible embodiments (and all
copies) of the Confidential Information which are in her, his or its possession.
In the event that the Seller, any Seller Partner or any Affiliate is requested
or required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, that person will
notify the Buyers promptly of the request or requirements so that the Buyers may
seek an appropriate protective order or waive compliance with the provisions of
this Section 6(g). If, in the absence of a protective order or waiver hereunder,
the Seller, any Seller Partner or any Affiliate is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, that person may disclose the Confidential Information to
the tribunal; provided, however, that the disclosing Seller, Seller Partner or
Affiliate shall use her, his or its best efforts to obtain, at the reasonable
request of the Buyers, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information required to be
disclosed as the Buyers shall designate. The foregoing provisions shall not
apply to any Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
(h) Transition. Neither the Seller Partners nor any of their respective
Affiliates will take any action that primarily is designed or intended to have
the effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of the Seller from maintaining the same business
relationships with the Buyers after the Closing as it maintained with the Seller
prior to the Closing. The Seller Partners will refer all customer inquiries
relating to the Stations or to the business of the Stations to the Buyers from
and after the Closing. Except with the Buyers' prior written consent, neither
the Seller Partners nor any of their respective Affiliates will employ or offer
to employ any employee of the Seller for a period of three (3) years after the
Closing Date.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b) and 2(c) hereof or
relating to the Seller's title to the Acquired Assets) shall survive the Closing
(even if the Buyers knew or had reason to know of any misrepresentation or
breach of warranty at the time of Closing) and continue in full force and effect
for a period of one (1) year thereafter except that any representation or
warranty relating to the absence of any Liability or claim
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by a third party or basis therefor shall continue in full force and effect for
the period of the applicable statute of limitations plus ninety (90) days. All
of the other representations, warranties, and covenants of the Buyers and the
Seller contained in this Agreement (including the representations and warranties
of the Seller contained in Sections 2(a), 2(b) and 2(c) hereof or relating to
the Seller's title to the Acquired Assets) and in this Agreement shall survive
the Closing (even if the damaged party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing) and
continue in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a default
of this Agreement prior to the Closing Date, the Seller and each of the Seller
Partners jointly and severally agrees to indemnify the Buyers from and against
the entirety of any Adverse Consequences the Buyers may suffer resulting from,
arising out of, relating to, in the nature of, or caused by:
(i) any breach of the Seller's representations, warranties, and
covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the Buyers
make a written claim for indemnification within the applicable survival
period);
(ii) any Liability of the Seller which is not an Assumed Liability;
or
(iii) any Liability of the Buyers pertaining to the Seller or the
Sellers operation of the Stations, arising by operation of law (including
under any bulk transfer law of any jurisdiction or under any common law
doctrine of defacto merger or successor liability) which is not an Assumed
Liability.
(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a default of this Agreement
prior to the Closing Date, the Buyers agree to indemnify the Seller from and
against the entirety of any Adverse Consequences the Seller may suffer resulting
from, arising out of, relating to, in the nature of, or caused by (i) the breach
of any of the Buyers' representations, warranties, and covenants contained in
this Agreement (so long as the particular representation, warranty, or covenant
survives the Closing and the Seller makes a written claim for indemnification
within the applicable survival period) or (ii) any Assumed Liability, including,
without limitation, any obligation of Seller under the Stock Purchase Agreement.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the Stations to be acquired pursuant to this Agreement are unique and that the
Buyers would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the Buyers shall be
entitled to an injunction or injunctions to prevent such breaches and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject
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to the provisions set forth in Section 10(o) below), in addition to any other
remedy to which it may be entitled, at law or in equity. Each of the Parties
acknowledges and agrees that not withstanding the provision in Section 7(e) with
respect to the remedy of liquidated damages upon a default of this Agreement
prior to the Closing, money damages would not be an adequate remedy for a breach
of any provision of this Agreement.
(e) Default Fee. In the event the transactions contemplated by this
Agreement are not consummated due to a default of this Agreement by the Buyers,
the Seller shall be paid the Earnest Money Deposit as a default fee. In the
event (i) the transactions contemplated by this Agreement are not consummated
due to a default of this Agreement by the Seller, and (ii) the Buyers are
unable, despite the Buyers' good faith efforts, to obtain specific performance
pursuant to Section 7(d), and (iii) an application to assign the Licenses of the
Stations to any party other than the Buyers is filed with the FCC and
consummated within fifteen (15) months from the date this Agreement is
terminated, then the Seller shall pay to the Buyers the sum of Six Hundred
Thirty-Seven Thousand Five Hundred and 00/100 Dollars ($637,500.00) as a default
fee.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party
will defend the Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may
retain separate co-counsel at its sole cost and expense (except that the
Indemnifying Party will be responsible for the fees and expenses of the separate
co-counsel to the extent the Indemnified Party concludes reasonably that the
counsel the Indemnifying Party has selected has a conflict of interest), (iii)
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the matter without the written consent of
the Indemnifying Party (not to be withheld unreasonably), and (iv) the
Indemnifying Party will not consent to the entry of any judgment with respect to
the matter, or enter into any settlement which does not include a provision
whereby the plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, without the written consent of the
Indemnified Party (not to be withheld unreasonably). In the event the
Indemnifying Party does not notify the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, however, the Indemnified
Party may defend against, or enter into any settlement with respect to, the
matter in any manner it reasonably may deem appropriate.
(g) Other Indemnification Provisions. The indemnification provisions of
Sections 7(a), 7(b), 7(c) and 7(f) are in addition to, and not in derogation of,
any statutory or common law remedy any Party may have after the closing for
breach of representation, warranty, or covenant. The
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remedies provided in Sections 7(d) and 7(e) shall be the exclusive remedies of
the Parties prior to the Closing for any breach of representation, warranty or
covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, (other than Retained Assets) that are used or useful
in the operation of the Stations, including but not limited to all of its (a)
leaseholds in real property and, improvements, fixtures and fittings thereon
(such as towers and antennae), and easements, rights-of-way and other
appurtenants thereof; (b) tangible personal property (such as computers,
electrical devices, monitoring equipment, test equipment, switching, terminal
and studio equipment, transmitters, transformers, receivers, broadcast
facilities, inventories of compact disks, records, tapes and other supplies,
vehicles, and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those barter agreements identified on the Disclosure Schedules) now existing or
entered into in the Ordinary Course of Business for the sale of advertising time
on the Stations; (e) contracts, indentures, Security Interests, guaranties,
other similar arrangements, and rights thereunder; (f) call letters of the
Stations, jingles, logos, slogans, and business goodwill of the Stations; (g)
Licenses and similar rights obtained from governments and governmental agencies;
(h) rights under the Stock Purchase Agreement; and (i) FCC logs and records and
all other books, records, ledgers, logs, files, documents, correspondence,
lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, studies, reports, and other
printed or written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" means any arrangement with any third party under
which the Seller has created, incurred, assumed or guaranteed an obligation to
provide advertising or air time on the Stations.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means obligations of the Seller under the licenses,
sublicenses, leases, subleases, contracts, and other arrangements referred to in
the definition of Acquired Assets either: (a) to furnish services, and other
non-Cash benefits to another party after the Closing; (b) to pay for goods,
services, and other non-Cash benefits that another party will furnish to it
after the Closing; or (c) obligation to pay the purchase price and all other
obligations under the Stock Purchase
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Agreement in the event that the transactions contemplated by the Stock Purchase
Agreement have not closed before the Closing or in the event that such
transactions do close before Closing, the obligation to reimburse Seller for the
purchase price and all other obligations under the Stock Purchase Agreement. The
Assumed Liabilities shall not include any Retained Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 and Section 3
above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Emerald Coast, N.A.
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"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(f) above.
"Indemnifying Party" has the meaning set forth in Section 7(f) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Lease Agreements" means (i) the Lease Agreement for Seller's two AM
antenna sites and, (ii) the Lease Agreement for seller's studio and offices, a
form of each of which is attached hereto as Exhibits F-1 and F-2.
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"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Licensing Company" has the meaning set forth in the preface above.
"Most Recent Financial Statements" has the meaning set forth in Section
2(e) above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37)
Noncompetition Agreement" means the Confidentiality and Noncompete
Agreement between the Operating Company and James Martin in the form attached as
Exhibit H.
"Operating Company" has the meaning set forth in the preface above.
"Option Agreement" means the option to purchase real estate a form of
which is attached hereto as Exhibit G.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Process Agent" has the meaning set forth in Section 10(o) below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Retained Assets" means (a) the partnership charter, qualifications to
conduct business as a foreign entity, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, partnership transfer books, blank partnership certificates,
and other documents relating to the organization, maintenance, and existence of
the Seller as a partnership; (b) any of the rights of the Seller under this
Agreement (or under any side agreement between the Seller on the one hand and
the Buyers on the other hand entered into on or after the date of this
Agreement); (c) accounts, notes and other receivables; (d) any fee interest in
real property owned by the Seller or any Seller Partner, and (e) the Seller's
Cash.
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"Retained Liabilities" means any other obligations or liabilities of
Seller, including but not limited to: (a) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (b) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (c) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby; or (d) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WVRK-FM and WMLF-AM, each licensed by the FCC to operate in Columbus, Georgia,
WGSY-FM, licensed by the FCC to operate in Phenix City, Alabama, and WPNX-AM,
licensed by the FCC to operate in both Columbus, Georgia and Phenix City,
Alabama. For purposes of the Pre-Closing Covenants and the conditions to
obligations of Buyer to close, "Stations" also includes WAGH-FM, licensed by the
FCC to operate in Fort Mitchell, Alabama.
"Stock Purchase Agreement" means the certain stock purchase agreement
dated August 8, 1997 by and among Arthur and Margaret Angell and Seller, for the
purchase of WAGH-FM, licensed to operate in Fort Mitchell, Alabama, and any
other agreement contemplated thereby.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 4(q) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
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"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach, and the Seller may terminate this Agreement by giving
written notice to the Buyers at any time prior to the Closing in the event
the Buyers are in breach, of any material representation, warranty, or
covenant contained in this Agreement in any material respect in each case
if such breach remains uncured for ten (10) days after notice of breach is
received from the other party;
(iii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
breaching any representation, warranty, or covenant contained in this
Agreement);
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant contained in
this Agreement);or
(v) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(vi) the Buyers may terminate this Agreement within thirty (30) days
of the termination by Seller of the Stock Purchase Agreement.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
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10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in the Post-Closing Agreement.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that the Buyers may assign all of the Buyers'
right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Seller the Purchase Price therefor.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: M & M Partners
3007 Bear Point Drive
Phenix City, FL 32408
Attn: J.T. Milligan
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Copy to: Reddy, Begley & McCormick
Suite 350
1001 22nd Street, NW
Washington, DC 20037-1803
Attn: Matthew H. McCormick
Bradley & Hatcher
P.O. Box 2866
Columbus, GA 31902
Attn: Richard Y. Bradley
If to the Buyers: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Copy to: Cumulus Licensing Corp.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrance J. Leahy
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Georgia.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
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(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications. The Seller will pay
all transfer or sales taxes and other recording or similar fees necessary to
vest title to each of the Acquired Assets in the Buyers in excess of $1,000 and
all income taxes. The Buyers will pay the first $1,000 of such transfer or sales
taxes.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any federal court sitting in Columbus, Georgia. In any action or
proceeding arising out of or relating to this Agreement, agrees that all claims
in respect of the action or proceeding may be heard and determined in any such
court, and agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. The Seller and each Seller Partner
appoints Richard Y. Bradley and the Buyers appoint CT Corporation (each of
Bradley and CT Corporation a "Process Agent") as its agent to receive on its
behalf service of copies of the summons
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and complaint and any other process that might be served in the action or
proceeding. Any Party may make service on the other Party by sending or
delivering a copy of the process (i) to the Party to be served at the address
and in the manner provided for the giving of notices in Section 10(h) above or
(ii) to the Party to be served in care of the Process Agent at the address and
in the manner provided for the giving of notices in Section 10(h) above. Nothing
in this Section 10(o), however, shall affect the right of any Party to serve
legal process in any other manner permitted by law. Each Party agrees that a
final judgment in any action or proceeding so brought shall be conclusive and
may be enforced by suit on the judgment or in any other manner provided by law.
(p) Bulk Transfer Laws. The Seller has complied with, or will as of the
Closing Date comply with the provisions of any bulk transfer laws of Georgia, if
any, or any other jurisdiction applicable to the transactions contemplated by
this Agreement.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
------------------------------
Title:
---------------------------
"Operating Company"
CUMULUS LICENSING CORP.
By:
------------------------------
Title:
---------------------------
"Licensing Company"
M & M PARTNERS
By:
------------------------------
Title:
---------------------------
"Seller"
JAMES THOMAS MILLIGAN
-----------------------------------------
"Seller Partner"
MARTHA BLACKMON MILLIGAN
-----------------------------------------
"Seller Partner"
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STOCK PURCHASE AGREEMENT
BETWEEN
CUMULUS HOLDINGS, INC..
AND
PHILIP T. KELLY
October 16, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Company Shares................................1
(a) Basic Transaction...........................................1
(b) Purchase Price..............................................1
(c) The Closing.................................................2
(d) Deliveries at the Closing...................................2
2. Representations and Warranties of the Seller.......................3
(a) Authorization of Transaction................................3
(b) Noncontravention............................................3
(c) Brokers' Fees...............................................3
(d) Company Shares..............................................3
3. Representations and Warranties of the Buyer........................3
(a) Organization of the Buyer...................................4
(b) Authorization of Transaction................................4
(c) Noncontravention............................................4
(d) Brokers' Fees...............................................4
4. Representations and Warranties Concerning the Company..............4
(a) Organization, Qualification, and Corporate Power............4
(b) Capitalization..............................................5
(c) Noncontravention............................................5
(d) Financial Statements........................................5
(e) Subsequent Events...........................................6
(f) Undisclosed Liabilities.....................................8
(g) Tax Matters.................................................8
(h) Tangible Assets.............................................9
(i) Owned Real Property........................................10
(j) Real Property Leases.......................................11
(k) Intellectual Property......................................12
(l) Contracts..................................................13
(m) FCC Licenses and Compliance with FCC Requirements..........14
(n) Insurance..................................................15
(o) Litigation.................................................16
(p) Employees..................................................16
(q) Notes and Accounts Receivable..............................16
(r) Powers of Attorney.........................................16
(s) Employee Benefits..........................................16
(t) Environment, Health, and Safety............................18
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(u) Legal Compliance...........................................19
(v) Certain Business Relationships With the Company
and Its Subsidiaries.....................................19
(w) Brokers' Fees..............................................19
(x) Advertising Contracts......................................19
(y) Disclosure.................................................19
5. Pre-Closing Covenants.............................................19
(a) General....................................................20
(b) Transfer Applications......................................20
(c) Notices and Consents.......................................20
(d) Operation of Business......................................20
(e) Employees..................................................21
(f) Advertising Obligations....................................21
(g) Operating Statements.......................................21
(h) Contracts..................................................21
(i) Operation of Stations......................................21
(j) Credit and Receivables.....................................21
(k) Preservation of Business...................................21
(l) Full Access and Consultation...............................22
(m) Notice of Developments.....................................22
(n) Exclusivity................................................22
(o) Title Insurance............................................22
(p) Surveys....................................................22
(q) Environmental Assessments..................................23
(r) Control of Stations........................................23
(s) Risk of Loss...............................................23
(t) Payment of Dividends.......................................24
(u) Wisconsin Tower Site.......................................24
6. Conditions to Obligation to Close.................................24
(a) Conditions to Obligation of the Buyer......................24
(b) Conditions to Obligation of the Seller.....................25
7. Post-Closing Covenants............................................26
(a) General....................................................26
(b) Funded Indebtedness........................................26
(c) Litigation Support.........................................26
(d) Transition.................................................27
(e) Confidentiality............................................27
(f) Covenant Not to Compete....................................27
(g) Retainage Adjustment.......................................27
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8. Remedies for Breaches of this Agreement...........................27
(a) Survival...................................................27
(b) Indemnification Provisions for the Benefit
of the Buyer ............................................28
(c) Indemnification Provisions for the Benefit
of the Seller ...........................................28
(d) Matters Involving Third Parties............................28
(e) Specific Performance.......................................29
(f) Limitation of Liability....................................29
(g) Other Indemnification......................................29
9. Definitions.......................................................29
10. Termination......................................................34
(a) Termination of Agreement...................................34
(b) Effect of Termination......................................35
11. Miscellaneous....................................................35
(a) Survival...................................................35
(b) Press Releases and Announcements...........................35
(c) No Third Party Beneficiaries...............................35
(d) Entire Agreement...........................................35
(e) Succession and Assignment..................................35
(f) Counterparts...............................................36
(g) Headings...................................................36
(h) Notices....................................................36
(i) Governing Law..............................................37
(j) Amendments and Waivers.....................................37
(k) Severability...............................................37
(l) Expenses...................................................37
(m) Construction...............................................37
(n) Incorporation of Exhibits and Schedules....................38
(o) The Seller.................................................38
(p) Submission to Jurisdiction.................................38
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EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Form of Retainage Agreement
Exhibit C--Form of Opinion of Counsel to the Seller
SCHEDULES
Description Section Reference
- ----------- -----------------
Company Shares 2(e)
Directors and Officers 4(a)
Financial Statements 4(d)
Subsequent Events 4(e)
Tax Matters 4(g)
Tangible Assets 4(h)
Owned Real Property 4(i)
Real Property Leases 4(j)
Intellectual Property 4(k)
Contracts 4(l)
FCC Licenses 4(m)
Insurance 4(n)
Litigation 4(o)
Employees 4(p)
Employee Benefits 4(s)
Business Relationships 4(v)
Advertising Contracts 4(x)
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STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") entered into on October 16, 1997, by
and between Cumulus Holdings, Inc., an Illinois corporation (the "Buyer") and
Philip T. Kelly, (the "Seller"). The Buyer and the Seller are referred to
collectively herein as the "Parties."
The Seller owns all of the outstanding capital stock of
Communications Properties, Inc., a Minnesota corporation (the "Company") which,
in turn, owns and operates radio stations WDBQ-AM, KXGE-FM, and KLYV-FM, all
licensed to operate in Dubuque, Iowa, and WJOD-FM, licensed to operate in
Galena, Illinois (collectively the "Stations").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of the Company in return for Cash.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Purchase and Sale of Company Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of the Company Shares for the consideration
specified below in this Section 1.
(b) Purchase Price. The purchase price to be paid to the Seller by
the Buyer for the Company Shares shall be an amount equal to $4,881,262.72 less
the amount of Funded Indebtedness (the "Purchase Price"), and shall be payable
as set forth in this Section 1. The Seller shall furnish the Buyer with a list
of Funded Indebtedness which Buyer agrees to cause to be paid by the Company in
full immediately following the Closing, whether any such indebtedness is due and
owing on the Closing Date; provided, that, in no event shall the aggregate
amount of the Funded Indebtedness exceed the Purchase Price less the Retainage
Deposit, as defined in Section 1(b)(ii) below. All Funded Indebtedness of the
Company as of the date of this Agreement shall constitute an adjustment to the
Purchase Price. The Purchase Price is payable as follows:
(i) on the date of this Agreement, the Buyer will deposit with
the Earnest Money Escrow Agent the amount of Two Hundred Fifty Thousand
and 00/100 Dollars ($250,000.00) (the "Earnest Money Deposit") either in
the form of (a) Cash by wire transfer or delivery of other immediately
available funds, or (b) a letter of credit issued by NationsBank of Texas,
N.A. naming the Escrow Agent as beneficiary;
(ii) on the Closing Date, the Buyer shall deposit with the
Retainage Agent the amount of Seven Hundred Fifty Thousand and 00/100
Dollars ($750,000.00) (the
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"Retainage Deposit") in Cash by wire transfer or delivery of other
immediately available funds; and
(iii) on the Closing Date, the Buyer shall pay to the Seller
the amount equal to $4,881,262.72, less Funded Indebtedness, less the
Earnest Money Deposit (and any interest earned thereon), and less the
Retainage Deposit.
On the Closing Date in addition to the Purchase Price, an amount
equal to One Million and 00/100 Dollars ($1,000,000.00) shall be paid to the
Seller as consideration for the agreements set forth in Section 7(f) of this
Agreement.
The Earnest Money Deposit referenced in this Section 1(b)(i) shall be placed in
escrow with the Escrow Money Escrow Agent pursuant to an escrow agreement in the
form attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), which
requires that the Earnest Money Deposit shall be deposited by the Earnest Money
Escrow Agent with a federally insured financial institution in an interest
bearing account. Interest earned on the Earnest Money Deposit, if any, shall
accrue to the benefit of the Buyer, and, together with the principal amount of
the Earnest Money Deposit, shall be payable to the Seller and credited against
the Purchase Price on the Closing Date. If this Agreement is terminated without
Closing of the transaction contemplated herein, the Earnest Money and all
accrued interest, if any, shall be paid to the Buyer or the Seller as provided
in the Earnest Money Escrow Agreement.
The Retainage Deposit referenced in this Section 1(b)(ii) shall be
placed in escrow with the Retainage Agent pursuant to an escrow agreement in the
form attached hereto as Exhibit B (the "Retainage Agreement"), which requires
that the Retainage Deposit shall be deposited by the Retainage Agent as provided
in the Retainage Agreement. Interest earned on the Retainage Deposit shall
accrue to the benefit of the Seller, and, together with the principal amount of
the Retainage Deposit, shall be payable to the Seller or the Buyer as provided
in the Retainage Agreement.
(c) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of the Stations
in Dubuque, Iowa, commencing at 9:00 a.m. local time on the date set by the
Buyer not earlier than the fifth business day or later than the tenth business
day after the FCC approval of the Transfer Application becomes a Final Order, by
which date all other conditions to the obligations of the Parties to consummate
the transactions contemplated hereby will have been satisfied or waived, or such
other date as the Parties may mutually determine (the "Closing Date").
(d) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6(a) below, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in Section 6(b)
below, (iii) the Seller will deliver to the Buyer stock certificates
representing all of his Company Shares, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) the Buyer will deliver to the Seller the
consideration specified in Section 1(b) above.
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2. Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 2 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 2) except as set forth in Disclosure Schedule accompanying this
Agreement and initialed by the Parties (the "Disclosure Schedule") corresponding
to the lettered and numbered sections of this Section 2.
(a) Authorization of Transaction. Seller has full power and
authority to execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of Seller, enforceable in accordance with its terms and conditions. Seller need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement, other than Transfer
Applications described in Section 5(b).
(b) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor the
performance of his obligations hereunder, will (i) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge, or
other restriction of any government, governmental agency, or court to which
Seller is subject or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which Seller is a party or by which he is
bound or to which any of his assets is subject.
(c) Brokers' Fees. Other than One Hundred Five Thousand and 00/100
Dollars ($105,000.00) which are one-half of the fees payable to Kalil & Co.,
Inc., Seller has no Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement for which the Buyer could become liable or obligated.
(d) Company Shares. Seller holds of record and owns beneficially the
number of Company Shares set forth next to his name in Section 2(d) of the
Disclosure Schedule, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws), claims,
Taxes, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities, and demands. Seller is not a party to any option,
warrant, right, contract, call, put, or other agreement or commitment providing
for the disposition or acquisition of any capital stock of the Company (other
than this Agreement). Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
the Company.
3. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made
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then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3), except as set forth in the Disclosure
Schedule. The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Section 3.
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Illinois.
(b) Authorization of Transaction. The Buyer has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Buyer, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Buyer is subject or any provision of the charter or bylaws
of the Buyer or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which either of the Buyer is a party or by
which it is bound or to which any of its assets are subject. Other than with
respect to the Transfer Application, the Buyer does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
(d) Brokers' Fees. Other than One Hundred Five Thousand and 00/100
Dollars ($105,000.00) which are one-half of the fees payable to Kalil & Co.,
Inc., the Buyer has no Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement for which the Seller could become liable or obligated.
4. Representations and Warranties Concerning the Company. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 4), except as set forth in the lettered and numbered paragraphs
contained in the Disclosure Schedule corresponding to the lettered and numbered
sections of this Section 4.
(a) Organization, Qualification, and Corporate Power. The Company is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction in
which the nature of its businesses or the ownership or leasing of its properties
requires such qualification. The Company has full corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. Section 4(a) of the Disclosure Schedule lists
the directors and officers of the Company. The
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Seller has delivered to the Buyer correct and complete copies of the charter and
bylaws of the Company (as amended to date). The minute books containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors, the stock certificate books, and the stock
record books of the Company are correct and complete. The Company is not in
default under or in violation of any provision of its charter or bylaws. The
Company does not have any Subsidiaries and does not control directly or
indirectly or have any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary of the Company.
(b) Capitalization. The entire authorized capital stock of the
Company consists of 1,250,000 of each of Class A and Class B Company Shares (and
no other class of capital stock), of which 21,132.5 Class A and 18,671.5 Class B
Company Shares are issued and outstanding. No Company Shares are held in
treasury. All of the issued and outstanding Company Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the Seller as set forth in Section 2(d) of the Disclosure Schedule.
There are no outstanding or authorized options, warrants, rights, contracts,
calls, puts, rights to subscribe, conversion rights, or other agreements or
commitments to which the Company is a party or which are binding upon the
Company providing for the issuance, disposition, or acquisition of any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, or similar rights with respect to the Company. There are no
voting trusts, proxies, or any other agreements or understandings with respect
to the voting of the capital stock of the Company; provided that the Company's
Restated Articles of Incorporation provide that its Class B Common Stock is
nonvoting.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Company is subject or any provision of the charter or
bylaws of the Company or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which the Company is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to that
Transfer Application, the Company need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(d) Financial Statements. Included in Section 4(d) of the Disclosure
Schedules are the following financial statements (collectively the "Financial
Statements"): (i) audited, compiled or reviewed balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the fiscal
years ended August 31, 1992; August 31, 1993; August 31, 1994; August 31, 1995
and August 31, 1996 (the "Most Recent Fiscal Year End"), for the Company; and
(ii) unaudited statements of income and Cash flow, as of and for each month
during 1995 and 1996 and the months ended January 31, February 28, March 31,
April 30, May 31, June 30, July 31, and August 31, 1997 for the Company. The
Financial Statements have been prepared in accordance with GAAP applied
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on a consistent basis throughout the periods covered thereby, are correct and
complete, and are consistent with the books and records of the Company (which
books and records are correct and complete). Without limiting the generality of
the foregoing, all material revenues and expenses of the Company (A) are
properly reflected in the Financial Statements, (B) have arisen in the Ordinary
Course of Business unless otherwise stated therein, (C) are valid and subject to
no offsets or claims, and (D) will be or have been collected or paid at their
recorded amounts subject only to the reserve for bad debts set forth on the face
of the Most Recent Balance Sheets.
(e) Subsequent Events. Since January 1, 1997, except as set forth in
Section 4(e) of the Disclosure Schedules, there has not been any material
adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the Company with
respect to the operation of the Stations. Without limiting the generality of the
foregoing and with respect to the operation of the Stations since that date:
(i) the Company has not sold, leased, transferred, or assigned
any of its material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Company has not entered into any contract, lease,
sublease, license, or sublicense (or series of related contracts, leases,
subleases, licenses, and sublicenses) outside the Ordinary Course of
Business;
(iii) no party has accelerated, terminated, modified, or
cancelled any contract, lease, sublease, license, or sublicense (or series
of related contracts, leases, subleases, licenses, and sublicenses)
involving more than $5,000 to which the Company is a party or by which it
is bound;
(iv) no Security Interest has been imposed upon any of the
Company's assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of
Business;
(vi) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of any other
person (or series of related capital investments, loans, and acquisitions)
outside the Ordinary Course of Business;
(vii) the Company has not created, incurred, assumed, or
guaranteed any indebtedness (including capitalized lease obligations)
outside the Ordinary Course of Business;
(viii) the Company has not delayed or postponed (beyond its
normal practice) the payment of accounts payable and other Liabilities;
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(ix) the Company has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims)
outside the Ordinary Course of Business;
(x) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(xi) the Company has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property or any
action adversely affecting the FCC Licenses or the Stations;
(xii) 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 giving rise to any claim or right
on its part against the person or on the part of the person against it;
(xiii) the Company has not entered into any employment
contract, consulting contract or severance agreement or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xiv) the Company has not granted any increase outside the
Ordinary Course of Business in the base compensation of any of its
directors, officers, and employees;
(xv) the Company has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E) retirement,
(F) medical, hospitalization, life, or other insurance, (G) severance, or
(H) other plan, contract, or commitment for any of its directors,
officers, and employees, or modified or terminated any existing such plan,
contract, or commitment (however, the employees of WJOD-FM and KXGE-FM,
both of which have been recently acquired by the Company, have become
participants in all of the Company's benefit plans);
(xvi) the Company has not made any other change in employment
terms for any of its directors, officers, and employees;
(xvii) the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xviii) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Company;
(xix) the Company has not altered its credit and collection
policies or its accounting policies;
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(xx) the Company has not materially altered the programming,
format or call letters of the Stations or their promotional and marketing
activities (other than the call letter change by former KGGY-FM to
KXGE-FM);
(xxi) the Company has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in compliance
therewith and with all FCC rules and regulations;
(xxii) there has been no change made or authorized in the
charter or bylaws of the Company;
(xxiii) 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 or exercise)
any of its capital stock;
(xxiv) the Company has not declared, set aside, or paid any
dividend or distribution with respect to its capital stock or redeemed,
purchased, or otherwise acquired any of its capital stock;
(xxv) there has been no material adverse change in the market
share or Cash flow of the Stations; and
(xxvi) the Company has not committed to any of the foregoing.
(f) Undisclosed Liabilities. The Company has no Liability (and there
is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the Most Recent Fiscal Year End in the
Ordinary Course of Business (none of which relates to any breach of contract,
breach of warranty, tort, infringement, or violation of law or arose out of any
charge, complaint, action, suit, proceeding, hearing, investigation, claim, or
demand).
(g) Tax Matters.
(i) The Company has filed all Tax Returns and returns that it
was required to file or may be required to file, except for extensions
granted to the Company which are disclosed on Section 4(g) of the
Disclosure Schedule. All such Tax Returns that were filed were correct and
complete in all respects, and all such Tax Returns that will be filed will
be correct and complete in all respects. All Taxes owed by the Company
have been paid. The Company is not currently a party to a pending Tax
audit, aware of a threatened Tax audit, or the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever
been made by an authority in a jurisdiction where the Company does not
file reports and returns that it is or may be subject to taxation by that
jurisdiction. There are no Security
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Interests on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, creditor, independent contractor, or other third party.
(iii) No Seller or director or officer (or employee
responsible for Tax matters) of the Company has Knowledge that any
authority has or will seek to assess any additional Taxes for any period
for which returns have been filed. There is no dispute or claim concerning
any Tax Liability of the Company either (A) claimed or raised by any
authority in writing or (B) as to which the Company and the directors and
officers (and employees responsible for Tax matters) of the Company has
Knowledge based upon personal contact with any agent of such authority.
Section 4(g) of the Disclosure Schedule lists all federal, state, local,
and foreign income Tax Returns filed with respect to the Company for
taxable periods ended on or after January 1, 1992, indicates those returns
that have been audited, and indicates those returns that currently are the
subject of audit. The Company has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by the
Company since January 1, 1993.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Company is not a party to any Tax allocation or
sharing agreement. The Company has not ever been (or has any Liability for
unpaid Taxes because it once was) a member of an Affiliated Group during
any part of any consolidated return year within any part of a consolidated
return year.
(vi) Section 4(g) of the Disclosure Schedule sets forth the
following information with respect the Company as of the most recent
practicable date: (A) the basis of the Company in its assets; (B) the
amount of any net operating loss, net capital loss, unused investment or
other credit, unused foreign tax, or excess charitable contribution
allocable to the Company; and (C) the amount of any deferred gain or loss
allocable to the Company arising out of any deferred intercompany
transaction.
(vii) The unpaid Taxes of the Company do not exceed the
reserve for tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth on the face of the Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company in
filing its Tax Returns.
(h) Tangible Assets. Section 4(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Stations. The Company owns or leases all tangible
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assets necessary for the conduct of the operation and business of the Stations
as presently conducted and as presently proposed to be conducted. Each such
tangible asset is free from defects (patent and latent), has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used. No such tangible asset is in need of immediate
replacement or retirement except the Wisconsin transmission tower of KXGE-FM.
(i) Owned Real Property. Section 4(i) of the Disclosure Schedule
lists and describes briefly all real property that the Company owns. Except as
disclosed in Section 4(i) of the Disclosure Schedule, with respect to each such
parcel of owned real property:
(i) the Company has good and marketable title to the parcel of
real property, free and clear of any Security Interest, easement,
covenant, or other restriction, (including but not limited to leases or
other agreements granting to any party the right of use or occupancy of
and options or rights of first refusal to purchase) except for recorded
easements, covenants, and other restrictions which do not impair the
current use, occupancy, or value, or the marketability of title, of the
property subject thereto;
(ii) there are no (A) pending or, to the Knowledge of the
Seller and the Company, threatened condemnation proceedings relating to
the property; (B) pending or, to the Knowledge of the Seller and the
Company, threatened litigation or administrative actions relating to the
property; or (C) other matters affecting occupancy, or value thereof;
(iii) the legal description for the parcel contained in the
deed thereof describes such parcel fully and adequately, the buildings,
towers, antennae and improvements are located within the boundary lines of
the described parcels of land, are not in violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties or
buildings or improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications), and do not
encroach on any easement which may burden the land, the land does not
serve any adjoining property for any purpose inconsistent with the use of
the land, the property is not located within any flood plain or subject to
any similar type restriction for which any permits or licenses necessary
to the use thereof have not been obtained, and access to the property is
provided by paved public right-of-way with adequate curb cuts available;
(iv) all facilities have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been operated
and maintained in accordance with applicable laws, rules, and regulations;
(v) there are no parties (other than the Company) in
possession of the parcel of real property, other than tenants under any
leases disclosed in Section 4(j) of the Disclosure Schedule who are in
possession of space to which they are entitled, no leases, subleases or
other agreements granting to any party any right of use or occupancy or
option or right of refusal with respect to any parcel of real property;
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(vi) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of
such facilities, including gas, electricity, water, telephone, sanitary
sewer, and storm sewer, all of which services are adequate in accordance
with all applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable, appurtenant
easements benefitting the parcel of real property; and
(vii) each parcel of real property abuts on and has direct
vehicular access to a public road or access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the parcel of
real property.
(j) Real Property Leases. Section 4(j) of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to the
Company. The Company has delivered to the Buyer correct and complete copies of
the leases and subleases listed in Section 4(j) of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in Section 4(j)
of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing, will
continue to be, legal, valid, binding, enforceable, and in full force and
effect;
(ii) no party to the lease or sublease is in breach or default
(or has repudiated any provision thereof), and no event has occurred
which, with notice or lapse of time, would constitute a breach or default
or permit termination, modification, or acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease other than the oral lease
for the Wisconsin transmission tower site described on Section 4(j) of the
Disclosure Schedule;
(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above are true and
correct with respect to the underlying lease;
(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vi) to the Knowledge of the Seller and the Company, all
facilities leased or subleased thereunder have received all approvals of
governmental authorities (including licenses, permits and zoning
approvals) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules, and
regulations;
(vii) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of
said facilities; and
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(viii) to the Knowledge of the Company, the owner of the
facility leased or subleased has good and marketable title to the parcel
of real property, free and clear of any Security Interest, easement,
covenant, or other restriction, except for recorded easements, covenants,
and other restrictions that impair the current use, occupancy, or value,
or the marketability of title, of the property subject thereto.
(k) Intellectual Property. The Company owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Company as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Company immediately prior to the
Closing hereunder will be owned or available for use by the Buyer on identical
terms and conditions immediately subsequent to the Closing hereunder. The
Company has taken all necessary or desirable action to protect each item of
Intellectual Property that it owns or uses.
(i) To the Knowledge of the Seller and the Company, the
Company has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
third parties, and the Company has never received any charge, complaint,
claim, or notice alleging any such interference, infringement,
misappropriation, or violation. To the Company's Knowledge, no third party
has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of the Company.
(ii) Section 4(k) of the Disclosure Schedule identifies each
patent, trademark or copyright registration which has been issued to the
Seller or the Company with respect to any of his Intellectual Property,
identifies each pending patent, trademark or copyright application for
registration which the Seller or the Company has made with respect to any
of his Intellectual Property, and identifies each license, agreement, or
other permission which the Seller or the Company has granted to any third
party with respect to any of its Intellectual Property (together with any
exceptions). The Company has delivered to the Buyer correct and complete
copies of all such patents, trademarks or copyright registrations,
applications, licenses, agreements, and permissions (as amended to date)
and has made available to the Buyer correct and complete copies of all
other written documentation evidencing ownership and prosecution (if
applicable) of each such item. With respect to each item of Intellectual
Property that the Seller or the Company owns:
(A) the Seller or the Company possesses all right, title, and
interest in and to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of
the Seller and the Company, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item;
and
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(D) except as set forth on Section 4(k) of the Disclosure
Schedule, the Seller or the Company has not ever agreed to indemnify
any person or entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iii) Section 4(k) of the Disclosure Schedule also identifies
each item of Intellectual Property that any third party owns and that the
Company uses pursuant to license, sublicense, agreement, or permission.
The Company has supplied the Buyer with correct and complete copies of all
such licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission covering
the item is, and following the Closing will continue to be on
identical terms, legal, valid, binding, enforceable, and in full
force and effect;
(B) no party to the license, sublicense, agreement, or
permission is, to the Knowledge of the Seller and the Company, in
material breach or default (or has repudiated any provision
thereof), 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) with respect to each sublicense, to the Knowledge of the
Seller and the Company, the representations and warranties set forth
in subsections (A) and (B) above are true and correct with respect
to the underlying license;
(D) to the Knowledge of the Seller and the Company, the
underlying item of Intellectual Property is not subject to any
outstanding judgment, order, decree, stipulation, injunction, or
charge;
(E) to the Knowledge of the Seller and the Company, no charge,
complaint, action, suit, proceeding, hearing, investigation, claim,
or demand is pending, or is threatened which challenges the
legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(F) the Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(l) Contracts. Other than Advertising Contracts, Section 4(l) of the
Disclosure Schedule lists the contracts, agreements, and other written
arrangements to which the Company is a party and either involving payment in
excess of One Thousand Dollars ($1,000) per year or not entered into in the
Ordinary Course of Business. The Company has delivered to the Buyer a correct
and complete copy of each written arrangement listed in Section 4(l) of the
Disclosure Schedule (as amended to date). With respect to each written
arrangement so listed:
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(i) the written arrangement is legal, valid, binding, and
enforceable in accordance with its terms against each party thereto;
(ii) the written arrangement will continue to be legal, valid,
binding, and enforceable in accordance with the terms against each party
thereto on identical terms following the Closing;
(iii) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification, or acceleration, under the
written arrangement; and
(iv) no party has repudiated any provision of the written
arrangement.
The written arrangements listed in Section 4(l) of the Disclosure Schedule are
all of the written arrangements reasonably necessary for the conduct of the
operation and business of the Stations as presently conducted and proposed to be
conducted. The Company is not a party to any verbal contract, agreement, or
other arrangement which, if reduced to written form, would be required to be
listed in Section 4(l) of the Disclosure Schedule under the terms of this
Section 4(l), other than the verbal lease of the transmission tower site for
KXGE-FM.
(m) FCC Licenses and Compliance with FCC Requirements.
(i) All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Stations as they are now being operated are detailed in
Section 4(m) of the Disclosure Schedules and are in full force and effect,
are unimpaired by any acts or omissions of Seller, the Company or the
Company's employees or agents, and are free and clear of any restrictions
which might limit the full operation of the Stations. Except as set forth
in Section 4(m) of the Disclosure Schedules, no condition exists or event
has occurred that permits, or after notice or lapse of time, or both,
would permit, the revocation or termination of any such license, permit,
consent, franchise, or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction or
limitation upon the operation of the Stations as now conducted. Except as
set forth in Section 4(m) of the Disclosure Schedules, the Seller and the
Company are not aware of any reason why the FCC licenses might not be
renewed in the ordinary course or revoked.
(ii) The Stations are each in compliance with the FCC's policy
on exposure to radio frequency radiation. No renewal of any FCC License
would constitute a major environmental action under the FCC's rules or
policies. Access to the Station's transmission facilities is restricted in
accordance with the policies of the FCC.
(iii) Except as set forth in Section 4(m) of the Disclosure
Schedule, to the best of the Knowledge of the Seller and the Company, the
Company is not the subject of any FCC or other governmental investigation
or any notice of violation or order, or any material complaint, objection,
petition to deny, or opposition issued by or filed with the FCC or any
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other governmental authority in connection with the operation of or
authorization for the Stations, and there are no proceedings (other than
rulemaking proceedings of general applicability) before the FCC or any
other governmental authority that could adversely affect any of the FCC
Licenses or the authorizations listed in Section 4(m) of the Disclosures
Schedule.
(iv) The Company has filed with the FCC and all other
governmental authorities having jurisdiction over the Stations all
material reports, applications, documents, instruments, and other
information required to be filed, and will continue to make such filings
through the Closing Date.
(n) Insurance. Section 4(n) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which the Company is a party, a
named insured, or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable in accordance with its terms against the parties
thereto; (B) the policy will continue to be legal, valid, binding, and
enforceable and in full force and effect on identical terms following the
Closing Date; (C) neither the Company nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. The Company has been covered during the
past three (3) years by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during that three-year period.
Section 4(n) of the Disclosure Schedule describes any self-insurance
arrangements affecting the Company.
(o) Litigation. Section 4(o) of the Disclosure Schedule sets forth
each instance in which the Company: (i) is subject to any unsatisfied judgement,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller and the Company, is
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threatened to be made a party to any charge, complaint, action, suit,
proceeding, hearing, or investigation of or in any court or quasijudicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the charges, complaints, actions, suits,
proceedings, hearings, and investigations set forth in Section 4(o) of the
Disclosure Schedule could result in any material adverse change in the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of the Company or the Stations taken as a whole. To the
Knowledge of the Seller, the Seller and the Company have no reason to believe
(and there is no Basis to have any reason to believe) that any other charge,
complaint, action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Company.
(p) Employees. Section 4(p) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
Company. To the Knowledge of the Seller and the Company, no key employee or
group of employees has any plans to terminate employment with the Company. The
Company is not a party to or bound by any collective bargaining agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. The Company has not committed any unfair
labor practice. The Seller and the Company have no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
(q) Notes and Accounts Receivable. All notes and accounts receivable
of the Company are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are presently current and
collectible, and will be collected with commercially reasonable efforts in
accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Company.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
(s) Employee Benefits. Section 4(s) of the Disclosure Schedule lists
all Employee Benefit Plans that the Company maintains or has maintained, or to
which the Company contributes, or has contributed for the benefit of any current
or former employee of the Company.
(i) Each Employee Benefit Plan (and each related trust or
insurance contract) complies in form and in operation in all respects with
the applicable requirements of ERISA and the Code.
(ii) Each Employee Benefit Plan that is an Employee Pension
Benefit Plan has received a determination from the Internal Revenue
Service that the form of the plan is qualified under Section 401(a) of the
Code, and nothing has occurred since the date of the determination that
would adversely affect the plan's qualified status.
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(iii) All required reports and descriptions (including, where
applicable, Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's,
and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each Employee Benefit Plan. The applicable
requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Sec.
4980(B) have been met with respect to each Employee Welfare Benefit Plan.
All premiums or other payments for all periods have been paid with respect
to each Employee Welfare Benefit Plan that is a group health plan within
the meaning of the Code Sec. 4980(B)(g)(2) and Section 607 of ERISA. All
contributions (including all employer contributions and employee salary
reduction contributions) which are or were due have been paid in a timely
manner to each Employee Benefit Plan.
(iv) There have been no Prohibited Transactions with respect
to any Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any Employee Benefit
Plan.
(v) No charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand with respect to the administration or the
investment of the assets of any Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of any of the Seller
and the Company, threatened. Neither the Seller nor the Company has any
Knowledge of any Basis for any such charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand.
(vi) The Company has delivered to the Buyer correct and
complete copies of (A) the plan documents and summary plan descriptions,
(B) the most recent determination letter received from the Internal
Revenue Service, (C) the most recent Form 5500 Annual Report, and (D) all
related trust agreements, insurance contracts, and other funding
agreements which implement each Employee Benefit Plan.
The Company does not contribute to, has never contributed to, or has never been
required to contribute to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan. The Company has not
incurred, and neither the Seller nor the Company has any reason to expect that
the Company will incur any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any Employee Pension Benefit Plan
that the Company maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to contribute. The Company does
not maintain and has not maintained or contributed, or been required to
contribute to any Employee Pension Benefit Plan that is or was subject to Title
IV of ERISA and/or Employee Welfare Benefit Plan providing health, accident, or
life insurance benefits to former employees, their spouses, or their dependents
(other than in accordance with Code Sec. 4980(B)).
(t) Environment, Health, and Safety.
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(i) The Company has complied in all material respects with all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning the environment,
public health and safety, and employee health and safety, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has been filed or commenced against the Company alleging
any failure to comply with any such law or regulation.
(ii) The Company has no Liability (and there is no Basis
related to the past or present operations, and its respective predecessors
for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Company giving rise
to any Liability) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Federal Water Pollution Control Act of 1972, the
Clean Air Act of 1970, the Safe Drinking Water Act of 1974, the Toxic
Substances Control Act of 1976, the Refuse Act of 1899, or the Emergency
Planning and Community Right-to-Know Act of 1986 (each as amended), or any
other law (or rule or regulation thereunder) of any federal, state, local,
or foreign government (or agency thereof, concerning release or threatened
release of hazardous substances, public health and safety, or pollution or
protection of the environment, or for damage to any site, location, or
body of water (surface or subsurface) or for illness or personal injury.
(iii) The Company has no Liability (and there is no Basis for
any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Seller giving rise to
any Liability) under the Occupational Safety and Health Act, as amended,
or any other law (or rule or regulation thereunder) of any federal, state,
local, or foreign government (or agency thereof) concerning employee
health and safety, or for any illness of or personal injury to any
employee.
(iv) The Company has obtained and has been in compliance with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all federal, state, local, and foreign laws (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety,
worker health and safety, and pollution or protection of the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes.
(v) All properties and equipment used in the business of the
Company have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
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(vi) No pollutant, contaminant, or chemical, industrial,
hazardous, or toxic material or waste ever has been buried, stored,
spilled, leaked, discharged, emitted, or released on any real property
that the Company owns or ever has owned or leases or ever has leased.
(u) Legal Compliance.
(i) The Company has complied in all material respects with all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof), and no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand, or notice
has been filed or commenced against the Company alleging any failure to
comply with any such law or regulation, including those relating to the
employment of labor, employee civil rights, and equal employment
opportunities and relating to antitrust matters.
(ii) The Company has filed in a timely manner all reports,
documents, and other materials it was required to file (and the
information contained therein was correct and complete in all respects)
under all applicable laws (including rules and regulations thereunder).
The Company has possession of all records and documents it was required to
retain under all applicable laws (including rules and regulations
thereunder).
(v) Certain Business Relationships With the Company and Its
Subsidiaries. Except as described in Section 4(v) of the Disclosure Schedules,
none of the Seller and his Affiliates has been involved in any business
arrangement or relationship with the Company within the past twelve (12) months,
and neither the Seller nor any Company Affiliate owns any property or right,
tangible or intangible, which is used in the business of the Company.
(w) Brokers' Fees. The Company has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(x) Advertising Contracts. Section 4(x) of the Disclosure Schedule
lists those Advertising Contracts and the daily value of such Advertising
Contracts as of September 19, 1997. Other than to employees of the Company or as
disclosed in Section 4(x) of the Disclosure Schedule, no commission or other
form of renumeration is paid by the Company with respect to Advertising
Contracts. No party to any Advertising Contract has indicated to the Company
within the past year that it will stop or decrease the rate of advertising.
(y) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
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(a) General. Each of the Parties will use commercially reasonable
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set for in Section 6 below).
(b) Transfer Applications. Within ten (10) business days after the
execution of this Agreement, the Company and the Buyer shall jointly file with
the FCC an application for transfer or control of the Company, including its FCC
Licenses, permits and authorizations pertaining to the Stations from the Seller
to the Buyer (the "Transfer Application"). The costs of the FCC filing fees in
connection with the Transfer Application shall be divided equally between the
Seller and the Buyer. Each Party shall pay their own attorneys' fees. The
Seller, the Company and the Buyer shall thereafter prosecute the Transfer
Application with all reasonable diligence and otherwise use their commercially
reasonable efforts to obtain the grant of the Transfer Application as
expeditiously as practicable (but neither the Seller nor the Buyer shall have
any obligation to satisfy complainants or the FCC by taking any steps which
would have material adverse effect upon the Buyer, the Seller, or the Stations.
If the FCC imposes any condition on any Party to the Transfer Application, such
Party shall use commercially reasonable efforts to comply with such condition;
provided that no such Party shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Buyer, the Seller
or the Stations. The Seller and the Buyer shall jointly oppose any requests for
reconsideration or judicial review of FCC approval of the Transfer Application
and shall jointly request from the FCC an extension of the effective period of
FCC approval of the Transfer Application if the Closing shall not have occurred
prior to the expiration of the original effective period of the FCC Consent.
Nothing in this Section 5(b) shall be construed to limit any Party's right to
terminate this Agreement pursuant to Section 10 of this Agreement.
(c) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will cause the Company to use its commercially
reasonable efforts to obtain any third party consents, that the Buyer reasonably
may request in connection with the matters pertaining to the Company or the
Seller disclosed or required to be disclosed in the Disclosure Schedule. Each of
the Parties will file any notification and report forms and related material
that he or it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act, will use his or its best efforts to obtain an early
termination of the applicable waiting period, and will make further filings
pursuant thereto that may be necessary, proper or advisable. Each of the Parties
will take any additional action that may be necessary, proper, or advisable in
connection with any other notices to, filings with, and authorizations,
consents, and approvals of governments, governmental agencies, and third parties
that it may be required to give, make, or obtain.
(d) Operation of Business. The Seller will not cause or permit the
Company to engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, the Seller will not (and will
not direct the Company to) engage in any practice, take any action, embark on
any course of inaction, or enter into any transaction of the sort described in
Section 4(e) above.
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(e) Employees. Upon notice to the Seller, and at mutually agreeable
times, the Company will permit the Buyer to meet with the Company's employees
prior to the Closing Date. Neither the Seller nor the Company will take any
action to preclude or discourage any of the Company's employees from continuing
employment with the Company. The Seller shall reimburse the Buyer for severance
and other obligations based on the Company's practices at or prior to the
Closing with respect to any employee of the Company whose employment with the
Company terminates within thirty (30) days after the Closing Date.
(f) Advertising Obligations. The Company shall satisfy its air time
obligations under its Advertising Contracts for goods or services ("Barter
Agreements") such that the outstanding aggregate balance owing under all Barter
Agreements as of the Closing Date shall not exceed Ten Thousand Dollars
($10,000) worth of air time. On the Closing Date, the Seller shall deliver to
the Buyer a schedule, certified by an officer of the Company, reflecting the
aggregate outstanding balances under all Barter Agreements in existence as of
the Closing Date.
(g) Operating Statements. The Seller shall deliver to the Buyer, for
the Buyer's informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Stations within ten (10) days
after each such statement is prepared by or for the Company or the Seller.
(h) Contracts. The Company will not without the prior written
consent of the Buyer amend, change, or modify any of the contracts listed on
Section 4(1) of the Disclosure Schedule in any material respect. The Company
will not without prior written consent of the Buyer enter into any new contracts
respecting the Stations or their properties, except (i) Advertising Contracts
which comply with the representations and warranties pertaining to such
contracts set forth in Section 4(1) above; (ii) contracts entered into in the
Ordinary Course of Business which are cancelable on not more than thirty (30)
days' notice without penalty or premium; (iii) contracts entered into in the
Ordinary Course of Business each of which does not involve more than Two
Thousand Dollars ($2,000) or all of which do not involve more than Ten Thousand
Dollars ($10,000) in the aggregate.
(i) Operation of Stations. The Company shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Company
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
(j) Credit and Receivables. The Company will follow its usual and
customary policies with respect to extending credit for Advertising Contracts
and with respect to collecting accounts receivable arising from such extension
of credit.
(k) Preservation of Business. The Seller will cause the Company to
keep its business and properties substantially intact, including its present
operations, physical facilities, working conditions, relationships with lessors,
licensers, advertisers, suppliers, customers, and employees, all of the
confidential information and trade secrets of the Stations, and the FCC
Licenses.
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(l) Full Access and Consultation. The Seller will permit and will
cause the Company to permit representatives of the Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Stations, to all premises, properties, books,
records, contracts, Tax records, and documents of or pertaining to the Company.
The Buyer will use its best efforts to complete its due diligence review of all
such premises, properties, books, records, contracts, Tax records and documents
of or pertaining to the Company within thirty (30) days from the date of this
Agreement. The Seller will cause the Company to consult with the Buyer's
management with a view to informing the Buyer's management as to the operations,
management and business of the Stations.
(m) Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material development affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of the Company. Each Party will give prompt written notice
to the other of any material development affecting the ability of the Parties to
consummate the transactions contemplated by this Agreement. No disclosure by any
Party pursuant to this Section 5(m), however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (and the Seller will not cause
or permit the Company to) (i) solicit, initiate, or encourage the submission of
any proposal or offer from any person relating to any (A) liquidation,
dissolution, or recapitalization, (B) merger or consolidation, (C) acquisition
or purchase of securities or assets, or (D) similar transaction or business
combination involving the Seller; or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
person to do or seek any of the foregoing. The Seller will notify the Buyer
immediately if any person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
(o) Abstract and Title Insurance. The Buyer will obtain and deliver
abstracts with respect to each parcel of real estate that the Company owns and
the leased facility at Saratoga Road, Dubuque, Iowa. The abstract(s) will be
delivered to an attorney of the Buyer's choice for an opinion as to title. With
regard to the real property located in the State of Illinois, the Seller will
assist the Buyer in obtaining an owner's policy issued by a title insurer
reasonably satisfactory to the Buyer in an amount equal to the fair market value
of such real property, insuring title to such real property in the Buyer as of
the Closing subject only to the title exceptions which do not impair the current
use, occupancy or value or the marketability of title of the property and are
disclosed in Section 4(i) or Section 4(j) of the Disclosure Schedule, together
with such endorsements for zoning, contiguity, public access and extended
coverage and such other endorsements as the Buyer reasonably requests. The Buyer
and the Seller shall each pay one-half (1/2) of the cost of such title policies.
(p) Surveys. With respect to each parcel of real property that the
Company owns and as to the leased facility at Saratoga Road, Dubuque, Iowa as to
which a title insurance policy or title opinion is to be procured pursuant to
Section 5(o) above, the Seller will assist the Buyer in the procurement in
preparation for the Closing a current survey of the real property certified to
the Buyer, prepared by a licensed surveyor and conforming to current expanded
ALTA Minimum Detail
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Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey shall not
disclose any survey defect or encroachment from or onto the real property which
has not been cured or insured over prior to the Closing. The Buyer and the
Seller shall each pay one-half (1/2) of the costs of such Surveys.
(q) Environmental Assessments. The Seller will assist the Buyer in
obtaining with respect to each parcel of real estate that the Company owns and
as to the leased facility at Saratoga Road, Dubuque, Iowa as to which a title
insurance policy or title opinion is to be procured pursuant to Section 5(o)
above, a current Phase I environmental site assessment from an environmental
consultant or engineer reasonably satisfactory to the Buyer which shall not
disclose or recommend any action with respect to any condition to be remediated
or investigated or any contamination on the site assessed. The Buyer and the
Seller shall each pay one-half (1/2) of the cost of such environmental site
assessment.
(r) Control of Stations. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Transfer Application. Between the date of this Agreement and the
Closing Date, the Buyer and its employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Company.
(s) Risk of Loss. The risk of loss, damage, or destruction to any of
the assets of the Company shall remain with the Seller until the Closing. In the
event of any such loss, damage, or destruction the Seller will promptly notify
the Buyer of all particulars thereof, stating the cause thereof (if known) and
the extent to which the cost of restoration, replacement and repair of the
assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will repair or replace such assets as soon as
possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Seller's notice to the Buyer, and the Buyer reasonably determines that
the Seller's failure to repair or replace, alone or in the aggregate, would have
a material adverse effect on the operation of the Stations:
(i) the Buyer may elect to terminate this Agreement; or
(ii) the Buyer may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyer, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyer, in which case either Party may terminate this
Agreement; or
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(iii) the Buyer may choose to accept the lost, damaged or
destroyed assets in their "then" condition, together with the Seller's
assignment to the Buyer all rights under any insurance claims covering the
loss, damage or destruction and payment over to the Buyer any proceeds
under any such insurance policies, previously received by the Seller with
respect thereto.
In the event the Closing Date is postponed pursuant to this Section 5(s),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
(t) Payment of Dividends. The Company shall not, without the written
approval of the Buyer (i) pay any dividend or make any distribution on any
Company Share or other security or interest in the Company or any distribution
for the benefit of the Seller, (ii) pay any bonuses or distributions to any
employee or person rendering services to or on behalf of the Company or (iii)
incur any additional Funded Indebtedness; provided, that nothing in this Section
5(t) shall prevent the Company from making expenditures and salary payments in
the Ordinary Course of Business. The Purchase Price will not be adjusted for the
amount of the payments made on Funded Indebtedness between the date of this
Agreement and the Closing.
(u) Wisconsin Tower Site. The Company and the Buyer will cooperate
to identify and purchase a suitable replacement site for the KXGE-FM
transmission tower and to file a construction permit to relocate the KXGE-FM
transmission tower to the site selected, all at the expense of the Buyer.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2
and Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of
his covenants hereunder in all material respects through the Closing;
(iii) the Seller and the Company shall have procured all of
the third party consents specified in Section 5(c) above, the Buyer shall
have received all of the title insurance commitments, and endorsements and
title opinions specified in Section 5(o) above, all of the surveys
specified in Section 5(p) above; and all the Phase I environmental site
assessments described in Section 5(q) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or
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charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or
(C) affect adversely the right of the Buyer to own, operate, or control
the Company Shares, the Company or the Stations (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section 6(a)(i)-(iv)
is satisfied in all respects;
(vi) the Transfer Applications shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
(vii) the Buyer shall have received from counsel to the Seller
an opinion with respect to the matters set forth in Exhibit C attached
hereto, addressed to the Buyer and dated as of the Closing Date;
(viii) subject to Section 7(b), the officers and directors of
the Company shall have tendered written confirmation of their resignation
of service by and for the Company and repaid or satisfied all Liabilities
owed by them to the Company and all shall have released the Company of all
Liabilities owed to them by the Company; and
(ix) all actions in consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by them in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
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Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Transfer Applications shall have been approved
by a Final Order of the FCC and the Buyer shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule; and
(vi) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Seller may waive any condition specified in this Section 6(b) if it executes
a writing so stating at or prior to the Closing.
7. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing:
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below).
(b) Funded Indebtedness. Immediately following the Closing, the
Buyer shall cause to Company to pay in full the Funded Indebtedness;
(c) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Company, each of the other Parties will cooperate with the
contesting or defending Party and its counsel in the contest or defense, make
available his or its personnel, and provide such testimony and access to its
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 8 below).
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(d) Transition. The Seller will not take any action that primarily
is designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of any of the Stations or the
Company from maintaining the same business relationships with the Stations or
the Company after the Closing as it maintained with the Stations or the Company
prior to the Closing. The Seller will refer all customer inquiries relating to
the business of any of the Stations to the Buyer from and after the Closing.
Seller, Affiliate of Seller, will not employ or offer to employ any employee of
the Company (other than members of Seller's family) for a period of three (3)
years after the Closing Date.
(e) Confidentiality. The Seller will treat and hold as confidential
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which are
in his possession. In the event that the Seller is requested or required (by
oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, that Seller will notify the Buyer
promptly of the request or requirement so that the Buyer may seek an appropriate
protective order or waive compliance with the provisions of this Section 7(e).
If, in the absence of a protective order or the receipt of a waiver hereunder,
the Seller is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, that Seller may
disclose the Confidential Information to the tribunal; provided, however, that
the Seller shall use his best efforts to obtain, at the request of the Buyer, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the Buyer
shall designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
(f) Covenant Not to Compete. For a period of three (3) years from
and after the Closing Date, the Seller will not engage directly or indirectly in
the radio broadcast business in any geographic area in which the Company
conducts that business as of the Closing Date; provided, however, that no owner
of less than 1% of the outstanding stock of any publicly-traded corporation
shall be deemed to engage solely by reason thereof in any of its businesses.
Nothing in this Section 7(f) shall prohibit the Seller from participating in
fee-based brokerage for sales of radio stations.
(g) Retainage Adjustment. In the event and to the extent that the
Buyer or the Company may become obligated to pay after the Closing any Liability
for which the Buyer would be entitled to indemnification by the Seller under
Section 8(b) of this Agreement, such amount shall be deducted from the Retainage
Deposit pursuant to the terms of the Retainage Agreement.
8. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the
Seller and the Company contained in Sections 4 and 7 of this Agreement (other
than the representations and warranties of the Seller and the Company contained
in Sections 4(a), 4(b), 4(c), 4(g) and 4(x) hereof) shall survive the Closing
(even if the Buyer knew or had reason to know of any misrepresentation or breach
of warranty at the time of Closing) and continue in full force and effect for
the period of the applicable
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statute of limitations plus ninety (90) days for any Liability associated
therewith. All of the other representations, warranties, and covenants of the
Buyer and the Seller contained in this Agreement (including the representations
and warranties of the Seller contained in Sections 2 and of the Company
contained in Sections 4(a), 4(b), 4(c) and 4(g) hereof) shall survive the
Closing (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty or covenant at the time of Closing) and
continue in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyer. The
Seller agrees to indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by (i) any breach of any of the
Seller's representations, warranties, and covenants contained in this Agreement
(so long as the particular representation, warranty, or covenant survives the
Closing and the Buyer makes a written claim for indemnification within the
applicable survival period); or (ii) the Retained Liabilities.
(c) Indemnification Provisions for the Benefit of the Seller. The
Buyer agrees to indemnify the Seller from and against all Adverse Consequences
the Seller may suffer resulting from, arising out of, relating to, in the nature
of, or caused by (i) the breach of any of the Buyer's representations,
warranties, and covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the Seller makes
a written claim for indemnification within the applicable survival period; or
(ii) the Assumed Liabilities.
(d) Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 8, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is prejudiced. In the
event any Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party
will defend the Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may
retain separate co-counsel at its sole cost and expense (except that the
Indemnifying Party will be responsible for the fees and expenses of the separate
co-counsel to the extent the Indemnified Party concludes reasonably that the
counsel the Indemnifying Party has selected has a conflict of interest), (iii)
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the matter without the written consent of
the Indemnifying Party (not to be withheld unreasonably), and (iv) the
Indemnifying Party will not consent to the entry of any judgment with respect to
the matter, or enter into any settlement which does not include a provision
whereby the plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, without the written consent of the
Indemnified Party (not to be withheld unreasonably). In the event the
Indemnifying Party does not notify the Indemnified Party within 15 days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
is assuming the defense thereof, however, the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in any manner
it reasonably may deem appropriate.
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(e) Specific Performance. Each of the Parties acknowledges and
agrees that the Buyer would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the Buyer shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 11(p) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that money damages would not be an adequate
remedy for a breach of any provision of this Agreement.
(f) Limitation of Liability. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Indemnified Party, in
the aggregate from all indemnifiable events shall exceed Ten Thousand Dollars
($10,000) and indemnification shall be made by the indemnifying party only to
the extent of such excess over Ten Thousand Dollars ($10,000); provided,
however, that the foregoing limitation shall not be applicable to: (i) the
obligations of the Buyer to pay and discharge any of the Assumed Liabilities of
the Company existing from and after the Closing Date; (ii) the obligation of the
Seller to pay and discharge any of the Retained Liabilities of the Company
existing as of the Closing; (iii) the Seller's obligation to deliver clear title
to the Company Shares; (iv) any Liability of the Company other than Liability
for Taxes arising from the Company's exchange of radio stations KATE/KCPI for
radio stations WJOD-FM and KGGY-FM; (v) any Liability of the Company for Taxes
arising from the Company's exchange of radio stations KATE/KCPI for radio
stations WJOD-FM and KGGY-FM net of any tax benefit obtained as a result of the
Internal Revenue Service's recharacterization or adjustment of the exchange
transaction; or (vi) any Lien on the assets of the Company arising from
circumstances existing at the Closing. The Buyer shall have the right to recoup
from any amount due to the Seller any amount due from the Seller under this
Section 8.
(g) Other Indemnification. The indemnification provisions set forth
in Section 8(a), 8(b), 8(c) and 8(d) are in addition to, and not in derogation
of, any statutory or common law remedy any Party may have for breach of
representation, warranty, or covenant.
9. Definitions.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contract" means any arrangement with any third party under
which the Seller has created, incurred, assumed or guaranteed an obligation to
provide advertising or air time on the Station.
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"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assumed Liabilities" means (a) Funded Indebtedness; (b) all unpaid trade
vendor payables incurred in the Ordinary Course of Business representing
services and/or non-Cash benefits incurred in the Ordinary Course of Business
prior to Closing; (c) obligations of the Company under commitments, contracts,
quotes and purchase orders with customers and suppliers entered into in the
Ordinary Course of Business as set forth on Section 4(l) of the Disclosure
Schedule; (d) obligations of the Company under Advertising Contracts as set
forth on Section 4(x) of the Disclosure Schedule; and (e) obligations of the
Company under real property leases as set forth on Section 4(j) of the
Disclosure Schedule. The Assumed Liabilities shall not include the Retained
Liabilities.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(c) above.
"Closing Date" has the meaning set forth in Section 1(c) above.
"Code" means the Internal Revenue Code of 1986, as amended
"Company" has the meaning set forth in the Preface above.
"Company Share" means any share of the Common Stock, par value $.01 per
share, of the Company.
"Confidential Information" means any information concerning the businesses
and affairs of the Company.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other items itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Agreement.
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"Earnest Money Deposit" has the meaning set forth in Section 1(b) above.
"Earnest Money Escrow Agent" means Dubuque Bank & Trust Company.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(b)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Entity" means a corporation, limited liability company, partnership,
limited partnership, limited liability partnership or other entity recognized by
any jurisdiction within the United States.
"ERISA" means the Employee Retirement Income Security Act of 1974 as
amended.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 4(d) above.
"Funded Indebtedness" means the Company's indebtedness for borrowed money
from any source accrued as of the date of this Agreement, in the principal
amount of $2,926,200.53, plus interest thereon to the Closing Date. All such
Funded Indebtedness as of the date is set forth on Section 9 to the Disclosure
Schedule.
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"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 8(d) above.
"Indemnifying Party" has the meaning set forth in Section 8(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (b) copies and tangible embodiments thereof (in whatever
form or medium).
"Joint and Several" has the meaning set forth in Section 10(o) below.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller and the Company
with respect to the operations of the Stations and all applications therefor,
together with any renewals, extension or modifications thereof and additions
thereto.
"Most Recent Balance Sheet" means the balance sheet of the Company as of
the Most Recent Fiscal Year End.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(d)
above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
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"PBGC" means the Pension Benefit Guaranty Corporation.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(b) above.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Requisite Seller" means holders of a majority of the Company Shares.
"Retainage Deposit" has the meaning set forth Section 1(b) above.
"Retainage Agent" means Dubuque Bank & Trust Company.
"Retainage Agreement" has the meaning set forth in Section 1(b) above.
"Retained Liabilities" means (a) any Liability of the Company for unpaid
Taxes (with respect to the Company or otherwise) for periods prior to Closing;
(b) any Liability of the Company for income, transfer, sales, use, and other
Taxes arising in connection with the consummation of the transactions
contemplated hereby; (c) any Liability of the Company for costs and expenses
incurred in connection with this Agreement or the consummation of the
transactions contemplated hereby; (d) any Liability of the Company to the Seller
or any Affiliate or family member of the Seller other than those Liabilities
included in Funded Indebtedness; or (e) any Liability of the Company for any
fine imposed or threatened, after the Closing but relating to events occurring
prior to Closing by a federal, state or local governmental or regulatory agency
for failure to report, register or otherwise comply with applicable law or
regulation.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WDBQ-AM, KLYV-FM and KXGE-FM all licensed by the FCC to operate in Dubuque,
Iowa, and WJOD-FM, licensed by the FCC to operate in Galena, Illinois.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
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"Survey" has the meaning set forth in Section 5(j) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Transfer Application" has the meaning set forth in Section 5(b) above.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach, and the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing in the event
the Buyer is in breach, of any material representation, warranty, or
covenant contained in this Agreement in any material respect in each case
if such breach remains uncured for twenty (20) days after notice of breach
is received from the other party;
(iii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 6(a) hereof (unless the failure results primarily from the Buyer
breaching any representation, warranty, or covenant contained in this
Agreement);
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 6(b) hereof (unless the failure results primarily from the Seller
breaching any representation, warranty, or covenant contained in this
Agreement); or
(v) the Buyer or the Seller may terminate this Agreement if
any Transfer Application is denied by Final Order.
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(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
11. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants
of the Parties contained in this Agreement shall survive the Closing hereunder
as and to the extent provided in Section 8(a).
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that the Buyer may assign all right, title
and interest in, to and under this Agreement to one or more affiliated entities.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
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If to the Seller
before closing: Mr. Philip T. Kelly
Communications Properties, Inc.
5490 Saratoga Road
Dubuque, IA 52002-2593
If to the Seller
after closing: Mr. Philip T. Kelly
1035 Prince Phillip Drive
Dubuque, IA 52003
Copy to: James M. Heckmann, Esq.
1660 Embassy West Drive
Suite 175
Dubuque, IA 52002
If to the Buyer: Cumulus Holdings, Inc.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Copy to: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Illinois.
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(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyer and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 5(b) with regard to the Transfer Application. The Seller will
pay all income taxes, transfer taxes and other recording or similar fees
necessary to vest title to the Company Shares in the Buyer. The Seller agrees
that the Company has not borne nor will bear any of the Seller's costs and
expenses (including any of their legal fees and expenses) in connection with
this Agreement or any of the transactions contemplated hereby.
(m) Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
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(o) The Seller. When the Seller makes a representation, warranty, or
covenant herein, then that representation, warranty, or covenant will be
referred to herein as the "Joint and Several" obligation of the Seller. This
means that Seller will be responsible for the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out of, relating to,
in the nature of, or caused by any breach thereof.
(p) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Chicago, Illinois in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. The Seller hereby appoints Heckmann &
Murphy as his agent and the Buyer hereby appoints CT Corporation as its agent to
receive on its behalf service of copies of the summons and complaint and any
other process that might be served in the action or proceeding. Any Party may
make service on the other Party by sending or delivering a copy of the process
(i) to the Party to be served at the address and in the manner provided for the
giving of notices in Section 10(h) above or (ii) to the Party to be served in
care of its or his agent at the address and in the manner provided for the
giving of notices in Section 10(h) above. Nothing in this Section 10(p),
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law. Each Party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS HOLDINGS, INC.
By:
-----------------------------
Title:
--------------------------
"Buyer"
-------------------------------------------
Philip T. Kelly
"Seller"
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<PAGE>
STOCK PURCHASE AGREEMENT
BETWEEN
CUMULUS HOLDINGS, INC.
AND
JAMES MAURER
November 7, 1997
<PAGE>
EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Form of Retainage Agreement
Exhibit C--Form of Opinion of Counsel to the Seller
<PAGE>
STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into on November 7, 1997, by
and among Cumulus Holdings, Inc., an Illinois corporation (the "Buyer") and
James Maurer (the "Seller"). The Buyer and the Seller are referred to
collectively herein as the "Parties."
The Seller owns all of the outstanding capital stock of Forjay
Broadcasting Corporation (the "Company") which owns and operates radio stations
WYNN-FM and WYNN-AM, each licensed to operate in Florence, South Carolina
(collectively the "Stations").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of the Company in return for Cash.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Purchase and Sale of Company Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of his Company Shares for the consideration
specified below in this Section 1.
(b) Purchase Price. The Buyer agrees to pay to the Seller Four
Million One Hundred Thousand and 00/100 Dollars ($4,100,000.00), plus the
Working Capital Price Adjustment (collectively the "Purchase Price") payable as
follows:
(i) on the date of this Agreement, the Buyer will deposit with
the Earnest Money Escrow Agent the amount of Two Hundred Five Thousand and
00/100 Dollars ($205,000.00) (the "Earnest Money Deposit") in Cash by
delivery of either (A) a clean and irrevocable letter of credit issued by
NationsBank Texas, N.A. for the benefit of the Earnest Money Escrow Agent
or (B) by wire transfer or delivery of other immediately available funds;
(ii) on the Closing Date, the Buyer shall deposit with the
Retainage Agent the amount of Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00) (the "Retainage Deposit") in Cash by wire transfer
or delivery of other immediately available funds;
(iii) on the Closing Date, the Buyer shall pay to the Seller
the amount of Three Million Six Hundred Forty Five Thousand and 00/100
Dollars ($3,645,000.00), less
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interest earned on the Earnest Money Deposit, by wire transfer or delivery
of other immediately available funds; and
(iv) on the date set forth in Section 7(d), the Buyer shall
pay to the Seller the Working Capital Price Adjustment.
The Earnest Money Deposit referenced in this Section 1(i) shall be placed in
escrow with the Escrow Money Escrow Agent pursuant to an escrow agreement in the
form attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), which
requires that the Earnest Money Deposit in the form of cash shall be deposited
by the Earnest Money Escrow Agent with a federally insured financial institution
in an interest bearing account. Any interest earned on the Earnest Money Deposit
shall accrue to the benefit of the Buyer, and, together with the principal
amount of the Earnest Money Deposit, shall be payable to the Seller and credited
against the Purchase Price on the Closing Date. If this Agreement is terminated
without Closing of the transaction contemplated herein, the Earnest Money and
all accrued interest shall be paid to the Buyer or the Seller as provided in the
Earnest Money Escrow Agreement.
The Retainage Deposit referenced in this Section 1(ii) shall be placed in escrow
with the Retainage Agreement pursuant to an escrow agreement in the form
attached hereto as Exhibit B (the "Retainage Agreement"), which requires that
the Retainage Deposit shall be deposited by the Retainage Agent as provided in
the Retainage Agreement. Interest earned on the Retainage Deposit shall accrue
to the benefit of the Seller, and, together with the principal amount of the
Retainage Deposit, shall be payable to the Seller or the Buyer as provided in
the Retainage Agreement.
(c) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of the Stations
in Florence, South Carolina, commencing at 9:00 a.m. local time on the date set
by the Buyer not earlier than the fifth business day or later than the tenth
business day after the FCC approval of the Transfer Application becomes a Final
Order, by which date all other conditions to the obligations of the Parties to
consummate the transactions contemplated hereby will have been satisfied or
waived, or such other date as the Parties may mutually determine (the "Closing
Date").
(d) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6(a) below, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in Section 6(b)
below, (iii) the Seller will deliver to the Buyer stock certificates
representing all of his Company Shares, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) the Buyer will deliver to the Seller the
consideration specified in Section 1(b) above.
2. Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 2 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 2) with respect to himself, herself or itself, except as set forth in
Disclosure Schedule accompanying
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this Agreement and initialed by the Parties (the "Disclosure Schedules")
corresponding to the lettered and numbered sections of this Section 2.
(a) Authorization of Transaction. The Seller has full power and
authority to execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Seller, enforceable in accordance with its terms and conditions. The
Seller need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement, other than
Transfer Assignment Applications described in Section 5(b).
(b) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor the
performance of his obligations hereunder, will (i) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge, or
other restriction of any government, governmental agency, or court to which the
Seller is subject or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which the Seller is a party or by which he is
bound or to which any of his assets is subject.
(c) Brokers' Fees. Other than One Hundred Twelve Thousand and 00/100
Dollars ($112,000.00) of the fees payable by the Seller to The Whittle Agency,
the Seller has no Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which the Buyer could become liable or obligated.
(d) Company Shares. The Seller holds of record and owns beneficially
the number of Company Shares set forth next to his or its name in Section 2(e)
of the Disclosure Schedule, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state securities
laws), claims, Taxes, Security Interests, options, warrants, rights, contracts,
calls, commitments, equities, and demands. The Seller is not a party to any
option, warrant, right, contract, call, put, or other agreement or commitment
providing for the disposition or acquisition of any capital stock of the Company
(other than this Agreement). The Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of any
capital stock of the Company.
3. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
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(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Illinois.
(b) Authorization of Transaction. The Buyer has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Buyer, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Buyer is subject or any provision of the charter or bylaws
of the Buyer or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which either of the Buyer is a party or by
which it is bound or to which any of its assets are subject. Other than with
respect to the Transfer Application, the Buyer does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
(d) Brokers' Fees. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
4. Representations and Warranties Concerning the Company. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 4), except as set forth in the lettered and numbered paragraphs
contained in the Disclosure Schedule corresponding to the lettered and numbered
sections of this Section 4.
(a) Organization, Qualification, and Corporate Power. The Company is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction in
which the nature of its businesses or the ownership or leasing of its properties
requires such qualification. The Company has full corporate power and authority
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it. Section 4(a) of the Disclosure Schedule lists
the directors and officers of the Company. The Seller has delivered to the Buyer
correct and complete copies of the charter and bylaws of the Company (as amended
to date). The minute books containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors, the stock certificate books, and the stock record books of the
Company are correct and complete. The Company is not in default under or in
violation of any provision of its charter or bylaws. The
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Company does not have any Subsidiaries and does not control directly or
indirectly or have any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary of the Company.
(b) Capitalization. The entire authorized capital stock of the
Company consists of ______ Company Shares, of which 40 Company Shares are issued
and outstanding and no Company Shares are held in treasury. All of the issued
and outstanding Company Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the Seller. There are
no outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights, or other agreements or commitments to
which the Company is a party or which are binding upon the Company providing for
the issuance, disposition, or acquisition of any of its capital stock. There are
no outstanding or authorized stock appreciation, phantom stock, or similar
rights with respect to the Company. There are no voting trusts, proxies, or any
other agreements or understandings with respect to the voting of the capital
stock of the Company.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Company is subject or any provision of the charter or
bylaws of the Company or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which the Company is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to that
Transfer Application, the Company need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(d) Financial Statements. Included in Section 4(d) of the Disclosure
Schedules are the following financial statements (collectively the "Financial
Statements") (i) compiled balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1993; December 31, 1994; December 31, 1995 and December 31, 1996
(the "Most Recent Fiscal Year End") for the Company; and (ii) unaudited
statements of income and cash flow for each month during 1995 and 1996 and for
the months ended January 31, February 28, March 31, April 30, May 31, June 30,
July 31 and August 31, 1997 for the Company. The Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby (other than the absence of accruals for income taxes),
are correct and complete, and are consistent with the books and records of the
Company (which books and records are correct and complete). Without limiting the
generality of the foregoing, all material revenues and expenses of the Company
(A) are properly reflected in the Financial Statements, (B) have arisen in the
Ordinary Course of Business, (C) are valid and subject to no counter-claims, and
(D) will be or has been collected or paid at their recorded amounts subject only
to the reserve for bad debts set forth on the face of the Most Recent Balance
Sheets.
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(e) Subsequent Events. Since January 1, 1997, except as set forth in
Section 4(e) of the Disclosure Schedules, there has not been any adverse change
in the assets, Liabilities, business, financial condition, operations, results
of operations, or future prospects of the Company with respect to the operation
of the Stations. Without limiting the generality of the foregoing and with
respect to the operation of the Stations since that date:
(i) the Company has not sold, leased, transferred, or assigned
any of its material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Company has not entered into any contract, lease,
sublease, license, or sublicense (or series of related contracts, leases,
subleases, licenses, and sublicenses) outside the Ordinary Course of
Business;
(iii) no party has accelerated, terminated, modified, or
cancelled any contract, lease, sublease, license, or sublicense (or series
of related contracts, leases, subleases, licenses, and sublicenses)
involving more than $5,000 to which the Company is a party or by which it
is bound;
(iv) no Security Interest has been imposed upon any of the
Company's assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of
Business;
(vi) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of any other
person (or series of related capital investments, loans, and acquisitions)
outside the Ordinary Course of Business;
(vii) the Company has not created, incurred, assumed, or
guaranteed any indebtedness (including capitalized lease obligations)
outside the Ordinary Course of Business other than the obligations of the
Company under the Bonus Agreements;
(viii) the Company has not delayed or postponed (beyond its
normal practice) the payment of accounts payable and other Liabilities;
(ix) the Company has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims)
outside the Ordinary Course of Business;
(x) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
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(xi) the Company has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property or any
action adversely affecting the FCC Licenses or the Stations;
(xii) 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 giving rise to any claim or right
on its part against the person or on the part of the person against it;
(xiii) the Company has not entered into any employment
contract, consulting contract or severance agreement or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xiv) the Company has not granted any increase outside the
Ordinary Course of Business in the base compensation of any of its
directors, officers, and employees;
(xv) the Company has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E) retirement,
(F) medical, hospitalization, life, or other insurance, (G) severance, or
(H) other plan, contract, or commitment for any of its directors,
officers, and employees, or modified or terminated any existing such plan,
contract, or commitment;
(xvi) the Company has not made any other change in employment
terms for any of its directors, officers, and employees;
(xvii) the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xviii) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Company;
(xix) the Company has not altered its credit and collection
policies or its accounting policies;
(xx) the Company has not materially altered the programming,
format or call letters of the Stations or their promotional and marketing
activities;
(xxi) the Company has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in compliance
therewith and with all FCC rules and regulations;
(xxii) there has been no change made or authorized in the
charter or bylaws of the Company;
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<PAGE>
(xxiii) 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 or exercise)
any of its capital stock;
(xxiv) the Company has not declared, set aside, or paid any
dividend or distribution with respect to its capital stock or redeemed,
purchased, or otherwise acquired any of its capital stock;
(xxv) there has been no adverse change in the market share or
Cash flow of the Stations; and
(xxvi) the Company has not committed to any of the foregoing.
(f) Undisclosed Liabilities. The Company has no Liability (and there
is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the Most Recent Fiscal Year End in the
Ordinary Course of Business (none of which relates to any breach of contract,
breach of warranty, tort, infringement, or violation of law or arose out of any
charge, complaint, action, suit, proceeding, hearing, investigation, claim, or
demand).
(g) Tax Matters.
(i) The Company has filed all Tax Returns and returns that it
was required to file or may be required to file. All such Tax Returns that
were filed were correct and complete in all respects, and all such Tax
Returns that will be filed will be correct and complete in all respects.
All Taxes owed by the Company have been paid. The Company is not currently
a party to a pending Tax audit, aware of a threatened Tax audit, or the
beneficiary of any extension of time within which to file any Tax Return.
No claim has ever been made by an authority in a jurisdiction where the
Company does not file reports and returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any of
the assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, creditor, independent contractor, or other third party.
(iii) No Seller or director or officer (or employee
responsible for Tax matters) of the Company has Knowledge that any
authority has or will seek to assess any additional Taxes for any period
for which returns have been filed. There is no dispute or claim concerning
any Tax Liability of the Company either (A) claimed or raised by any
authority in writing or (B) as to which the Company and the directors and
officers (and employees responsible for Tax matters) of the Company has
Knowledge based upon
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<PAGE>
personal contact with any agent of such authority. Section 4(g) of the
Disclosure Schedule lists all federal, state, local, and foreign income
Tax Returns filed with respect to the Company for taxable periods ended on
or after January 1, 1992, indicates those returns that have been audited,
and indicates those returns that currently are the subject of audit. The
Company has delivered to the Buyer correct and complete copies of all
federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since January 1,
1993.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Company is not a party to any Tax allocation or
sharing agreement. The Company has not ever been (or has any Liability for
unpaid Taxes because it once was) a member of an Affiliated Group during
any part of any consolidated return year within any part of a consolidated
return year.
(vi) Section 4(g) of the Disclosure Schedule sets forth the
following information with respect the Company as of the most recent
practicable date: (A) the basis of the Company in its assets; (B) the
amount of any net operating loss, net capital loss, unused investment or
other credit, unused foreign tax, or excess charitable contribution
allocable to the Company; and (C) the amount of any deferred gain or loss
allocable to the Company arising out of any Deferred Intercompany
Transaction.
(vii) The unpaid Taxes of the Company do not exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth on the face of the Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company in
filing its Tax Returns; provided, that the financial statements do not
reflect accruals for federal, state and local income taxes of the Company.
(h) Tangible Assets. Section 4(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Stations. The Company owns or leases all tangible assets necessary for the
conduct of the operation and business of the Stations as presently conducted and
as presently proposed to be conducted. Each such tangible asset is free from
defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is used.
To the Knowledge of the Seller, no such tangible asset is in need of
replacement.
(i) Owned Real Property. Section 4(i) of the Disclosure Schedule
lists and describes briefly all real property that the Company owns. With
respect to each such parcel of owned real property:
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(i) the Company has good and marketable title to the parcel of
real property, free and clear of any Security Interest, easement,
covenant, or other restriction, (including but not limited to leases or
other agreements granting to any party the right of use or occupancy of
and options or rights of first refusal to purchase) except for recorded
easements, covenants, and other restrictions which do not impair the
current use, occupancy, or value, or the marketability of title, of the
property subject thereto;
(ii) there are no (A) pending or, to the Knowledge of the
Seller and the Company, threatened condemnation proceedings relating to
the property; (B) pending or, to the Knowledge of the Seller and the
Company, threatened litigation or administrative actions relating to the
property; or (C) other matters affecting occupancy, or value thereof;
(iii) the legal description for the parcel contained in the
deed thereof describes such parcel fully and adequately, the buildings,
towers, antennae and improvements are located within the boundary lines of
the described parcels of land, are not in violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties or
buildings or improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications), and do not
encroach on any easement which may burden the land, the land does not
serve any adjoining property for any purpose inconsistent with the use of
the land, the property is not located within any flood plain or subject to
any similar type restriction for which any permits or licenses necessary
to the use thereof have not been obtained, and access to the property is
provided by paved public right-of-way with adequate curb cuts available;
(iv) all facilities have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been operated
and maintained in accordance with applicable laws, rules, and regulations;
(v) there are no parties (other than the Seller) in possession
of the parcel of real property, other than tenants under any leases
disclosed in Section 4(j) of the Disclosure Schedule who are in possession
of space to which they are entitled, no leases, subleases or other
agreements granting to any party any right of use or occupancy or option
or right of refusal with respect to any parcel of real property;
(vi) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of
such facilities, including gas, electricity, water, telephone, sanitary
sewer, and storm sewer, all of which services are adequate in accordance
with all applicable laws, ordinances, rules, and regulations and are
provided via public roads or via permanent, irrevocable, appurtenant
easements benefitting the parcel of real property; and
(vii) except as set forth on Section 4(i) of the Disclosure
Schedule, each parcel of real property abuts on and has direct vehicular
access to a public road or access
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<PAGE>
to a public road via a permanent, irrevocable, appurtenant easement
benefitting the parcel of real property.
(j) Real Property Leases. Section 4(j) of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to the
Company. Section 4(j) of the Disclosure Schedule also identifies the leased or
subleased properties for which title insurance policies are to be procured in
accordance with Section 6(i) below. The Company has delivered to the Buyer
correct and complete copies of the leases and subleases listed in Section 4(j)
of the Disclosure Schedule (as amended to date). With respect to each lease and
sublease listed in Section 4(j) of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing, will
continue to be, legal, valid, binding, enforceable, and in full force and
effect;
(ii) no party to the lease or sublease is in breach or default
(or has repudiated any provision thereof), and no event has occurred
which, with notice or lapse of time, would constitute a breach or default
or permit termination, modification, or acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above are true and
correct with respect to the underlying lease;
(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vi) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses,
permits and zoning approvals) required in connection with the operation
thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations;
(vii) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of
said facilities; and
(viii) the owner of the facility leased or subleased has good
and marketable title to the parcel of real property, free and clear of any
Security Interest, easement, covenant, or other restriction, except for
recorded easements, covenants, and other restrictions impair the current
use, occupancy, or value, or the marketability of title, of the property
subject thereto.
(k) Intellectual Property. The Company owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation
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of the businesses of the Company as presently conducted and as presently
proposed to be conducted. Each item of Intellectual Property owned or used by
the Company immediately prior to the Closing hereunder will be owned or
available for use by the Buyer on identical terms and conditions immediately
subsequent to the Closing hereunder. The Company has taken all necessary or
desirable action to protect each item of Intellectual Property that it owns or
uses.
(i) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Company has never received any
charge, complaint, claim, or notice alleging any such interference,
infringement, misappropriation, or violation. No third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of any of the Company.
(ii) Section 4(k) of the Disclosure Schedule identifies each
patent, trademark or copyright registration which has been issued to the
Seller or the Company with respect to any of his, her or its Intellectual
Property, identifies each pending patent, trademark or copyright
application for registration which the Seller or the Company has made with
respect to any of his, her or its Intellectual Property, and identifies
each license, agreement, or other permission which the Seller or the
Company has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). The Company has
delivered to the Buyer correct and complete copies of all such patents,
trademarks or copyright registrations, applications, licenses, agreements,
and permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. With respect
to each item of Intellectual Property that the Seller or the Company owns:
(A) the Seller or the Company possesses all right, title, and
interest in and to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of
the Seller and the Company, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item;
and
(D) the Seller or the Company has not ever agreed to indemnify
any person or entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iii) Section 4(k) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the Company
uses pursuant to license, sublicense, agreement, or permission. The Company has
supplied the Buyer with
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correct and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each such item of used
Intellectual Property:
(A) the license, sublicense, agreement, or permission covering
the item is, and following the Closing will continue to be on
identical terms, legal, valid, binding, enforceable, and in full
force and effect;
(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated any provision
thereof), and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and
correct with respect to the underlying license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation,
injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of
the Seller and the Company, is threatened which challenges the
legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(F) the Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(l) Contracts. Other than Advertising Contracts, Section 4(l) of the
Disclosure Schedule lists the contracts, agreements, and other written
arrangements to which the Company is a party and either involving payment in
excess of One Thousand Dollars ($1,000) per year or not entered into in the
Ordinary Course of Business. The Company has delivered to the Buyer a correct
and complete copy of each written arrangement listed in Section 4(l) of the
Disclosure Schedule (as amended to date). With respect to each written
arrangement so listed:
(i) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the written arrangement will continue to be legal, valid,
binding, and enforceable and in full force and effect on identical terms
following the Closing;
(iii) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification, or acceleration, under the
written arrangement; and
(iv) no party has repudiated any provision of the written
arrangement.
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The written arrangement listed in Section 4(l) of the Disclosure Schedule are
all of the written arrangements necessary for the conduct of the operation and
business of the Stations as presently conducted and proposed to be conducted.
The Company is not a party to any verbal contract, agreement, or other
arrangement which, if reduced to written form, would be required to be listed in
Section 4(l) of the Disclosure Schedule under the terms of this Section 4(l).
(m) FCC Licenses and Compliance with FCC Requirements.
(i) All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies,
including, without limitation, the FCC Licenses, used or useful in the
operation of the Stations as they are now being operated are detailed in
Section 4(m) of the Disclosure Schedules and are in full force and effect,
are unimpaired by any acts or omissions of the Seller, the Company or the
Company's employees or agents, and are free and clear of any restrictions
which might limit the full operation of the Stations. Except as set forth
in Section 4(m) of the Disclosure Schedules, no condition exists or event
has occurred that permits, or after notice or lapse of time, or both,
would permit, the revocation or termination of any such license, permit,
consent, franchise, or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction or
limitation upon the operation of the Stations as now conducted. Except as
set forth in Section 4(m) of the Disclosure Schedules, the Seller and the
Company are not aware of any reason why the FCC licenses might not be
renewed in the ordinary course or revoked.
(ii) The Stations are each in compliance with the FCC's policy
on exposure to radio frequency radiation. No renewal of any FCC License
would constitute a major environmental action under the FCC's rules or
policies. Access to the Station's transmission facilities is restricted in
accordance with the policies of the FCC.
(iii) Except as set forth in Section 4(m) of the Disclosure
Schedule, to the best of the Knowledge of the Seller and the Company, the
Company is not the subject of any FCC or other governmental investigation
or any notice of violation or order, or any material complaint, objection,
petition to deny, or opposition issued by or filed with the FCC or any
other governmental authority in connection with the operation of or
authorization for the Stations, and there are no proceedings (other than
rulemaking proceedings of general applicability) before the FCC or any
other governmental authority that could adversely affect any of the FCC
Licenses or the authorizations listed in Section 4(m) of the Disclosure
Schedule.
(iv) The Company has filed with the FCC and all other
governmental authorities having jurisdiction over the Stations all
material reports, applications, documents, instruments, and other
information required to be filed, and will continue to make such filings
through the Closing Date.
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<PAGE>
(n) Insurance. Section 4(n) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which the Company is a party, a
named insured, or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing Date; (C) neither the Company
nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination, modification, or acceleration, under the
policy; and (D) no party to the policy has repudiated any provision thereof. The
Company has been covered during the past three (3) years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during that three-year period. Section 4(n) of the Disclosure Schedule describes
any self-insurance arrangements affecting the Company.
(o) Litigation. Section 4(o) of the Disclosure Schedule sets forth
each instance in which the Company: (i) is subject to any unsatisfied judgement,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller and the Company, is threatened to be made a party to any
charge, complaint, action, suit, proceeding, hearing, or investigation of or in
any court or quasijudicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 4(o) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Company or the Stations taken as a whole.
To the Knowledge of the Seller, the Seller and the Company have no reason to
believe (and there is no Basis to have any reason to believe) that any other
charge, complaint, action, suit, proceeding, hearing, or investigation may be
brought or threatened against the Company.
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(p) Employees. Section 4(p) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
Company. To the Knowledge of the Seller and the Company, no key employee or
group of employees has any plans to terminate employment with the Company. The
Company is not a party to or bound by any collective bargaining agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. The Company has not committed any unfair
labor practice. The Seller and the Company have no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
(q) Notes and Accounts Receivable. All notes and accounts receivable
of the Company are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are presently current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
(s) Employee Benefits. Section 4(s) of the Disclosure Schedule lists
all Employee Benefit Plans that the Company maintains or has maintained, or to
which the Company contributes, or has contributed for the benefit of any current
or former employee of the Company. Each Employee Benefit Plan so listed is an
Employee Welfare Benefit Plan and none is an Employee Pension Benefit Plan.
(i) Each Employee Benefit Plan (and each related trust or
insurance contract) complies in form and in operation in all respects with
the applicable requirements of ERISA and the Code.
(ii) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to
each Employee Benefit Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Sec. 4980(B) have been met with respect to
each Employee Welfare Benefit Plan. All premiums or other payments for all
periods have been paid with respect to each Employee Welfare Benefit Plan
that is a group health plan within the meaning of the Code Sec.
4980(B)(g)(2) and Section 607 of ERISA.
(iii) There have been no Prohibited Transactions with respect
to any Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any Employee Benefit
Plan.
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(iv) No charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand with respect to the administration or the
investment of the assets of any Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of any of the Seller
and the Company, threatened. None of the Seller and the Company has any
Knowledge of any Basis for any such charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand.
(v) The Company has delivered to the Buyer correct and
complete copies of (A) the plan documents and summary plan descriptions,
(B) the most recent determination letter received from the Internal
Revenue Service, (C) the most recent Form 5500 Annual Report, and (D) all
related trust agreements, insurance contracts, and other funding
agreements which implement each Employee Benefit Plan.
The Company does not contribute to, has never contributed to, or has never been
required to contribute to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan. The Company has not
incurred, and neither the Seller nor the Company has any reason to expect that
the Company will incur any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any Employee Pension Benefit Plan
that the Company maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to contribute. The Company does
not maintain and has not maintained or contributed, or been required to
contribute to any Employee Pension Benefit Plan or Employee Welfare Benefit Plan
providing health, accident, or life insurance benefits to former employees,
their spouses, or their dependents (other than in accordance with Code Sec.
4980(B)).
(t) Environment, Health, and Safety.
(i) The Company has complied in all material respects with all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning the environment,
public health and safety, and employee health and safety, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has been filed or commenced against the Company alleging
any failure to comply with any such law or regulation.
(ii) To the Knowledge of the Seller, the Company has no
Liability (and there is no Basis related to the past or present
operations, and its respective predecessors for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against the Seller giving rise to any Liability) under
the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act of 1976, the Federal
Water Pollution Control Act of 1972, the Clean Air Act of 1970, the Safe
Drinking Water Act of 1974, the Toxic Substances Control Act of 1976, the
Refuse Act of 1899, or the Emergency Planning and Community Right-to-Know
Act of 1986 (each as amended), or any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign government (or agency
thereof, concerning release or threatened release of hazardous substances,
public health
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and safety, or pollution or protection of the environment, or for damage
to any site, location, or body of water (surface or subsurface) or for
illness or personal injury.
(iii) To the Knowledge of the Seller, the Company has no
Liability (and there is no Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand against the Seller giving rise to any Liability) under the
Occupational Safety and Health Act, as amended, or any other law (or rule
or regulation thereunder) of any federal, state, local, or foreign
government (or agency thereof) concerning employee health and safety, or
for any illness of or personal injury to any employee.
(iv) To the Knowledge of the Seller, the Company has obtained
and has been in compliance with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and
has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all federal, state, local, and foreign
laws (including rules, regulations, codes, plans, judgments, orders,
decrees, stipulations, injunctions, and charges thereunder) relating to
public health and safety, worker health and safety, and pollution or
protection of the environment, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
(v) To the Knowledge of the Seller, all properties and
equipment used in the business of the Company have been free of asbestos,
PCB's, methylene chloride, trichloroethylene, 1, 2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances.
(vi) To the Knowledge of the Seller, no pollutant,
contaminant, or chemical, industrial, hazardous, or toxic material or
waste ever has been buried, stored, spilled, leaked, discharged, emitted,
or released on any real property that the Company owns or ever has owned
or leases or ever has leased.
(u) Legal Compliance.
(i) The Company has complied in all material respects with all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof), and no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand, or notice
has been filed or commenced against the Company alleging any failure to
comply with any such law or regulation, including those relating to the
employment of labor, employee civil rights, and equal employment
opportunities and relating to antitrust matters.
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(ii) To the Knowledge of the Seller, the Company has filed in
a timely manner all reports, documents, and other materials it was
required to file (and the information contained therein was correct and
complete in all respects) under all applicable laws (including rules and
regulations thereunder). The Company has possession of all records and
documents it was required to retain under all applicable laws (including
rules and regulations thereunder).
(v) Certain Business Relationships With the Company and Its
Subsidiaries. Except as described in Section 4(v) of the Disclosure Schedules,
neither the Seller nor his Affiliates has been involved in any business
arrangement or relationship with the Company within the past twelve (12) months,
and neither the Seller nor his Affiliates owns any property or right, tangible
or intangible, which is used in the business of the Company.
(w) Brokers' Fees. The Company has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(x) Advertising Contracts. Section 4(x) of the Disclosure Schedule
lists those Advertising Contracts and the daily value of such Advertising
Contracts as of November 3, 1997. Other than to employees of the Company or as
disclosed in Section 4(x) of the Disclosure Schedule, no commission or other
form of renumeration is paid by the Company with respect to Advertising
Contracts. No party to any Advertising Contract has indicated to the Company
within the past year that it will stop or decrease the rate of advertising.
(y) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use commercially reasonable
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set for in Section 6 below).
(b) Transfer Applications. Within ten (10) business days after the
execution of this Agreement, the Company and the Buyer shall jointly file with
the FCC an application for transfer or control of the Company, including its FCC
Licenses, permits and authorizations pertaining to the Stations from the Seller
to the Buyer (the "Transfer Application"). The costs of the FCC filing fees in
connection with the Transfer Application shall be divided equally between the
Seller and the Buyer. Each Party shall pay their own attorneys' fees. The
Seller, the Company and the Buyer shall thereafter prosecute the Transfer
Application with all reasonable diligence and otherwise use their commercially
reasonable efforts to obtain the grant of the Transfer Application as
expeditiously as practicable (but neither the Seller nor the Buyer shall have
any
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obligation to satisfy complainants or the FCC by taking any steps which would
have material adverse effect upon the Buyer, the Seller, or the Stations. If the
FCC imposes any condition on any Party to the Transfer Application, such Party
shall use commercially reasonable efforts to comply with such condition;
provided that no such Party shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Buyer, the Seller
or the Stations. The Seller and the Buyer shall jointly oppose any requests for
reconsideration or judicial review of FCC approval of the Transfer Application
and shall jointly request from the FCC an extension of the effective period of
FCC approval of the Transfer Application if the Closing shall not have occurred
prior to the expiration of the original effective period of the FCC Consent.
Nothing in this Section 5(b) shall be construed to limit any Party's right to
terminate this Agreement pursuant to Section 10 of this Agreement.
(c) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will cause the Company to use its commercially
reasonable efforts to obtain any third party consents, that the Buyer reasonably
may request in connection with the matters pertaining to the Company or the
Seller disclosed or required to be disclosed in the Disclosure Schedule. Each of
the Parties will file any notification and report forms and related material
that he or it may be required to file Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the Hart-Scott-Rodino
Act, will use his or its best efforts to obtain an early termination of the
applicable waiting period, and will make further filings pursuant thereto that
may be necessary, proper or advisable. Each of the Parties will take any
additional action that may be necessary, proper, or advisable in connection with
any other notices to, filings with, and authorizations, consents, and approvals
of governments, governmental agencies, and third parties that it may be required
to give, make, or obtain.
(d) Operation of Business. The Seller will not cause or permit the
Company to engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction outside the Ordinary Course of Business,
other than the obligations of the Company under the Bonus Agreements and other
than a distribution to the Seller at Closing of all Cash and accounts
receivable, the automobile owned by the Company and the life insurance policy on
the life of James Maurer (the purchase price will be reduced by the equity value
of the automobile and the cash value of the life insurance policy and the Seller
assumes all Liability associated with the automobile and the life insurance
policy). Without limiting the generality of the foregoing, the Seller will not
(and will not direct the Company to) engage in any practice, take any action,
embark on any course of inaction, or enter into any transaction of the sort
described in Section 4(e) above.
(e) Employees. Upon notice to the Seller, and at mutually agreeable
times, the Company will permit the Buyer to meet with the Company's employees
prior to the Closing Date. Neither the Seller nor the Company will take any
action to preclude or discourage any of the Company's employees from continuing
employment with the Company. The Seller shall reimburse the Buyer for severance
and other obligations based on the Company's past policies and practices as of
or prior to the Closing with respect to any employee of the Company whose
employment with the Company terminates within sixty (60) days after the Closing
Date.
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<PAGE>
(f) Advertising Obligations. The Company shall satisfy its air time
obligations under its Advertising Contracts for goods or services ("Barter
Agreements") such that the outstanding aggregate balance owing under all Barter
Agreements as of the Closing Date shall not exceed Five Thousand Dollars
($5,000) worth of air time. On the Closing Date, the Seller shall deliver to the
Buyer a schedule, certified by an officer of the Company, reflecting the
aggregate outstanding balances under all Barter Agreements in existence as of
the Closing Date.
(g) Operating Statements. The Seller shall deliver to the Buyer, for
the Buyer's informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Stations with ten (10) days
after each such statement is prepared by or for the Company or the Seller.
(h) Contracts. The Company will not without the prior written
consent of the Buyer amend, change, or modify any of the contracts listed on
Section 2(1) of the Disclosure Schedule in any material respect. The Company
will not without prior written consent of the Buyer enter into any new contracts
respecting the Stations or their properties, except (i) Advertising Contracts
which comply with the representations and warranties pertaining to such
contracts set forth in Section 2(1) above; (ii) contracts entered into in the
Ordinary Course of Business which are cancelable on not more than thirty (30)
days' notice without penalty or premium; (iii) contracts entered into in the
Ordinary Course of Business each of which does not involve more than One
Thousand Dollars ($1,000) or all of which do not involve more than Five Thousand
Dollars ($5,000) in the aggregate.
(i) Operation of Stations. The Company shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Company
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
(j) Credit and Receivables. The Company will follow its usual and
customary policies with respect to extending credit for Advertising Contracts
and with respect to collecting accounts receivable arising from such extension
of credit.
(k) Preservation of Business. The Seller will cause the Company to
keep its business and properties substantially intact, including its present
operations, physical facilities, working conditions, relationships with lessors,
licensers, advertisers, suppliers, customers, and employees, all of the
confidential information and trade secrets of the Stations, and the FCC
Licenses.
(l) Full Access and Consultation. The Seller will permit and will
cause the Company to permit representatives of the Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Stations, to all premises, properties, books,
records, contracts, Tax records, and documents of or pertaining to the Company.
The Buyer will use its best efforts to complete its due diligence review of all
such premises, properties, books, records, contracts, Tax records and documents
of or pertaining to the
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Company within sixty (60) days from the date of this Agreement. The Seller will
cause the Company to consult with the Buyer's management with a view to
informing the Buyer's management as to the operations, management and business
of the Stations.
(m) Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material development affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of the Company. Each Party will give prompt written notice
to the other of any material development affecting the ability of the Parties to
consummate the transactions contemplated by this Agreement. No disclosure by any
Party pursuant to this Section 5(g), however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (and the Seller will not cause
or permit the Company to) (i) solicit, initiate, or encourage the submission of
any proposal or offer from any person relating to any (A) liquidation,
dissolution, or recapitalization, (B) merger or consolidation, (C) acquisition
or purchase of securities or assets, or (D) similar transaction or business
combination involving any of the Seller; or (ii) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
person to do or seek any of the foregoing. The Seller will notify the Buyer
immediately if any person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
(o) Title Insurance. The Seller will assist the Buyer in obtaining
with respect to each parcel of real estate that the Company owns, leases or
subleases an owner's or leasehold owner's policy (as appropriate) issued by a
title insurer reasonably satisfactory to the Buyer, in an amount equal to the
fair market value of such real property (including all improvements located
thereon), insuring title to such real property in the Buyer as of the Closing
subject only to the title exceptions which do not impair the current use,
occupancy or value or the marketability of title of the property and are
disclosed in Section 4(i) or Section 4(j) of the Disclosure Schedule, together
with such endorsements for zoning, contiguity, public access and extended
coverage and such other endorsements as the Buyer reasonably requests. The Buyer
and the Seller will each pay one-half (1/2) of the costs of these title
policies.
(p) Surveys. With respect to each parcel of real property that the
Company owns, leases, or subleases, and as to which a title insurance policy is
to be procured pursuant to Section 5(o) above, the Seller will assist the Buyer
in the procurement in preparation for the Closing a current survey of the real
property certified to the Buyer, prepared by a licensed surveyor and conforming
to current expanded ALTA Minimum Detail Requirements for Land Title Surveys,
disclosing the location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, and other matters shown customarily on such surveys,
and showing access affirmatively to public streets and roads (the "Survey"). The
Survey shall not disclose any survey defect or encroachment from or onto the
real property which has not been cured or insured over prior to the Closing. The
Buyer and Seller will each pay one-half the cost of these surveys.
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<PAGE>
(q) Environmental Assessments. The Seller will assist the Buyer in
obtaining, with respect to each parcel of real estate that the Company owns,
leases or subleases and as to which a title insurance policy is to be procured
pursuant to Section 5(o) above, a current Phase I environmental site assessment
from an environmental consultant or engineer reasonably satisfactory to the
Buyer which shall not disclose or recommend any action with respect to any
condition to be remediated or investigated or any contamination on the site
assessed. The Buyer and the Seller will each pay one-half (1/2) of the costs of
these environmental assessments.
(r) Control of Stations. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Transfer Application. Between the date of this Agreement and the
Closing Date, the Buyer and its employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Company.
(s) Risk of Loss. The risk of loss, damage, or destruction to any of
the assets of the Company shall remain with the Seller until the Closing. In the
event of any such loss, damage, or destruction the Seller will promptly notify
the Buyer of all particulars thereof, stating the cause thereof (if known) and
the extent to which the cost of restoration, replacement and repair of the
assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will repair or replace such assets as soon as
possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Seller's notice to the Buyer, and the Buyer determines that the Seller's
failure to repair or replace, alone or in the aggregate, would have a material
adverse effect on the operation of the Stations:
(i) the Buyer may elect to terminate this Agreement; or
(ii) the Buyer may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyer, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyer, in which case either Party may terminate this
Agreement; or
(iii) the Buyer may choose to accept the lost, damaged or
destroyed assets in their "then" condition, together with the Seller's
assignment to the Buyer all rights under any insurance claims covering the
loss, damage or destruction and payment over to the Buyer any proceeds
under any such insurance policies, previously received by the Seller with
respect thereto.
In the event the Closing Date is postponed pursuant to this Section 5(s),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
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<PAGE>
(t) Bonus Agreements. The Company shall enter into the Bonus
Agreements.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2
and Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) the Seller and the Company shall have procured all of
the third party consents specified in Section 5(c) above, all of the title
insurance commitments, and endorsements specified in Section 5(o) above,
all of the surveys specified in Section 5(p) above; and all the Phase I
environmental site assessments described in Section 5(q) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyer to own, operate, or control the Company Shares, the
Company or the Stations (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section 6(a)(i)-(iv)
is satisfied in all respects;
(vi) the Transfer Applications shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
(vii) the Buyer shall have received from counsel to the Seller
an opinion with respect to the matters set forth in Exhibit C attached
hereto, addressed to the Buyer and dated as of the Closing Date; and
(viii) the officers and directors of the Company shall have
tendered written confirmation of their resignation of service by and for
the Company and repaid or satisfied all Liabilities to the Company and
shall have released the Company of all Liabilities;
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(ix) the Seller and the Company shall have paid or obtained
the release of all Liabilities of the Company existing at the Closing Date
including, but not limited to, indebtedness for borrowed money and trade
accounts payable and all Liabilities to Seller;
(x) the Company shall have entered into the Bonus Agreements;
and
(xi) all actions in consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by them in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Transfer Applications shall have been approved
by a Final Order of the FCC and the Buyer shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vi) the Company shall have entered into the Bonus Agreements;
and
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(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Seller may waive any condition specified in this Section 6(b) if it executes
a writing so stating at or prior to the Closing.
7. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing:
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Company, each of the other Parties will cooperate with the
contesting or defending Party and its counsel in the contest or defense, make
available his or its personnel, and provide such testimony and access to its
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 8 below).
(c) Transition. The Seller will not take any action that primarily
is designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of any of the Stations or the
Company from maintaining the same business relationships with the Stations or
the Company after the Closing as it maintained with the Stations or the Company
prior to the Closing. The Seller will refer all customer inquiries relating to
the business of any of the Stations to the Buyer from and after the Closing. The
Seller and no Affiliate of Seller will employ or offer to employ any employee of
the Company for a period of three (3) years after the Closing Date. Buyer shall
retain the books and business records of the Company according to its record
retention policy. No later than thirty (30) days prior to the date on which the
Buyer intends to discard the documents of the Company the related to the
Stations, the Buyer will give written notice to the Seller of its intention to
discard the documents and will transfer to the Seller upon request of the Seller
and at the Seller's expense, any documents related to the Stations.
(d) Working Capital Purchase Price Adjustment. At the Closing, the
Seller will deliver to the Buyer a schedule of the accounts receivable of the
Stations owing to the Seller as of the close of business on the Closing Date.
The Buyer agrees to use commercially reasonable
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efforts in the ordinary course of business (but without responsibility to
institute legal or collection proceedings) to collect such accounts receivable
during the 120-day period following the Closing Date from any advertiser. The
Buyer shall apply said moneys to the oldest outstanding balance due on the
particular account, except in the case of a "disputed" account receivable. For
purposes of this Section 7(d), a "disputed" account receivable means one which
the account debtor refuses to pay because he asserts that the money is not owed
or the amount is incorrect. In the case of such a disputed account, the Buyer
shall immediately assign the account to the Seller prior to expiration of the
120-day period following the Closing Date. If the Buyer returns a disputed
account to the Seller, the Buyer shall have no further responsibility for its
collection and may accept payment from the account debtor for advertising
carried on any of the Stations after the Closing Date. At the end of the 120-day
period following the Closing Date, the Buyer will assign to the Seller all of
the accounts receivable of the Stations as of the Closing Date owing to the
Seller which have not yet been collected, and the Buyer will thereafter have no
further responsibility with respect to the collection of such receivables. At
the end of the 120-day period following the Closing Date, the Buyer will pay to
the Seller as the purchase price for such collected accounts an amount (the
"Working Capital Price Adjustment") equal to the aggregate collections of
accounts receivable of the Stations as of the Closing Date, plus any Cash of the
Company on hand as of the Closing Date, less the aggregate amount of any
Liabilities of Seller as of the Closing Date paid by the Seller after the
Closing Date.
(e) Confidentiality. The Seller will treat and hold as confidential
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which are
in his or its possession. In the event that any of the Seller is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Company will notify the
Buyer promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 7(e). If, in the absence of a protective order or the receipt of a
waiver hereunder, the Seller is, on the advice of counsel, compelled to disclose
any Confidential Information to any tribunal or else stand liable for contempt,
that Company may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing Company shall use his or its best efforts
to obtain, at the request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
(f) Covenant Not to Compete. For a period of three (3) years from
and after the Closing Date, the Seller will not engage directly or indirectly
the radio broadcast business in any geographic area in which the Company
conducts that business as of the Closing Date; provided, however, that no owner
of less than 1% of the outstanding stock of any publicly-traded corporation
shall be deemed to engage solely by reason thereof in any of its businesses.
Furthermore, the Seller will not take any action primarily designed or intended
to have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the
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Company or the Seller from maintaining the same business relationship with the
Company or the Buyer after the Closing as it maintained with the Company or the
Seller prior to Closing. The Seller will refer all inquiries relating to the
Company to the Buyer from and after the Closing. No Seller and no one affiliated
with the Seller will employ or offer to employ any employee of the Company for a
period of three years after the Closing Date.
(g) Retainage Adjustment. In the event and to the extent that the
Buyer or the Company may become obligated to pay after the Closing any Liability
of the Company that accrued prior to the Closing, such amount shall be deducted
from the Retainage Deposit pursuant to the terms of the Retainage Agreement.
8. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the
Seller and the Company contained in Section 4 of this Agreement (other than the
representations and warranties of the Seller contained in Section 2 and of the
Company contained in Sections 4(a), 4(b), 4(c) and 4(x) hereof) shall survive
the Closing (even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for the period of 18 months thereafter, except that any
representation or warranty relating to Buyer's freedom from liability to pay a
Liability of Seller shall continue in full force and effect for the period of
the applicable statute of limitations plus ninety (90) days for any Liability
associated therewith. All of the other representations, warranties, and
covenants of the Seller contained in Section 2 and of the Company contained in
Sections 4(a), 4(b), 4(c) and 4(x) hereof) shall survive the Closing (even if
the damaged Party knew or had reason to know of any misrepresentation or breach
of warranty or covenant at the time of Closing) and continue in full force and
effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyer. The
Seller agrees to indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by (i) any breach of any of the
Seller's representations, warranties, and covenants contained in this Agreement
(so long as the particular representation, warranty, or covenant survives the
Closing and the Buyer makes a written claim for indemnification within the
applicable survival period); or (ii) any Liability of the Company existing as of
the Closing, including, but not limited to accounts payable.
(c) Indemnification Provisions for the Benefit of the Seller. The
Buyer agrees to indemnify the Seller from and against the entirety of any
Adverse Consequences the Seller may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the breach of any of the Buyer's
representations, warranties, and covenants contained in this Agreement (so long
as the particular representation, warranty, or covenant survives the Closing and
the Seller make a written claim for indemnification within the applicable
survival period).
(d) Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 8, then the
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Indemnified Party shall notify the Indemnifying Party thereof promptly;
provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party from any
liability or obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is damaged. In the event any Indemnifying Party
notifies the Indemnified Party within fifteen (15) days after the Indemnified
Party has given notice of the matter that the Indemnifying Party is assuming the
defense thereof, (i) the Indemnifying Party will defend the Indemnified Party
against the matter with counsel of its choice reasonably satisfactory to the
Indemnified Party, (ii) the Indemnified Party may retain separate co-counsel at
its sole cost and expense (except that the Indemnifying Party will be
responsible for the fees and expenses of the separate co-counsel to the extent
the Indemnified Party concludes reasonably that the counsel the Indemnifying
Party has selected has a conflict of interest), (iii) the Indemnified Party will
not consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Indemnifying Party (not
to be withheld unreasonably), and (iv) the Indemnifying Party will not consent
to the entry of any judgment with respect to the matter, or enter into any
settlement which does not include a provision whereby the plaintiff or claimant
in the matter releases the Indemnified Party from all Liability with respect
thereto, without the written consent of the Indemnified Party (not to be
withheld unreasonably). In the event the Indemnifying Party does not notify the
Indemnified Party within 15 days after the Indemnified Party has given notice of
the matter that the Indemnifying Party is assuming the defense thereof, however,
the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
(e) Specific Performance. Each of the Parties acknowledges and
agrees that the Buyer would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the Buyer shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 11(p) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that notwithstanding the provision in
Section 8(f) with respect to the payment of the transaction fee upon a breach of
a covenant of this Agreement prior to the Closing, money damages would not be an
adequate remedy for a breach of any provision of this Agreement.
(f) Other Indemnification Provisions. The indemnification provisions
set forth in Sections 8(a), 8(b), 8(c) and 8(d) are in addition to, and not in
derogation of, any statutory or common law remedy any Party may have for breach
of representation, warranty, or covenant. The Buyer shall have the right to
recoup from any amount due to the Seller any amount due from the Seller under
this Section 8.
9. Definitions.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions,
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damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including all attorneys'
fees and court costs.
"Advertising Contract" means any arrangement with any third party under
which the Seller has created, incurred, assumed or guaranteed an obligation to
provide advertising or air time on the Station.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Bonus Agreements" means the agreements entered into between the Company
and each of Paige Smith and Pansy Lowe for the one-time bonus payment of
$100,000.00.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(c) above.
"Closing Date" has the meaning set forth in Section 1(c) above.
"Code" means the Internal Revenue Code of 1986, as amended
"Company" has the meaning set forth in the Preface above.
"Company Share" means any share of the Common Stock, par value $______ per
share, of the Company.
"Confidential Information" means any information concerning the businesses
and affairs of the Company.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other items itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Agreement.
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"Earnest Money Deposit" has the meaning set forth in Section 1(b) above.
"Earnest Money Escrow Agent" means Branch Banking & Trust Company of South
Carolina.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(b)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Entity" means a corporation, limited liability company, partnership,
limited partnership, limited liability partnership or other entity recognized by
any jurisdiction within the United States.
"ERISA" means the Employee Retirement Income Security Act of 1974 as
amended.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 4(d) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 8(d) above.
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"Indemnifying Party" has the meaning set forth in Section 8(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (b) copies and tangible embodiments thereof (in whatever
form or medium).
"Joint and Several" has the meaning set forth in Section 10(o) below.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller and the Company
with respect to the operations of the Stations and all applications therefor,
together with any renewals, extension or modifications thereof and additions
thereto.
"Most Recent Balance Sheet" means the balance sheet of the Company as of
the Most Recent Fiscal Year End.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(d)
above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Process Agent" has the meaning set forth in Section 11(p) below.
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"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(b) above.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Retainage Deposit" has the meaning set forth in Section 1(b) above.
"Retainage Agent" means ________________________.
"Retainage Agreement" has the meaning set forth in Section 1(b) above.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WYNN-AM and WYNN-FM, each licensed by the FCC to operate in Florence, South
Carolina.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 5(j) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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"Transfer Application" has the meaning set forth in Section 5(b) above.
"Working Capital Price Adjustment" has the meaning set forth in Section
6(d) above.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach, and the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing in the event
the Buyer is in breach, of any material representation, warranty, or
covenant contained in this Agreement in any material respect in each case
if such breach remains uncured for ten (10) days after notice of breach is
received from the other party;
(iii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 7(a) hereof (unless the failure results primarily from the Buyer
breaching any representation, warranty, or covenant contained in this
Agreement);
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 7(b) hereof (unless the failure results primarily from the Seller
breaching any representation, warranty, or covenant contained in this
Agreement); or
(v) the Buyer or the Seller may terminate this Agreement if
any Transfer Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
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11. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants
of the Parties contained in this Agreement shall survive the Closing hereunder
as and to the extent provided in Section 8(a).
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, provided that the Buyer may assign all right, title
and interest in, to and under this Agreement to one or more affiliated entities.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: Mr. James Maurer
----------------------
----------------------
----------------------
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Copy to: Gary Crawford, Esq.
510 S. Coit Street
P.O. Box 508
Florence, SC 29503
If to the Buyer: Cumulus Holdings, Inc.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Copy to: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue, Ste. 3650
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of South Carolina.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable,
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the Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
(l) Expenses. The Buyer and the Seller will each bear his or its
respective costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby, other
than as set forth in Section 5(b) with regard to the Transfer Application. The
Seller will pay all income taxes, transfer taxes and other recording or similar
fees necessary to vest title to the Company Shares in the Buyer. The Seller
costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby
will be paid at or prior to Closing.
(m) Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Florence, South Carolina
in any action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court, and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Each Party
appoints CT Corporation (the "Process Agent") as its agent to receive on its
behalf service of copies of the summons and complaint and any other process that
might be served in the action or proceeding. Any Party may make service on the
other Party by sending or delivering a copy of the process (i) to the Party to
be served at the address and in the manner provided for the giving of notices in
Section 10(h) above or (ii) to the Party to be served in care of the Process
Agent at the address and in the manner provided for the giving of notices in
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Section 10(h) above. Nothing in this Section 10(p), however, shall affect the
right of any Party to serve legal process in any other manner permitted by law.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS HOLDINGS, INC.
By:
---------------------------
Title:
------------------------
("Buyer")
------------------------------
James Maurer ("Seller")
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ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CUMULUS BROADCASTING, INC.,
AND
CUMULUS LICENSING CORPORATION
AND
CAROLINA BROADCASTING, INC.
AND
GEORGETOWN RADIO, INC.
October 29, 1997
1
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction..................................................1
(a) Purchase and Sale of Assets.................................1
(b) Assumption of Liabilities...................................1
(c) Purchase Price..............................................1
(d) The Closing.................................................2
(e) Deliveries at the Closing...................................2
(f) Postclosing Agreement.......................................3
(g) Allocation..................................................3
2. Representations and Warranties of the Sellers......................3
(a) Organization of the Sellers.................................3
(b) Authorization of Transaction................................3
(c) Non-contravention...........................................3
(d) Title to Acquired Assets....................................4
(e) Financial Statements........................................4
(f) Events Subsequent to June 30, 1997..........................4
(g) Tax Matters.................................................6
(h) Tangible Assets.............................................7
(i) Real Property...............................................7
(j) Intellectual Property.......................................8
(k) Contracts..................................................10
(l) Commission Licenses and Compliance with
Commission Requirements...................................12
(m) Insurance..................................................13
(n) Litigation.................................................13
(o) Employees..................................................14
(p) Employee Benefits..........................................14
(q) Environment, Health, and Safety............................15
(r) Legal Compliance...........................................16
(s) Advertising Contracts......................................17
(t) Brokers' Fees..............................................17
(u) Undisclosed Commitments or Liabilities.....................17
(v) Disclosure.................................................17
3. Representations and Warranties of the Buyer.......................17
(a) Organization of the Buyers.................................17
(b) Authorization of Transaction...............................17
(c) Non-contravention..........................................17
(d) Brokers' Fees..............................................18
<PAGE>
4. Pre-Closing Covenants.............................................18
(a) General....................................................18
(b) Assignment Applications....................................18
(c) Employment Offers..........................................19
(d) Notices and Consents.......................................19
(e) Operation of Business......................................19
(f) Advertising Obligations....................................19
(g) Operating Statements.......................................19
(h) Contracts..................................................19
(i) Operation of Stations......................................20
(j) Credit and Receivables.....................................20
(k) Preservation of Business...................................20
(l) Full Access and Consultation...............................20
(m) Notice of Developments.....................................20
(n) Exclusivity................................................21
(o) Title Insurance, Surveys and Environmental Assessments.....21
(p) Control of Stations........................................22
(q) Risk of Loss...............................................22
-ii-
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EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Forms of Assignments
Exhibit C--Form of Assumption
Exhibit D--Form of Postclosing Agreement
Exhibit E--Allocation Schedule
Exhibit F--Form of Opinion of Counsel to the Sellers
Exhibit G--Assumed Contracts
SCHEDULES
Description of Schedule Section
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Organization of the Seller 2(a)
Exceptions to Title to Acquired Assets 2(d)
Financial Statements 2(e)
Events Subsequent to June 30, 1997 2(f)
Tangible Assets 2(h)
Real Property 2(i)
Intellectual Property 2(j)
Contracts 2(k)
Commission Licenses and Compliance with Commission Requirements 2(l)
Insurance 2(m)
Litigation 2(n)
Employees 2(o)
Employee Benefits 2(p)
Environmental, Health and Safety 2(q)
Advertising Contracts 2(s)
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of October 29, 1997, by
and between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing"), and Carolina
Broadcasting, Inc., a Maryland corporation ("CBI") and Georgetown Radio, Inc., a
Maryland corporation ("GRI"). (CBI and GRI are referred to collectively herein
as the "Sellers.") Broadcasting and Licensing are referred to collectively
herein as the "Buyers." The Buyers and the Sellers are referred to collectively
herein as the "Parties." Capitalized terms used in this Agreement are defined in
Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Sellers that are used or useful in the operation of radio
stations WJXY-AM and WJXY-FM, licensed to Conway, South Carolina, of which CBI
is licensee, and WXJY-FM, licensed to Georgetown, South Carolina of which GRI is
licensee (the "Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Licensing agrees to purchase from the Sellers, and
the Sellers agree to sell, transfer, convey, and deliver to Licensing, all of
the FCC Licenses listed in Section 2(l) of the Disclosure Schedule. In addition,
Broadcasting agrees to purchase from the Sellers, and the Sellers agree to sell,
transfer, convey, and deliver to Broadcasting, all of the Acquired Assets other
than the FCC Licenses. Both such sales shall take place at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, Broadcasting agrees to assume and become responsible for all
of the Assumed Liabilities at the Closing. The Buyers will not assume or have
any responsibility, however, with respect to any other obligation or Liability
of the Sellers not included within the definition of Assumed Liabilities and the
Sellers agree to pay and discharge all Liabilities and obligations of the
Sellers other than the Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Sellers, as
consideration for the Acquired Assets, the amount of Two Million Three Hundred
Thousand Dollars ($2,300,000) (the "Purchase Price"). The Purchase Price shall
be payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of One Hundred Fifteen Thousand Dollars
($115,000.00) (the "Earnest Money Deposit") by wire transfer or delivery
of either (A) a letter of credit drawn on NationsBank
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of Texas, N.A. naming Escrow Agent as beneficiary ("Letter of Credit"), or
(B) other immediately available funds; and
(ii) on the Closing Date, the Buyers shall pay to the Sellers the
amount of Two Million One Hundred Thirty Five Thousand Dollars
($2,135,000.00), less any interest earned on the Earnest Money Deposit if
the Earnest Money Deposit is in a form other than the Letter of Credit;
and
(iii) on the Closing Date, the Buyer shall pay to the Sellers, on
behalf of all parties to the Postclosing Agreement, the amount of Fifty
Thousand Dollars ($50,000.00).
The Earnest Money Deposit referenced in this Section 1(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), and if in a
form other than the Letter of Credit shall be deposited by the Escrow Agent with
a federally insured financial institution in an interest bearing account.
Interest earned on the Earnest Money Deposit, if any, shall accrue to the
benefit of Buyers, and, together with the principal amount of the Earnest Money
Deposit, shall be payable to the Sellers and credited against the Purchase Price
on the Closing Date. If this Agreement is terminated without Closing of the
transaction contemplated herein, the Earnest Money Deposit and all accrued
interest, if any, shall be paid to the Buyers or the Sellers as provided in the
Earnest Money Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Stations in
Conway, South Carolina, commencing at 9:00 a.m. local time on the date set by
the Buyers not earlier than the fifth business day or later than the tenth
business day after the FCC approval of the Assignment Application becomes a
Final Order, by which date all other conditions to the obligations of the
Parties to consummate the transactions contemplated hereby will have been
satisfied or such other date as the Parties may mutually determine (the "Closing
Date").
(e) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Sellers will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds in the forms attached hereto as Exhibits B-1 through B-2, (B)
such affidavits, transfer tax returns, memorandums of lease, and other
additional documents as may be required by the terms of the title insurance
commitments described in Section 4(o) hereof, as necessary to furnish title
insurance as required by such section or as may be necessary to convey title to
the Real Estate to the Buyers in the condition required herein or provided
public notice of existence of the Leases, and (C) such other instruments of
sale, transfer, conveyance, and assignment as the Buyers and their counsel
reasonably may request; (iv) the Buyers will execute, acknowledge (if
appropriate), and deliver to the Sellers (A) an assumption in the form attached
hereto as Exhibit C and (B) such other
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instruments of assumption as the Sellers and their counsel reasonably may
request; and (v) the Buyers will deliver to the Sellers the consideration
specified in Section 1(c) above.
(f) Postclosing Agreement. On the Closing Date, the Sellers shall execute,
and shall cause shareholders Eugene Sobel, Joseph Wolinsky and Stan Karas to
execute, a Postclosing Agreement with Broadcasting including covenants not to
compete with the Buyers in the markets served by the Stations and agreements to
indemnify the Buyers in the form of Exhibit D attached hereto. A portion of the
Purchase Price equal to Fifty Thousand Dollars ($50,000.00) shall be paid to the
Sellers by the Buyers on the Closing Date as consideration for the agreements
set forth in the Postclosing Agreement.
(g) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit E.
2. Representations and Warranties of the Sellers. The Sellers jointly and
severally represent and warrant to the Buyers that the statements contained in
this Section 2 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 2), except as set forth in the lettered and numbered
paragraphs contained in the disclosure schedule accompanying this Agreement and
initialed by the Parties (the "Disclosure Schedule") corresponding to the
lettered and numbered sections of this Section 2.
(a) Organization of the Sellers. CBI and GRI are each a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of Maryland. Neither CBI nor GRI has any subsidiaries. Each Seller
has the power and authority to own or lease its properties and to carry on all
business activities now conducted by it. All of the shareholders of CBI and GRI
are listed in Section 2(a) of the Disclosure Schedule.
(b) Authorization of Transaction. Each Seller has full power and authority
to execute and deliver this Agreement and all agreements and instruments to be
executed and delivered by such Party pursuant to this Agreement (collectively,
the "Ancillary Agreements") and to perform its obligations hereunder and
thereunder. Without limiting the generality of the foregoing, the Board of
Directors of each CBI and GRI have duly authorized the execution, delivery, and
performance of this Agreement and the Ancillary Agreements by each Seller. This
Agreement and the Ancillary Agreements constitute the valid and legally binding
obligation of the Sellers, enforceable in accordance with their respective terms
and conditions.
(c) Non-contravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the
Sellers are
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subject or any provision of the charter or bylaws of either Seller; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other agreement, arrangement to which either Seller is a party or by which
either Seller is bound or to which any of the assets of either Seller is subject
(or result in the imposition of any Security Interest upon any of the assets of
either Seller). Other than with respect to the Assignment Application described
in Section 4(b) the Sellers does not need to give any notice to, make any filing
with, or obtain any Licenses, consent, or approval of any court or government or
governmental agency in order for the Parties to enter into this Agreement or the
Ancillary Agreements or to consummate the transactions contemplated by this
Agreement or the Ancillary Agreements (including the assignments and assumptions
referred to in Section 1(e) above).
(d) Title to Acquired Assets. Other than the Security Interests set forth
on Section 2(d) of the Disclosure Schedule (which shall be released at or before
the Closing) the Sellers have good and marketable title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are: (i) all of the balance sheets, financial statements and income tax
returns for the fiscal years ending December 31, 1993, December 31, 1994, and
December 31, 1995 that were prepared by predecessor licensees of the Stations
and received by the Sellers in connection with the Sellers' acquisitions of the
Stations; (ii) all of the balance sheets, financial statements and income tax
returns covering any portion of 1996 that were prepared by predecessor licensees
of the Stations and received by the Sellers in connection with the Sellers'
acquisitions of the Stations; and (iii) balance sheets and statements of income
prepared by the Sellers covering portions of 1996 and 1997 through August 31,
1997 ("Financial Statements"). The Financial Statements prepared by the Sellers
for portions of 1996 and 1997 (A) have been prepared on a cash basis,
consistently applied throughout the periods covered thereby, (B) are correct and
complete, and (C) fairly represent the financial condition of the Sellers on the
dates and the results of the operations for the periods designated therein and
are consistent with the books and records of the Sellers (which books and
records are correct and complete). To the Knowledge of the Sellers, the
Financial Statements prepared by predecessor licensees of the Stations and
received by the Sellers in connection with the Sellers' acquisitions of the
Stations are correct and complete except as may be disclosed in Section 2(e) of
the Disclosure Schedules. At the end of the fiscal year 1997, the Sellers will
prepare Financial Statements on an accrual basis and will provide such statement
to the Buyers.
(f) Events Subsequent to June 30, 1997. Since June 30, 1997, except as set
forth in Section 2(f) of the Disclosure Schedule, and with respect to the
operation of the Stations since that date:
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(i) neither Seller has sold, leased, transferred, or assigned any of
its material assets, tangible or intangible;
(ii) other than this Agreement, neither Seller has not entered into
any agreement, contract, lease, sublease, license, or sublicense (or
series of related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled
any agreement, contract, lease, sublease, license, or sublicense (or
series of related agreements, contracts, leases, subleases, licenses, and
sublicenses) involving more than $5,000 to which either Seller is a party
or by which either Seller or any of the assets of either Seller are bound;
(iv) no Security Interest has been imposed upon any of Sellers'
assets, tangible or intangible;
(v) neither Seller has made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of Business;
(vi) neither Seller has made any capital investment in, any loan to,
or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions);
(vii) neither Seller has created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations) outside the
Ordinary Course of Business;
(viii) neither Seller has delayed or postponed (beyond its normal
practice in the Ordinary Course of Business) the payment of accounts
payable and other Liabilities;
(ix) neither Seller has canceled, compromised, waived, or released
any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(x) neither Seller has granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) neither Seller has experienced any damage, destruction, or loss
(whether or not covered by insurance) to any of its property or any action
adversely affecting the FCC Licenses or experienced any period of more
than 48 hours when the Stations were not broadcasting at full signal
strength;
(xii) neither Seller has made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees giving
rise to any claim or right on its part against the person or on the part
of the person against it;
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(xiii) neither Seller has entered into any employment contract,
consulting contract or severance agreement or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement;
(xiv) neither Seller has granted any increase (outside routine
salary and wage increases in the Ordinary Course of Business) in the rate
of compensation, commissions, bonus or other remuneration payable, or
granted any severance or termination pay to, any of its directors,
officers, and employees;
(xv) neither Seller has adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other
plan, contract, or commitment for any of its directors, officers, and
employees, or modified or terminated any existing such plan, contract, or
commitment;
(xvi) neither Seller has made any other change in employment terms
for any of its directors, officers, and employees;
(xvii) neither Seller has made or pledged to make any charitable or
other capital contribution;
(xviii) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving either Seller;
(xix) neither Seller has altered its credit and collection policies
or its accounting policies;
(xx) neither Seller has materially altered the programming, format
or call letters of the Stations, or its promotional and marketing
activities;
(xxi) neither Seller has applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to preserve the
FCC Licenses, no proceeding has been issued before the FCC which could, if
adversely determined, affect the FCC Licenses each Seller and has operated
the Stations in compliance therewith and with all FCC rules and
regulations;
(xxii) there has been no other occurrence or non-occurrence the
result of which has caused or would be reasonably likely to cause
significant damage to the financial condition, operations or prospects of
the Stations or Acquired Assets including, but not limited to a drop of
more than ten percent (10%) in broadcast signal strength; and
(xxiii) neither Seller has committed to any of the foregoing.
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(g) Tax Matters. The Sellers have timely and properly filed all Tax
Returns that they were required to file with respect to the Sellers' operations.
All such Tax Returns were correct and complete in all respects and properly
reflect the tax liability of the Sellers. The Sellers have not requested any
extension of time within which to file returns in respect of any Taxes with
respect to the Sellers' operations. No Tax deficiencies have been proposed or
assessed against either of the Sellers. There are no pending, or to the Sellers'
Knowledge, threatened audits, investigations, or claims for or relating to any
liability in respect of Taxes with respect to the Sellers' operations. All Taxes
owed by the Sellers with respect to their operations (whether or not shown on
any Tax Return) have been paid. The Sellers have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other third party. No
claim has ever been made by any authority in any jurisdiction where the Sellers
do not file Tax Returns that either Seller is or may be subject to taxation by
that jurisdiction. There are no Security Interests on any of the assets of the
Sellers that arose in connection with any failure (or alleged failure) to pay
any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and Station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Stations.
The Sellers own or lease all tangible assets necessary for the conduct of the
operation and business of the Stations as presently conducted and as presently
proposed to be conducted and all leased assets are specifically identified as
such in Section 2(h) of the Disclosure Schedule. Except as listed in Section
2(h) of the Disclosure Schedule, each such tangible asset is free from defects
(patent and latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used. Except
as listed in Section 2(h) of the Disclosure Schedule, no such tangible asset is
in need of replacement. Any leased personal property included within the
tangible personal property is in the condition required of such property by the
terms of the lease applicable thereto during the term of the lease and upon the
expiration thereof. All of the equipment utilized in the operation of the
Stations is in compliance with all FCC and FAA requirements and is sufficient to
satisfy the intended needs of the normal customary operations of the Stations at
all times of the year and all such equipment is in compliance with all
applicable laws.
(i) Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Sellers
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Sellers have delivered to the Buyers correct and complete copies of
the Leases. With respect to the Real Estate:
(i) the Sellers have good and marketable title to all of the Owned
Real Estate free and clear of all liens, charges, mortgages, security
interests, easements, restrictions or other encumbrances of any nature
whatsoever except (A) real estate taxes for the year of Closing and
municipal and zoning ordinances and recorded utility easements which do
not impair the current use, occupancy or value or the marketability of
title of the property and which are disclosed in Section 2(i) of the
Disclosure Schedule (collectively, the
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"Permitted Real Estate Encumbrances") and (B) mortgages and Security
Interests that are to be discharged at Closing and which are disclosed in
Section 2(i) of the Disclosure Schedule.
(ii) the Leases are and, following the Closing will continue to be,
legal, valid, binding, enforceable, and in full force and effect;
(iii) no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default thereunder
or permit termination, modification, or acceleration thereunder;
(iv) there are no disputes, oral agreements, or forbearance programs
in effect as to any Lease;
(v) none of the Owned Real Estate and to the Sellers' Knowledge,
none of the properties subject to the Leases are subject to any lease
(other than Leases), option to purchase or rights of first refusal;
(vi) except for Permitted Real Estate Encumbrances, there are no (A)
actual or, to the Sellers' Knowledge, proposed special assessments with
respect to any of the Real Estate; (B) pending or, to the Sellers'
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (C) pending or, to the Sellers' Knowledge, threatened
litigation or administrative actions with respect to any of the Real
Estate; (D) mechanic's or materialmens' liens with respect to the Owned
Real Estate; (E) structural or mechanical defects in any of the buildings
or improvements located in the Real Estate; (F) planned or commenced
improvements which will result in an assessment or otherwise affect the
Real Estate; (G) governmental agency or court orders requiring the repair,
alteration or correction of any existing condition with respect to the
Real Estate or any portion thereof; or (H) any pending or, to the Sellers'
Knowledge, threatened changed in any zoning laws or ordinances which may
affect any of the Real Estate or Sellers' use thereof;
(vii) all buildings and improvements on the Real Estate are in good
operating condition and repair, normal wear and tear excepted;
(viii) the Sellers have not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or
its rights thereunder;
(ix) to the Sellers' Knowledge, all facilities on the Real Estate
have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; and
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(x) all facilities on the Real Estate are supplied with utilities
and other services necessary for the operation of said facilities.
(j) Intellectual Property. The Sellers own or have the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for or currently used in the operation of the business of the
Sellers as presently conducted and as presently proposed to be conducted. Each
item of Intellectual Property owned or used by the Sellers immediately prior to
the Closing hereunder will be owned or available for use by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
It is specifically acknowledged that the unregistered servicemark "Cruisin'
Country" and logos using "Cruisin' Country" as depicted in Section 2(j) of the
Disclosure Schedule, are among the Retained Assets. Sellers, however, at Closing
will execute a licensing agreement, in a form reasonably satisfactory to the
Parties, under which the Buyers shall have the right to continue using the
"Cruisin' Country" servicemark and logos in connection with the operation and
promotion of the Stations, but will not be authorized to use those items of
Intellectual Property in connection with the operation or promotion of any other
broadcast station that the Buyers own now or in the future. The Sellers have
taken all necessary or desirable action to protect each item of Intellectual
Property that each Seller owns or uses. With respect to such Intellectual
Property:
(i) The Sellers have not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Sellers have never received any
charge, complaint, claim, or notice alleging any such interference,
infringement, misappropriation, or violation. To the Knowledge of the
Sellers, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Sellers.
(ii) Section 2(j) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Sellers
with respect to any of its Intellectual Property and the call letters
(current and past) of the Stations, identifies each pending patent,
trademark or copyright application for registration which the Sellers have
made with respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission which the Sellers have granted to
any third party with respect to any of the Sellers' Intellectual Property
(together with any exceptions). The Sellers have delivered to the Buyers
correct and complete copies of all such patents, trademarks or copyright
registrations, applications, licenses, agreements, and permissions (as
amended to date) and have made available to the Buyers correct and
complete copies of all other written documentation evidencing ownership
and prosecution (if applicable) of each such item. With respect to each
item of Intellectual Property that the Sellers own:
(A) the Sellers possess all right, title, and interest in and
to the item and all registrations and applications are in full force
and effect;
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(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of
the Sellers, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Sellers have not ever agreed to indemnify any person
or entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the
Sellers use pursuant to license, sublicense, agreement, or permission
including, but not limited to the call letters of the Stations. The
Sellers have supplied the Buyers with correct and complete copies of all
such licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission covering
the item is, and following the Closing will continue to be on
identical terms, legal, valid, binding, enforceable, and in full
force and effect;
(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated any provision
thereof), and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and
correct with respect to the underlying license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation,
injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of
the Sellers, is threatened which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property;
(F) the Sellers have not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the underlying
item of Intellectual Property; and
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(G) the Sellers have not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(iv) The Sellers have no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or other third
parties have developed which reasonably could be expected to supersede or
make obsolete any product or process of the Sellers.
(k) Contracts. Section 2(k) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than Advertising
Contracts which are listed in Section 2(s) of the Disclosure Schedule) to which
the Sellers are a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under which
Sellers are imposed (or may impose) a Security Interest on any of Sellers'
assets, tangible or intangible;
(v) any written arrangement concerning confidentiality or
non-competition;
(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, compensation
agreement, employment agreement, commission agreement, or severance
agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Sellers or the Stations;
(viii) any written arrangement concerning a guaranty by either
Seller of the obligations of any other party; or
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(ix) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
The Sellers have delivered to the Buyers a correct and complete copy of each
written arrangement listed in Section 2(k) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect; (B) the written arrangement
will continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Sellers are not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(k) of the Disclosure Schedule under the terms
of this Section 2(k). Except for the Assumed Contracts, the Buyers shall not
have any Liability or obligations for or in respect of any of the contracts set
forth in Section 2(k) of the Disclosure Schedule or any other contracts or
agreements of the Sellers.
(l) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates
of compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or useful in the operation of the
Stations as they are now being operated are (A) in full force and effect,
(B) unimpaired by any acts or omissions of the Sellers or the Sellers'
employees or agents, (C) free and clear of any restrictions which might
limit the full operation of the Stations, and (D) detailed in Section 2(1)
of the Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and consents
referenced in the preceding sentence, Section 2(1) of the Disclosure
Schedule also sets forth, without limitation, the date of the last
renewal, the expiration date thereof, and any conditions or contingencies
related thereto. Except as set forth in Section 2(1) of the Disclosure
Schedule, no condition exists or event has occurred that permits, or after
notice or lapse of time, or both, would permit, the revocation or
termination of any such license, permit, consent, franchise, or
authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Stations as now conducted. Except as set forth in Section
2(1) of the Disclosure Schedule, the Sellers are not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or
revoked.
(ii) The Stations are each in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a
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major environmental action under the FCC's rules or policies. Access to
the Stations' transmission facilities is restricted in accordance with the
policies of the FCC.
(iii) Except as set forth in Section 2(1) of the Disclosure
Schedule, to the Sellers' Knowledge, the Sellers are not the subject of
any FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(1) of the Disclosure Schedule.
(iv) The Sellers have filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(v) The Sellers are not aware of any information concerning the
Stations that could cause the FCC or any other regulatory authority not to
issue to Licensing all regulatory certificates and approvals necessary for
the consummation of the transactions contemplated hereunder or the Buyers'
operation and/or ownership of the Stations. Except as set forth in Section
(l) of the Disclosure Schedule, to the Sellers' Knowledge as of the date
of this Agreement, there are no pending FCC applications which, if
approved, would allow for the operation of a new radio station with a
signal reaching the signal area of the Stations and there are not any
plans or proposals by existing radio Stations with a signal reaching the
signal area of the Stations to alter or change their format to a format
similar to that of the Stations.
(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Sellers are a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
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(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; and (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms through the Closing Date.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth each
instance in which either Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Sellers, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(n) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Sellers or the Stations taken as a whole.
The Sellers have no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Sellers.
(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
the Sellers. Section 2(o) of the Disclosure Schedule also sets forth a list of
all employee handbooks and/or manuals relating to the employees of the Sellers,
true and correct copies of which have been delivered to the Buyers. To the
Knowledge of the Sellers, except as set forth in Section 2(o) of the Disclosure
Schedule, no key employee or group of employees has any plans to terminate
employment with the Sellers. The Sellers are not a party to or bound by any
understanding (whether written or oral), agreement or contract with any union,
labor organization, employee group or other entity or individual which affects
the employment of employees of the Sellers including, but not limited to any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. The
Sellers have no Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Sellers. The Sellers have not been subject to a strike, slow down or
other work stoppage during the five (5) year period immediately preceding the
date hereof and, to the Sellers' Knowledge, there are no strikes, slow downs or
work stoppages threatened against the Sellers. To the Sellers' Knowledge, it has
not committed any unfair labor practice. There is no basis for any claim by any
past or present employee of the Sellers that such employee was subject to
wrongful discharge or any employment discrimination by the Sellers or the
Sellers' management arising out of or relating to the employee's race, sex, age,
religion, national origin, ethnicity, handicap or any other protected
characteristic under applicable law. No proceedings are pending before any
court, governmental agency or instrumentality or
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arbitrator relating to labor matters, and there is no pending investigation by
any governmental agency or, to the Knowledge of the Sellers, threatened claim by
any such agency or other person relating to labor or employment matters.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists all
Employee Benefit Plans that the Sellers maintain or to which the Sellers
contribute or are required to contribute for the benefit of any current or
former employee of the Sellers and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Sellers do not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Sellers. There are no pending or, to the Knowledge of the Sellers, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
(q) Environment, Health, and Safety.
(i) With respect to the operation of the Stations and the Real
Estate, the Sellers are, and at all times in the past have been, in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health
and safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has ever been filed or commenced
or, to the Sellers' Knowledge, is threatened, against the Sellers alleging
any failure to comply with any such Environmental Law or laws concerning
employee health and safety.
(ii) With respect to the operation of the Stations and the Real
Estate, the Sellers have no Liability (and to Sellers' Knowledge there is
no Basis related to the past or present operations of the Sellers or the
Sellers' predecessors for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand against the
Sellers giving rise to any Liability) under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, the Federal Water
Pollution Control Act of 1972, the Clean Air Act of 1970, the Safe
Drinking Water Act of 1974, the Toxic Substances Control Act of 1976, the
Refuse Act of 1899, or the Emergency Planning and Community Right-to-Know
Act of 1986 (each as amended), or any other law of any federal, state,
local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety,
or pollution or protection
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of the environment, including, without limitation, laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous or toxic materials or
wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes ("Environmental Laws");
(iii) The Sellers have no Liability (and to Sellers' Knowledge there
is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Sellers
giving rise to any Liability) under the Occupational Safety and Health
Act, as amended, or any other law (or rule or regulation thereunder) of
any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal
injury to any employee.
(iv) The Sellers have obtained and at all times has been in
compliance in all material respects with all of the terms and conditions
of all permits, licenses, and other authorizations which are required
under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of
any federal, state, or local or foreign government relating to worker
health and safety.
(v) All properties and equipment used in the business of the Sellers
are, and to the Sellers' Knowledge have been free of PCBs and, to the
Sellers' Knowledge, free of asbestos, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
(vi) To the Sellers' Knowledge no pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste ever has been
buried, stored, spilled, leaked, discharged, emitted, or released on any
of the Real Estate.
(vii) To the Sellers' Knowledge, none of the Acquired Assets are
required to be upgraded, modified or replaced to be in compliance with
Environmental Laws.
(viii) Section 2(q) of the Disclosure Schedule contains a copy of
all environmental claims, reports, studies, compliance actions or the like
of the Sellers or which are available to the Sellers with respect to any
of the Real Estate or any of the Acquired Assets.
(ix) To the Sellers' Knowledge, no above ground or underground
storage tanks (other than septic tanks) have ever been located at, on or
under the Real Estate.
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None of the Real Estate is contaminated by hazardous or toxic substances
or waste, as defined under Environmental Laws, originating from off-site
sources.
(r) Legal Compliance.
(i) The Sellers have complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, local and
foreign governments (and all agencies thereof, and no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand, or notice
has been filed or commenced or, to the Sellers' Knowledge, is threatened,
against the Sellers alleging any failure to comply with any such law or
regulation, including those relating to the employment of labor, employee
civil rights, and equal employment opportunities and relating to antitrust
matters.
(ii) The Sellers have filed all reports, documents, and other
materials it was required to file (and the information contained therein
was correct and complete in all material respects) under all applicable
laws (including rules and regulations thereunder) of federal state, local
and foreign governments (and all agencies thereof). To the Sellers'
Knowledge, the Sellers have possession of all records and documents it was
required to retain under all applicable laws (including rules and
regulations thereunder).
(s) Advertising Contracts. Section 2(s) of the Disclosure Schedule lists
all arrangements for the sale of air time or advertising on the Stations
("Advertising Contracts") in excess of $1000, and the amount to be paid to the
Sellers therefor.
(t) Brokers' Fees. Other than the fee payable to The Whittle Agency, which
shall be the exclusive responsibility of Sellers, the Sellers have no Liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
(u) Undisclosed Commitments or Liabilities. There are no commitments,
liabilities or obligations relating to any of the Stations, whether accrued,
absolute, contingent or otherwise including, without limitation, guaranties by
the Sellers of the liabilities of third parties, for which specific and adequate
provisions have not been made on the Financial Statements except those incurred
in or as a result of the Ordinary Course of Business since June 30, 1997 (none
of which Ordinary Course of Business obligations have had or will have a
material adverse effect on any Stations).
(v) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 2 not materially misleading.
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3. Representations and Warranties of the Buyer. Buyers represent and
warrant to the Sellers that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
(b) Authorization of Transaction. The Buyers have full power and authority
to execute and deliver this Agreement and the Ancillary Agreements and to
perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute the valid and legally binding obligation of the
Buyers, enforceable against the Buyers in accordance with their respective terms
and conditions.
(c) Non-contravention. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Buyers
are subject or any provision of their articles of organization or other charter
documents, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1(e) above).
(d) Brokers' Fees. The Buyers have no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the
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transactions contemplated by this Agreement (including satisfying the closing
conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Sellers and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Sellers to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
Party shall pay its own attorneys' fees. The Sellers and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use the commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Sellers
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have material adverse effect upon the Stations or
upon any Affiliate or impose significant costs on such Party). If the FCC
imposes any condition on either Party to the Assignment Application, such Party
shall use commercially reasonable efforts to comply with such condition,
provided, that neither Party shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Stations or any
Affiliate. The Sellers and the Buyers shall jointly oppose any requests for
reconsideration or judicial review of FCC approval of the Assignment Application
and shall jointly request from the FCC extension of the effective period of FCC
approval of the Assignment Application if the Closing shall not have occurred
prior to the expiration of the original effective period of the FCC Consent.
Nothing in this Section 4(b) shall be construed to limit either party's right to
terminate this Agreement pursuant to Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Sellers, and at mutually
agreeable times, the Sellers will permit the Buyers to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyers may, at their option, extend offers of employment to all or any of
the Sellers' employees effective on the Closing Date. From and after the
execution of this Agreement, the Sellers shall use their best efforts to assist
Buyers in retaining those employees of the Stations that the Buyers wish to hire
in connection with the operation of the Stations by the Buyers subsequent to the
Closing, and the Sellers will not take any action to preclude or discourage any
of the Sellers' employees from accepting any offer of employment extended by the
Buyers.
(d) Notices and Consents. The Sellers will give all notices to third
parties and shall have obtained all third party consents that the Buyers
reasonably may request in connection with the matters pertaining to the Sellers
disclosed or required to be disclosed in the Disclosure Schedule (including,
without limitation, consents to assignment of the Leases and other Assumed
Contracts). Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
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(e) Operation of Business. The Sellers will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Sellers will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 2(f) above.
(f) Advertising Obligations. The Sellers shall satisfy the Sellers' air
time obligations under the Sellers' agreements for sale of air time and
advertising on the Stations for goods or services ("Barter Agreements") such
that the outstanding aggregate balance owing under all Barter Agreements as of
the Closing Date shall not exceed Five Thousand Dollars ($5,000.00) worth of air
time without the Buyers' consent. On the Closing Date, the Sellers shall deliver
to the Buyers a schedule, certified by an officer of the Sellers, reflecting the
aggregate outstanding balances under all Barter Agreements in existence as of
the Closing Date.
(g) Operating Statements. The Sellers shall deliver to the Buyers, for the
Buyers' informational purposes only, monthly unaudited statements of operating
revenues and operating expenses of the Stations within ten (10) days after each
such statement is prepared by or for the Sellers.
(h) Contracts. The Sellers will not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on Section 2(k)
of the Disclosure Schedule in any material respect. The Sellers will not without
prior written consent of the Buyers enter into any new contracts respecting the
Stations or their properties, except (i) contracts for the sale of time on the
Stations for cash, goods or services which are entered into in the Ordinary
Course of Business and comply with Sections 4(f) and 4(j) hereof, (ii) contracts
entered into in the Ordinary Course of Business which are cancelable on not more
than thirty-one (31) days' notice without penalty or premium, and (iii)
contracts entered into in the Ordinary Course of Business each of which does not
involve more than Five Thousand Dollars ($5,000) or all of which do not involve
more than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Stations. The Sellers shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Sellers
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
(j) Credit and Receivables. The Sellers will follow Sellers' usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Stations and with respect to collecting accounts receivable
arising from such extension of credit.
(k) Preservation of Business. The Sellers will keep Sellers' business and
properties substantially intact, including its present operations, physical
facilities, working conditions,
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relationships with lessors, licensors, advertisers, suppliers, customers, and
employees, all of the Confidential Information, call letters and trade secrets
of the Stations, and the FCC Licenses.
(l) Full Access and Consultation. The Sellers will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Stations, to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to the Sellers for the purpose of permitting the Buyers to, among
other things: (a) conduct the Buyers' due diligence review, (b) review financial
statements of the Sellers, (c) verify the accuracy of representations and
warranties of the Sellers contained in this Agreement, and (d) prepare for the
consummation of the transactions contemplated by this Agreement. The Sellers
will consult with the Buyers' management with a view to informing Buyer's
management as to the operations, management and business of the Stations.
Without limiting the foregoing, Sellers acknowledge and agree that Sellers will
provide the Buyers and their representatives with such access to the properties,
books, records, documents and operations of the Sellers as contemplated herein
in a manner which will permit the Buyers to fully complete their due diligence
review within the twenty (20) day period referenced in Section 5(a)(ix) below.
(m) Notice of Developments. The Sellers will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Sellers or the Stations. Each Party will give prompt written
notice to the other of any material development affecting the ability of the
Parties to consummate the transactions contemplated by this Agreement. No
disclosure by any Party pursuant to this Section 4(m), however, shall be deemed
to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Sellers will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Sellers; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Sellers will
notify the Buyers immediately if any person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. The Sellers
will obtain (i) with respect to the parcel of Real Estate used as the WXJY-FM
transmitter site ("WXJY Site"), a leasehold owner's policy issued by a title
insurer reasonably satisfactory to the Buyers, in an amount equal to the fair
market value of such Real Estate (including all Seller-owned improvements
located thereon), insuring over the standard pre-printed exceptions and insuring
leasehold title to such Real Estate in the Buyers as of the Closing subject only
to
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the Permitted Real Estate Encumbrances, together with such endorsements for
zoning, contiguity, public access and extended coverage as the Buyers or their
lender reasonably requests, (ii) with respect to each parcel of Owned Real
Estate, an owner's policy of title insurance by a title insurer reasonably
satisfactory to the Buyers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring title to the Owned Real Estate to
be vested in the Buyers as of the Closing free and clear of all liens and
encumbrances except Permitted Real Estate Encumbrances, together with such
endorsements for zoning, contiguity, public access and extended coverage as the
Buyers or the Buyers' lender reasonably requests, and (iii) a current survey of
each parcel of the WXJY Site and Owned Real Estate certified to the Buyers and
the Buyers' lender, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys") which shall not
disclose any survey defect or encroachment from or onto any of the WXJY Site or
Owned Real Estate which has not been cured or insured over prior to the Closing;
and (iv) with respect to the WXJY site, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Buyers which does not indicate that the Sellers and the Real Estate are
not in compliance with any Environmental Law and which shall not disclose or
recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. The Buyers and the
Sellers will each pay one-half (1/2) of the costs of these title policies,
Surveys and environmental assessments. The Sellers have delivered to the Buyers
a Phase I Environmental Site Assessment prepared by Southeastern Environmental,
Inc. and dated December 9, 1996, pertaining to both parcels of Owned Real
Estate. The Sellers have taken no action and, to Sellers' Knowledge, no
circumstance or event has arisen that would render that Phase I Environmental
Site Assessment no longer accurate.
(p) Control of Stations. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Sellers.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Sellers until the Closing. In the event of
any such loss, damage, or destruction, the Sellers will promptly notify the
Buyers of all particulars thereof, stating the cause thereof (if known) and the
extent to which the cost of restoration, replacement and repair of the Acquired
Assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Sellers will, at Sellers' expense, repair or replace
such Acquired Assets to their former condition as soon as possible after loss,
damage or destruction thereof and shall use the Sellers' best efforts to restore
as promptly as possible
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transmissions as authorized in the FCC Licenses. The Closing Date shall be
extended (with FCC consent, if necessary) for up to sixty (60) days to permit
such repair or replacement. If repair or replacement cannot be accomplished
within sixty (60) days of the date of the Sellers' notice to the Buyers, and the
Buyers determine that the Sellers' failure to repair or replace, alone or in the
aggregate with any other then existing factors, would have a material adverse
effect on the operation of the Stations:
(i) the Buyers may elect to terminate this Agreement; or
(ii) the Buyers may postpone the Closing Date until such time as the
property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Sellers'
notice to the Buyers, in which case either Party may terminate this
Agreement; or
(iii) the Buyers may choose to accept the Acquired Asset in their
"then" condition, together with the Sellers' assignment to the Buyers of
all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers of any proceeds under any such
insurance policies, previously received by the Sellers with respect
thereto plus an amount equal to the amount of any deductible or
self-insurance maintained by the Sellers on such Acquired Assets.
In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above
shall be true and correct in all respects at and as of the Closing Date as
though made on and as of the Closing Date;
(ii) the Sellers shall have performed and complied with all of the
Sellers' covenants hereunder in all respects through the Closing;
(iii) the Sellers shall have procured all of the third party
consents specified in Section 4(d) above, including but not limited to
those relating to transmitter and studio leases, and all of the title
insurance commitments (and endorsements), Surveys and environmental site
assessments described in Section 4(o) above;
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(iv) no action, suit, investigation, inquiry or other proceeding
shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the parties if such transactions are consummated, (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (C) affect adversely the right of the Buyers to
own, operate, or control the Acquired Assets (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
(v) the Sellers shall have delivered to the Buyers a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Sections 5(a)(i)
through (iv) is satisfied in all respects and the statements contained in
such certificate shall be deemed a warranty of the Sellers which shall
survive the Closing;
(vi) each of the Assignment Applications shall have been approved by
a Final Order of the FCC and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Postclosing
Agreement;
(viii) the Buyers shall have received from counsel to the Sellers an
opinion with respect to the matters set forth in Exhibit F attached
hereto, addressed to the Buyers and the Buyers' lender and dated as of the
Closing Date;
(ix) The Buyers shall, within twenty (20) days after the date
hereof, be satisfied as to the results of their examination and due
diligence review referred to in Section 4(l) hereof. If, within twenty
(20) days after the date hereof, Buyers do not deliver to sellers a
written notice terminating this Agreement in regard to the contingency
described in this Section 5(a)(ix), then the contingency set forth in this
Section 5(a)(ix) shall be deemed waived by Buyers; and
(x) all actions to be taken by the Sellers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Buyers.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, as of the Closing Date, the Buyers shall provide written notice to
the Sellers of the specific condition(s) that have not been satisfied and the
Closing shall be postponed until they are
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satisfied, provided, however, that if the conditions so specified are not
satisfied within ten (10) days after Buyers' notice is received, Buyers may
elect to (A) terminate this Agreement without liability to the Sellers, or (B)
consummate the transactions contemplated herein despite such failure. If the
Buyers elect to consummate the transactions described herein, not withstanding
breach of any provision of this Agreement by the Sellers (including, without
limitation, any breach arising as a result of the failure of the Sellers to
execute and/or deliver any item described in this Section 5(a)), the Buyers may
seek appropriate remedies for any and all damages, costs and expenses incurred
by the Buyers by reason of such breach including, without limitation,
indemnification pursuant to Section 7(b), below.
(b) Conditions to Obligation of the Sellers. The obligation of the Sellers
to consummate the transactions to be performed by the Sellers in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all respects at and as of the Closing Date as
though made on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of their
covenants hereunder in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other proceeding
shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Sellers a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section
5(b)(i)-(iii) is satisfied in all respects and the statements contained in
such certificate shall be deemed a warranty of the Buyers which shall
survive the Closing;
(v) each of the Assignment Applications shall have been approved by
a Final Order of the FCC and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement; and
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(vii) all actions to be taken by the Buyers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Sellers.
In the event that any of the foregoing conditions to the Closing shall not have
been satisfied, as of the Closing Date the Sellers shall provide written notice
to the Buyers of the specific condition(s) that have not been satisfied and the
Closing shall be postponed until they are satisfied, provided, however, that if
the conditions so specified are not satisfied within ten (10) days after
Sellers' notice is received, the Sellers may elect to (A) terminate this
Agreement without liability to the Buyers, or (B) consummate the transactions
contemplated herein despite such failure. If the Sellers elect to consummate the
transactions described herein, not withstanding a breach of any provision of
this Agreement by the Buyers (including, without limitation, any breach arising
as a result of the failure of the Buyers to execute and/or deliver any item
described in this Section 5(a)), the Sellers may seek appropriate remedies for
any and all damages, costs and expenses incurred by the Sellers by reason of
such breach including, without limitation, indemnification pursuant to Section
7(c), below.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating Party.
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(c) Adjustments. Operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Sellers and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for Cash, trade or barter so
assigned) shall be prorated between the Sellers and the Buyers as of the Closing
Date in accordance with the foregoing principle. In addition, all commissions
payable with respect to the accounts receivable of the Sellers (whether due
before or after the Closing) shall be solely for the account and responsibility
of the Sellers. Contractual arrangements that do not reflect an equal rate of
compensation to a Stations over the term of the agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by an
independent accounting firm mutually acceptable to both parties and the fees and
expenses of such accounting firm shall be paid one-half (1/2) by the Sellers and
one-half (1/2) by the Buyer.
(d) Collection of Accounts Receivable. At the Closing, the Sellers will
turn over to the Buyers, for collection only, the accounts receivable of the
Stations owing to the Sellers as of the close of business on the Closing Date. A
schedule of such accounts receivable will be delivered by the Sellers to the
Buyers on the Closing Date or as soon thereafter as possible. The Buyers agree
to use commercially reasonable efforts in the ordinary course of business (but
without responsibility to institute legal or collection proceedings) to collect
such accounts receivable during the 120-day period following the Closing Date,
and will remit all payments received on such accounts during each calendar month
during this 120-day period on the one hundred twentieth (120th) day together
with an accounting of all payments received within such period. The Buyers shall
have the sole right to collect such accounts receivable during such one hundred
twenty (120) day period. In the event the Buyers receive moneys during the
120-day period following the Closing Date from an advertiser who, after the
Closing Date, is advertising over any of the Stations, and that advertiser was
included among the accounts receivable as of the Closing Date, the Buyers shall
apply said moneys to the oldest outstanding balance due on the particular
account, except in the case of a "disputed" account receivable. For purposes of
this Section 6(d), a "disputed" account receivable means one which the account
debtor refuses to pay because he asserts that the money is not owed or the
amount is incorrect. In the case of such a disputed account, the Buyers shall
immediately return the account to the Sellers prior to expiration of the 120-day
period following the Closing Date. If the Buyers return a disputed account to
the Sellers, the Buyers shall have no further responsibility for its collection
and may accept payment from the account debtor for advertising carried on any of
the Stations after the Closing Date. At the end of the 120-day period following
the Closing Date, the Buyers will turn back to the Sellers all of the accounts
receivable of the Stations as of the
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Closing Date owing to the Sellers which have not yet been collected, and the
Buyers will thereafter have no further responsibility with respect to the
collection of such receivables. During the 120-day period following the Closing
Date, the Buyers shall afford the Sellers reasonable access to the accounts
receivable "aging list." The Sellers acknowledge and agree that the Buyers are
acting as the Sellers' collection agent hereunder for the sole benefit of the
Sellers and that Buyers have accepted such responsibility for the accommodation
of the Sellers. The Buyers shall not have any duty to inquire as to the form,
manner of execution or validity of any item, document, instrument or notice
deposited, received or delivered in connection with such collection efforts, nor
shall the Buyers have any duty to inquire as to the identity, authority or
rights of the persons who executed the same. The Sellers shall indemnify Buyers
and hold them harmless from and against any judgments, expenses (including
attorney's fees) costs or liabilities which the Buyers may incur or sustain as a
result of or by reason of such collection efforts.
(e) Severance Obligations. In the event an offer of employment is extended
by the Buyers to and accepted by an employee of the Sellers pursuant to Section
4(c) and such subsequent employment by the Buyers is terminated within sixty
(60) days from the Closing Date, the Sellers shall be responsible for, and shall
pay to such accepting employee, all severance benefits (if any, pursuant to the
Sellers' practices as in effect on the Closing Date) that may be due and owing
such employee by reason of his or her employment with either the Sellers or the
Buyers
(f) Consents. In the event any of the Assumed Contracts are not assignable
or any consent to such assignment is not obtained on or prior to the Closing
Date, and the Buyers elect to consummate the transactions contemplated herein
despite such failure or inability to obtain such consent, the Sellers shall
continue to use commercially reasonable efforts to obtain any such assignment or
consent after the Closing Date. Until such time as such assignment or approval
has been obtained, the Sellers will cooperate with Buyers in any lawful and
economically feasible arrangement to provide that the Buyers shall receive the
Sellers' interest in the benefits under any such Assumed Contract, including
performance by the Sellers as agent, if economically feasible; provided,
however, that the Buyers shall undertake to pay or satisfy the corresponding
liabilities for the enjoyment of such benefit to the extent that Buyers would
have been responsible therefor if such consent or assignment had been obtained.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Sellers
contained in Section 2 of this Agreement (other than the representations and
warranties of the Sellers contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g),
[2(r)] and 2(t) hereof or relating to the Sellers' title to the Acquired Assets)
shall survive the Closing and continue in full force and effect for a period
until ninety (90) days after the applicable statute of limitations has expired
with respect to any claim by the Buyers based on a claim or action by a third
party and for a period of eighteen (18) months following Closing with respect to
any claim by the Buyers
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not based on a claim or action by a third party. All of the other
representations and warranties (including the representations and warranties of
the Sellers contained in Sections 2(a), 2(b), 2(c), 2(d), 2(g), [2(r)] and 2(t)
hereof or relating to the Sellers' title to the Acquired Assets) and all
covenants of the Buyers and the Sellers contained in this Agreement shall
survive the Closing and continue in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a breach of a
warranty or covenant prior to the Closing Date, the Sellers agree to indemnify
the Buyers from and against the entirety of any Adverse Consequences the Buyers
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by:
(i) any misrepresentation or breach of any of the Sellers'
representations or warranties, and covenants contained in this Agreement
or in any Ancillary Agreement executed and/or delivered by the Sellers (so
long as the Buyers make a written claim for indemnification within the
applicable survival period);
(ii) any breach or nonfulfillment of any agreement or covenant of
the Sellers contained herein or in any Ancillary Agreement;
(iii) any Liability of the Sellers which is not an Assumed
Liability; and/or
(iv) any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Sellers. Except as
described below in Section 7(e) with respect to a breach of a warranty or
covenant prior to the Closing Date, Broadcasting agrees to indemnify the Sellers
from and against the entirety of any Adverse Consequences the Sellers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Sellers make a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action
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instituted in federal court in South Carolina, in addition to any other remedy
to which it may be entitled, at law or in equity. Each of the Parties
acknowledges and agrees that not withstanding the provision in Section 7(e) with
respect to the remedy of liquidated damages upon a breach of a warranty or
covenant of this Agreement prior to the Closing, money damages would not be an
adequate remedy for a breach of any provision of this Agreement.
(e) Liquidated Damages. The Buyers and the Sellers acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
lieu of indemnification pursuant to Section 7(b) or 7(c), the non-defaulting
Party shall be entitled to receive from the defaulting Party for such default
the sum of Two Hundred Thirty Thousand Dollars ($230,000.00) as liquidated
damages without the need for proof of damages, subject only to successfully
proving in a court of competent jurisdiction that the other Party has materially
breached this Agreement and that the transactions contemplated thereby have not
occurred; provided however, that the Buyers shall retain the option to receive,
pursuant to Section 7(d), and in lieu of receiving the liquidated damages
provided in this Section 7(e), the remedy of specific performance with respect
to a breach of this Agreement prior to the Closing. The Buyers and the Sellers
agree to pay said sum of liquidated damages within ten (10) days of the date
that the non-defaulting party obtains such a judgment, and agree that in the
event this Agreement is terminated by the Sellers prior to the Closing Date as a
result of a breach or default by the Buyers under this Agreement, the Sellers
shall proceed against the Earnest Money as partial satisfaction of liquidated
damages owed by Buyers.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within fifteen (15) days after the Indemnified Party has given notice of
the matter that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all
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Liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event the Indemnifying Party
does not notify the Indemnified Party within fifteen (15) days after the
Indemnified Party has given notice of the matter that the Indemnifying Party is
assuming the defense thereof, however, and/or in the event the Indemnifying
Party shall fail to defend such claim actively and in good faith, then the
Indemnified Party may defend against, or enter into any settlement with respect
to, the matter in any manner it reasonably may deem appropriate.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Sellers, other than Retained Assets, that are used or useful
in the operation of the Stations, wherever located, including but not limited to
all of its (a) Real Property, leaseholds and other interests of any kind
therein, improvements, fixtures, and fittings thereon (such as towers and
antennae), and easements, rights-of-way, and other appurtenances thereto; (b)
tangible personal property (such as fixed assets, computers, data processing
equipment, electrical devices, monitoring equipment, test equipment, switching,
terminal and studio equipment, transmitters, transformers, receivers, broadcast
facilities, furniture, furnishings, inventories of compact disks, records, tapes
and other supplies), vehicles, and all assignable warranties with respect
thereto; (c) Intellectual Property, goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions; (d) rights under orders and
agreements (including those Barter Agreements and Advertising Contracts
identified on the Disclosure Schedule) now existing or entered into in the
Ordinary Course of Business for the sale of advertising time on the Stations;
(e) Assumed Contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the Stations, jingles,
logos, slogans, and business goodwill of the Stations; (g) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment; (h) Licenses and similar rights obtained from governments and
governmental agencies; (i) FCC logs and records and all other books, records,
ledgers, logs, files, documents, correspondence, advertiser lists, all other
lists, plats, architectural plans, drawings and specifications, creative
materials, advertising and promotional materials, program production materials,
studies, reports, and other printed or written materials; and (j) goodwill of
the Stations.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" has the meaning set forth in Section 2(s), above.
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"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Contracts" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts listed on Exhibit G attached hereto.
"Assumed Liabilities" means obligations of the Sellers that accrue after
the Closing Date under the Assumed Contracts either: (a) to furnish services,
and other non-Cash benefits to another party after the Closing; or (b) to pay
for goods, services, and other non-Cash benefits that another party will furnish
to it after the Closing. The Assumed Liabilities shall not include any Retained
Liabilities.
"Barter Agreements" has the meaning set forth in Section 2(f) above.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Sellers.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee
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Pension Benefit Plan (including any Multi-employer Plan), or (d) Employee
Welfare Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"Environmental Laws" has the meaning set forth in Section 2(q), above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means The Whittle Agency, Inc.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Sellers in connection with the conduct of the business and operation
of the Stations.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for
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registration thereof, (c) all programs, programming materials, copyrights and
registrations and applications for registration thereof, (d) mask works and
registrations and applications for registration thereof, (e) computer software,
data, and documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, market and other
research information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information), (g) other proprietary rights, and (b) copies
and tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Leases" means those real estate leases to which Sellers are a party
governing Sellers' studios and FM tower sites as described in Section 2(i) of
the Disclosure Schedule.
"Letter of Credit" has the meaning set forth in Section 1(c) above.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Sellers with respect
to the operations of the Stations and all applications therefor, together with
any renewals, extension or modifications thereof and additions thereto.
"Multi-employer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Estate" means the real property owned by the Sellers as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"Party" has the meaning set forth in the preface above.
"Permitted Real Estate Encumbrances" shall have the meaning set forth in
Section 2(i) above.
"Post-Closing Agreement" means the Post-Closing Agreement with Sellers'
owners in the form attached hereto as Exhibit D.
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"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Real Estate" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of each
Seller as a corporation; (ii) any of the rights of the Sellers under this
Agreement (or under any side agreement between the Sellers on the one hand and
the Buyers on the other hand entered into on or after the date of this
Agreement); (iii) accounts, notes and other receivables of the Sellers; (iv)
Cash; and (v) the servicemark "Cruisin' Country" and logo using that servicemark
depicted in Section 2(j) of the Disclosure Schedule.
"Retained Liabilities" means any other obligations or Liabilities of the
Sellers, including but not limited to: (a) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (b) any Liability
of the Sellers for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (c) any Liability of the
Sellers for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application); or (d) any Liability or
obligation of the Sellers under this Agreement (or under any side agreement
between the Sellers on the one hand and the Buyers on the other hand entered
into on or after the date of this Agreement).
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"Sellers" has the meaning set forth in the preface above.
"Stations" means the radio broadcast Stations having the call letters
WJXY-AM and WJXY-FM, licensed by the FCC to operate in Conway, South Carolina,
and WXJY-FM, licensed by the FCC to operate in Georgetown, South Carolina.
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"Subsidiary," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) 50% or more of (a) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (b) the interest in the profits of such partnership or joint
venture, or (c) the beneficial interest of such trust or estate are at such time
directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"Surveys" has the meaning set forth in Section 4(o) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing in the event the
Sellers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however, that if such breach is
capable of being cured, such breach also remains uncured for twenty (20)
days after notice of breach is received by the Sellers from the Buyers;
(iii) the Sellers may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable being cured, such breach remains uncured for twenty (20) days
after notice of breach is received by the Buyers from the Sellers;
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<PAGE>
(iv) the Buyers may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing if the Closing
shall not have occurred on or before the 270th day following the date of
this Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
breaching any representation, warranty, or covenant contained in this
Agreement);
(v) the Sellers may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the
Sellers' breaching any representation, warranty, or covenant contained in
this Agreement); or
(vi) the Buyers or the Sellers may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in Section 7(a) hereof and the Post-Closing Agreement
with respect to Sellers' owners.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
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(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that (i) the Buyers may assign all of its right,
title and interest in, to and under this Agreement to one or more Affiliates,
who shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Sellers the Purchase Price therefor or to any successor to the Buyers in
the event of any sale, merger or consolidation of the Buyers, and (ii) Buyers
may assign their indemnification claims and their rights under the warranties
and representations of the Sellers to the financial institution(s) providing
financing to the Buyers in connection with this transaction.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
If to the Sellers:
Notices Provision
Eugene Sobel
590 Montrose Road
Rockville, MD 20852
Fax: (301) 984-8712
and
Joseph Wolinsky
6001 Montrose Road
Rockville, MD 20852
Fax: (301) 881-4874
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Copy to:
Matthew H. McCormick, Esq.
Reddy, Begley & McCormick
2175 K Street, N.W., Suite 350
Washington, DC 20037
Fax: (202) 659-5711
(which copy shall not constitute notice to Sellers)
If to the Buyers:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
South Carolina.
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<PAGE>
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyers and the Sellers, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications and as set forth in
Section 4(o) with respect to Surveys, title commitments and environmental
audits. The Sellers will pay all income taxes. The Sellers and the Buyers will
each pay one-half (1/2) of any transfer or sales taxes and other recording or
similar fees necessary to vest title to each of the Acquired Assets in the
Buyers.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
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(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any federal court sitting in South Carolina in any action or
proceeding arising out of or relating to this Agreement, agrees that all claims
in respect of the action or proceeding may be heard and determined in any such
court, and agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(h) above. Nothing in this Section 10(o), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
(p) Time of Essence. With respect to the obligations of the Parties to
diligently prosecute the Assignment Application and, upon fulfillment of all
necessary conditions, to Close the transaction contemplated herein, time is of
the essence.
* * * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CAROLINA BROADCASTING, INC.
By:
--------------------------------
Stan Karas
Its: President
By:
--------------------------------
Joseph Wolinsky
Its: Secretary
GEORGETOWN RADIO, INC.
By:
--------------------------------
Stan Karas
Its: President
By:
--------------------------------
Joseph Wolinsky
Its: Secretary
CUMULUS BROADCASTING, INC.
By:
--------------------------------
Richard Weening
Its: Chairman
CUMULUS LICENSING CORPORATION
By:
--------------------------------
Richard Weening
Its: Chairman
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ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SEACOAST RADIO COMPANY, LLC
AND
CUMULUS BROADCASTING, INC.
AND
CUMULUS LICENSING CORP.
October 9, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction..................................................1
(a) Purchase and Sale of Assets.................................1
(b) Assumption of Liabilities...................................1
(c) Purchase Price..............................................1
(d) The Closing.................................................2
(e) Deliveries at the Closing...................................2
(f) Allocation..................................................2
2. Representations and Warranties of the Seller.......................2
(a) Organization of the Seller..................................3
(b) Authorization of Transaction................................3
(c) Noncontravention............................................3
(d) Title to Acquired Assets....................................3
(e) Financial Statements........................................3
(f) Events Subsequent to .......................................4
(g) Tax Matters.................................................6
(h) Tangible Assets.............................................6
(i) Intellectual Property.......................................6
(j) Contracts...................................................8
(k) Commission Licenses and Compliance with
Commission Requirements....................................9
(l) Insurance...................................................9
(m) Litigation.................................................10
(n) Employees..................................................10
(o) Employee Benefits..........................................11
(q) Brokers' Fees..............................................11
(r) Advertising Contracts......................................11
(s) Disclosure.................................................12
3. Representations and Warranties of the Buyers......................12
(a) Organization of the Buyers.................................12
(b) Authorization of Transaction...............................12
(c) Noncontravention...........................................12
(d) Brokers' Fees..............................................13
4. Pre-Closing Covenants.............................................13
(a) General....................................................13
(b) Assignment Applications....................................13
(c) Employment Offers..........................................13
(d) Notices and Consents.......................................14
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<PAGE>
(e) Operation of Business......................................14
(f) Advertising Obligations....................................14
(g) Operating Statements.......................................14
(h) Contracts..................................................14
(i) Operation of Station.......................................14
(j) Credit and Receivables.....................................15
(k) Preservation of Business...................................15
(l) Full Access................................................15
(m) Notice of Developments.....................................15
(n) Exclusivity................................................15
(p) Control of Station.........................................15
(q) Risk of Loss...............................................16
5. Conditions to Obligation to Close.................................16
(a) Conditions to Obligation of the Buyers.....................16
(b) Conditions to Obligation of the Seller.....................18
6. Post-Closing Covenants............................................19
(a) General....................................................19
(b) Litigation Support.........................................19
(c) Adjustments................................................19
(d) Collection of Accounts Receivable..........................19
7. Remedies for Breaches of this Agreement...........................20
(a) Survival...................................................20
(b) Indemnification Provisions for the Benefit of the Buyers...20
(c) Indemnification Provisions for the Benefit of the Seller...21
(d) Specific Performance.......................................21
(e) Liquidated Damages.........................................21
(f) Matters Involving Third Parties............................22
(g) Other Indemnification Provisions...........................22
8. Definitions.......................................................22
9. Termination.......................................................27
(a) Termination of Agreement...................................27
(b) Effect of Termination......................................28
10. Miscellaneous....................................................28
(a) Survival...................................................28
(b) Press Releases and Announcements...........................28
(c) No Third Party Beneficiaries...............................28
(d) Entire Agreement...........................................28
-ii-
<PAGE>
(e) Succession and Assignment..................................28
(f) Counterparts...............................................28
(g) Headings...................................................29
(h) Notices....................................................29
(i) Governing Law..............................................29
(j) Amendments and Waivers.....................................30
(k) Severability...............................................30
(l) Expenses...................................................30
(m) Construction...............................................30
(n) Incorporation of Exhibits and Schedules....................30
(o) Submission to Jurisdiction.................................30
-iii-
<PAGE>
EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Forms of Assignments
Exhibit C--Form of Assumption
Exhibit D--Form of Postclosing Agreement
Exhibit E--Allocation Schedule
Exhibit F--Form of Opinion of Counsel to the Seller
Exhibit G--Form of Lease Agreement
SCHEDULES
Description of Schedule Section
----------------------- -------
Financial Statements 2(e)
Events Subsequent to January 1, 1997 2(f)
Tangible Assets 2(h)
Intellectual Property 2(i)
Contracts 2(j)
Commission Licenses and Compliance with Commission Requirements 2(k)
Insurance 2(l)
Litigation 2(m)
Employees 2(n)
Employee Benefits 2(o)
Advertising Contracts 2(r)
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of October 9, 1997, by and
between Seacoast Radio Company, LLC, a South Carolina limited liability company
(the "Seller"), Cumulus Broadcasting, Inc., a Nevada corporation (the "Operating
Company"), and Cumulus Licensing Corp., a Nevada corporation (the "Licensing
Company"). The Operating Company and the Licensing Company are collective
referred to herein as the "Buyers." The Buyers and the Seller are collectively
referred to herein as the "Parties." Capitalized terms used in this Agreement
are defined in Section 8 hereof.
This Agreement contemplates a transaction in which the Buyers will
purchase substantially all of the assets (and assume certain of the liabilities)
of the Seller that are used or useful in the operation of radio station WDAI-FM,
licensed to operate in Pawleys Island, South Carolina in return for Cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyers agree to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyers, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyers agree to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyers will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller Three Million
and no/100 Dollars ($3,000,000.00) (the "Purchase Price") payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of One Hundred Fifty Thousand and no/100 Dollars
($150,000.00) (the "Earnest Money Deposit") by delivery of either (A) Cash
payable by wire transfer or delivery of other immediately available funds
or (B) a letter of credit issued by NationsBank of Texas, N.A. naming
Escrow Agent as beneficiary; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Two Million Eight Hundred Fifty Thousand and 00/100 Dollars
($2,850,000.00) by delivery of Cash payable by wire transfer or delivery
of other immediately available funds.
<PAGE>
The Earnest Money Deposit referenced in this Section 1(c) shall be placed
in escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), which
requires that such Earnest Money Deposit shall, if other than pursuant to
Section 1(c)(B), be deposited by the Escrow Agent with a federally insured
financial institution in an interest bearing account. Interest earned on the
Earnest Money Deposit, if any, shall accrue to the benefit of the Buyers (with
the use of the Buyers' federal tax identification number), and, together with
the principal amount of the Earnest Money Deposit, shall be payable to the
Seller and credited against the Purchase Price on the Closing Date. If this
Agreement is terminated without Closing of the transaction contemplated herein,
the Earnest Money and any accrued interest shall be paid to the Buyers or the
Seller as provided in the Earnest Money Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Station in
Pawleys Island, South Carolina, commencing at 9:00 a.m. local time on the date
set by the Buyers not earlier than the fifth business day or later than the
tenth business day after the FCC approval of the Assignment Application becomes
a Final Order, by which date all other conditions to the obligations of the
Parties to consummate the transactions contemplated hereby will have been
satisfied or waived or such other date as the Parties may mutually determine
(the "Closing Date"); provided, however, that the Closing Date shall be no
earlier than January 5, 1998 and no later than two hundred seventy (270) days
from the date of this Agreement.
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in Section 5(a) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including Intellectual Property transfer documents) in
the forms attached hereto as Exhibit B and (B) such other instruments of sale,
transfer, conveyance, and assignment as the Parties may determine are
applicable; (iv) the Buyers will execute, acknowledge (if appropriate), and
deliver to the Seller (A) an assumption in the form attached hereto as Exhibit C
and (B) such other instruments of assumption as the Parties may determine are
applicable; and (v) the Buyers will deliver to the Seller the consideration
specified in Section 1(c) above.
(f) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with an allocation schedule
to be attached hereto as Exhibit E.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule
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accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule") corresponding to the lettered and numbered sections of this Section
2.
(a) Organization of the Seller. The Seller is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of South Carolina. The Seller does not have any Subsidiaries.
(b) Authorization of Transaction. The Seller has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the managers, and members of the Seller have duly
authorized the execution, delivery, and performance of this Agreement by the
Seller. This Agreement constitutes the valid and legally binding obligation of
the Seller, enforceable in accordance with its terms and conditions.
(c) Noncontravention. To the Knowledge of the Seller, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in Section 1 above), will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court to which the Seller is subject
or any provision of the charter or operating agreement of the Seller; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other arrangement to
which the Seller is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest upon any
of its assets). Other than with respect to the transfer of the FCC Licenses, the
Seller does not need to give any notice to, make any filing with, or obtain any
Licenses, consent, or approval of any government or governmental agency in order
for the Parties to consummate the transactions contemplated by this Agreement
(including the assignments and assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Seller has good and marketable title to all
of the Acquired Assets, and will convey the Acquired Assets free and clear of
any Security Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedules are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1993, December 31, 1994, December 31, 1995 and December 31, 1996,
for the Seller; and (ii) unaudited statements of income, as of and for each
month during 1995 and 1996 and the months ended January 31 and February 28,
March 31, April 30, and May 31, 1997 for the Seller (the "Most Recent Financial
Statements"). The Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered
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thereby, are correct and complete, and are consistent with the books and records
of the Seller (which books and records are correct and complete). Without
limiting the generality of the foregoing, all material revenues and expenses of
the Seller and the Station (A) are properly reflected in the Financial
Statements, (B) have arisen in the Ordinary Course of Business, (C) are valid
and subject to no counterclaims, and (D) will be or have been collected or paid
at their recorded amounts subject only to the reserve for bad debts set forth on
the face of the Most Recent Financial Statements.
(f) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(f) of the Disclosure Schedules, there has not been any
adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or to the Knowledge of the Seller, or future
prospects of the Seller with respect to the operation of the Station. Without
limiting the generality of the foregoing and with respect to the operation of
the Station since that date:
(i) the Seller has not sold, leased, transferred, or assigned any of
its material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Seller has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts, leases, subleases,
licenses, and sublicenses) outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or cancelled
any contract, lease, sublease, license, or sublicense (or series of
related contracts, leases, subleases, licenses, and sublicenses) involving
more than $5,000 to which the Seller is a party or by which it is bound
other than in the Ordinary Course of Business;
(iv) no Security Interest has been imposed upon any of its assets,
tangible or intangible not disclosed in the Financial Statements or in
writing to the Buyers;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions) outside
the Ordinary Course of Business;
(vii) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations) outside the
Ordinary Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other Liabilities;
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(ix) the Seller has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(x) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property or any action
adversely affecting the FCC Licenses or the Station;
(xii) the Seller 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 giving rise to any claim or right on its
part against the person or on the part of the person against it;
(xiii) the Seller has not entered into any employment contract,
consulting contract or severance agreement or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement;
(xiv) the Seller has not granted any increase outside the Ordinary
Course of Business in the base compensation of any of its directors,
officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other
plan, contract, or commitment for any of its directors, officers, and
employees, or modified or terminated any existing such plan, contract, or
commitment;
(xvi) the Seller has not made any other change in employment terms
for any of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xviii) the Seller has not paid any amount to any third party with
respect to any Liability or obligation (including any costs and expenses
the Seller has incurred or may incur in connection with this Agreement or
any of the transactions contemplated hereby) which would not constitute an
Assumed Liability if in existence as of the Closing;
(xix) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Seller;
(xx) the Seller has not altered its credit and collection policies
or its accounting policies;
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(xxi) the Seller has not materially altered the programming, format
or call letters of the Station, or its promotional and marketing
activities;
(xxii) the Seller has not applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to preserve the
FCC Licenses and has operated the Station in compliance therewith and with
all FCC rules and regulations;
(xxiii) there has been no adverse change in the market share (to the
Knowledge of the Seller) or Cash flow of the Station; and
(xxiv) the Seller has not committed to any of the foregoing.
(g) Tax Matters. The Seller has filed and will file all Tax Returns that
it was required to file and may be required to file. All such Tax Returns that
were filed were correct and complete in all respects, and all such Tax Returns
that will be filed will be correct and complete in all respects. All Taxes owed
by the Seller (whether or not shown on any Tax Return) have been paid. The
Seller has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party. The Sellers have not waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency. The Seller is not a party to a
pending Tax audit and is aware of no threatened Tax audit. No claim has ever
been made by an authority in a jurisdiction where the Seller does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the assets of the Seller that arose in
connection with any failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Station.
The Seller owns or leases all tangible assets necessary for the conduct of the
operation and business of the Station as presently conducted and as presently
proposed to be conducted. Each such tangible asset has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear) and in the opinion of the Seller is
suitable for the purpose for which it is presently used. To the Knowledge of the
Seller, no such tangible asset is in need of replacement.
(i) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission the Intellectual
Property identified on Section 2(i) of the Disclosure Schedule. Each item of
Intellectual Property identified in Section 2(i) of the Disclosure Schedule will
be owned or available for use by the Buyers on identical terms and conditions
immediately subsequent to the Closing hereunder. The Seller has taken all
necessary or desirable action to protect each item of Intellectual Property that
it owns or uses.
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(i) To the Knowledge of the Seller, the Seller has not interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of third parties, and the Seller has
never received any charge, complaint, claim, or notice alleging any such
interference, infringement, misappropriation, or violation. To the
Knowledge of the Seller, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller.
(ii) Section 2(i) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller
with respect to any of its Intellectual Property, identifies each pending
patent, trademark or copyright application for registration which the
Seller has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which the Seller
has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Seller has delivered to the
Buyers correct and complete copies of all such patents, trademarks or
copyright registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyers
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. With respect
to each item of Intellectual Property identified in Section 2(i) of the
Disclosure Schedule:
(A) the Seller possesses all right, title, and interest in and
to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iii) Section 2(i) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the
Seller uses pursuant to license, sublicense, agreement, or permission
including, but not limited to the call letters of the Station. The Seller
has supplied the Buyers with correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date).
With respect to each such item of used Intellectual Property:
(A) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated any provision
thereof), and no event has occurred which
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with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(B) with respect to each sublicense, the representations and
warranties set forth in subsection (A) above are true and correct
with respect to the underlying license;
(C) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation,
injunction, or charge;
(D) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property;
(E) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the underlying
item of Intellectual Property; and
(F) the Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(j) Contracts. Other than Advertising Contracts, Section 2(j) of the
Disclosure Schedule lists the contracts, agreements, and other written
arrangements to which the Seller is a party and either involving payment in
excess of One Thousand Dollars ($1,000) per year or not entered into in the
Ordinary Course of Business. The Seller has delivered to the Buyers a correct
and complete copy of each written arrangement listed in Section 2(j) of the
Disclosure Schedule (as amended to date). With respect to each written
arrangement so listed to the Knowledge of the Seller:
(i) the written arrangement is legal, valid, binding, enforceable,
and in full force and effect;
(ii) the written arrangement will continue to be legal, valid,
binding, and enforceable and in full force and effect on identical terms
following the Closing;
(iii) no party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration, under the written
arrangement; and
(iv) no party has repudiated any provision of the written
arrangement.
The written arrangement listed in Section 2(j) of the Disclosure Schedule are
all of the written arrangements necessary for the conduct of the operation and
business of the Station as presently
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conducted and are included within the definition of Acquired Assets. The Seller
is not a party to any verbal contract, agreement, or other arrangement which, if
reduced to written form, would be required to be listed in Section 2(j) of the
Disclosure Schedule under the terms of this Section 2(j).
(k) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates
of compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or useful in the operation of the
Station as they are now being operated (A) are in full force and effect,
(B) are unimpaired by any acts or omissions of the Seller or the Seller's
employees or agents, (C) are free and clear of any restrictions which
might limit the full operation of the Station as it is now operating, and
(D) are detailed in Section 2(k) of the Disclosure Schedules. With respect
to the licenses, permits, authorizations, franchises, certificates of
compliance and consents referenced in the preceding sentence, Section 2(k)
of the Disclosure Schedules also sets forth, without limitation, the date
of the last renewal, the expiration date thereof, and any conditions or
contingencies related thereto. Except as set forth in Section 2(k) of the
Disclosure Schedules, no condition exists or event has occurred that
permits, or after notice or lapse of time, or both, would permit, the
revocation or termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Station as now conducted. Except as set forth in Section
2(k) of the Disclosure Schedules, the Seller is not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or
revoked.
(ii) The Station is in compliance with the FCC's policy on exposure
to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Station's transmission facilities is restricted in
accordance with the policies of the FCC.
(iii) Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Knowledge of the Seller, the Seller is not the subject of
any FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Station, and there are no proceedings (other than rulemaking proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(k) of the Disclosures Schedule.
(iv) Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Station all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
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(l) Insurance. Section 2(l) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy and to the Knowledge of the Seller:
(A) the policy is legal, valid, binding, and enforceable and in full force and
effect; (B) neither the Seller nor any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default or permit termination, modification,
or acceleration, under the policy; and (C) no party to the policy has repudiated
any provision thereof. The Seller has been covered during the past three (3)
years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during that three-year period. Section 2(l)
of the Disclosure Schedule describes any self-insurance arrangements affecting
the Seller.
(m) Litigation. Section 2(m) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgement,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(m) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(n) Employees. Section 2(n) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work
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at the Station of each employee of Seller. The Seller is not a party to or bound
by any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Seller has not committed any unfair labor practice. The Seller has
no Knowledge of any organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of the Seller.
(o) Employee Benefits. Section 2(o) of the Disclosure Schedule lists all
Employee Benefit Plans and other executive compensation plans that the Seller
maintains or to which the Seller contributes for the benefit of any current or
former employee of the Seller. Each Employee Benefit Plan (and each related
trust or insurance contract) complies in form and in operation in all respects
with the applicable requirements of ERISA and the Code. The Seller does not
contribute to, ever has contributed to, or ever has been required to contribute
to any Multiemployer Plan. The Seller has not incurred and has no reason to
expect that it will incur any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
liability) or under the Code with respect to any Employee Pension Benefit Plan
that the Seller maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to contribute. The Seller does
not maintain and has not maintained, contributed or been required to contribute
to any Employee Welfare Benefit Plan providing health, accident, or life
insurance benefits to former employees, their spouses, or their dependents
(other than in accordance with Code Sec. 4980B).
(p) Legal Compliance.
(i) To the Knowledge of the Seller, the Seller has complied with
all laws (including rules and regulations thereunder) of
federal, state, and local governments (and all agencies
thereof) and no charge, compliant, action suit, proceeding,
hearing, investigation, claim, demand, or notice has been
filed or commenced against the Seller alleging any failure to
comply with any such law or regulation, including those
relating to the employment of labor, employee civil rights,
and equal employment opportunities and relating to antitrust
matters.
(ii) To the Knowledge of the Seller, the Seller has filed in a
timely manner all reports, documents, and other materials it
was required to file (and the information contained therein
was correct and complete in all respects) under all applicable
laws (including rules and regulations thereunder). The Seller
has possession of all records and documents it was required to
retain under all applicable laws (including rules and
regulations thereunder).
(q) Brokers' Fees. Other than the payment of Forty Six Thousand Eight
Hundred Seventy Five and No/100 ($46,875.00) Dollars payable to the Whittle
Agency at Closing, the Seller has no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
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(r) Advertising Contracts. Section 2(r) of the Disclosure Schedule lists
those Advertising Contracts and the daily value of such Advertising in Contracts
as of the Closing Date. Other than to employees of the Seller or the Station or
as disclosed in Section 2(r) of the Disclosure Schedule, no commission or other
form of renumeration is paid by the Seller with respect to Advertising Contracts
and any renumeration so listed shall be paid by Seller at or prior to Closing.
Other then in the Ordinary Course of Business, no party to an Advertising
Contract has indicated to the Seller within the past year that it will stop or
decrease the rate of advertising.
(s) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or to the Knowledge of
the Seller, omit to state any fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. Representations and Warranties of the Buyers. The Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. The Operating Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of Nevada. The Licensing Company is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Nevada.
(b) Authorization of Transaction. The Buyers have full power and authority
to execute and deliver this Agreement and to perform the Buyers' obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of each the Buyers, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which either of the Buyers are subject or any provision of either of
the Buyers' articles of organization or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which either of the
Buyers are a party or by which either of the Buyers are bound or to which any of
the Buyers' assets are subject. The Buyers do not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental
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agency in order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to in Section
1 above).
(d) Brokers' Fees. Other than the payment of Forty Six Thousand Eight
Hundred Seventy Five and No/100 ($46,875.00) Dollars payable to the Whittle
Agency at Closing, the Buyers have no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Seller could become liable or
obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Licensing Company shall jointly
file with the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Seller to the Licensing
Company (the "Assignment Application"). The costs of the FCC filing fees in
connection with the Assignment Application shall be paid by Licensing Company.
The Licensing Company shall pay all attorneys' fees relating to the Assignment
Application. The Seller and the Licensing Company shall thereafter prosecute the
Assignment Application with all reasonable diligence and otherwise use the
commercially reasonable efforts to obtain the grant of the Assignment
Application as expeditiously as practicable (but neither the Seller nor the
Licensing Company shall have any obligation to satisfy complainants or the FCC
by taking any steps which would have material adverse effect upon the Station or
upon any Affiliate). If the FCC imposes any condition on either party to the
Assignment Application, such party shall use commercially reasonable efforts to
comply with such condition, provided, that neither party shall be required
hereunder to comply with any condition that would have a material adverse effect
upon the Station or any Affiliate. The Seller and the Licensing Company shall
jointly oppose any requests for reconsideration or judicial review of FCC
approval of the Assignment Application and shall jointly request from the FCC
extension of the effective period of FCC approval of the Assignment Application
if the Closing shall not have occurred prior to the expiration of the original
effective period of the FCC Consent. Nothing in this Section 4(b) shall be
construed to limit either the Seller's or the Buyer's right to terminate this
Agreement pursuant to Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at the Buyers' option and upon the
Buyers' terms and conditions, extend offers of employment to all or any of the
Seller's employees effective on the Closing Date. The Seller will not take any
action
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to preclude or discourage any of the Seller's employees from accepting any offer
of employment extended by the Buyers.
(d) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its commercially reasonable efforts to obtain
any third party consents, that the Buyers reasonably may request in connection
with the matters pertaining to the Seller disclosed or required to be disclosed
in the Disclosure Schedule. Each of the Parties will file any notification and
report forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its best efforts
to obtain an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary, proper, or
advisable. Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
(e) Operation of Business. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 2(f) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations for goods or services under its Advertising Contracts in the
Ordinary Course of Business. On the Closing Date, the Seller shall deliver to
the Operating Company a schedule, certified by an officer of the Seller,
reflecting all such Advertising Contracts and the daily value thereof and
outstanding balances thereunder in existence as of the Closing Date.
(g) Operating Statements. The Seller shall deliver to Buyers, for Buyers'
informational purposes only, monthly unaudited statements of operating revenues
and operating expenses of the Station within ten (10) days after each such
statement is prepared by or for the Seller.
(h) Contracts. Seller will not without the prior written consent of the
Operating Company amend, change, or modify any of the contracts listed on
Section 2(j) of the Disclosure Schedule in any material respect. The Seller will
not without prior written consent of the Operating Company enter into any new
contracts respecting the Station or their properties, except (i) contracts for
the sale of time on the Station for cash, goods or services which comply with
the representations and warranties pertaining to such contracts set forth in
Section 2(j) above, and (ii) contracts entered into in the Ordinary Course of
Business.
(i) Operation of Station. The Seller shall operate the Station in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications,
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documents, instruments and other information required to be filed in connection
with the operation of the Station.
(j) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Station and with respect to collecting accounts receivable arising from
such extension of credit.
(k) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensers,
advertisers, suppliers, customers, and employees, all of the confidential
information, call letters and trade secrets of the Station, and the FCC
Licenses. The Seller will continue to make expenditures for advertising,
programming, sales, technical and administrative support at a level consistent
with the past practices of the Seller.
(l) Full Access and Consultation. The Seller will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Station, to all
premises, properties, assets, books, records, contracts, Tax records, and
documents of or pertaining to the Acquired Assets or the Seller. The Seller will
consult with the Buyers' management with a view to informing Buyers' management
as to the operations, management and business of the Station.
(m) Notice of Developments. The Seller will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller. Each Party will give prompt written notice to the other
of any material development affecting the ability of the Parties to consummate
the transactions contemplated by this Agreement. No disclosure by any party
pursuant to this Section 4(m), however, shall be deemed to amend or supplement
the Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Seller or the Station; or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing.
(o) Environmental Assessments. The Operating Company may, obtain with
respect to each parcel of real estate that the Seller owns a current Phase I
environmental site assessment from an environmental consultant or engineer which
shall not disclose or recommend any action with respect to any condition to be
remediated or investigated or any contamination on the site assessed. The Buyers
shall pay the cost and expense associated with any environmental assessment
initiated pursuant to this Section 4(o).
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(p) Control of Station. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Operating Company and its employees or agents shall not
directly or indirectly control, supervise, or direct, or attempt to control,
supervise, or direct, the operation of the Station, and such operation shall be
the sole responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyers
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will repair or replace such Acquired Assets as soon
as possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Seller's notice to the Buyers, and the Buyers determine that the Seller's
failure to repair or replace, alone or in the aggregate, would have a material
adverse effect on the operation of the Station:
(i) The Buyers may elect to terminate this Agreement; or
(ii) The Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's notice
to Buyers, in which case either party may terminate this Agreement; or
(iii) The Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to Buyers all
rights under any insurance claims covering the loss, damage or destruction and
payment over to Buyers any proceeds under any such insurance policies,
previously received by the Seller with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(p),
the Parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by the Buyers in connection with
the Closing is subject to satisfaction of the following conditions:
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(i) the representations and warranties set forth in Section 2 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to those
relating to transmitter and studio leases;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyers to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(v) the Seller shall have delivered to the Buyers a certificate to
the effect that each of the conditions specified above in Section
5(a)(i)-(iv) is satisfied in all respects;
(vi) the Assignment Application shall have been approved by a Final
Order of the FCC, all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise
been terminated and the Seller and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vii) the Buyers shall have completed the Buyers' review and
verification of the Seller's Financial Statements, the Buyers' review of
the FCC Licenses and the Station, the Buyers' engineering audit of the
Seller's studio and transmitter facilities and equipment, all with results
satisfactory to the Buyers in the Buyers' sole judgment;
(viii) the relevant parties shall have entered into the Post Closing
Agreement;
(ix) the relevant parties shall have entered into the Lease
Agreement;
(x) the Buyers shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit F attached
hereto, addressed to the Buyers and dated as of the Closing Date; and
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(xi) all actions consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
The Buyers may waive any condition specified in this Section 5(a) if the Buyers
execute a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyers shall have performed and complied with all of the
Buyers' covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Seller a certificate to
the effect that each of the conditions specified above in Section
5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Assignment Applications shall have been approved by
a Final Order of the FCC, all applicable waiting periods (and any
extension thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Seller and the Buyers shall have
received all governmental approvals required to transfer all other
authorizations, consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Lease
Agreement;
(vii) the relevant parties shall have entered into the Post Closing
Agreement; and
(viii) all actions to be taken by the Buyers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
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The Seller may waive any condition specified in this Section 5(b) if it executes
a writing so stating at or prior to the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Seller, the other Party will cooperate with the contesting or
defending Party and its counsel in the contest or defense, make available his or
its personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 7 below).
(c) Adjustments. Operation of the Station and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Operating Company. Such items as employee salaries, vacation,
sick day and personal time accruals, and fringe benefits, power and utilities
charges, insurance, real and personal property taxes, prepared expenses,
deposits, music license fees, and rents and payments pertaining to the leases
and contracts being assigned hereunder (inducing any contracts for the sale of
time for cash, trade or barter so assigned) shall be prorated between the Seller
and the Operating Company as of the Closing Date in accordance with the
foregoing principle. The prorations and adjustments hereunder shall be made and
paid insofar as feasible on the Closing Date, with a final settlement sixty (60)
days after the Closing Date. In the event of any disputes between the Parties as
to such adjustments, the amounts not in dispute shall nonetheless be paid at
such time and such disputes shall be determined by the accounting firm of Price
Waterhouse, LLP and the fees and expenses of such accounting firm shall be paid
one-half (1/2) by the Seller and one-half (1/2) by the Operating Company.
(d) Collection of Accounts Receivable. At the Closing, the Seller will
turn over to the Operating Company, for collection only, the accounts receivable
of the Station owing to the Seller as of the close of business on the Closing
Date. A schedule of such accounts receivable will be delivered by the Seller to
the Operating Company on the Closing Date or as soon thereafter as
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possible. The Operating Company agrees to use commercially reasonable efforts in
the ordinary course of business (but without responsibility to institute legal
or collection proceedings) to collect such accounts receivable during the
120-day period following the Closing Date, and will remit all payments received
on such accounts to Seller at the end of each month during such 120-day period.
In the event the Operating Company receives moneys during the 120-day period
following the Closing Date from an advertiser who, after the Closing Date, is
advertising over any of the Station, and that advertiser was included among the
accounts receivable as of the Closing Date, the Operating Company shall apply
said moneys to the oldest outstanding balance due on the particular account,
except in the case of a "disputed" account receivable. For purposes of this
Section 6(d), a "disputed" account receivable means one which the account debtor
refuses to pay because he asserts that the money is not owed or the amount is
incorrect. In the case of such a disputed account, the Operating Company shall
immediately return the account to the Seller prior to expiration of the 120-day
period following the Closing Date. If the Operating Company returns a disputed
account to the Seller, the Operating Company shall have no further
responsibility for its collection and may accept payment from the account debtor
for advertising carried on any of the Station after the Closing Date. At the end
of the 120-day period following the Closing Date, the Operating Company will
turn back to the Seller all of the accounts receivable of the Station as of the
Closing Date owing to the Seller which have not yet been collected, and the
Operating Company will thereafter have no further responsibility with respect to
the collection of such receivables. During the 120-day period following the
Closing Date, the Operating Company shall afford the Seller reasonable access to
the accounts receivable "aging list."
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b) and 2(c) hereof or
relating to the Seller's title to the Acquired Assets) shall survive the Closing
and continue in full force and effect for a period of eighteen (18) months
thereafter, except that any representation or warranty relating to the Buyers'
freedom from liability to pay a Liability of the Seller shall continue in full
force and effect for the period of the applicable statute of limitations plus
ninety (90) days. All of the other representations, warranties, and covenants of
the Buyers and the Seller contained in this Agreement (including the
representations and warranties of the Seller contained in Sections 2(a), 2(b)
and 2(c) hereof or relating to the Seller's title to the Acquired Assets) and in
this Agreement shall survive the Closing (even if the damaged party knew or had
reason to know of any misrepresentation or breach of warranty or covenant at the
time of Closing) and continue in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a breach
of a covenant prior to the Closing Date, the Seller agrees to indemnify the
Buyers from and against the entirety of any Adverse Consequences the Buyers may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by:
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(i) any breach of the Seller's representations, warranties, and
covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the Buyers
make a written claim for indemnification within the applicable survival
period);
(ii) any Liability of the Seller which is not an Assumed Liability;
or
(iii) the operation of the Station by the Seller prior to the
Closing Date.
(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a breach of a covenant prior to
the Closing Date, the Buyers agree to indemnify the Seller from and against the
entirety of any Adverse Consequences the Seller may suffer resulting from,
arising out of, relating to, in the nature of, or caused by:
(i) the breach of any of the Buyers' representations, warranties,
and covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the Seller makes
a written claim for indemnification within the applicable survival period);
(ii) any Assumed Liability; or
(iii) the operation of the Station by the Buyers after the Closing
Date.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the Stations to be acquired pursuant to this Agreement are unique and that the
Buyers would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the Buyers shall be
entitled to an injunction or injunctions to prevent such breaches and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 10(o) below), in addition to any other remedy to which it may
be entitled, at law or in equity. Each of the Parties acknowledges and agrees
that not withstanding the provision in Section 7(e) with respect to the remedy
of liquidated damages upon a breach of a covenant of this Agreement prior to the
Closing, money damages would not be an adequate remedy for a breach of any
provision of this Agreement.
(e) Liquidated Damages. The Buyers and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
the event the transactions contemplated by this Agreement are not consummated
due to a default of this Agreement by either Party, then the non-defaulting
Party shall be entitled to receive from the defaulting Party for such default,
in lieu of indemnification pursuant to Sections 7(b) or 7(c), the sum of One
Hundred Fifty Thousand and no/100 Dollars ($150,000.00) as liquidated
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damages without the need for proof of damages; provided, however, that the
Buyers retain the option to seek, pursuant to Section 7(d), and recover in lieu
of the remedy of liquidated damages pursuant to this Section 7(e), the remedy of
specific performance. The defaulting Party agrees to pay said sum of liquidated
damages within ten (10) days of the date that the non-defaulting Party obtains
such a judgment.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party
will defend the Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may
retain separate co-counsel at its sole cost and expense (except that the
Indemnifying Party will be responsible for the fees and expenses of the separate
co-counsel to the extent the Indemnified Party concludes reasonably that the
counsel the Indemnifying Party has selected has a conflict of interest), (iii)
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the matter without the written consent of
the Indemnifying Party (not to be withheld unreasonably), and (iv) the
Indemnifying Party will not consent to the entry of any judgment with respect to
the matter, or enter into any settlement which does not include a provision
whereby the plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, without the written consent of the
Indemnified Party (not to be withheld unreasonably). In the event the
Indemnifying Party does not notify the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, however, the Indemnified
Party may defend against, or enter into any settlement with respect to, the
matter in any manner it reasonably may deem appropriate.
(g) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory or common
law remedy any party may have for breach of representation, warranty, or
covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, (other than Retained Assets) that are used or useful
in the operation of the Station, including but not limited to all of its (a)
tangible personal property (such as computers, electrical devices, monitoring
equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, inventories of
compact disks, records, tapes and other supplies), vehicles, and all assignable
warranties with respect thereto; (b) Intellectual Property, goodwill
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associated therewith, licenses and sublicenses granted and obtained with respect
thereto, and rights thereunder, remedies against infringements thereof, and
rights to protection of interests therein under the laws of all jurisdictions;
(c) rights under orders and agreements (including those barter agreements
identified on the Disclosure Schedules) now existing or entered into in the
Ordinary Course of Business for the sale of advertising time on the Station; (d)
contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (e) call letters of the Station, jingles,
logos, slogans, and business goodwill of the Station; (f) Licenses and similar
rights obtained from governments and governmental agencies; and (g) FCC logs and
records and all other books, records, ledgers, logs, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" means any arrangement with any third party under
which the Seller has created, incurred, assumed or guaranteed an obligation to
provide advertising or air time on the Station.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means obligations of the Seller under the licenses,
sublicenses, leases, subleases, contracts, and other arrangements referred to in
the definition of Acquired Assets either: (a) to furnish services, and other
non-Cash benefits to another party after the Closing; or (b) to pay for goods,
services, and other non-Cash benefits that another party will furnish to it
after the Closing. The Assumed Liabilities shall not include any Retained
Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
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"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 and Section 3
above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means The Whittle Agency, Inc.
"FCC" means the Federal Communications Commission of the United States.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
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"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(f) above.
"Indemnifying Party" has the meaning set forth in Section 7(f) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Lease Agreement" means the lease agreement by and between Sunny
Broadcasters, Inc. and the Operating Company the form of which is attached
hereto at Exhibit G.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Licensing Company" has the meaning set forth in the preface above.
"Most Recent Financial Statements" has the meaning set forth in Section
2(e) above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37)
"Operating Company" has the meaning set forth in the preface above.
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post Closing Agreement" means the Post Closing Agreement with "Seller
Members" (as defined in the Post Closing Agreement) the form of which is
attached hereto as Exhibit D and pursuant to which the "Seller Members" (as
defined in the Post Closing Agreement) jointly and severally agree to (a) cause
the Seller to retain fee ownership of and unencumbered certain real property
that is subject of the Lease Agreement and (b) guarantee up to Five Hundred
Thousand Dollars ($500,000.00) in the aggregate the indemnity obligations of the
Seller.
"Process Agent" has the meaning set forth in Section 10(o) below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Retained Assets" means (a) the limited liability company charter,
qualifications to conduct business as a foreign entity, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, membership transfer books, blank
membership certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a limited liability company; (b) any
of the rights of the Seller under this Agreement (or under any side agreement
between the Seller and the Buyers entered into on or after the date of this
Agreement); (c) accounts, notes and other receivables; (d) the Seller's Cash;
and (e) all of the Seller's right, title and interest in and to its real
property, and all improvements, fixtures, and fittings thereon (such as towers
and antennae), and easements, rights-of-way and other appurtenants thereto.
"Retained Liabilities" means any other obligations or liabilities of
Seller, including but not limited to: (a) any Liability relating to the
ownership or operation of the Station prior to the Closing; (b) any Liability of
the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (c) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby; or (d) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
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"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
WDAI-FM licensed by the FCC to operate in Pawleys, South Carolina.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach, and the Seller may terminate this Agreement by giving
written notice to the Buyers at any time prior to the Closing in the event
the Buyers are in breach, of any material representation, warranty, or
covenant contained in this Agreement in any material respect in each case
if such breach remains uncured for ten (10) days after notice of breach is
received from the other party;
(iii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent
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<PAGE>
under Section 5(a) hereof (unless the failure results primarily from the
Buyers breaching any representation, warranty, or covenant contained in
this Agreement);
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant contained in
this Agreement);or
(v) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If this Agreement is terminated pursuant to
Section 9(a)(i) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party. If this Agreement is not
consummated by the Closing Date or terminates as a result of a breach or default
of a Party, then the non-defaulting Party shall be entitled to liquidated
damages as set forth in Section 7(e) above.
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing to the extent set
forth in Section 7(a) of this Agreement.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein. No Party may assign either
this Agreement or any of its rights, interests, or obligations hereunder without
the prior written approval of the other Party.
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<PAGE>
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: Seacoast Radio Company, LLC
Attn: Richard J. Laughridge
6027 Devine Street
Columbia, SC 29209
Copy to: John T. Moore
Nelson Mullins Riley & Scarborough, L.L.P.
1330 Lade Street
P.O. Box 11070-29211
Columbia, SC 29201
If to the Buyers: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Copy to: Cumulus Licensing Corp.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other
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<PAGE>
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
South Carolina.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications. The Seller will pay
all income taxes, transfer or sales taxes and other recording or similar fees
necessary to vest title to each of the Acquired Assets in the Buyers.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the
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<PAGE>
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in South Carolina, in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Each Party agrees that a final judgment in
any action or proceeding so brought shall be conclusive and may be enforced by
suit on the judgment or in any other manner provided by law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
------------------------------
Title:
---------------------------
"Operating Company"
CUMULUS LICENSING CORP.
By:
------------------------------
Title:
---------------------------
"Licensing Company"
SEACOAST RADIO COMPANY, LLC
By:
------------------------------
Title:
---------------------------
"Seller"
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<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SUNNY BROADCASTERS, INC.
AND
CUMULUS BROADCASTING, INC.
AND
CUMULUS LICENSING CORP.
October 9, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction..................................................1
(a) Purchase and Sale of Assets.................................1
(b) Assumption of Liabilities...................................1
(c) Purchase Price..............................................1
(d) The Closing.................................................2
(e) Deliveries at the Closing...................................2
(f) Allocation..................................................2
2. Representations and Warranties of the Seller.......................2
(a) Organization of the Seller..................................3
(b) Authorization of Transaction................................3
(c) Noncontravention............................................3
(d) Title to Acquired Assets....................................3
(e) Financial Statements........................................3
(f) Events Subsequent to .......................................4
(g) Tax Matters.................................................6
(h) Tangible Assets.............................................6
(i) Intellectual Property.......................................6
(j) Contracts...................................................8
(k) Commission Licenses and Compliance with Commission
Requirements.............................................9
(l) Insurance...................................................9
(m) Litigation.................................................10
(n) Employees..................................................10
(o) Employee Benefits..........................................11
(q) Brokers' Fees..............................................11
(r) Advertising Contracts......................................11
(s) Disclosure.................................................12
3. Representations and Warranties of the Buyers......................12
(a) Organization of the Buyers.................................12
(b) Authorization of Transaction...............................12
(c) Noncontravention...........................................12
(d) Brokers' Fees..............................................13
4. Pre-Closing Covenants.............................................13
(a) General....................................................13
(b) Assignment Applications....................................13
(c) Employment Offers..........................................13
(d) Notices and Consents.......................................13
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<PAGE>
(e) Operation of Business......................................14
(f) Advertising Obligations....................................14
(g) Operating Statements.......................................14
(h) Contracts..................................................14
(i) Operation of Station.......................................14
(j) Credit and Receivables.....................................14
(k) Preservation of Business...................................15
(l) Full Access................................................15
(m) Notice of Developments.....................................15
(n) Exclusivity................................................15
(p) Control of Station.........................................15
(q) Risk of Loss...............................................16
5. Conditions to Obligation to Close.................................16
(a) Conditions to Obligation of the Buyers.....................16
(b) Conditions to Obligation of the Seller.....................18
6. Post-Closing Covenants............................................18
(a) General....................................................19
(b) Litigation Support.........................................19
(c) Adjustments................................................19
(d) Collection of Accounts Receivable..........................19
7. Remedies for Breaches of this Agreement...........................20
(a) Survival...................................................20
(b) Indemnification Provisions for the Benefit of the
Buyers...................................................20
(c) Indemnification Provisions for the Benefit of the
Seller...................................................21
(d) Specific Performance.......................................21
(e) Liquidated Damages.........................................21
(f) Matters Involving Third Parties............................21
(g) Other Indemnification Provisions...........................22
8. Definitions.......................................................22
9. Termination.......................................................27
(a) Termination of Agreement...................................27
(b) Effect of Termination......................................28
10. Miscellaneous....................................................28
(a) Survival...................................................28
(b) Press Releases and Announcements...........................28
(c) No Third Party Beneficiaries...............................28
(d) Entire Agreement...........................................28
-ii-
<PAGE>
(e) Succession and Assignment..................................28
(f) Counterparts...............................................28
(g) Headings...................................................28
(h) Notices....................................................29
(i) Governing Law..............................................29
(j) Amendments and Waivers.....................................29
(k) Severability...............................................30
(l) Expenses...................................................30
(m) Construction...............................................30
(n) Incorporation of Exhibits and Schedules....................30
(o) Submission to Jurisdiction.................................30
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<PAGE>
EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Forms of Assignments
Exhibit C--Form of Assumption
Exhibit D--Form of Postclosing Agreement
Exhibit E--Allocation Schedule
Exhibit F--Form of Opinion of Counsel to the Seller
Exhibit G--Form of Lease Agreement
SCHEDULES
Description of Schedule Section
----------------------- -------
Financial Statements 2(e)
Events Subsequent to January 1, 1997 2(f)
Tangible Assets 2(h)
Intellectual Property 2(i)
Contracts 2(j)
Commission Licenses and Compliance with Commission Requirements 2(k)
Insurance 2(l)
Litigation 2(m)
Employees 2(n)
Employee Benefits 2(o)
Advertising Contracts 2(r)
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of October 9, 1997, by and
between Sunny Broadcasters, Inc., a South Carolina corporation (the "Seller"),
Cumulus Broadcasting, Inc., a Nevada corporation (the "Operating Company"), and
Cumulus Licensing Corp., a Nevada corporation (the "Licensing Company"). The
Operating Company and the Licensing Company are collective referred to herein as
the "Buyers." The Buyers and the Seller are collectively referred to herein as
the "Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
This Agreement contemplates a transaction in which the Buyers will
purchase substantially all of the assets (and assume certain of the liabilities)
of the Seller that are used or useful in the operation of radio station WSYN-FM,
licensed to operate in Georgetown, South Carolina in return for Cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyers agree to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyers, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyers agree to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyers will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller Five Million and
no/100 Dollars ($5,000,000.00) (the "Purchase Price") payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Two Hundred Fifty Thousand and no/100 Dollars
($250,000.00) (the "Earnest Money Deposit") by delivery of either (A) Cash
payable by wire transfer or delivery of other immediately available funds
or (B) a letter of credit issued by NationsBank, Texas, N.A. naming Escrow
Agent as beneficiary; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Four Million Two Hundred Fifty Thousand and 00/100 Dollars
($4,250,000.00) by delivery of Cash payable by wire transfer or delivery
of other immediately available funds.
<PAGE>
The Earnest Money Deposit referenced in this Section 1(c) shall be placed
in escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), which
requires that such Earnest Money Deposit shall, if other than pursuant to
Section 1(c)(B), be deposited by the Escrow Agent with a federally insured
financial institution in an interest bearing account. Interest earned on the
Earnest Money Deposit, if any, shall accrue to the benefit of the Buyers (with
the use of the Buyers' federal tax identification number), and, together with
the principal amount of the Earnest Money Deposit, shall be payable to the
Seller and credited against the Purchase Price on the Closing Date. If this
Agreement is terminated without Closing of the transaction contemplated herein,
the Earnest Money and any accrued interest shall be paid to the Buyers or the
Seller as provided in the Earnest Money Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Station in
Georgetown, South Carolina, commencing at 9:00 a.m. local time on the date set
by the Buyers not earlier than the fifth business day or later than the tenth
business day after the FCC approval of the Assignment Application becomes a
Final Order, by which date all other conditions to the obligations of the
Parties to consummate the transactions contemplated hereby will have been
satisfied or waived or such other date as the Parties may mutually determine
(the "Closing Date"); provided, however, that the Closing Date shall be no
earlier than January 5, 1998 and no later than two hundred seventy (270) days
from the date of this Agreement.
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in Section 5(a) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including Intellectual Property transfer documents) in
the forms attached hereto as Exhibit B and (B) such other instruments of sale,
transfer, conveyance, and assignment as the Parties may determine are
applicable; (iv) the Buyers will execute, acknowledge (if appropriate), and
deliver to the Seller (A) an assumption in the form attached hereto as Exhibit C
and (B) such other instruments of assumption as the Parties may determine are
applicable; and (v) the Buyers will deliver to the Seller the consideration
specified in Section 1(c) above.
(f) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with an allocation schedule
to be attached hereto as Exhibit E.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule
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<PAGE>
accompanying this Agreement and initialed by the Parties (the "Disclosure
Schedule") corresponding to the lettered and numbered sections of this Section
2.
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of South Carolina. The Seller does not have any Subsidiaries.
(b) Authorization of Transaction. The Seller has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors and stockholders of the
Seller have duly authorized the execution, delivery, and performance of this
Agreement by the Seller. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms and
conditions.
(c) Noncontravention. To the Knowledge of the Seller, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in Section 1 above), will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court to which the Seller is subject
or any provision of the charter or bylaws of the Seller; or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest, or other arrangement to which the
Seller is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). Other than with respect to the transfer of the FCC Licenses, the Seller
does not need to give any notice to, make any filing with, or obtain any
Licenses, consent, or approval of any government or governmental agency in order
for the Parties to consummate the transactions contemplated by this Agreement
(including the assignments and assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Seller has good and marketable title to all
of the Acquired Assets, and will convey the Acquired Assets free and clear of
any Security Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedules are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1993, December 31, 1994, December 31, 1995 and December 31, 1996,
for the Seller; and (ii) unaudited statements of income, as of and for each
month during 1995 and 1996 and the months ended January 31 and February 28,
March 31, April 30, and May 31, 1997 for the Seller (the "Most Recent Financial
Statements"). The Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby, are
correct and complete, and are consistent with the books and records of the
Seller (which
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<PAGE>
books and records are correct and complete). Without limiting the generality of
the foregoing, all material revenues and expenses of the Seller and the Station
(A) are properly reflected in the Financial Statements, (B) have arisen in the
Ordinary Course of Business, (C) are valid and subject to no counterclaims, and
(D) will be or have been collected or paid at their recorded amounts subject
only to the reserve for bad debts set forth on the face of the Most Recent
Financial Statements.
(f) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(f) of the Disclosure Schedules, there has not been any
adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or to the Knowledge of the Seller, or future
prospects of the Seller with respect to the operation of the Station. Without
limiting the generality of the foregoing and with respect to the operation of
the Station since that date:
(i) the Seller has not sold, leased, transferred, or assigned any of
its material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Seller has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts, leases, subleases,
licenses, and sublicenses) outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or cancelled
any contract, lease, sublease, license, or sublicense (or series of
related contracts, leases, subleases, licenses, and sublicenses) involving
more than $5,000 to which the Seller is a party or by which it is bound
other than in the Ordinary Course of Business;
(iv) no Security Interest has been imposed upon any of its assets,
tangible or intangible not disclosed in the Financial Statements or in
writing to the Buyers;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions) outside
the Ordinary Course of Business;
(vii) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations) outside the
Ordinary Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other Liabilities;
(ix) the Seller has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
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<PAGE>
(x) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property or any action
adversely affecting the FCC Licenses or the Station;
(xii) the Seller 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 giving rise to any claim or right on its
part against the person or on the part of the person against it;
(xiii) the Seller has not entered into any employment contract,
consulting contract or severance agreement or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement;
(xiv) the Seller has not granted any increase outside the Ordinary
Course of Business in the base compensation of any of its directors,
officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other
plan, contract, or commitment for any of its directors, officers, and
employees, or modified or terminated any existing such plan, contract, or
commitment;
(xvi) the Seller has not made any other change in employment terms
for any of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xviii) the Seller has not paid any amount to any third party with
respect to any Liability or obligation (including any costs and expenses
the Seller has incurred or may incur in connection with this Agreement or
any of the transactions contemplated hereby) which would not constitute an
Assumed Liability if in existence as of the Closing;
(xix) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Seller;
(xx) the Seller has not altered its credit and collection policies
or its accounting policies;
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(xxi) the Seller has not materially altered the programming, format
or call letters of the Station, or its promotional and marketing
activities;
(xxii) the Seller has not applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to preserve the
FCC Licenses and has operated the Station in compliance therewith and with
all FCC rules and regulations;
(xxiii) there has been no adverse change in the market share (to the
Knowledge of the Seller) or Cash flow of the Station; and
(xxiv) the Seller has not committed to any of the foregoing.
(g) Tax Matters. The Seller has filed and will file all Tax Returns that
it was required to file and may be required to file. All such Tax Returns that
were filed were correct and complete in all respects, and all such Tax Returns
that will be filed will be correct and complete in all respects. All Taxes owed
by the Seller (whether or not shown on any Tax Return) have been paid. The
Seller has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party. The Sellers have not waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency. The Seller is not a party to a
pending Tax audit and is aware of no threatened Tax audit. No claim has ever
been made by an authority in a jurisdiction where the Seller does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the assets of the Seller that arose in
connection with any failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Station.
The Seller owns or leases all tangible assets necessary for the conduct of the
operation and business of the Station as presently conducted and as presently
proposed to be conducted. Each such tangible asset has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear) and in the opinion of the Seller is
suitable for the purpose for which it is presently used. To the Knowledge of the
Seller, no such tangible asset is in need of replacement.
(i) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission the Intellectual
Property identified on Section 2(i) of the Disclosure Schedule. Each item of
Intellectual Property identified in Section 2(i) of the Disclosure Schedule will
be owned or available for use by the Buyers on identical terms and conditions
immediately subsequent to the Closing hereunder. The Seller has taken all
necessary or desirable action to protect each item of Intellectual Property that
it owns or uses.
(i) To the Knowledge of the Seller, the Seller has not interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of third
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parties, and the Seller has never received any charge, complaint, claim,
or notice alleging any such interference, infringement, misappropriation,
or violation. To the Knowledge of the Seller, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of the Seller.
(ii) Section 2(i) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller
with respect to any of its Intellectual Property, identifies each pending
patent, trademark or copyright application for registration which the
Seller has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which the Seller
has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Seller has delivered to the
Buyers correct and complete copies of all such patents, trademarks or
copyright registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyers
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. With respect
to each item of Intellectual Property identified in Section 2(i) of the
Disclosure Schedule:
(A) the Seller possesses all right, title, and interest in and
to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iii) Section 2(i) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the
Seller uses pursuant to license, sublicense, agreement, or permission
including, but not limited to the call letters of the Station. The Seller
has supplied the Buyers with correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date).
With respect to each such item of used Intellectual Property:
(A) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated any provision
thereof), and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
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(B) with respect to each sublicense, the representations and
warranties set forth in subsection (A) above are true and correct
with respect to the underlying license;
(C) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation,
injunction, or charge;
(D) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property;
(E) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the underlying
item of Intellectual Property; and
(F) the Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(j) Contracts. Other than Advertising Contracts, Section 2(j) of the
Disclosure Schedule lists the contracts, agreements, and other written
arrangements to which the Seller is a party and either involving payment in
excess of One Thousand Dollars ($1,000) per year or not entered into in the
Ordinary Course of Business. The Seller has delivered to the Buyers a correct
and complete copy of each written arrangement listed in Section 2(j) of the
Disclosure Schedule (as amended to date). With respect to each written
arrangement so listed to the Knowledge of the Seller:
(i) the written arrangement is legal, valid, binding, enforceable,
and in full force and effect;
(ii) the written arrangement will continue to be legal, valid,
binding, and enforceable and in full force and effect on identical terms
following the Closing;
(iii) no party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration, under the written
arrangement; and
(iv) no party has repudiated any provision of the written
arrangement.
The written arrangement listed in Section 2(j) of the Disclosure Schedule
are all of the written arrangements necessary for the conduct of the operation
and business of the Station as presently conducted and are included within the
definition of Acquired Assets. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(j) of the Disclosure Schedule under the terms
of this Section 2(j).
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(k) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates
of compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or useful in the operation of the
Station as they are now being operated (A) are in full force and effect,
(B) are unimpaired by any acts or omissions of the Seller or the Seller's
employees or agents, (C) are free and clear of any restrictions which
might limit the full operation of the Station as it is now operating, and
(D) are detailed in Section 2(k) of the Disclosure Schedules. With respect
to the licenses, permits, authorizations, franchises, certificates of
compliance and consents referenced in the preceding sentence, Section 2(k)
of the Disclosure Schedules also sets forth, without limitation, the date
of the last renewal, the expiration date thereof, and any conditions or
contingencies related thereto. Except as set forth in Section 2(k) of the
Disclosure Schedules, no condition exists or event has occurred that
permits, or after notice or lapse of time, or both, would permit, the
revocation or termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Station as now conducted. Except as set forth in Section
2(k) of the Disclosure Schedules, the Seller is not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or
revoked.
(ii) The Station is in compliance with the FCC's policy on exposure
to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Station's transmission facilities is restricted in
accordance with the policies of the FCC.
(iii) Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Knowledge of the Seller, the Seller is not the subject of
any FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Station, and there are no proceedings (other than rulemaking proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(k) of the Disclosures Schedule.
(iv) Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Station all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(l) Insurance. Section 2(l) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
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(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy and to the Knowledge of the
Seller: (A) the policy is legal, valid, binding, and enforceable and in full
force and effect; (B) neither the Seller nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default or permit termination,
modification, or acceleration, under the policy; and (C) no party to the policy
has repudiated any provision thereof. The Seller has been covered during the
past three (3) years by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during that three-year period.
Section 2(l) of the Disclosure Schedule describes any self-insurance
arrangements affecting the Seller.
(m) Litigation. Section 2(m) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgement,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(m) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(n) Employees. Section 2(n) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Station of each employee of
Seller. The Seller is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strikes, grievances, claims of unfair
labor practices, or other collective bargaining disputes. The Seller has not
committed any unfair labor practice. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Seller.
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(o) Employee Benefits. Section 2(o) of the Disclosure Schedule lists all
Employee Benefit Plans and other executive compensation plans that the Seller
maintains or to which the Seller contributes for the benefit of any current or
former employee of the Seller. Each Employee Benefit Plan (and each related
trust or insurance contract) complies in form and in operation in all respects
with the applicable requirements of ERISA and the Code. The Seller does not
contribute to, ever has contributed to, or ever has been required to contribute
to any Multiemployer Plan. The Seller has not incurred and has no reason to
expect that it will incur any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
liability) or under the Code with respect to any Employee Pension Benefit Plan
that the Seller maintains or ever has maintained or to which it contributes,
ever has contributed, or ever has been required to contribute. The Seller does
not maintain and has not maintained, contributed or been required to contribute
to any Employee Welfare Benefit Plan providing health, accident, or life
insurance benefits to former employees, their spouses, or their dependents
(other than in accordance with Code Sec. 4980B).
(p) Legal Compliance.
(i) To the Knowledge of the Seller, the Seller has complied with
all laws (including rules and regulations thereunder) of
federal, state, and local governments (and all agencies
thereof) and no charge, compliant, action suit, proceeding,
hearing, investigation, claim, demand, or notice has been
filed or commenced against the Seller alleging any failure to
comply with any such law or regulation, including those
relating to the employment of labor, employee civil rights,
and equal employment opportunities and relating to antitrust
matters.
(ii) To the Knowledge of the Seller, the Seller has filed in a
timely manner all reports, documents, and other materials it
was required to file (and the information contained therein
was correct and complete in all respects) under all applicable
laws (including rules and regulations thereunder). The Seller
has possession of all records and documents it was required to
retain under all applicable laws (including rules and
regulations thereunder).
(q) Brokers' Fees. Other than the payment of Seventy Eight Thousand One
Hundred Twenty Five and No/100 Dollars ($78,125.00) payable to the Whittle
Agency at Closing, the Seller has no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
(r) Advertising Contracts. Section 2(r) of the Disclosure Schedule lists
those Advertising Contracts and the daily value of such Advertising in Contracts
as of the Closing Date. Other than to employees of the Seller or the Station or
as disclosed in Section 2(r) of the Disclosure Schedule, no commission or other
form of renumeration is paid by the Seller with respect to Advertising Contracts
and any renumeration so listed shall be paid by Seller at or prior to Closing.
Other then
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in the Ordinary Course of Business, no party to an Advertising Contract has
indicated to the Seller within the past year that it will stop or decrease the
rate of advertising.
(s) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or to the Knowledge of
the Seller, omit to state any fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. Representations and Warranties of the Buyers. The Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. The Operating Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of Nevada. The Licensing Company is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Nevada.
(b) Authorization of Transaction. The Buyers have full power and authority
to execute and deliver this Agreement and to perform the Buyers' obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of each the Buyers, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which either of the Buyers are subject or any provision of either of
the Buyers' articles of organization or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which either of the
Buyers are a party or by which either of the Buyers are bound or to which any of
the Buyers' assets are subject. The Buyers do not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 1 above).
(d) Brokers' Fees. Other than the payment of Seventy Eight Thousand One
Hundred Twenty Five and No/100 Dollars ($78,125.00) payable to the Whittle
Agency at Closing, the Buyers have no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Seller could become liable or
obligated.
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4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Licensing Company shall jointly
file with the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Seller to the Licensing
Company (the "Assignment Application"). The costs of the FCC filing fees in
connection with the Assignment Application shall be paid by Licensing Company.
The Licensing Company shall pay all attorneys' fees relating to the Assignment
Application. The Seller and the Licensing Company shall thereafter prosecute the
Assignment Application with all reasonable diligence and otherwise use the
commercially reasonable efforts to obtain the grant of the Assignment
Application as expeditiously as practicable (but neither the Seller nor the
Licensing Company shall have any obligation to satisfy complainants or the FCC
by taking any steps which would have material adverse effect upon the Station or
upon any Affiliate). If the FCC imposes any condition on either party to the
Assignment Application, such party shall use commercially reasonable efforts to
comply with such condition, provided, that neither party shall be required
hereunder to comply with any condition that would have a material adverse effect
upon the Station or any Affiliate. The Seller and the Licensing Company shall
jointly oppose any requests for reconsideration or judicial review of FCC
approval of the Assignment Application and shall jointly request from the FCC
extension of the effective period of FCC approval of the Assignment Application
if the Closing shall not have occurred prior to the expiration of the original
effective period of the FCC Consent. Nothing in this Section 4(b) shall be
construed to limit either the Seller's or the Buyer's right to terminate this
Agreement pursuant to Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at the Buyers' option and upon the
Buyers' terms and conditions, extend offers of employment to all or any of the
Seller's employees effective on the Closing Date. The Seller will not take any
action to preclude or discourage any of the Seller's employees from accepting
any offer of employment extended by the Buyers.
(d) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its commercially reasonable efforts to obtain
any third party consents, that the Buyers reasonably may request in connection
with the matters pertaining to the Seller disclosed or required to be disclosed
in the Disclosure Schedule. Each of the Parties will file any notification and
report forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its best efforts
to obtain an early termination of the applicable waiting period, and will make
any
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further filings pursuant thereto that may be necessary, proper, or advisable.
Each of the Parties will take any additional action that may be necessary,
proper, or advisable in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental agencies,
and third parties that it may be required to give, make, or obtain.
(e) Operation of Business. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 2(f) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations for goods or services under its Advertising Contracts in the
Ordinary Course of Business. On the Closing Date, the Seller shall deliver to
the Operating Company a schedule, certified by an officer of the Seller,
reflecting all such Advertising Contracts and the daily value thereof and
outstanding balances thereunder in existence as of the Closing Date.
(g) Operating Statements. The Seller shall deliver to Buyers, for Buyers'
informational purposes only, monthly unaudited statements of operating revenues
and operating expenses of the Station within ten (10) days after each such
statement is prepared by or for the Seller.
(h) Contracts. Seller will not without the prior written consent of the
Operating Company amend, change, or modify any of the contracts listed on
Section 2(j) of the Disclosure Schedule in any material respect. The Seller will
not without prior written consent of the Operating Company enter into any new
contracts respecting the Station or their properties, except (i) contracts for
the sale of time on the Station for cash, goods or services which comply with
the representations and warranties pertaining to such contracts set forth in
Section 2(j) above, and (ii) contracts entered into in the Ordinary Course of
Business.
(i) Operation of Station. The Seller shall operate the Station in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Station.
(j) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Station and with respect to collecting accounts receivable arising from
such extension of credit.
(k) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensers,
advertisers, suppliers, customers, and employees, all of the confidential
information, call letters and trade secrets of the Station, and the FCC
Licenses. The Seller will
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continue to make expenditures for advertising, programming, sales, technical and
administrative support at a level consistent with the past practices of the
Seller.
(l) Full Access and Consultation. The Seller will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Station, to all
premises, properties, assets, books, records, contracts, Tax records, and
documents of or pertaining to the Acquired Assets or the Seller. The Seller will
consult with the Buyers' management with a view to informing Buyers' management
as to the operations, management and business of the Station.
(m) Notice of Developments. The Seller will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller. Each Party will give prompt written notice to the other
of any material development affecting the ability of the Parties to consummate
the transactions contemplated by this Agreement. No disclosure by any party
pursuant to this Section 4(m), however, shall be deemed to amend or supplement
the Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Seller or the Station; or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing.
(o) Environmental Assessments. The Operating Company may, obtain with
respect to each parcel of real estate that the Seller owns a current Phase I
environmental site assessment from an environmental consultant or engineer which
shall not disclose or recommend any action with respect to any condition to be
remediated or investigated or any contamination on the site assessed. The Buyers
shall pay the cost and expense associated with any environmental assessment
initiated pursuant to this Section 4(o).
(p) Control of Station. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Operating Company and its employees or agents shall not
directly or indirectly control, supervise, or direct, or attempt to control,
supervise, or direct, the operation of the Station, and such operation shall be
the sole responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyers
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost,
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damaged or destroyed will be reimbursed under any insurance policy with respect
thereto. The Seller will repair or replace such Acquired Assets as soon as
possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Seller's notice to the Buyers, and the Buyers determine that the Seller's
failure to repair or replace, alone or in the aggregate, would have a material
adverse effect on the operation of the Station:
(i) The Buyers may elect to terminate this Agreement; or
(ii) The Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's notice
to Buyers, in which case either party may terminate this Agreement; or
(iii) The Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to Buyers all
rights under any insurance claims covering the loss, damage or destruction and
payment over to Buyers any proceeds under any such insurance policies,
previously received by the Seller with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(p),
the Parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by the Buyers in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to those
relating to transmitter and studio leases;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A)
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prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyers to own, operate, or control the Acquired Assets
(and no such judgment, order, decree, stipulation, injunction, or charge
shall be in effect);
(v) the Seller shall have delivered to the Buyers a certificate to
the effect that each of the conditions specified above in Section
5(a)(i)-(iv) is satisfied in all respects;
(vi) the Assignment Application shall have been approved by a Final
Order of the FCC, all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise
been terminated and the Seller and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vii) the Buyers shall have completed the Buyers' review and
verification of the Seller's Financial Statements, the Buyers' review of
the FCC Licenses and the Station, the Buyers' engineering audit of the
Seller's studio and transmitter facilities and equipment, all with results
satisfactory to the Buyers in the Buyers' sole judgment;
(viii) the relevant parties shall have entered into the Post Closing
Agreement;
(ix) the relevant parties shall have entered into the Lease
Agreement;
(x) the Buyers shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit F attached
hereto, addressed to the Buyers and dated as of the Closing Date; and
(xi) all actions consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyers.
The Buyers may waive any condition specified in this Section 5(a) if the
Buyers execute a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the
Closing Date;
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(ii) the Buyers shall have performed and complied with all of the
Buyers' covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Seller a certificate to
the effect that each of the conditions specified above in Section
5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Assignment Applications shall have been approved by
a Final Order of the FCC, all applicable waiting periods (and any
extension thereof) under the Hart-Scott- Rodino Act shall have expired or
otherwise been terminated and the Seller and the Buyers shall have
received all governmental approvals required to transfer all other
authorizations, consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Lease
Agreement;
(vii) the relevant parties shall have entered into the Post Closing
Agreement; and
(viii) all actions to be taken by the Buyers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Seller may waive any condition specified in this Section 5(b) if it
executes a writing so stating at or prior to the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
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(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Seller, the other Party will cooperate with the contesting or
defending Party and its counsel in the contest or defense, make available his or
its personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 7 below).
(c) Adjustments. Operation of the Station and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Operating Company. Such items as employee salaries, vacation,
sick day and personal time accruals, and fringe benefits, power and utilities
charges, insurance, real and personal property taxes, prepared expenses,
deposits, music license fees, and rents and payments pertaining to the leases
and contracts being assigned hereunder (inducing any contracts for the sale of
time for cash, trade or barter so assigned) shall be prorated between the Seller
and the Operating Company as of the Closing Date in accordance with the
foregoing principle. The prorations and adjustments hereunder shall be made and
paid insofar as feasible on the Closing Date, with a final settlement sixty (60)
days after the Closing Date. In the event of any disputes between the Parties as
to such adjustments, the amounts not in dispute shall nonetheless be paid at
such time and such disputes shall be determined by the accounting firm of Price
Waterhouse, LLP and the fees and expenses of such accounting firm shall be paid
one-half (1/2) by the Seller and one-half (1/2) by the Operating Company.
(d) Collection of Accounts Receivable. At the Closing, the Seller will
turn over to the Operating Company, for collection only, the accounts receivable
of the Station owing to the Seller as of the close of business on the Closing
Date. A schedule of such accounts receivable will be delivered by the Seller to
the Operating Company on the Closing Date or as soon thereafter as possible. The
Operating Company agrees to use commercially reasonable efforts in the ordinary
course of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Closing Date, and will remit all payments received on such
accounts to Seller at the end of each month during such 120-day period. In the
event the Operating Company receives moneys during the 120-day period following
the Closing Date from an advertiser who, after the Closing Date, is advertising
over any of the Station, and that advertiser was included among the accounts
receivable as of the Closing Date, the Operating Company shall apply said moneys
to the oldest outstanding balance due on the particular account, except in the
case of a "disputed" account receivable. For purposes of this Section 6(d), a
"disputed" account receivable means one which the account debtor refuses to pay
because he asserts that the money is not owed or the amount is incorrect. In the
case of such a disputed account, the Operating Company shall immediately return
the account to the Seller prior to expiration of the 120-day period following
the Closing Date. If the Operating Company returns a disputed account to the
Seller, the
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Operating Company shall have no further responsibility for its collection and
may accept payment from the account debtor for advertising carried on any of the
Station after the Closing Date. At the end of the 120-day period following the
Closing Date, the Operating Company will turn back to the Seller all of the
accounts receivable of the Station as of the Closing Date owing to the Seller
which have not yet been collected, and the Operating Company will thereafter
have no further responsibility with respect to the collection of such
receivables. During the 120-day period following the Closing Date, the Operating
Company shall afford the Seller reasonable access to the accounts receivable
"aging list."
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b) and 2(c) hereof or
relating to the Seller's title to the Acquired Assets) shall survive the Closing
and continue in full force and effect for a period of eighteen (18) months
thereafter, except that any representation or warranty relating to the Buyers'
freedom from liability to pay a Liability of the Seller shall continue in full
force and effect for the period of the applicable statute of limitations plus
ninety (90) days. All of the other representations, warranties, and covenants of
the Buyers and the Seller contained in this Agreement (including the
representations and warranties of the Seller contained in Sections 2(a), 2(b)
and 2(c) hereof or relating to the Seller's title to the Acquired Assets) and in
this Agreement shall survive the Closing (even if the damaged party knew or had
reason to know of any misrepresentation or breach of warranty or covenant at the
time of Closing) and continue in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a breach of a
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
(i) any breach of the Seller's representations, warranties, and
covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the Buyers
make a written claim for indemnification within the applicable survival
period);
(ii) any Liability of the Seller which is not an Assumed Liability;
or
(iii) the operation of the Station by the Seller prior to the
Closing Date.
(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a breach of a covenant prior to
the Closing Date, the Buyers agree to
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indemnify the Seller from and against the entirety of any Adverse Consequences
the Seller may suffer resulting from, arising out of, relating to, in the nature
of, or caused by:
(i) the breach of any of the Buyers' representations, warranties,
and covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the Seller makes
a written claim for indemnification within the applicable survival period);
(ii) any Assumed Liability; or
(iii) the operation of the Station by the Buyers after the Closing
Date.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the Stations to be acquired pursuant to this Agreement are unique and that the
Buyers would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the Buyers shall be
entitled to an injunction or injunctions to prevent such breaches and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 10(o) below), in addition to any other remedy to which it may
be entitled, at law or in equity. Each of the Parties acknowledges and agrees
that not withstanding the provision in Section 7(e) with respect to the remedy
of liquidated damages upon a breach of a covenant of this Agreement prior to the
Closing, money damages would not be an adequate remedy for a breach of any
provision of this Agreement.
(e) Liquidated Damages. The Buyers and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
the event the transactions contemplated by this Agreement are not consummated
due to a default of this Agreement by either Party, then the non-defaulting
Party shall be entitled to receive from the defaulting Party for such default,
in lieu of indemnification pursuant to Sections 7(b) or 7(c), the sum of Two
Hundred Fifty Thousand and no/100 Dollars ($250,000.00) as liquidated damages
without the need for proof of damages; provided, however, that the Buyers retain
the option to seek, pursuant to Section 7(d), and recover in lieu of the remedy
of liquidated damages pursuant to this Section 7(e), the remedy of specific
performance. The defaulting Party agrees to pay said sum of liquidated damages
within ten (10) days of the date that the non-defaulting Party obtains such a
judgment.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party
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from any liability or obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is damaged. In the event any Indemnifying
Party notifies the Indemnified Party within fifteen (15) days after the
Indemnified Party has given notice of the matter that the Indemnifying Party is
assuming the defense thereof, (i) the Indemnifying Party will defend the
Indemnified Party against the matter with counsel of its choice reasonably
satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
to the extent the Indemnified Party concludes reasonably that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iv) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
Liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event the Indemnifying Party
does not notify the Indemnified Party within fifteen (15) days after the
Indemnified Party has given notice of the matter that the Indemnifying Party is
assuming the defense thereof, however, the Indemnified Party may defend against,
or enter into any settlement with respect to, the matter in any manner it
reasonably may deem appropriate.
(g) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory or common
law remedy any party may have for breach of representation, warranty, or
covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, (other than Retained Assets) that are used or useful
in the operation of the Station, including but not limited to all of its (a)
tangible personal property (such as computers, electrical devices, monitoring
equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, inventories of
compact disks, records, tapes and other supplies), vehicles, and all assignable
warranties with respect thereto; (b) Intellectual Property, goodwill associated
therewith, licenses and sublicenses granted and obtained with respect thereto,
and rights thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions; (c) rights
under orders and agreements (including those barter agreements identified on the
Disclosure Schedules) now existing or entered into in the Ordinary Course of
Business for the sale of advertising time on the Station; (d) contracts,
indentures, Security Interests, guaranties, other similar arrangements, and
rights thereunder; (e) call letters of the Station, jingles, logos, slogans, and
business goodwill of the Station; (f) Licenses and similar rights obtained from
governments and governmental agencies; and (g) FCC logs and records and all
other books, records, ledgers, logs, files, documents, correspondence, lists,
plats, architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials.
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"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" means any arrangement with any third party under
which the Seller has created, incurred, assumed or guaranteed an obligation to
provide advertising or air time on the Station.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means obligations of the Seller under the licenses,
sublicenses, leases, subleases, contracts, and other arrangements referred to in
the definition of Acquired Assets either: (a) to furnish services, and other
non-Cash benefits to another party after the Closing; or (b) to pay for goods,
services, and other non-Cash benefits that another party will furnish to it
after the Closing. The Assumed Liabilities shall not include any Retained
Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 and Section 3
above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
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"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means The Whittle Agency, Inc.
"FCC" means the Federal Communications Commission of the United States.
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(f) above.
"Indemnifying Party" has the meaning set forth in Section 7(f) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data,
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and documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, market and other
research information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information), (g) other proprietary rights, and (h) copies
and tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Lease Agreement" means the lease agreement by and between the Seller and
the Operating Company the form of which is attached hereto at Exhibit G.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Licensing Company" has the meaning set forth in the preface above.
"Most Recent Financial Statements" has the meaning set forth in Section
2(e) above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37)
"Operating Company" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post Closing Agreement" means the Post Closing Agreement with "Seller
Stockholders" (as defined in the Post Closing Agreement) the form of which is
attached hereto as Exhibit D and pursuant to which the "Seller Stockholders"
jointly and severally agree to (a) cause the Seller to retain fee ownership of
and unencumbered certain real property that is subject of the Lease Agreement
and (b) guarantee up to Five Hundred Thousand Dollars ($500,000.00) in the
aggregate the indemnity obligations of the Seller.
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"Process Agent" has the meaning set forth in Section 10(o) below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Retained Assets" means (a) the corporate charter, qualifications to
conduct business as a foreign entity, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (b) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller and the Buyers entered into on or
after the date of this Agreement); (c) accounts, notes and other receivables;
(d) the Seller's Cash; and (e) all of the Seller's right, title and interest in
and to its real property, and all improvements, fixtures, and fittings thereon
(such as towers and antennae), and easements, rights-of-way and other
appurtenants thereto.
"Retained Liabilities" means any other obligations or liabilities of
Seller, including but not limited to: (a) any Liability relating to the
ownership or operation of the Station prior to the Closing; (b) any Liability of
the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (c) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby; or (d) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
WSYN-FM licensed by the FCC to operate in Georgetown, South Carolina.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental
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(including taxes under Code Sec. 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach, and the Seller may terminate this Agreement by giving
written notice to the Buyers at any time prior to the Closing in the event
the Buyers are in breach, of any material representation, warranty, or
covenant contained in this Agreement in any material respect in each case
if such breach remains uncured for ten (10) days after notice of breach is
received from the other party;
(iii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyers
breaching any representation, warranty, or covenant contained in this
Agreement);
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Seller
itself breaching any representation, warranty, or covenant contained in
this Agreement);or
(v) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If this Agreement is terminated pursuant to
Section 9(a)(i) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party. If this Agreement is not
consummated by the Closing Date or terminates as a result of a
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<PAGE>
breach or default of a Party, then the non-defaulting Party shall be entitled to
liquidated damages as set forth in Section 7(e) above.
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing to the extent set
forth in Section 7(a) of this Agreement.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein. No Party may assign either
this Agreement or any of its rights, interests, or obligations hereunder without
the prior written approval of the other Party.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: Seacoast Radio Company, LLC
Attn: Richard J. Laughridge
6027 Devine Street
Columbia, SC 29209
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<PAGE>
Copy to: John T. Moore
Nelson Mullins Riley & Scarborough, L.L.P.
1330 Lady Street
P.O. Box 11070-29201
Columbia, SC 29201
If to the Buyers: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Copy to: Cumulus Licensing Corp.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
South Carolina.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining
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<PAGE>
terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction. If the
final judgment of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
(l) Expenses. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications. The Seller will pay
all income taxes, transfer or sales taxes and other recording or similar fees
necessary to vest title to each of the Acquired Assets in the Buyers.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in South Carolina, in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Each Party agrees that a final judgment in
any action or proceeding so brought shall be conclusive and may be enforced by
suit on the judgment or in any other manner provided by law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
--------------------------------
Title:
-----------------------------
"Operating Company"
CUMULUS LICENSING CORP.
By:
--------------------------------
Title:
-----------------------------
"Licensing Company"
SUNNY BROADCASTERS, INC.
By:
--------------------------------
Title:
-----------------------------
"Seller"
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<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
VENICE BROADCASTING CORP.
AND
VENICE MICHEL
AND
CUMULUS BROADCASTING, INC.
AND
CUMULUS LICENSING CORP.
June 26, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction..................................................1
(a) Purchase and Sale of Assets................................1
(b) Assumption of Liabilities..................................1
(c) Purchase Price.............................................1
(d) The Closing................................................2
(e) Deliveries at the Closing..................................3
(f) Postclosing Agreement......................................3
(g) Allocation.................................................3
2. Representations and Warranties of the Seller.......................3
(a) Organization of the Seller.................................3
(b) Authorization of Transaction...............................3
(c) Noncontravention...........................................4
(d) Title to Acquired Assets...................................4
(e) Financial Statements.......................................4
(f) Events Subsequent to ......................................5
(g) Tax Matters................................................7
(h) Tangible Assets............................................7
(i) Real Property..............................................7
(j) Intellectual Property......................................8
(k) Contracts.................................................10
(l) Commission Licenses and Compliance with Commission
Requirements ............................................11
(m) Insurance.................................................12
(n) Litigation................................................12
(o) Employees.................................................12
(p) Employee Benefits.........................................13
(q) Environment, Health, and Safety...........................13
(r) Legal Compliance..........................................14
(s) Brokers' Fees.............................................15
(t) Advertising Contracts.....................................15
(u) Disclosure................................................15
3. Representations and Warranties of the Buyers......................15
(a) Organization of the Buyers................................15
(b) Authorization of Transaction..............................15
(c) Noncontravention..........................................15
(d) Brokers' Fees.............................................16
4. Pre-Closing Covenants.............................................16
(a) General...................................................16
(b) Assignment Applications...................................16
(c) Employment Offers.........................................17
(d) Notices and Consents......................................17
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<PAGE>
(e) Operation of Business.....................................17
(f) Advertising Obligations...................................17
(g) Operating Statements......................................18
(h) Contracts.................................................18
(i) Operation of Station......................................18
(j) Credit and Receivables....................................18
(k) Preservation of Business..................................18
(l) Full Access...............................................18
(m) Notice of Developments....................................19
(n) Exclusivity...............................................19
(o) Title Insurance...........................................19
(p) Survey....................................................19
(q) Environmental Assessments.................................20
(r) Control of Station........................................20
(s) Risk of Loss..............................................20
5. Conditions to Obligation to Close.................................21
(a) Conditions to Obligation of the Buyers....................21
(b) Conditions to Obligation of the Seller....................22
6. Post-Closing Covenants............................................23
(a) General...................................................23
(b) Litigation Support........................................23
(c) Adjustments...............................................24
(d) Collection of Accounts Receivable.........................24
(e) Severance Obligations.....................................25
7. Remedies for Breaches of this Agreement...........................25
(a) Survival..................................................25
(b) Indemnification Provisions for the Benefit of the Buyers..25
(c) Indemnification Provisions for the Benefit of the Seller..26
(d) Specific Performance......................................26
(e) Matters Involving Third Parties...........................26
(f) Other Indemnification Provisions..........................27
8. Definitions.......................................................27
9. Termination.......................................................32
(a) Termination of Agreement..................................32
(b) Effect of Termination.....................................33
10. Miscellaneous....................................................33
(a) Survival..................................................33
(b) Press Releases and Announcements..........................33
-ii-
<PAGE>
(c) No Third Party Beneficiaries..............................33
(d) Entire Agreement..........................................33
(e) Succession and Assignment.................................33
(f) Counterparts..............................................33
(g) Headings..................................................34
(h) Notices...................................................34
(i) Governing Law.............................................34
(j) Amendments and Waivers....................................35
(k) Severability..............................................35
(l) Expenses..................................................35
(m) Construction..............................................35
(n) Incorporation of Exhibits and Schedules...................36
(o) Submission to Jurisdiction................................36
(p) Bulk Transfer Laws........................................36
-iii-
<PAGE>
EXHIBITS
Exhibit A--Form of Note
Exhibit B--Form of Earnest Money Escrow Agreement
Exhibit C--Forms of Assignments
Exhibit D--Form of Assumption
Exhibit E--Form of Postclosing Agreement
Exhibit F--Allocation Schedule
Exhibit G--Form of Opinion of Counsel to the Seller
SCHEDULES
Description Reference Section
Financial Statements 2(e)
Events Subsequent to January 1, 1997 2(f)
Tangible Assets 2(h)
Real Property 2(i)
Intellectual Property 2(j)
Contracts 2(k)
Commission Licenses and Compliance with Commission Requirements 2(l)
Insurance 2(m)
Litigation 2(n)
Employees 2(o)
Employee Benefits 2(p)
Advertising Contracts 2(t)]
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of June 26, 1997, by and
between Venice Broadcasting Corp. an Ohio corporation (the "Seller"), Venice
Michel, an individual Ohio resident and owner of all of the outstanding capital
stock of Seller ("Michel"), Cumulus Broadcasting, Inc., a Nevada corporation
(the "Operating Company"), and Cumulus Licensing Corp., a Nevada corporation
(the "Licensing Company"). The Operating Company and the Licensing Company are
collective referred to herein as the "Buyers." The Buyers, the Seller, and
Michel are sometimes collectively referred to herein as the "Parties."
Capitalized terms used in this Agreement are defined in Section 8 hereof.
This Agreement contemplates a transaction in which the Buyers will
purchase substantially all of the assets (and assume certain of the liabilities)
of the Seller that are used or useful in the operation of radio station WXKR-FM,
licensed to operate in Port Clinton, Ohio in return for Cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyers agree to purchase from the
Seller, and the Seller agrees to sell, transfer, convey, and deliver
to the Buyers, all of the Acquired Assets at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyers agree to assume and become
responsible for all of the Assumed Liabilities at the Closing. The
Buyers will not assume or have any responsibility, however, with
respect to any other obligation or Liability of the Seller not
included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller Five
Million Dollars ($5,000,000) (the "Purchase Price") payable as
follows:
(i) on the date of this Agreement, the Buyers will deposit with
the Escrow Agent the amount of Two Hundred Fifty Thousand
Dollars ($250,000) (the "Earnest Money Deposit") by delivery
of Cash payable by wire transfer or delivery of other
immediately available funds; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Four Million Six Hundred Thousand Dollars
($4,600,000) by delivery of Cash
<PAGE>
payable by wire transfer or delivery of other immediately
available funds; and
(iii) on the Closing Date, the Buyers shall pay to the Seller, on
behalf of all parties to the Postclosing Agreement, the amount
of One Hundred Fifty Thousand Dollars ($150,000) by delivery
of Cash payable by wire transfer or delivery of other
immediately available funds; and
(iv) on the Closing Date, the Buyers, at the Buyers' option, shall
deliver to the Seller, in lieu of the delivery of Two Million
Dollars ($2,000,000) in Cash pursuant to Section 1(c)(ii)
above, a promissory note in the form of Exhibit A in the
principal amount of Two Million Dollars ($2,000,000) (the
"Note"), payable with interest at six and one-half percent
(6.5%) per annum, One Million Dollars ($1,000,000) on the
first anniversary of the Closing Date and One Million Dollars
($1,000,000) on the second anniversary of the Closing Date.
The Earnest Money Deposit referenced in this Section 1(c) shall be placed
in escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit B (the "Earnest Money Escrow Agreement"), which
requires that such Earnest Money Deposit shall be deposited by the Escrow Agent
with a federally insured financial institution in an interest bearing account.
Interest earned on the Earnest Money Deposit shall accrue to the benefit of the
Buyers, and, together with the principal amount of the Earnest Money Deposit,
shall be payable to the Seller and credited against the Purchase Price on the
Closing Date. If this Agreement is terminated without Closing of the transaction
contemplated herein, the Earnest Money and all accrued interest shall be paid to
the Buyers or the Seller as provided in the Earnest Money Escrow Agreement.
In the event that the Note is delivered at the Closing, the payments to be
made by the Buyers to the Seller pursuant to the Note, shall be secured by a
letter of credit in favor of the Buyers issued by NationsBank National
Association in the form acceptable to the Seller in the Seller's sole
discretion. The expenses associated with the issuance and maintenance of such
letters of credit shall be paid by the Buyers.
(d) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
Thomas G. Zraik, Esq. in Toledo, Ohio, commencing at 9:00 a.m. local
time on the date set by the Buyers not earlier than the fifth
business day or later than the tenth business day after the FCC
approval of the Assignment Application becomes a Final Order, by
which date all other conditions to the obligations of the Parties to
consummate the transactions contemplated hereby will have been
satisfied or waived or such other date as the Parties may mutually
determine (the "Closing Date"); provided, however, that the Closing
Date shall be no later than two hundred seventy (270) days from the
date of this Agreement.
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<PAGE>
(e) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and
documents referred to in Section 5(a) below; (ii) the Buyers will
deliver to the Seller the various certificates, instruments, and
documents referred to in Section 5(b) below; (iii) the Seller will
execute, acknowledge (if appropriate), and deliver to the Buyers (A)
assignments (including real property and Intellectual Property
transfer documents) in the forms attached hereto as Exhibit C and
(B) such other instruments of sale, transfer, conveyance, and
assignment as the Buyers and Buyers' counsel reasonably may request;
(iv) the Buyers will execute, acknowledge (if appropriate), and
deliver to the Seller (A) an assumption in the form attached hereto
as Exhibit D and (B) such other instruments of assumption as the
Seller and its counsel reasonably may request; and (v) the Buyers
will deliver to the Seller the consideration specified in Section
1(c) above.
(f) Postclosing Agreement. On the Closing Date, the Seller shall
cause Venice Michel to execute, a Postclosing Agreement with the
Buyers including covenants not to compete with the Buyers in the
markets served by the Station and to indemnify the Buyers in the
form of Exhibit E attached hereto. A portion of the Purchase Price,
equal to One Hundred Fifty Thousand Dollars ($150,000) shall be paid
by the Buyers to the Seller Stockholders, on the Closing Date as
consideration for the agreements set forth in the Postclosing
Agreement.
(g) Allocation. The Parties agree to allocate the Purchase Price
(and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with the allocation schedule attached hereto as Exhibit
F.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation. The Seller does not have any
Subsidiaries.
(b) Authorization of Transaction. The Seller has full power and
authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder.
Without limiting the generality of the foregoing, the board of
directors and stockholders of the Seller have duly authorized the
execution, delivery, and performance of this Agreement by the
Seller. This
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<PAGE>
Agreement constitutes the valid and legally binding obligation of
the Seller, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 1 above), will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to
which the Seller is subject or any provision of the charter or
bylaws of the Seller; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or
other arrangement to which the Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). Other
than with respect to the transfer of the FCC Licenses, the Seller
does not need to give any notice to, make any filing with, or obtain
any Licenses, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and
assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Seller has good and marketable title
to all of the Acquired Assets, free and clear of any Security
Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedules are the following financial statements (collectively the
"Financial Statements"): (i) unaudited balance sheets as of December
31, 1994, and unaudited statements of income for the fiscal year
ended December 31, 1995, for the Seller; (ii) unaudited balance
sheets and statements of income and cash flows, as of and for the
fiscal years ended December 31, 1996; and (iii) unaudited statements
of income, as of and for months ended January 31, February 28, March
31 and April 30 1997, for the Seller. The Financial Statements
identified in clauses (ii) and (iii) in the preceding sentence are
referred to herein as the "Most Recent Financial Statements." The
Most Recent Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods
covered thereby, are correct and complete, and are consistent with
the books and records of the Seller (which books and records are
correct and complete). Without limiting the generality of the
foregoing, all material revenues and expenses of the Seller and the
Station with respect to the Most Recent Financial Statements (A) are
properly reflected in the Most Recent Financial Statements, (B) have
arisen in the Ordinary Course of Business, (C) are valid and subject
to no counterclaims, and (D) will be or have been collected or paid
at their recorded amounts subject only to the reserve for bad debts
set forth on the face of the Most Recent Financial Statements.
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<PAGE>
(f) Events Subsequent to January 1, 1997. Since January 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedules,
there has not been any material adverse change in the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller with respect to the
operation of the Station. Without limiting the generality of the
foregoing and with respect to the operation of the Station since
that date:
(i) the Seller has not sold, leased, transferred, or assigned any
of its material assets, tangible or intangible, other than for
a fair consideration in the Ordinary Course of Business;
(ii) the Seller has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts,
leases, subleases, licenses, and sublicenses) outside the
Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled
any contract, lease, sublease, license, or sublicense (or
series of related contracts, leases, subleases, licenses, and
sublicenses) involving more than $5,000 to which the Seller is
a party or by which it is bound;
(iv) no Security Interest has been imposed upon any of its assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of
Business;
(vi) the Seller has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of any
other person (or series of related capital investments, loans,
and acquisitions) outside the Ordinary Course of Business;
(vii) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations)
outside the Ordinary Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other
Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims)
outside the Ordinary Course of Business;
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<PAGE>
(x) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property or
any action adversely affecting the FCC Licenses or the
Station;
(xii) the Seller 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 giving rise
to any claim or right on its part against the person or on the
part of the person against it;
(xiii) the Seller has not entered into any employment contract,
consulting contract or severance agreement or collective
bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(xiv) the Seller has not granted any increase outside the Ordinary
Course of Business in the base compensation of any of its
directors, officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F)
medical, hospitalization, life, or other insurance, (G)
severance, or (H) other plan, contract, or commitment for any
of its directors, officers, and employees, or modified or
terminated any existing such plan, contract, or commitment;
(xvi) the Seller has not made any other change in employment terms
for any of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of
Business;
(xviii) the Seller has not paid any amount to any third party with
respect to any Liability or obligation (including any costs
and expenses the Seller has incurred or may incur in
connection with this Agreement or any of the transactions
contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing;
(xix) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary
Course of Business involving the Seller;
(xx) the Seller has not altered its credit and collection policies
or its accounting policies;
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<PAGE>
(xxi) the Seller has not materially altered the programming, format
or call letters of the Station, or its promotional and
marketing activities;
(xxii) the Seller has not applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Station in
compliance therewith and with all FCC rules and regulations;
(xxiii) there has been no material adverse change in the Cash flow of
the Station; and
(xxiv) the Seller has not committed to any of the foregoing.
(g) Tax Matters. The Seller has filed and will file all Tax Returns
that it was required to file and may be required to file. All such
Tax Returns were correct and complete in all respects. All Taxes
owed by the Seller (whether or not shown on any Tax Return) have
been paid. The Seller has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other third
party. The Seller has not waived any statute of limitations with
respect to Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency. The Seller is not a party to a
pending Tax audit and is aware of no threatened Tax audit. No claim
has ever been made by an authority in a jurisdiction where the
Seller does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Seller that arose in connection with any
failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles
and other tangible personal property used in conducting the
operation and business of the Station. The Seller owns or leases all
tangible assets necessary for the conduct of the operation and
business of the Station as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from
defects (patent and latent), has been maintained in accordance with
normal industry practice, is in good operating condition and repair
(subject to normal wear and tear) and is suitable for the purpose
for which it is presently used.
(i) Real Property. The Seller owns no real property that is used or
useful in the operation of the Station. The Seller does not lease or
sublease any real property other than pursuant to the Tower Lease
and the Studio Lease. The Seller has delivered to the Buyers correct
and complete copies of the Tower Lease and the Studio Lease. With
respect to the Tower Lease:
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(i) the lease is and, following the Closing will continue to be,
legal, valid, binding, enforceable, and in full force and
effect;
(ii) no party to the lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred
which, with notice or lapse of time, would constitute a breach
or default or permit termination, modification, or
acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease;
(iv) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold;
(v) all facilities leased thereunder have received all approvals
of governmental authorities (including licenses, permits and
zoning approvals) required in connection with the operation
thereof and have been operated and maintained in accordance
with applicable laws, rules, and regulations; and
(vi) all facilities leased thereunder are supplied with utilities
and other services necessary for the operation of said
facilities.
(j) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the businesses
of the Seller as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by the
Seller immediately prior to the Closing hereunder will be owned or
available for use by the Buyers on identical terms and conditions
immediately subsequent to the Closing hereunder. The Seller has
taken all necessary or desirable action to protect each item of
Intellectual Property that it owns or uses.
(i) Except as described in Section 2(j) of the Disclosure
Schedule, the Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and the Seller
has never received any charge, complaint, claim, or notice
alleging any such interference, infringement,
misappropriation, or violation. Except as described in Section
2(j) of the Disclosure Schedule, to the Knowledge of the
Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller.
(ii) Section 2(j) of the Disclosure Schedule identifies each
patent, trademark or copyright registration which has been
issued to the Seller with respect to any of its Intellectual
Property, identifies each pending patent, trademark or
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copyright application for registration which the Seller has
made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which
the Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions).
The Seller has delivered to the Buyers correct and complete
copies of all such patents, trademarks or copyright
registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the
Buyers correct and complete copies of all other written
documentation evidencing ownership and prosecution (if
applicable) of each such item. With respect to each item of
Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in
and to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the
Knowledge of the Seller, is threatened which challenges
the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Seller is not a party to any agreement or other
arrangement to indemnify any person or entity for or
against any interference, infringement,
misappropriation, or other conflict with respect to the
item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and
that the Seller uses pursuant to license, sublicense,
agreement, or permission including, but not limited to the
call letters of the Station. The Seller has supplied the
Buyers with correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date).
With respect to each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission
covering the item is, and following the Closing will
continue to be on identical terms, legal, valid,
binding, enforceable, and in full force and effect;
(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated
any provision thereof), and no event has occurred which
with notice or lapse of time would constitute a breach
or default or permit termination, modification, or
acceleration thereunder;
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(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above
are true and correct with respect to the underlying
license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree,
stipulation, injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the
Knowledge of the Seller, is threatened which challenges
the legality, validity, or enforceability of the
underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the
underlying item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar
right with respect to the license, sublicense,
agreement, or permission.
(k) Contracts. Other than Advertising Contracts, Section 2(k) of the
Disclosure Schedule lists the contracts, agreements, and other
written arrangements to which the Seller is a party and either
involving payment in excess of One Thousand Dollars ($1,000) per
year or not entered into in the Ordinary Course of Business. The
Seller has delivered to the Buyers a correct and complete copy of
each written arrangement listed in Section 2(k) of the Disclosure
Schedule (as amended to date). With respect to each written
arrangement so listed:
(i) the written arrangement is legal, valid, binding, enforceable,
and in full force and effect;
(ii) the written arrangement will continue to be legal, valid,
binding, and enforceable and in full force and effect on
identical terms following the Closing;
(iii) no party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or
acceleration, under the written arrangement; and
(iv) no party has repudiated any provision of the written
arrangement.
The written arrangement listed in Section 2(k) of the Disclosure Schedule
are all of the written arrangements necessary for the conduct of the
operation and business of
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the Station as presently conducted and proposed to be conducted and,
except for the Studio Lease, are included within the definition of
Acquired Assets. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would
be required to be listed in Section 2(k) of the Disclosure Schedule under
the terms of this Section 2(k).
(l) Commission Licenses and Compliance with Commission
Requirements.
(i) All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental
bodies, including, without limitation, the FCC Licenses, used
or useful in the operation of the Station as they are now
being operated (A) are in full force and effect, (B) are
unimpaired by any acts or omissions of the Seller or the
Seller's employees or agents, (C) are free and clear of any
restrictions which might limit the full operation of the
Station, and (D) are detailed in Section 2(l) of the
Disclosure Schedules. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(l) of
the Disclosure Schedules also sets forth, without limitation,
the date of the last renewal, the expiration date thereof, and
any conditions or contingencies related thereto. Except as set
forth in Section 2(l) of the Disclosure Schedules, no
condition exists or event has occurred that permits, or after
notice or lapse of time, or both, would permit, the revocation
or termination of any such license, permit, consent,
franchise, or authorization (other than pursuant to their
express expiration date) or the imposition of any material
restriction or limitation upon the operation of the Station as
now conducted. Except as set forth in Section 2(l) of the
Disclosure Schedules, the Seller is not aware of any reason
why the FCC licenses might not be renewed in the ordinary
course or revoked.
(ii) The Station is in compliance with the FCC's policy on exposure
to radio frequency radiation. No renewal of any FCC License
would constitute a major environmental action under the FCC's
rules or policies. Access to the Station's transmission
facilities is restricted in accordance with the policies of
the FCC.
(iii) Except as set forth in Section 2(l) of the Disclosure
Schedules, to the best of the Seller's Knowledge, the Seller
is not the subject of any FCC or other governmental
investigation or any notice of violation or order, or any
material complaint, objection, petition to deny, or opposition
issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization
for the Station, and there are no proceedings (other than
rulemaking proceedings of general applicability) before the
FCC or any other governmental authority that could adversely
affect any of the
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FCC Licenses or the authorizations listed in Section 2(l) of
the Disclosures Schedules.
(iv) Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Station all material
reports, applications, documents, instruments, and other
information required to be filed, and will continue to make
such filings through the Closing Date.
(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and
workers' compensation coverage and bond and surety arrangements) to
which the Seller is a party or was a party during the past 3 years,
a named insured, or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured; and
(iii) the policy number and the period of coverage.
Section 2(m) of the Disclosure Schedule describes any self-insurance
arrangements affecting the Seller. Notwithstanding the Seller's intention to
terminate such insurance policies upon Closing, with respect to each such
insurance policy prior to such termination, to the knowledge of Seller: (A) the
policy is legal, valid, binding, and enforceable and in full force and effect;
(B) neither the Seller nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default or permit termination, modification, or
acceleration, under the policy; and (C) no party to the policy has repudiated
any provision thereof.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied
judgement, order, decree, stipulation, injunction, or charge; or
(ii) is a party or, to the Knowledge of the Seller, is threatened to
be made a party to any charge, complaint, action, suit, proceeding,
hearing, or investigation of or in any court or quasijudicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 2(n) of the Disclosure Schedule
could result in any adverse change in the assets, Liabilities,
business, financial condition, operations, results of operations, or
future prospects of the Seller or the Station taken as a whole. The
Seller has no reason to believe that any such charge, complaint,
action, suit, proceeding, hearing, or investigation may be brought
or threatened against the Seller.
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<PAGE>
(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage
rates and all other forms of compensation paid for work at the
Station of each employee of Seller. To the Knowledge of the Seller,
no key employee or group of employees has any plans to terminate
employment with the Seller. The Seller is not a party to or bound by
any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. The Seller has not committed any
unfair labor practice. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Seller.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans and other executive compensation plans
that the Seller maintains or to which the Seller contributes for the
benefit of any current or former employee of the Seller. Each
Employee Benefit Plan (and each related trust or insurance contract)
complies in form and in operation in all respects with the
applicable requirements of ERISA and the Code. The Seller does not
contribute to, ever has contributed to, or ever has been required to
contribute to any Multiemployer Plan. The Seller has not incurred
and has no reason to expect that it will incur any Liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV
of ERISA (including any withdrawal liability) or under the Code with
respect to any Employee Pension Benefit Plan that the Seller
maintains or ever has maintained or to which it contributes, ever
has contributed, or ever has been required to contribute. The Seller
does not maintain and has not maintained, contributed or been
required to contribute to any Employee Welfare Benefit Plan
providing health, accident, or life insurance benefits to former
employees, their spouses, or their dependents (other than in
accordance with Code Sec. 4980B).
(q) Environment, Health, and Safety.
(i) The Seller has complied with all laws (including rules and
regulations thereunder) of federal, state, and local
governments (and all agencies thereof) concerning the
environment, public health and safety, and employee health and
safety, and no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice has been
filed or commenced against any of them alleging any failure to
comply with any such law or regulation.
(ii) The Seller has no Liability (and there is no Basis related to
the past or present operations, and its respective
predecessors for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or
demand against the Seller giving rise to any Liability) under
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972,
the Clean Air Act of 1970, the Safe Drinking
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Water Act of 1974, the Toxic Substances Control Act of 1976,
the Refuse Act of 1899, or the Emergency Planning and
Community Right-to-Know Act of 1986 (each as amended), or any
other law (or rule or regulation thereunder) of any federal,
state, local, or foreign government (or agency thereof),
concerning release or threatened release of hazardous
substances, public health and safety, or pollution or
protection of the environment, or for damage to any site,
location, or body of water (surface or subsurface) or for
illness or personal injury.
(iii) The Seller has no Liability (and there is no Basis for any
present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Occupational Safety
and Health Act, as amended, or any other law (or rule or
regulation thereunder) of any federal, state, local, or
foreign government (or agency thereof) concerning employee
health and safety, or for any illness of or personal injury to
any employee.
(iv) The Seller has obtained and has been in compliance with all of
the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with
all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all federal, state, local,
and foreign laws (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and
charges thereunder) relating to public health and safety,
worker health and safety, and pollution or protection of the
environment, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or
wastes into ambient air, surface water, ground water, or lands
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
(v) To the Knowledge of the Seller, no pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste
has been buried, stored, spilled, leaked, discharged, emitted,
or released on any real property that the Seller leases or
ever has leased with respect to the Station.
(r) Legal Compliance.
(i) The Seller has complied with all laws (including rules and
regulations thereunder) of federal, state, and local
governments (and all agencies thereof, and no charge,
complaint, action, suit, proceeding, hearing, investigation,
claim, demand, or notice has been filed or commenced against
the Seller
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alleging any failure to comply with any such law or
regulation, including those relating to the employment of
labor, employee civil rights, and equal employment
opportunities and relating to antitrust matters.
(ii) The Seller has filed in a timely manner all reports,
documents, and other materials it was required to file (and
the information contained therein was correct and complete in
all respects) under all applicable laws (including rules and
regulations thereunder). The Seller has possession of all
records and documents it was required to retain under all
applicable laws (including rules and regulations thereunder).
(s) Brokers' Fees. The Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.
(t) Advertising Contracts. Other than to employees of the Seller or
the Station or as disclosed in Section 2(t) of the Disclosure
Schedule, no commission or other form of renumeration is paid by the
Seller with respect to Advertising Contracts and any renumeration so
listed shall be paid by Seller at or prior to Closing. To Michel's
Knowledge, no party to a material Advertising Contract has indicated
to the Seller within the past year that it will stop or
substantially decrease the rate of advertising.
(u) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to
state any fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. Representations and Warranties of the Buyers. The Buyers represent and
warrant to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. The Operating Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the state of Nevada. The Licensing Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the state of Nevada.
(b) Authorization of Transaction. The Buyers have full power and
authority to execute and deliver this Agreement and to perform the
Buyers' obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of each the Buyers, enforceable in
accordance with its terms and conditions.
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(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 1 above), will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to
which either of the Buyers are subject or any provision of either of
the Buyers' articles of organization or (ii) conflict with, result
in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which
either of the Buyers are a party or by which either of the Buyers
are bound or to which any of the Buyers' assets are subject. The
Buyers do not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 1 above).
(d) Brokers' Fees. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which the
Seller could become liable or obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper,
or advisable to consummate and make effective the transactions
contemplated by this Agreement (including satisfying the closing
conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Licensing Company
shall jointly file with the FCC an application for assignment of the
FCC Licenses, permits and authorizations pertaining to the Station
from the Seller to the Licensing Company (the "Assignment
Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the
Seller and the Licensing Company. The Seller and the Licensing
Company shall each pay its own attorneys' fees. The Seller and the
Licensing Company shall thereafter prosecute the Assignment
Application with all reasonable diligence and otherwise use the
commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither
the Seller nor the Licensing Company shall have any obligation to
satisfy complainants or the FCC by taking any steps which would have
material adverse effect upon the Station or upon any Affiliate). If
the FCC imposes
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any condition on either party to the Assignment Application, such
party shall use commercially reasonable efforts to comply with such
condition, provided, that neither party shall be required hereunder
to comply with any condition that would have a material adverse
effect upon the Station or any Affiliate. The Seller and the
Licensing Company shall jointly oppose any requests for
reconsideration or judicial review of FCC approval of the Assignment
Application and shall jointly request from the FCC extension of the
effective period of FCC approval of the Assignment Application if
the Closing shall not have occurred prior to the expiration of the
original effective period of the FCC Consent. Nothing in this
Section 4(b) shall be construed to limit either the Seller's or the
Buyer's right to terminate this Agreement pursuant to Section 9 of
this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its
employees prior to the Closing Date. The Buyers may, at the Buyers'
option and upon the Buyers' terms and conditions, extend offers of
employment to all or any of the Seller's employees effective on the
Closing Date. The Seller will not take any action to preclude or
discourage any of the Seller's employees from accepting any offer of
employment extended by the Buyers.
(d) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its commercially reasonable efforts
to obtain any third party consents, that the Buyers reasonably may
request in connection with the matters pertaining to the Seller
disclosed or required to be disclosed in the Disclosure Schedule.
Each of the Parties will file any notification and report forms and
related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its
best efforts to obtain an early termination of the applicable
waiting period, and will make any further filings pursuant thereto
that may be necessary, proper, or advisable. Each of the Parties
will take any additional action that may be necessary, proper, or
advisable in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make,
or obtain.
(e) Operation of Business. The Seller will not engage in any
practice, take any action, embark on any course of inaction, or
enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, the Seller will
not engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction of the sort described in
Section 2(f) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations for goods or services under its Advertising Contracts
such that the outstanding aggregate balance owing under all such
Advertising Contracts as of the Closing Date shall not
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exceed Five Thousand Dollars ($5,000.00) worth of air time. On the
Closing Date, the Seller shall deliver to the Operating Company a
schedule, certified by an officer of the Seller, reflecting all such
Advertising Contracts and the daily value thereof and outstanding
balances thereunder in existence as of the Closing Date.
(g) Operating Statements. The Seller shall deliver to the Buyers,
for the Buyers' informational purposes only, monthly unaudited
statements of operating revenues and operating expenses of the
Station within ten (10) days after each such statement is prepared
by or for the Seller.
(h) Contracts. The Seller will not without the prior written consent
of the Operating Company amend, change, or modify any of the
contracts listed on Section 2(k) of the Disclosure Schedule in any
material respect. The Seller will not without prior written consent
of the Operating Company enter into any new contracts respecting the
Station or their properties, except (i) contracts for the sale of
time on the Station for cash, goods or services which comply with
the representations and warranties pertaining to such contracts set
forth in Section 2(k) above, (ii) contracts entered into in the
Ordinary Course of Business which are cancelable on not more than
thirty-one (31) days' notice without penalty or premium, and (iii)
contracts entered into in the Ordinary Course of Business each of
which does not involve more than One Thousand Dollars ($1,000) or
all of which do not involve more than Five Thousand Dollars ($5,000)
in the aggregate.
(i) Operation of Station. The Seller shall operate the Station in
compliance with the FCC Licenses and the rules and regulations of
the FCC, and the FCC Licenses shall at all times remain in full
force and effect. The Seller shall file with the FCC all material
reports, applications, documents, instruments and other information
required to be filed in connection with the operation of the
Station.
(j) Credit and Receivables. The Seller will follow its usual and
customary policies with respect to extending credit for sales of air
time and advertising on the Station and with respect to collecting
accounts receivable arising from such extension of credit.
(k) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its present operations,
physical facilities, working conditions, relationships with lessors,
licensers, advertisers, suppliers, customers, and employees, all of
the confidential information, call letters and trade secrets of the
Station, and the FCC Licenses. The Seller will continue to make
expenditures for advertising, programming, sales, technical and
administrative support at a level consistent with the past practices
of the Seller.
(l) Full Access and Consultation. The Seller will permit
representatives of the Buyers to have full access at all reasonable
times, and in a manner so as not to
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interfere with the normal business operations of the Station, to all
premises, properties, assets, books, records, contracts (except
Advertising Contracts), Tax records, and documents of or pertaining
to the Acquired Assets or the Seller. The Seller will consult with
the Buyers' management with a view to informing Buyers' management
as to the operations, management and business of the Station.
(m) Notice of Developments. The Seller will give prompt written
notice to the Buyers of any material development affecting the
assets, Liabilities, business, financial condition, operations,
results of operations, or future prospects of the Seller. Each Party
will give prompt written notice to the other of any material
development affecting the ability of the Parties to consummate the
transactions contemplated by this Agreement. No disclosure by any
party pursuant to this Section 4(m), however, shall be deemed to
amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person
relating to any (A) liquidation, dissolution, or recapitalization,
(B) merger or consolidation, (C) acquisition or purchase of
securities or assets, or (D) similar transaction or business
combination involving the Seller or the Station; or (ii) participate
in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any person to do or
seek any of the foregoing. The Seller will notify the Buyers
immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(o) Title Insurance. The Seller will obtain with respect to the
parcel of real estate that the Seller leases pursuant to the Tower
Lease, a leasehold owner's policy issued by a title insurer
reasonably satisfactory to the Operating Company, in an amount equal
to the fair market value of such real property (including all
improvements located thereon), insuring title to such real property
in the Operating Company as of the Closing subject only to the title
exceptions which do not impair the current use, occupancy or value
or the marketability of title of the property, together with such
endorsements for zoning, contiguity, public access and extended
coverage as the Operating Company reasonably requests. The Seller
shall pay the cost and expense associated with any such title
insurance procured pursuant to this Section 4(o).
(p) Survey. With respect to the parcel of real property that the
Seller leases pursuant to the Tower Lease, the Seller will provide
to the Operating Company in preparation for the Closing a current
survey of the real property certified to the Operating Company,
prepared by a licensed surveyor and conforming to current ALTA
Minimum Detail Requirements for Land Title Surveys, disclosing the
location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, and
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other masters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey
shall not disclose any survey defect or encroachment from or onto
such real property which has not been cured or insured over prior to
the Closing. The Operating Company shall pay the cost and expense
associated with any Survey initiated pursuant to this Section 4(p).
(q) Environmental Assessments. The Operating Company may, at its own
expense, obtain with respect to the parcel of real estate that the
Seller leases pursuant to the Tower Lease, a current Phase I
environmental site assessment from an environmental consultant or
engineer which shall not disclose or recommend any action with
respect to any condition to be remediated or investigated or any
contamination on the site assessed.
(r) Control of Station. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its
consent and approval to the Assignment Application. Between the date
of this Agreement and the Closing Date, the Operating Company and
its employees or agents shall not directly or indirectly control,
supervise, or direct, or attempt to control, supervise, or direct,
the operation of the Station, and such operation shall be the sole
responsibility of and in the control of the Seller.
(s) Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing.
In the event of any such loss, damage, or destruction the Seller
will promptly notify the Buyers of all particulars thereof, stating
the cause thereof (if known) and the extent to which the cost of
restoration, replacement and repair of the Acquired Assets lost,
damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will repair or replace such
Acquired Assets as soon as possible after loss, damage or
destruction thereof and shall use its best efforts to restore as
promptly as possible transmissions as authorized in the FCC
Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or
replacement. If repair or replacement cannot be accomplished within
sixty (60) days of the date of the Seller's notice to the Buyers,
and the Buyers determine that the Seller's failure to repair or
replace, alone or in the aggregate, would have a material adverse
effect on the operation of the Station:
(i) the Buyers may elect to terminate this Agreement; or
(ii) the Buyers may postpone the Closing Date until such time as
the property has been repaired, replaced or restored in a
manner and to an extent reasonably satisfactory to the Buyers,
unless the same cannot be reasonably effected within ninety
(90) days of the date of the Seller's notice to Buyers, in
which case either party may terminate this Agreement; or
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(iii) the Buyers may choose to accept the Acquired Asset in their
"then" condition, together with the Seller's assignment to
Buyers all rights under any insurance claims covering the
loss, damage or destruction and payment over to Buyers any
proceeds under any such insurance policies, previously
received by the Seller with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(s),
the Parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the
Buyers to consummate the transactions to be performed by the Buyers
in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 2
above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to
those relating to the Tower Lease, the title insurance
commitment and endorsement specified in Section 4(o) above,
and the Survey specified in section 4(p) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction,
or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of
the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the
right of the Buyers to own, operate, or control the Acquired
Assets (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyers a certificate
(without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified
above in Section 5(a)(i)-(iv) is satisfied in all respects;
(vi) the Assignment Application shall have been approved by a Final
Order of the FCC, all applicable waiting periods (and any
extensions thereof) under the
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Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Seller and the Buyers shall have received
all governmental approvals required to transfer all other
authorizations, consents, and approvals of governments and
governmental agencies set forth in the Disclosure Schedule;
(vii) the relevant Parties shall have entered into the Postclosing
Agreement;
(viii) the Seller shall have delivered to the Buyers, pursuant to
Section 4(f), a list of the Advertising Contracts and the
daily value any outstanding balance of such Advertising
Contracts as of the Closing Date;
(ix) the Buyers shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit G
attached hereto, addressed to the Buyers and dated as of the
Closing Date; and
(x) all actions consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance
to the Buyers.
The Buyers may waive any condition specified in this Section 5(a) if the Buyers
execute a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of the
Buyers' covenants hereunder in all material respects through
the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction,
or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any
of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in
effect);
(iv) the Buyers shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or
otherwise) to the effect that
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each of the conditions specified above in Section
5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Assignment Applications shall have been approved
by a Final Order of the FCC, all applicable waiting periods
(and any extension thereof) under the Hart-Scott-Rodino Act
shall have expired or otherwise been terminated and the Seller
and the Buyers shall have received all governmental approvals
required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vi) the relevant Parties shall have entered into the Postclosing
Agreement; and
(vii) all actions to be taken by the Buyers in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the
Seller.
The Seller may waive any condition specified in this Section 5(b) if it executes
a writing so stating at or prior to the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments
and documents) as any other Party reasonably may request, all the
sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 7
below).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand
in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing
Date involving the Seller, the other Party will cooperate with the
contesting or defending Party and its counsel in the contest or
defense, make available his or its personnel, and provide such
testimony and access to its books and records as shall be necessary
in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting
or defending Party is entitled to indemnification therefor under
Section 7 below).
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(c) Adjustments. Operation of the Station and the income and
expenses attributable thereto up through the close of business on
the day before the Closing Date shall be for the account of the
Seller and thereafter for the account of the Operating Company. Such
items as employee salaries, vacation, sick day and personal time
accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepared expenses,
deposits, music license fees, and rents and payments pertaining to
the leases and contracts being assigned hereunder (inducing any
contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Operating
Company as of the Closing Date in accordance with the foregoing
principle. Contractual arrangements that do not reflect an equal
rate of compensation to the Station over the term of the Agreement
shall be equitably adjusted as of the Closing Date. The prorations
and adjustments hereunder shall be made and paid insofar as feasible
on the Closing Date, with a final settlement sixty (60) days after
the Closing Date. In the event of any disputes between the Parties
as to such adjustments, the amounts not in dispute shall nonetheless
be paid at such time and such disputes shall be determined by the
accounting firm of Ernst & Young and the fees and expenses of such
accounting firm shall be paid one-half (1/2) by the Seller and
one-half (1/2) by the Operating Company.
(d) Collection of Accounts Receivable. At the Closing, the Seller
will turn over to the Operating Company, for collection only, the
accounts receivable of the Station owing to the Seller as of the
close of business on the Closing Date. A schedule of such accounts
receivable will be delivered by the Seller to the Operating Company
on the Closing Date or as soon thereafter as possible. The Operating
Company agrees to use commercially reasonable efforts in the
ordinary course of business (but without responsibility to institute
legal or collection proceedings) to collect such accounts receivable
during the 120-day period following the Closing Date, and will remit
all payments received on such accounts to Seller at the end of such
120-day period. In the event the Operating Company receives moneys
during the 120-day period following the Closing Date from an
advertiser who, after the Closing Date, is advertising over any of
the Station, and that advertiser was included among the accounts
receivable as of the Closing Date, the Operating Company shall apply
said moneys to the oldest outstanding balance due on the particular
account, except in the case of a "disputed" account receivable. For
purposes of this Section 6(d), a "disputed" account receivable means
one which the account debtor refuses to pay because he asserts that
the money is not owed or the amount is incorrect. In the case of
such a disputed account, the Operating Company shall immediately
return the account to the Seller prior to expiration of the 120-day
period following the Closing Date. If the Operating Company returns
a disputed account to the Seller, the Operating Company shall have
no further responsibility for its collection and may accept payment
from the account debtor for advertising carried on any of the
Station after the Closing Date. At the end of the 120-day period
following the Closing Date, the Operating Company will turn back to
the Seller all of the accounts receivable of the Station as of the
Closing Date owing to the Seller which have not yet been
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collected, and the Operating Company will thereafter have no further
responsibility with respect to the collection of such receivables.
During the 120-day period following the Closing Date, the Operating
Company shall afford the Seller reasonable access to the accounts
receivable "aging list."
(e) Severance Obligations. In the event an offer of employment is
extended by the Buyers to and accepted by an employee of the Seller
pursuant to Section 4(c) and such subsequent employment by the
Buyers is terminated within sixty (60) days from the Closing Date,
the Seller shall be exclusively responsible for, and shall pay to
such accepting employee, all severance benefits that may be due and
owing such employee by reason of his or her employment with either
the Seller or the Buyers based on Seller's severance policies as in
effect on the Closing Date.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the
Seller contained in Section 2 of this Agreement (other than the
representations and warranties of the Seller contained in Sections
2(a), 2(b) and 2(c) hereof or relating to the Seller's title to the
Acquired Assets) shall survive the Closing (even if the Buyers knew
or had reason to know of any misrepresentation or breach of warranty
at the time of Closing) and continue in full force and effect for a
period of three (3) years thereafter. All of the other
representations, warranties, and covenants of the Buyers and the
Seller contained in this Agreement (including the representations
and warranties of the Seller contained in Sections 2(a), 2(b) and
2(c) hereof or relating to the Seller's title to the Acquired
Assets) and in this Agreement shall survive the Closing (even if the
damaged party knew or had reason to know of any misrepresentation or
breach of warranty or covenant at the time of Closing) and continue
in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Michel and the Seller jointly and severally agree to indemnify the
Buyers from and against the entirety of any Adverse Consequences the Buyers may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by:
(i) any breach of the Seller's representations, warranties, and
covenants contained in this Agreement (so long as the
particular representation, warranty, or covenant survives the
Closing and the Buyers make a written claim for
indemnification within the applicable survival period);
(ii) any Liability of the Seller which is not an Assumed Liability;
or
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(iii) any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or
under any common law doctrine of defacto merger or successor
liability) which is not an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Seller. The
Buyers agree to indemnify the Seller from and against the entirety
of any Adverse Consequences the Seller may suffer resulting from,
arising out of, relating to, in the nature of, or caused by (i) the
breach of any of the Buyers' representations, warranties, and
covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the
Seller makes a written claim for indemnification within the
applicable survival period) or (ii) any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledge and agree
that (i) the Station to be acquired pursuant to this Agreement is
unique; (ii) the Buyers would be damaged irreparably in the event
any provision of this Agreement is not performed in accordance with
specific term or otherwise is breached; and (iii) money damages
would not be an adequate remedy for a breach of any provision of
this Agreement. Accordingly, each of the Parties agrees that the
Buyers shall be entitled to an injunction or injunctions to prevent
such breach and to enforce specifically this Agreement and the terms
and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in
Section 10(o) below), in addition to any other remedy to which it
may be entitled, at law or in equity.
(e) Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which
may give rise to a claim for indemnification against any other Party
(the "Indemnifying Party") under this Section 7, then the
Indemnified Party shall notify the Indemnifying Party thereof
promptly; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is damaged. In the event any Indemnifying Party notifies the
Indemnified Party within fifteen (15) days after the Indemnified
Party has given notice of the matter that the Indemnifying Party is
assuming the defense thereof, (i) the Indemnifying Party will defend
the Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost
and expense (except that the Indemnifying Party will be responsible
for the fees and expenses of the separate co-counsel to the extent
the Indemnified Party concludes reasonably that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii)
the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (iv) the Indemnifying Party will not consent to
the entry of any judgment with respect to the matter, or enter into
any settlement which does
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not include a provision whereby the plaintiff or claimant in the
matter releases the Indemnified Party from all Liability with
respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event the
Indemnifying Party does not notify the Indemnified Party within
fifteen (15) days after the Indemnified Party has given notice of
the matter that the Indemnifying Party is assuming the defense
thereof, however, the Indemnified Party may defend against, or enter
into any settlement with respect to, the matter in any manner it
reasonably may deem appropriate.
(f) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any
statutory or common law remedy any party may have for breach of
representation, warranty, or covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, (other than Retained Assets) that are used or useful
in the operation of the Station, including but not limited to all of its (i)
interests of any kind in real property, improvements, fixtures, and fittings
thereon (such as towers and antennae), and easements, rights-of-way, and other
appurtenants thereto under the Tower Lease; (ii) tangible personal property
(such as computers, electrical devices, monitoring equipment, test equipment,
switching, terminal and studio equipment, transmitters, transformers, receivers,
broadcast facilities, inventories of compact disks, records, tapes and other
supplies, vehicles, and all assignable warranties with respect thereto; (iii)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions; (iv) rights under orders and agreements
(including those barter agreements identified on the Disclosure Schedules) now
existing or entered into in the Ordinary Course of Business for the sale of
advertising time on the Station; (v) contracts, indentures, Security Interests,
guaranties, other similar arrangements, and rights thereunder; (vi) call letters
of the Station, jingles, logos, slogans, and business goodwill of the Station;
(vii) Licenses and similar rights obtained from governments and governmental
agencies; and (viii) FCC logs and records and all other books, records, ledgers,
logs, files, documents, correspondence, lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" means any arrangement with any third party under
which the Seller has created, incurred, assumed or guaranteed an obligation to
provide advertising or air time on the Station.
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"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means obligations of the Seller under the licenses,
sublicenses, leases, subleases, contracts, and other arrangements referred to in
the definition of Acquired Assets either: (a) to furnish services, and other
non-Cash benefits to another party after the Closing; or (b) to pay for goods,
services, and other non-Cash benefits that another party will furnish to it
after the Closing. The Assumed Liabilities shall not include any Retained
Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 and Section 3
above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
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"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Fifth Third Bank of Northwest Ohio N.A.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(f) above.
"Indemnifying Party" has the meaning set forth in Section 7(f) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and
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information), (g) other proprietary rights, and (h) copies and tangible
embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Licensing Company" has the meaning set forth in the preface above.
"Most Recent Financial Statements" has the meaning set forth in Section
2(e) above.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37)
"Operating Company" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller
Stockholders entered into concurrently herewith and attached hereto as Exhibit
E.
"Process Agent" has the meaning set forth in Section 10(o) below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Retained Assets" means (a) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a
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corporation; (b) any of the rights of the Seller under this Agreement (or under
any side agreement between the Seller on the one hand and the Buyers on the
other hand entered into on or after the date of this Agreement); (c) accounts,
notes and other receivables; (d) Seller's Cash; (e) all rights as lessor or
otherwise under the Studio Lease; and (f) a single personal computer.
"Retained Liabilities" means any other obligations or liabilities of
Seller, including but not limited to: (a) any Liability relating to the
ownership or operation of the Station prior to the Closing; (b) any Liability of
the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (c) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby; (d) all obligations as
lessor or otherwise under the Studio Lease; or (e) any Liability or obligation
of the Seller under this Agreement (or under any side agreement between the
Seller on the one hand and the Buyers on the other hand entered into on or after
the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
WXKR-FM licensed by the FCC to operate in Port Clinton, Ohio.
"Studio Lease" means that Lease Agreement (as amended) entered into as of
April 30, 1990, by and between Richard A. Dunn, Lind M. Dunn and Venice
Broadcasting Incorporated, pursuant to which Venice Broadcasting Incorporated
does lease Unit Nos. 609 and 611 in the building located at 605 Lemoyne Road,
Northwood, Ohio 43619.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 4(p) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
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<PAGE>
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Tower Lease" means that Property Lease (as amended) entered into as of
December 11, 1991, by and between Eugene F. Dunham and Betsy Dunham and the
Seller pursuant to which the Seller does lease approximately six (6) acres in
the Township of Harris, County of Ottawa, State of Ohio on which the Seller has
erected and maintains a radio station tower and requisite building and
equipment.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the
event the Seller is in breach, and the Seller may terminate
this Agreement by giving written notice to the Buyers at any
time prior to the Closing in the event the Buyers are in
breach, of any material representation, warranty, or covenant
contained in this Agreement in any material respect in each
case if such breach remains uncured for ten (10) days after
notice of breach is received from the other party;
(iii) the Buyers may terminate this Agreement by giving written
notice to the Seller on or before the 30th day following the
date of this Agreement if the Buyers are not satisfied in the
Buyers' sole discretion with the results of its continuing
business, legal, engineering and accounting due diligence
regarding the Seller;
(iv) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the
Closing shall not have occurred on or before the 270th day
following the date of this Agreement by reason of the failure
of any condition precedent under Section 5(a) hereof (unless
the failure results primarily from the Buyers breaching any
representation, warranty, or covenant contained in this
Agreement);
(v) the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the
Closing shall not have occurred on or before the 270th day
following the date of this Agreement by reason of the failure
of any condition precedent under Section 5(b) hereof (unless
the
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<PAGE>
failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this
Agreement); or
(vi) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties
hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants
of the Parties contained in this Agreement shall survive the Closing
hereunder as and to the extent provided in the Post-Closing
Agreement.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of
the other Party; provided, however, that any Party may make any
public disclosure it believes in good faith is required by law or
regulation (in which case the disclosing Party will advise the other
Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the
Parties and supersedes any prior understandings, agreements, or
representations by or between the Parties, written or oral, that may
have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign
either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the
other Party, provided that the Buyers may assign all of the Buyers'
right, title and interest in, to and under this Agreement to one or
more Affiliates or Midwest Broadcasting, who shall then, subject to
the terms and conditions of this Agreement, have the right to
receive the Acquired Assets, assume the Assumed Liabilities, and to
pay to the Seller the Purchase Price therefor.
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<PAGE>
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered
or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Seller: Venice Michel
6543 Wayne Court
Maumee, Ohio 43537
Copy to: Thomas G. Zraik, Esq.
2650 N. Reynolds Road
Toledo, Ohio 43615
If to the Buyers: Cumulus Media, LLC
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrance J. Leahy
Copy to: Cumulus Media, LLC
c/o Century Broadcasting
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests,
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<PAGE>
demands, claims, and other communications hereunder are to be delivered by
giving the other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts)
of the State of Ohio.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by the Buyers and the Seller. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid
or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
(l) Expenses. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby, other than as set forth in Section 4(b) with regard to the
Assignment Applications. The Seller will pay all income taxes,
transfer or sales taxes and other recording or similar fees
necessary to vest title to each of the Acquired Assets in the
Buyers.
(m) Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against
any Party. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty
made herein unless the Disclosure Schedule identifies the exception
with reasonable particularity and describes the relevant facts in
reasonable detail. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent
significance. If any Party has breached any
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<PAGE>
representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party
has not breached shall not detract from or mitigate the fact that
the Party is in breach of the first representation, warranty, or
covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Toledo, Ohio,
in any action or proceeding arising out of or relating to this
Agreement, agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court, and agrees
not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto.
Seller appoints Thomas G. Zraik, Esq., of 2560 North Reynolds Road,
Toledo, Ohio 43615, and Buyers appoint CT Corporation (each the
"Process Agent") as their respective agent to receive on behalf of
each service of copies of the summons and complaint and any other
process that might be served in the action or proceeding. Any Party
may make service on the other Party by sending or delivering a copy
of the process (i) to the Party to be served at the address and in
the manner provided for the giving of notices in Section 10(h) above
or (ii) to the Party to be served in care of the Process Agent at
the address and in the manner provided for the giving of notices in
Section 10(h) above. Nothing in this Section 10(p), however, shall
affect the right of any Party to serve legal process in any other
manner permitted by law. Each Party agrees that a final judgment in
any action or proceeding so brought shall be conclusive and may be
enforced by suit on the judgment or in any other manner provided by
law.
(p) Bulk Transfer Laws. The Seller has, or will as of the Closing
Date, comply with the provisions of any bulk transfer laws of Ohio
or any other jurisdiction applicable to the transactions
contemplated by this Agreement.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
--------------------------------
Title:
-----------------------------
"Operating Company"
CUMULUS LICENSING CORP.
By:
-----------------------------------
(printed)
-----------------------------------
Title:
-----------------------------------
"Licensing Company"
VENICE BROADCASTING CORP.
By:
-----------------------------------
(printed)
-----------------------------------
Title:
-----------------------------------
"Seller"
VENICE MICHEL
-----------------------------------
"Michel"
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<PAGE>
WBBQ AGREEMENT OF SALE
Between
MEDICAL COLLEGE OF GEORGIA FOUNDATION
And
Cumulus Licensing Corporation
And
Cumulus Broadcasting, Inc.
-------------------------------------------
Dated: September 4, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. ASSETS SOLD AND PURCHASED............................................ 2
2. PURCHASE PRICE; DEPOSIT; ASSUMPTION OF LIABILITIES................... 4
(a) Purchase Price................................................. 4
(b) Deposit........................................................ 5
(c) Assumption of Liabilities...................................... 6
3. PAYMENT OF CERTAIN ITEMS............................................. 6
4. SELLER'S REPRESENTATIONS AND WARRANTIES.............................. 8
(a) (i) Organization and Authority.......................... 8
(ii) No Insolvency....................................... 9
(iii) Taxes............................................... 10
(iv) FCC Filings......................................... 10
(v) Representations and Warranties...................... 10
(b) (i) Compliance with Laws................................ 11
(ii) Tangible Assets..................................... 12
(iii) Condition of Equipment.............................. 12
(iv) FCC Licenses........................................ 13
(v) Public Inspection Files............................. 14
(vi) Financial Statements................................ 14
(vii) Contracts........................................... 14
(viii) No Insolvency....................................... 15
(ix) Union Activity...................................... 16
(x) Employee Benefits................................... 16
(xi) Adverse Conditions.................................. 17
(xii) Transmitter and Studio Sites........................ 17
(xiii) Environmental Matters............................... 18
(xiv) Taxes............................................... 20
(xv) Insurance........................................... 20
(xvi) All Necessary Assets................................ 21
(xvii) Copyrights and Service Marks........................ 21
(xviii) FCC Filings......................................... 22
(xix) Conduct of Business................................. 22
i
<PAGE>
5. PURCHASER'S REPRESENTATIONS AND WARRANTIES........................... 22
(a) Organization................................................... 22
(b) Due Authorization.............................................. 23
(c) Binding Agreement.............................................. 23
(d) No Conflicts................................................... 23
(e) FCC Approval................................................... 23
(f) No Conflicting Agreements...................................... 23
(g) No Litigation.................................................. 24
(h) Representations and Warranties................................. 24
6. OPERATIONS PENDING CLOSING........................................... 24
(a) Access to Stations............................................. 24
(b) Compliance with Laws........................................... 25
(c) Maintenance of Stations Assets................................. 25
(d) Conduct of Business............................................ 25
(e) Salary Increases............................................... 26
(f) Required Consents.............................................. 26
(g) Books and Records.............................................. 26
(h) Contracts...................................................... 27
7. PURCHASER'S PERFORMANCE.............................................. 27
8. SELLER'S PERFORMANCE................................................. 30
9. FCC APPROVAL AND APPLICATION......................................... 32
10. HART-SCOTT-RODINO FILING............................................. 33
11. DATE, NOTICE AND PLACE OF CLOSING.................................... 33
12. CONTROL OF STATIONS.................................................. 34
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................... 34
14. RIGHTS OF INDEMNIFICATION; DEFAULT................................... 34
15. INDEMNIFICATION ESCROW............................................... 39
16. ALTERNATIVE DISPUTE RESOLUTION....................................... 40
17. BROKER'S FEE......................................................... 44
18. SELLER'S PERFORMANCE AT CLOSING...................................... 44
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<PAGE>
19. PURCHASER'S PERFORMANCE AT CLOSING................................... 46
20. EVENTS OF TERMINATION; DISBURSEMENT OF DEPOSIT....................... 47
(a) Failure to Close without Fault................................. 47
(b) Disbursement of Deposit to Seller.............................. 48
(c) Return of Deposit to Purchaser................................. 49
(d) Mutual Agreement............................................... 50
21. SPECIFIC PERFORMANCE................................................. 50
22. BULK SALES LAW....................................................... 51
23. ASSET ACQUISITION STATEMENT.......................................... 51
24. EXHIBITS AND SCHEDULES............................................... 51
25. ASSIGNMENTS; SUCCESSORS AND ASSIGNS.................................. 51
26. CONSTRUCTION......................................................... 51
27. COUNTERPARTS......................................................... 51
28. NOTICES.............................................................. 52
29. ADDITIONAL DOCUMENTS................................................. 53
30. PARAGRAPH HEADINGS................................................... 53
31. ENTIRE AGREEMENT..................................................... 53
32. EXPENSES............................................................. 54
33. ATTORNEYS' FEES...................................................... 54
34. CONFIDENTIALITY...................................................... 54
35. TIME BROKERAGE AGREEMENT............................................. 55
iii
<PAGE>
WBBQ AGREEMENT OF SALE
THIS WBBQ AGREEMENT OF SALE (this "Agreement"), made this day of , 1997,
by and between MEDICAL COLLEGE OF GEORGIA FOUNDATION, a Georgia not for profit
corporation ("Seller"), and ______________________, a ______________________
corporation ("Purchaser").
WITNESSETH:
WHEREAS, Savannah Valley Broadcasting Company, a Georgia corporation
("Grantor"), is the licensee and operator of Radio Broadcast Stations WBBQ AM
and FM, Augusta, Georgia ("Stations"), holding valid authorizations for the
operation thereof from the Federal Communications Commission ("FCC");
WHEREAS, Grantor wishes to make a charitable contribution to Seller of the
Stations Assets (as hereinafter defined) pursuant to the Agreement to Transfer
WBBQ Assets dated _________________, 1997, a copy of which is attached as
Exhibit A hereto;
WHEREAS, Seller, upon transfer of the Station Assets from Grantor, wishes
to sell and Purchaser wishes to acquire the Stations Assets, in order that the
proceeds from said sale may be added to the corpus of Seller's endowment; and
WHEREAS, Grantor and Purchaser desire to enter into a time brokerage
agreement ("TBA"), consistent with FCC rules and regulations, under which
Purchaser will operate the Stations for the period commencing with the effective
date of the TBA ("TBA Commencement Date") to the Closing Date (as hereinafter
defined).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, Seller and Purchaser hereby agree as
follows:
<PAGE>
1. ASSETS SOLD AND PURCHASED.
On the Closing Date, Seller will sell, transfer, assign and convey to
Purchaser, by appropriate instruments, and Purchaser will purchase,
subject to the terms and conditions hereinafter set forth, the following
assets and properties (the "Stations Assets"), free and clear of all
liens, claims, encumbrances and rights of others, except as otherwise set
forth herein:
(a) The FCC licenses and authorizations and all other licenses, permits
and authorizations issued by any other federal, state or local
governmental agency or authority for the operation of the Stations,
including but not limited to those listed on Exhibit B hereto, and
all other licenses, permits and authorizations now or hereafter
obtained in connection with the operation of the Stations.
(b) All fixed, tangible and intangible assets used and usable in the
operation of the Stations, including, but not limited to, those
assets identified on Exhibit C hereto, subject to any changes
thereto made in the ordinary course of business between the date
hereof and the Closing Date.
(c) The contracts, leases and agreements listed and described on Exhibit
D hereto which are to be in effect on the Closing Date, except those
which may have been unilaterally canceled by a party other than
Seller, provided that legal rights, if any, accruing to Seller by
virtue of any such unilateral cancellation by a party other than
Seller shall be assigned by Seller to Purchaser. To the extent that
the assignment of any contract listed on
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<PAGE>
Exhibit D may require the consent of a third party, Seller shall
exercise its best efforts to secure such consent. In the event that
Seller is unable to secure such consent, Purchaser shall not be
required to assume performance pursuant to said contract.
(d) The rights and obligations under the agreements, pursuant to which
reimbursement is or was to be made in whole or in part in services,
merchandise or other non-cash considerations ("Trade Deals"), listed
and described on Exhibit E hereto, subject to any changes thereto
made in the ordinary course of business between the date hereof and
the Closing Date.
(e) The call letters "WBBQ" and all copyrights, trademarks, trade names,
logos, jingles, service marks, slogans and promotional materials
used in connection with the Stations, and any registrations or
applications for registration of any of the same, including but not
limited to those copyrights, trademarks, trade names and service
marks listed and described on Exhibit F hereto.
(f) Such files, records and logs pertaining to the operation of the
Stations as are required to be maintained by federal, state or local
law or regulation and as Purchaser may reasonably require; provided,
however, that Purchaser is not purchasing and will not be entitled
to receive Seller's corporate charter, corporate minute books,
original accounting journals, books of accounts, ledgers, tax
returns or other confidential books and records not directly
relating to the operation of the Stations.
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<PAGE>
(g) The real property, the improvements thereon, fixtures and all
easements and rights for the benefit of such property ("Real
Property") as described on Exhibit G hereto, subject only to such
easements, reservations, servitudes and other non-monetary
encumbrances as described on Exhibit G and liens for taxes not yet
due and payable.
(h) The goodwill and all other intangible assets used in the operation
of the Stations.
Purchaser acknowledges that the WBBQ-FM transmitter site and tower ("FM
Tower Site") is owned by Grantor. On the Closing Date, Purchaser shall
enter into an agreement with Grantor for the lease of the FM Tower Site,
in the form of Exhibit H hereto ("Tower Lease Agreement"). This Agreement
is limited to the assets herein described, and Purchaser is not purchasing
cash, cash equivalents, securities, accounts receivable for the sale of
commercial time or insurance policies, all of which shall be and remain
the exclusive property of Seller or Grantor, as the case may be, free and
clear of any claim from Purchaser whatsoever.
2. PURCHASE PRICE; DEPOSIT; ASSUMPTION OF LIABILITIES.
(a) Purchase Price.
The Purchase Price for the Stations Assets shall be ________________
Dollars ($__________). The Purchase Price for the Stations Assets
shall be payable in full to Seller by wire transfer of immediately
available funds on the Closing Date. The Purchase Price shall
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<PAGE>
be allocated among the Stations Assets according to their current
fair market values, as agreed to by Seller and Purchaser and as set
forth in Exhibit I.
(b) Deposit.
(i) Upon execution of this Agreement, Purchaser, by bank wire
transfer of immediately available funds, shall deposit in
escrow with _______________________, acting as escrow agent on
the parties' behalf ("Escrow Agent"), a deposit ("Deposit") in
the amount of _________ Dollars ($____________), which
represents ten percent (10%) of the Purchase Price excluding
the value of the Accounts Receivable. The Deposit shall be
security for the consummation of the sale of the Stations
Assets and shall be held in escrow pursuant to a separate
escrow agreement ("Escrow Agreement") entered into between
Seller, Purchaser and the Escrow Agent in the form of Exhibit
J hereto. In the event of any conflict between this Agreement
and the Escrow Agreement, the terms of the Escrow Agreement
shall control. The Deposit shall be invested and disbursed in
accordance with the terms of the Escrow Agreement.
(ii) Subject to Section 20 of this Agreement and the Escrow
Agreement, the Deposit, together with any interest earned
thereon, shall be credited toward partial payment of the
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<PAGE>
Purchase Price on the Closing Date, disbursed to Seller, or
returned to Purchaser upon termination of this Agreement.
(c) Assumption of Liabilities.
The Stations Assets shall be sold and conveyed to Purchaser free and
clear of all mortgages, liens, deeds of trust, security interests,
pledges, restrictions, prior assignments, charges, claims, defects
in title and encumbrances of any kind or type whatsoever except the
following: (i) liens for taxes not yet due and payable; and (ii) the
obligations of Seller for periods from and after the Closing Date
under leases and contracts assigned to Purchaser that are described
in Sections 1(c) and 1(d) hereof, which, subject to all necessary
consents, Purchaser hereby expressly agrees to assume.
3. PAYMENT OF CERTAIN ITEMS.
(a) All FCC filing and grant fees, if any, shall be paid by Purchaser.
(b) Subject to any accounting made pursuant to the TBA referred to in
Section 35 hereof, within ninety (90) days after closing, an
accounting shall be made as follows:
(i) All prepaid income, prepaid expenses, prepayments on any
written contracts assumed by Purchaser hereunder, accrued
income and accrued expenses of the Stations as of the end of
the day prior to the Closing Date shall, except as otherwise
expressly provided herein, be adjusted and allocated between
Seller and Purchaser to reflect the principle that all
expenses
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<PAGE>
and income arising from the operation of the Stations before
12:01 a.m. on the Closing Date shall be for the account of
Seller, and all expenses and income arising from the operation
of the Stations from and after 12:01 a.m. on the Closing Date
shall be for the account of Purchaser.
(ii) As soon as practicable following the Closing Date, and in any
event within ninety (90) days thereafter, or at such other
time as the parties mutually agree, Purchaser shall deliver to
Seller Purchaser's certificate setting forth as of the Closing
Date all adjustments to be made as provided in (i) above.
Purchaser shall provide Seller or Seller's representatives
access to copies of all books and records as Seller may
reasonably request for purposes of verifying such adjustments.
Purchaser's certificate shall be final and conclusive unless
objected to by Seller in writing within thirty (30) days after
delivery. Seller and Purchaser shall attempt jointly to reach
agreement as to the amount of the adjustments to be made
hereunder within sixty (60) days after receipt by Purchaser of
such written objection by Seller, which agreement, if
achieved, shall be binding upon all parties to this Agreement
and not subject to dispute or review.
(iii) In the event of a disagreement between Purchaser and Seller
with respect to the accounting to be made hereunder, the
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<PAGE>
parties agree that a public accounting firm chosen jointly by
Purchaser and Seller shall be the final arbiter of such
disagreement. The cost of such accounting firm shall be shared
equally by the parties.
(iv) Any amounts due Purchaser or Seller for the adjustments
provided for herein shall be paid within ten (10) calendar
days after final determination.
(c) Filing and recordation fees and any other fees incurred in
connection with the transfer of title to the property being conveyed
hereunder, and any applicable transfer, sales or use taxes, and all
expenses incurred in connection with such filing or recordation,
shall be borne entirely by Purchaser.
4. SELLER'S REPRESENTATIONS AND WARRANTIES.
(a) Seller covenants, represents and warrants the following, which
representations and warranties shall be true and correct as of the
Closing Date as if expressly restated on said date.
(i) Organization and Authority. Medical College of Georgia
Foundation is a not for profit corporation duly organized,
validly existing and in good standing under the laws of the
State of Georgia, has full power and authority to own its
properties, and has full power and authority to enter into
this Agreement and to consummate the transactions contemplated
herein. All required corporate action
-8-
<PAGE>
with respect to Seller has been taken to approve this
Agreement and the transactions contemplated hereby. The making
and performance of this Agreement by Seller does not and will
not violate any provisions of the organizational documents of
Seller, or, subject to Seller obtaining those consents set
forth on Exhibit K hereto, breach or constitute a default
under any agreement, instrument, order, judgment or decree to
which Seller is a party or by which it is bound or violate any
law or regulation applicable to Seller or the Stations. This
Agreement has been duly executed and delivered by Seller and
constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
(ii) No Insolvency.
No insolvency proceedings of any character, including, without
limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or
involuntary, affecting Seller or any of its respective assets
or properties are pending or, to the best of Seller's
knowledge, overtly threatened, and Seller has made no
assignment for the benefit of creditors, nor taken any action
with a view to, or which would constitute the basis for, the
institution of any such insolvency proceedings.
(iii) Taxes.
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Seller has, and as of the Closing Date will have, paid and
discharged all taxes, assessments, excises and other levies
which are due, including any such taxes, assessments, excises
and levies which, if due and not paid, would interfere with
Purchaser's enjoyment or use of the Stations Assets, excepting
such taxes, assessments and other levies which will not be due
until or after the Closing Date and which are to be prorated
between Seller and Purchaser pursuant to the provisions of
Section 3(b) hereof.
(iv) FCC Filings.
None of the information contained in the representations and
warranties of Seller set forth in any filing made by it with
the FCC with respect to the transfer of the Stations or the
assignment of the licenses therefor contains or will contain
any untrue statement of a material fact or omits or will omit
any material fact.
(v) Representations and Warranties.
The representations and warranties made by Seller in this
Agreement are not, and will not be on the Closing Date, false
or misleading individually or in the aggregate with respect to
any material fact and will not omit to state a material fact
required to
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be stated therein when necessary in order to make the
statements contained therein not materially false or
misleading.
(b) Based upon the covenants, representations and warranties made to
Seller by Grantor as set forth in Exhibit A hereto, Seller
covenants, represents and warrants the following, which
representations and warranties shall be true and correct as of the
Closing Date as if expressly restated on said date.
(i) Compliance with Laws.
The operation of the Stations is now, and on the Closing Date
will be, in compliance in all material respects with all
applicable laws, rules and regulations of all federal, state
and local authorities or agencies, and there is not now, nor
on the Closing Date will there be, any judgment outstanding or
litigation or proceeding pending or, to the best of Seller's
knowledge, overtly threatened which affects the title or
interest of Seller in or to any license or any other property
or asset to be sold hereunder, or its power or right to sell,
convey, transfer or assign the same to Purchaser as
hereinafter provided, or which would prevent or affect the
operation and use of the same by Purchaser, as presently
operated and used by Grantor. Except for the consent of the
FCC, the consent contemplated by Section 10 hereof, and any
such consent set forth on Exhibit K hereto, no authorizations,
approvals or consents from any governmental or
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regulatory authorities or agencies are necessary to permit
Seller to execute and deliver this Agreement and to perform
its obligations hereunder.
(ii) Tangible Assets.
Exhibit C attached hereto represents a true, complete and
accurate list of all tangible assets (other than the Real
Property) used and usable in the business and/or operation of
the Stations. Subject to Grantor's right to dispose of any
properties, equipment and assets in the ordinary course of
business, on the Closing Date Seller will convey to Purchaser
good and valid title to such properties, equipment and assets
and any other properties, equipment and assets acquired by it
subsequent to the date hereof and used or usable in the
business or operation of the Stations, free of any and all
liens, charges, assessments, taxes, mortgages, pledges,
conditional sales agreements, security agreements,
encumbrances and rights of third parties of any kind
whatsoever.
(iii) Condition of Equipment.
Transmission and studio equipment and other equipment
(mechanical and electrical) to be transferred to Purchaser
hereunder is, and will be as of the Closing Date, in good
repair and working condition with no material defects therein,
fit for the
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purposes for which they are being utilized and in material
compliance with all current FCC requirements and all other
applicable laws and regulations.
(iv) FCC Licenses.
The FCC licenses, permits and authorizations to be assigned to
Purchaser are, and will be as of the Closing Date, valid and
existing authorizations for the purpose of operating the
Stations, issued by the FCC under the Communications Act of
1934, as amended, and in accordance with the Rules and
Regulations of the FCC, and applications, reports and other
disclosures required by the FCC with respect to the Stations
have been, and will be as of the Closing Date, duly filed.
Grantor is an FCC licensee in good standing and, as of the
date hereof, there are no proceedings or complaints pending
or, to the best of Seller's knowledge, overtly threatened at
the FCC against Grantor with respect to the Stations and
Seller is not aware of any facts or circumstances that could
reasonably provide a basis for any such proceedings or
complaints. Grantor holds all licenses and governmental
authorizations necessary to enable the Grantor to conduct its
business of operating the Stations as presently conducted.
(v) Public Inspection Files.
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The public inspection files for the Stations are in material
compliance with the regulations of the FCC relating thereto.
(vi) Financial Statements.
The 1995, 1996 and January 1 to May 31, 1997 operating and
financial statements of the Stations provided to Purchaser
accurately reflect the financial condition and operations of
the Stations for the periods covered and said financial
statements are stated in accordance with generally accepted
accounting principles consistently applied. There are no
material liabilities associated with the Stations that are not
accurately reflected in such operating and financial
statements.
(vii) Contracts.
True and complete copies of all contracts, leases,
understandings and/or agreements and all modifications,
amendments and renewals thereof listed on Exhibits D and E
have been furnished to Purchaser and represent all contracts,
leases, understandings and/or agreements of Grantor in
conjunction with the operation of the Stations except
contracts for the sale of air time. All material provisions of
the contracts, understandings, leases and agreements listed on
said Exhibits D and E and all other contracts, leases,
understandings and agreements which may be effectuated between
the date hereof
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and the Closing Date relating to the operations of the
Stations have been complied with, and will have been complied
with, in all material respects as of the Closing Date, and no
material default in respect to any duties or obligations
required according to the terms of such contracts, leases,
understandings and agreements are or will have occurred.
Exhibit E specifies the trade balance of all contracts listed
thereon as of _______, 1997. All contracts and other
agreements listed on Exhibits D and E are in full force and
effect and are valid and, to the best of Seller's knowledge,
enforceable in accordance with their respective terms.
(viii) No Insolvency.
No insolvency proceedings of any character, including, without
limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or
involuntary, affecting Grantor or any of its respective assets
or properties are pending or, to the best of Seller's
knowledge, threatened, and Grantor has made no assignment for
the benefit of creditors, nor taken any action with a view to,
or which would constitute the basis for, the institution of
any such insolvency proceedings.
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(ix) Union Activity.
The employees of Grantor are not presently represented by and
are not seeking representation through any union or other
collective bargaining agent.
(x) Employee Benefits.
Purchaser will have no obligation or liability due to or
because of any past service liability, vested benefits,
retirement plan insolvencies or other obligation under local,
state or federal law (including the Employee Retirement Income
Security Act of 1974) resulting from the purchase of the
Stations or from former employees of Grantor becoming
employees of Purchaser. Nothing contained in this Agreement
shall confer upon any employee of Grantor any right with
respect to continued employment by Purchaser, nor shall
anything herein interfere with any right Purchaser may have
after the Closing Date to (i) terminate the employment of any
of the employees at any time, with or without cause, or (ii)
establish or modify any of the terms or conditions of
employment of the employees in the exercise of Purchaser's
independent business judgement.
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(xi) Adverse Conditions.
Seller does not know of any condition, including, but not
limited to, pending or threatened litigation, which may
materially and adversely affect the Stations' business
prospects, other than changes in the ordinary course of
business.
(xii) Transmitter and Studio Sites.
The Stations' transmitter and studio sites are not the subject
of any official complaint, notice of noncompliance or notice
of violation of any applicable zoning ordinance or building
code or regulation of the Federal Aviation Administration,
Federal Occupational Safety and Health Administration or
Federal Environmental Protection Agency, or regulations of
local or state agencies or departments and no such violation
is known to exist, and there is no zoning ordinance or
building code or use or occupancy restriction or condemnation
proceeding pending or, to the best of Seller's knowledge,
threatened, which would include or impair the use of such real
property or the improvements thereon by Purchaser, in the
manner and for the purposes for which they are presently used.
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(xiii) Environmental Matters.
For the purposes of this paragraph the following terms shall
have the following meanings: (1) the term "Hazardous Material"
shall mean any material, substance or item that, whether by
its nature or use, is subject to regulation as of the date of
this Agreement under any Environmental Requirement, including
but not limited to Polychlorinated Biphenyls, petroleum,
pesticides, herbicides, asbestos and underground storage
tanks; (2) the term "Environmental Requirements" shall
collectively mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Sec. 9601 et
seq.), Super Fund Amendments and Reauthorization Act of 1986,
the Hazardous Materials Transportation Act (49 U.S.C. Sec.
1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Sec. 6901 et seq.), the Toxic Substances Control Act
(15 U.S.C. Sec. 2601 et seq.), the Clean Air Act (42 U.S.C.
Sec. 7401 et seq.) and the Federal Water Pollution Control Act
(33 U.S.C. Sec. 1251 et seq.), all as presently in effect, any
regulation pursuant thereto presently in effect, or any other
law, ordinance, rule, regulation, order or directive in effect
as of the date of this Agreement addressing environmental,
health or safety issues of or by any Governmental Authority,
and (3) the term "Governmental
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Authority" shall mean the federal government, any state or
other political subdivision thereof, exercising executive,
legislative, judicial, regulatory or administrative functions.
Seller hereby represents and warrants to Purchaser that, to
the best of the knowledge of Birnied Florie, the President of
Grantor, (1) no Hazardous Material in reportable quantities
are currently located at, on, in or under the Stations or the
Stations Assets, (2) no Hazardous Material in reportable
quantities have been or are currently located at, in, on or
under the Stations or the Stations Assets in a manner which
violates any Environmental Requirement, (3) no releasing,
emitting, discharging, leaching, dumping or disposing of any
Hazardous Material from the Stations or the Stations Assets
onto or into any other property or from any other property
onto or into the Stations or the Stations Assets has occurred
or is occurring in reportable quantities; and (4) Grantor has
received no notice of violation, lien, complaint, suit, order
or other notice with respect to the environmental condition of
any of the Stations or the Stations Assets, nor has any such
notice been issued during Seller's ownership of the Stations
or the Stations Assets which has not been fully satisfied and
complied with in a timely fashion as to
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bring the Stations and the Stations Assets into full
compliance with all Environmental Requirements.
(xiv) Taxes.
Seller has, and as of the Closing Date will have, paid and
discharged all taxes, assessments, excises and other levies
which are due, including any such taxes, assessments, excises
and levies which, if due and not paid, would interfere with
Purchaser's enjoyment or use of the Stations Assets, excepting
such taxes, assessments and other levies which will not be due
until or after the Closing Date and which are to be prorated
between Seller and Purchaser pursuant to the provisions of
Section 3(b) hereof.
(xv) Insurance.
Grantor now has in force adequate fire and other risk
insurance covering the full replacement value of the Real
Property and tangible personal property to be transferred
herein and shall cause such insurance to be maintained in full
force until the Closing Date. Grantor also shall maintain in
full force until the Closing Date adequate general public
liability insurance in amounts consistent with broadcasting
industry standards for similar stations. None of the assets to
be conveyed herein has been adversely affected in any way as a
result of fire, explosion,
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earthquake, accident, fraud, rain, storm, drought, riot, Act
of God or public enemy or any other casualty, whether or not
covered by insurance.
(xvi) All Necessary Assets.
The Stations Assets described in Section 1 and set forth in
the Exhibits hereto, together with the Real Property and the
Tower Lease Agreement for the FM Tower Site, constitute all of
the assets, property and business owned, used or needed by
Grantor or in which Grantor has any interest (other than the
Excluded Assets) in carrying on the business and operation of
the Stations as presently conducted. Other than the Excluded
Assets, there are no other rights, assets or property owned,
used or needed by Grantor in connection with the Stations or
needed in the operation thereof.
(xvii) Copyrights and Service Marks.
Except as set forth on Exhibit F hereto, Grantor does not own
nor is possessed of or is licensed under any copyrights,
patents, patent applications, service marks, trademarks, trade
names, logos, emblems or slogans used in the conduct of the
business of the Stations as now operated. There is no claim
pending or threatened against Seller with respect to the
alleged infringement of any such copyright, patent, patent
application,
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service mark, trademark, trade name, logo, emblem or slogan
owned by another, and to the best of Seller's knowledge, there
is not any basis for any such claim.
(xviii) FCC Filings.
None of the information contained in the representations and
warranties of Grantor set forth in any filing made by it with
the FCC with respect to the transfer of the Stations or the
assignment of the licenses therefor contains or will contain
any untrue statement of a material fact or omits or will omit
any material fact.
(xix) Conduct of Business.
Since July 1, 1997, Grantor has conducted the business of the
Stations in the ordinary course.
5. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Purchaser represents and warrants the following, which representations and
warranties shall be true and correct as of the Closing Date as if
expressly restated on said date.
(a) Organization.
Purchaser is now, and will be as of the Closing Date, a corporation,
duly organized, validly existing and in good standing under the laws
of the State of __________, and qualified to do business in the
State of Georgia and the State of South Carolina.
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(b) Due Authorization.
The execution, delivery and consummation of this Agreement have been
duly authorized by the Board of Directors of Purchaser and no
further corporate authorization, approval or consent is required.
(c) Binding Agreement.
This Agreement constitutes the legal, valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with and
subject to its terms.
(d) No Conflicts.
Subject to the FCC's approval of this transaction, the execution,
delivery and consummation of this Agreement do not and will not
conflict with any of the provisions of Purchaser's organizational
documents or violate any provisions of law.
(e) FCC Approval.
Purchaser knows of no reason why the FCC (i) would not approve an
application for the assignment of the Stations' licenses to it or
(ii) would require any type of waiver before approving an
application for the assignment of the Stations' licenses to it.
(f) No Conflicting Agreements.
There will not be as of the Closing Date any agreements, contracts,
understandings or commitments which will restrain or inhibit the
right of Purchaser to enter into this Agreement, make any
representations or
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warranties herein and/or consummate any of the transactions
contemplated herein.
(g) No Litigation.
There are no suits, legal proceedings or investigations of any
nature pending or, to Purchaser's knowledge, threatened against or
affecting it that would affect Purchaser's ability to carry out the
transactions contemplated by this Agreement.
(h) Representations and Warranties.
The representations and warranties made by Purchaser in this
Agreement are true and correct and are not, and will not be on the
Closing Date, false or misleading individually or in the aggregate
with respect to any material fact and do not and will not omit to
state a material fact required to be stated therein when necessary
in order to make the statements contained herein not materially
false or misleading.
6. OPERATIONS PENDING CLOSING.
Pending the closing hereunder and subject to the TBA referred to in
Section 35 hereof, Seller shall itself or cause Grantor:
(a) Access to Stations.
Give to Purchaser and its authorized representatives access during
normal business hours to the properties, books and records of the
Stations and the Stations Assets, and furnish Purchaser with such
information concerning the same as Purchaser may reasonably request;
provided, however, that
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Purchaser may not visit the Stations without the consent of Grantor,
nor may Purchaser contact any current employee of Grantor without
the consent of Grantor.
(b) Compliance with Laws.
Comply with all material and applicable federal, state and local
laws, ordinances and regulations, including, but not limited to, the
Communications Act of 1934 and the Rules and Regulations of the FCC.
(c) Maintenance of Stations Assets.
Keep, at is own expense, in a normal state of repair and operating
efficiency the Stations Assets. On the Closing Date, the operation
of the Stations and the technical equipment shall be in compliance
with the FCC licenses and the FCC's Rules and Regulations and all
other applicable laws and regulations and no citations, complaints
or petitions shall be pending or, to Seller's knowledge, threatened
against Seller or Grantor.
(d) Conduct of Business.
Make all reasonable efforts to maintain the business reputation and
financial condition of the Stations and preserve their customers,
employees and suppliers. During the period from the date of this
Agreement to the Closing Date, the business of Grantor shall be
operated in ordinary course and in the same manner as operated prior
to the execution hereof. On the Closing Date, there shall be
outstanding no liability, judgment or litigation that could result
in an encumbrance of, or otherwise substantially adversely affect,
the
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assets, licenses and property being sold, assigned and transferred
hereunder or the operation of the Stations.
(e) Salary Increases.
Grant no salary increase to any officer or employee of the Stations,
except normal merit, promotional and similar increases granted in
the ordinary course of business and consistent with prior practice.
(f) Required Consents.
Use its best efforts to obtain all of the consents noted on Exhibit
K hereto, and in connection therewith promptly to commence and
thereafter diligently prosecute application for all such consents,
waivers and approvals required herein, and to keep Purchaser
currently informed of the status thereof and of any difficulties
encountered in obtaining same and promptly to advise Purchaser of
all communications relevant to the transactions provided for in this
Agreement received by Seller or Grantor from the FCC subsequent to
the date hereof, and to furnish the Purchaser copies of all written
communications and documents filed with the FCC by Seller or Grantor
and received by Seller or Grantor from the FCC subsequent to the
date hereof.
(g) Books and Records.
Maintain the books of accounts and records of the Stations in the
usual, regular and ordinary manner, in accordance with Grantor's
standard accounting practices.
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(h) Contracts.
Not enter into or terminate any contract in an amount greater than
$10,000 or for a term exceeding one year and to be assumed by
Purchaser, or amend any provision of any contract in an amount
greater than $10,000 or for a term exceeding one year and to be
assumed by Purchaser, whether or not in the ordinary course of
business, without the prior written consent of Purchaser, which
consent will not be unreasonably withheld. Grantor shall not enter
into any Trade Deal after execution of this Agreement which shall
obligate Purchaser without Purchaser's prior written consent.
7. PURCHASER'S PERFORMANCE.
The obligations of Purchaser hereunder are subject at its election to the
conditions that on the Closing Date:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects and the
covenants and agreements of Seller to be performed on or prior to
the Closing Date pursuant to the terms of this Agreement shall have
been duly performed, and Seller shall have delivered to Purchaser a
certificate, dated as of the Closing Date, signed by a duly
authorized officer of Seller to that effect.
(b) The FCC authorizations, including those set forth on Exhibit B shall
be assigned and transferred to Purchaser and shall contain no
adverse modifications of the terms of such authorizations as they
presently exist. Any
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and all governmental approvals necessary to consummate the
transactions contemplated by this Agreement shall have been
received.
(c) Purchaser shall have received a written opinion of Hull, Towill,
Norman and Barrett, Counsel for Seller, dated as of the Closing
Date, in customary form and substance that:
(i) Medical College of Georgia Foundation is a not for profit
corporation duly organized and validly existing and in good
standing under the laws of Georgia, has full power and
authority to own its properties, and has full power and
authority to enter into this Agreement and to consummate the
transactions contemplated herein.
(ii) This Agreement has been duly authorized, executed and
delivered by Seller, and is a valid and binding obligation of
Seller, enforceable against Seller in accordance with its
terms.
(iii) The sale of all of the Stations Assets to Purchaser hereunder
has been duly authorized by all necessary action of Seller,
and deed(s) of conveyance, bill(s) of sale and any and all
other instruments delivered to Purchaser hereunder have been
duly authorized, executed and delivered, and conform with all
legal requirements to vest in Purchaser good and valid title
to all the Stations Assets.
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(iv) The execution, delivery and performance of this Agreement and
all of the documents executed in conjunction therewith by
Seller do not violate any provisions of Seller's
organizational documents or, to the best of counsel's
knowledge, any provision of any material note, mortgage,
agreement, franchise, order, arbitration award, judgment, law,
ordinance or decree to which Seller is a party or by which
Seller is bound.
(v) To the best of the knowledge of such counsel, no action,
claim, suit or proceeding or any investigation of any
governmental authority is pending or threatened against or
affecting Seller or the Stations or the Stations Assets which
would affect such Stations Assets or the transactions
contemplated by this Agreement.
(d) Purchaser shall have received a written opinion of Holland & Knight
LLP, FCC Counsel for Seller, dated as of the Closing Date,
substantially in the form of Exhibit L hereto.
(e) No suit, action or other proceeding against Seller or Grantor shall
be pending before any court or governmental agency of competent
jurisdiction in which it is sought to restrain or prohibit any of
the transactions contemplated by this Agreement or to obtain damages
or other relief in connection with this Agreement or the
transactions contemplated hereby.
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(f) The Tower Lease Agreement for the FM Tower Site shall be executed
concurrently.
(g) Seller shall have executed and delivered to Purchaser the documents
required herein to be executed and delivered by it.
8. SELLER'S PERFORMANCE.
Seller's performance is subject at its election to the conditions that, at
the Closing Date:
(a) All payments hereunder which are due and payable by Purchaser on the
Closing Date shall have been paid in accordance with the terms of
this Agreement, and Purchaser shall have executed all of the
documents required of it herein.
(b) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects, and
the covenants and agreements of Purchaser to be performed on or
prior to the Closing Date pursuant to the terms of this Agreement
shall have been duly performed, and Purchaser shall have delivered
to Seller a certificate, dated as of the Closing Date, signed by a
duly authorized officer of Purchaser to that effect.
(c) No litigation, investigation or proceeding of any kind shall have
been instituted which would adversely affect the ability of
Purchaser to comply with the provisions of this Agreement.
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(d) Seller shall have received an opinion of ______________________,
Counsel for Purchaser, dated as of the Closing Date, in customary
form and substance that:
(i) Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of ________,
and Purchaser is authorized to do business in the State of
Georgia and the State of South Carolina.
(ii) Each of the documents executed and/or ratified by Purchaser in
accordance with the terms of this Agreement has been duly
authorized and/or ratified by all necessary corporate action.
(iii) This Agreement has been duly authorized, executed and
delivered by Purchaser and is a valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with
its terms.
(iv) The execution, delivery and performance of this Agreement and
all of the documents to be executed in conjunction therewith
by Purchaser do not violate any provisions of Purchaser's
organizational documents or, to the best of Counsel's
knowledge, after reasonable investigation, any provision of
any material note, mortgage, agreement, franchise, order,
arbitration award, judgement, law, ordinance or decree to
which Purchaser is a party or by which Purchaser is bound.
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(e) The Tower Lease Agreement for the FM Tower Site shall be executed
concurrently.
9. FCC APPROVAL AND APPLICATION.
(a) Consummation of the transactions contemplated hereunder is
conditioned upon the FCC having given its prior consent in writing
to the assignment to Purchaser of the FCC licenses and other
authorizations set forth in Exhibit B hereto and such consent having
become a Final Order. For purposes of this Agreement, such consent
shall be deemed a Final Order when it is no longer subject to timely
review by the FCC or by any court or, in the event of
reconsideration upon its own motion or otherwise by the FCC or an
appeal by any person to any court, upon the decision of such body
becoming no longer subject to review. The condition of finality may
be waived jointly by Seller and Purchaser.
(b) The parties agree to proceed, as expeditiously as possible, but in
no event later than ten (10) business days after the date of this
Agreement, to file or cause to be filed an application requesting
FCC consent to the transactions herein involved.
(c) If the FCC has failed or refused to grant its Final written consent
to the assignment of the aforesaid licenses and other authorizations
and/or any other transactions contemplated to be consummated
hereunder on or before December 31, 1998 (the "Termination Date"),
Purchaser or Seller, at their respective options, may terminate this
Agreement upon ten (10) days' prior
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written notice to the other, in which event this Agreement shall
have no further force or effect; or if the delay in the FCC's action
is due to the refusal or failure of either party to supply the FCC
with information which the FCC has requested, only the party not at
fault shall have the option of terminating this Agreement.
10. HART-SCOTT-RODINO FILING.
In the event consummation of the transactions contemplated hereunder
requires Purchaser and Seller to file with the United States Department of
Justice ("DOJ") and Federal Trade Commission ("FTC") all notifications and
reports required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, the parties hereto each agrees to supply to the other upon request
all information needed to complete such notifications and reports and to
proceed as expeditiously as possible (but in no event later than thirty
(30) business days after the date hereof) to make the filing. Each party
shall promptly apprise the other of the status of any inquiries made by
the DOJ, FTC or any other governmental agency with respect to this
Agreement or the transactions contemplated herein. All filing fees payable
to the DOJ and the FTC with respect to such notifications and reports
shall be paid by Purchaser.
11. DATE, NOTICE AND PLACE OF CLOSING.
The date and time of closing ("Closing Date") shall be mutually agreed
upon by Seller and Purchaser, but, in the absence of such agreement, shall
not be more than ten (10) business days after all of the conditions to
closing set forth in Sections 7, 8, 9 and 10 hereof are satisfied or
waived. In the event of the inability of the
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parties to agree on the Closing Date, Seller shall have the right to fix
the same on ten (10) days' prior written notice to Purchaser. The closing
shall be held at a mutually agreeable location in Augusta, Georgia, or at
such other location as shall be mutually agreed upon by Seller and
Purchaser.
12. CONTROL OF STATIONS.
Until the Closing Date, Grantor shall have complete control of the
Stations, their equipment and operation. Purchaser shall be entitled,
however, to notice of any significant problems or developments with the
purpose that an uninterrupted and efficient transfer to Purchaser of the
Stations and assets and all other assets and properties to be transferred
hereunder may be accomplished.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations, warranties, covenants and agreements contained in
this Agreement shall be true and correct on and as of the Closing Date as
though such representations, warranties, covenants and agreements were
made on and as of such time, and all such representations, warranties,
covenants and agreements shall survive the closing hereunder; provided,
however, that Seller shall have no liability for a misrepresentation or
breach of warranty unless written notice of claim therefor specifying with
particularity the facts upon which such claim is based has been given to
Seller by Purchaser within one (1) year from the Closing Date.
14. RIGHTS OF INDEMNIFICATION; DEFAULT.
(a) It is understood and agreed that Purchaser does not assume, and
shall not be obligated to pay, any liabilities of Seller under the
terms of this Agreement
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or otherwise and shall not be obligated to perform any obligations
of Seller of any kind or manner except by reason of contracts
expressly assigned and assumed by Purchaser hereunder, and, with
respect to such contracts, only such obligations which arise
subsequent to the Closing Date (or, if applicable, the TBA
Commencement Date) or as is herein provided. Seller hereby agrees to
indemnify and hold Purchaser, its successors and assigns, harmless
from and against:
(i) Claims, liabilities and obligations arising from the operation
of the Stations prior to the Closing Date (or, if applicable,
the TBA Commencement Date), including claims arising or
required to be performed prior to the Closing Date (or, if
applicable, the TBA Commencement Date) under any contract or
instrument assumed by Purchaser hereunder; and
(ii) Any and all damage or deficiency resulting from a material
misrepresentation, breach of warranty or nonfulfillment of an
agreement on the part of Seller under this Agreement, arising
out of events occurring prior to the Closing Date (or, if
applicable, the TBA Commencement Date), or from a material
misrepresentation in or omission from any certificate or other
instrument furnished to Purchaser pursuant to this Agreement,
or in connection with any of the transactions contemplated
hereby; and
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(iii) Any and all actions, suits, proceeding, damages, assessments,
judgments, costs and expenses, including reasonable attorneys'
fees, incurred by Purchaser as a result of Seller's failure or
refusal to compromise or defend any claim incident to the
foregoing provisions.
Notwithstanding the foregoing, Seller shall not be required to
indemnify Purchaser under the foregoing clauses (i), (ii) or (iii)
unless the aggregate amount owed by Seller to Purchaser pursuant to
the foregoing clauses (i), (ii) and (iii) exceeds $50,000, in which
event Seller shall be required to indemnify Purchaser for the entire
amount owed.
(b) If any claim for which Purchaser is entitled to indemnity is
asserted against Purchaser by a third party, Purchaser shall
promptly give Seller notice thereof and give Seller an opportunity
to defend the same with counsel of Seller's choice (subject to the
approval of Purchaser, not to be unreasonably withheld or delayed)
at Seller's expense. Purchaser, at Seller's expense, shall provide
reasonable cooperation in connection with such defense. In the event
that Seller desires to compromise or settle any such claim,
Purchaser shall have the right to consent to such settlement or
compromise; provided, however, that if such compromise or settlement
is for money damages only and will include a full release and
discharge of Purchaser, and Purchaser withholds its consent to such
compromise or settlement, Purchaser and Seller agree that (i)
Seller's liability shall be limited to the
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amount of the proposed settlement and, upon payment of such sum to
Purchaser, Seller shall thereupon be relieved of any further
liability with respect to such claim, and (ii) from and after such
date, Purchaser will undertake all legal costs and expenses in
connection with any such claim. If Seller fails to defend any claim
within a reasonable time, Purchaser shall be entitled to assume the
defense thereof, and Seller shall be liable to Purchaser for its
expenses reasonably incurred, including attorneys' fees and payment
of any settlement amount or judgment.
(c) Purchaser hereby agrees to indemnify and hold Seller and its
successors and assigns harmless from and against:
(i) Claims, liabilities and obligations arising from the operation
of the Stations on or after the Closing Date (or, if
applicable, the TBA Commencement Date), including claims
arising or required to be performed on or after the Closing
Date (or, if applicable, the TBA Commencement Date) under any
contract or instrument assumed by Purchaser hereunder; and
(ii) Any and all damage or deficiency resulting from a material
misrepresentation, breach of warranty, nonfulfillment of any
agreement or obligation, assumed or required to be assumed by
Purchaser under this Agreement, or from a material
misrepresentation in or omission from any certificate or other
instrument furnished to Purchaser pursuant to this Agreement,
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or in connection with any of the transactions contemplated
hereby; and
(iii) Any and all actions, suits, proceedings, damages, assessments,
judgements, costs and expenses, including reasonable
attorneys' fees, incurred by Seller as the result of
Purchaser's failure or refusal to defend or compromise any
claim incident to any of the foregoing provisions.
(d) If any claim covered by the foregoing indemnity is asserted against
Seller by a third party, Seller shall notify Purchaser promptly and
give Purchaser an opportunity to defend the same with counsel of
Purchaser's choice (subject to the approval of Seller, not to be
unreasonably withheld or delayed) at Purchaser's expense. Seller, at
Purchaser's expense, shall provide reasonable cooperation in
connection with such defense. In the event that Purchaser desires to
compromise or settle any such claim and such compromise will
adversely affect Seller, Seller shall have the right to consent to
such settlement or compromise; provided, however, that if such
compromise or settlement is for money damages only and will include
a full release and discharge of Seller, and Seller withholds its
consent to such compromise or settlement, Purchaser and Seller agree
that (i) Purchaser's liability shall be limited to the amount of the
proposed settlement and, upon payment of such sum to Seller,
Purchaser shall thereupon be relieved of any further liability with
respect to such claim, and (ii) from and after such date,
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Seller will undertake all legal costs and expenses in connection
with any such claims. If Purchaser fails to defend any claim within
a reasonable time, Seller shall be entitled to assume the defense
thereof, and Purchaser shall be liable to Seller for its expenses
reasonably incurred, including attorneys' fees and payment of any
settlement amount or judgement.
(e) In the event either party shall default in its obligations
hereunder, such party shall have a period not to exceed fifteen (15)
days after notice thereof by the other party in which to cure said
default.
15. INDEMNIFICATION ESCROW.
(a) On the Closing Date, Seller shall deposit in escrow with
____________, acting as the indemnification escrow agent on the
parties' behalf ("Indemnification Escrow Agent"), a deposit in the
amount of Two Hundred Thousand and No/100 Dollars ($200,000.00)
("Indemnification Escrow") by bank wire transfer of immediately
available funds, to be held in escrow for a period of twelve (12)
months from the Closing Date in accordance with the terms and
conditions of the Indemnification Escrow Agreement entered into
between Seller, Purchaser and Indemnification Escrow Agent in the
form of Exhibit M hereto.
(b) The Indemnification Escrow Agent shall retain the Indemnification
Escrow in accordance with the terms of the Indemnification Escrow
Agreement as security for Seller's obligation to indemnify Purchaser
as provided in Section 14 hereof. It is expressly understood that
the amount of the Indemnification
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Escrow is not a limit upon Seller's liability for any breach of this
Agreement or its indemnity obligations hereunder, provided, however,
Seller's liability for any breach of this Agreement shall not exceed
the Purchase Price.
16. ALTERNATIVE DISPUTE RESOLUTION.
(a) Except as otherwise provided herein, in case any disagreement of
whatever nature arising out of or relating to this Agreement or the
breach, termination, enforceability or validity thereof ("Dispute")
shall arise between the parties hereto, the parties shall first
attempt in good faith to resolve the Dispute promptly by negotiation
between executives who have authority to settle the Dispute. If the
Dispute cannot be resolved through negotiation, either party may
initiate mediation of the Dispute as hereinafter provided.
(b) If the Dispute has not been resolved by negotiation as hereinabove
provided, the parties shall make a good faith attempt to settle the
Dispute by mediation pursuant to the provisions of this Section 16
before resorting to arbitration. Unless the parties agree otherwise,
the mediation shall be conducted in accordance with the Commercial
Mediation Rules of the American Arbitration Association (the "AAA")
then in effect by a mediator who (i) has the qualifications and
experience set forth in paragraph (c) of this Section 16 and (ii) is
selected as provided in paragraph (d) of this Section 16.
(c) Unless the parties agree otherwise, the mediator shall be a lawyer
licensed in the State of Georgia (i) who is or has been a partner in
(or counsel to) a highly respected law firm for at least 15 years as
a practicing attorney
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specializing in either general commercial litigation or general
corporate and commercial matters and (ii) who has had both training
and experience as a mediator.
(d) Either party (the "Initiating Party") may initiate mediation of the
Dispute by giving the other party (the "Recipient Party") written
notice (a "Mediation Notice") setting forth a list of the names and
resumes of qualifications and experience of three impartial persons
who the Initiating Party believes would be qualified as a mediator
pursuant to the provisions of paragraph (c) hereof. Within 15 days
after the delivery of the Mediation Notice, the Recipient Party
shall give a counter-notice (the "Counter-Notice") to the Initiating
Party in which the Recipient Party may designate a person to serve
as the mediator from among the three persons listed by the
Initiating Party in the Mediation Notice (in which event such
designated person shall be the mediator). If none of the persons
listed in the Mediation Notice is designated by the Recipient Party
to serve as the mediator, the Counter-Notice should set forth a list
of the names and resumes of three impartial persons who the
Recipient Party believes would be qualified as a mediator pursuant
to the provisions of paragraph (c) hereof. Within 10 days after the
delivery of the Counter- Notice, the Initiating Party may designate
a person to serve as the mediator from among the three persons
listed by the Recipient Party in the Counter-Notice (in which event
such designated person shall be the mediator). If the parties cannot
agree on a mediator from the three impartial nominees
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submitted by each party, each party shall strike two names from the
other party's list, and the two remaining persons on both lists will
jointly select as the mediator any person who has the qualifications
and experience set forth in paragraph (c) hereof. If they are unable
to agree, then the mediator will be selected by the President of the
AAA.
(e) Within 30 days after the mediator has been selected as provided
above, both parties and their respective attorneys shall meet with
the mediator for one mediation session of at least six hours, it
being agreed that each party representative attending such mediation
session shall be an executive with authority to settle the Dispute.
If the Dispute cannot be settled at such mediation session or at any
mutually agreed continuation thereof, either party may give the
other and the mediator a written notice declaring the mediation
process at an end, in which event the Dispute shall be resolved by
arbitration as hereinafter provided.
(f) The costs of the mediation shall be shared equally between the
parties.
(g) If the Dispute is not settled by negotiation or mediation, then the
Dispute shall be decided by arbitration. Arbitration shall be
initiated by either party giving written notice to arbitrate to the
other party, stating the question to be arbitrated and the name of
the arbitrator selected by that party. Within ten (10) days of the
date of said notice to arbitrate certificate, the other party shall
select and give written notice of its arbitrator to the initiating
party. The two arbitrators so selected shall select a third
arbitrator and give written
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notice within five (5) days after the second arbitrator is chosen.
The arbitration shall be conducted solely by the third arbitrator,
who shall hear evidence and make an award within twenty (20) days
after the notice of selection of the third arbitrator is given to
the parties, which award, when signed by the third arbitrator, shall
be final. If either party shall refuse or neglect to appoint an
arbitrator within ten (10) days after the other shall have appointed
an arbitrator and given written notice to arbitrate to the other,
requiring such party to appoint an arbitrator, then the arbitrator
so appointed by the first party shall have power to proceed to
arbitrate and determine the matters of disagreement as if he were an
arbitrator appointed by both the parties hereto for that purpose,
and his award in writing signed by him shall be final; provided that
such award shall be made within fifteen (15) days after such refusal
or neglect of the other party to appoint an arbitrator. The party
against which such award is made shall pay all costs and expenses of
the arbitration.
(h) Any arbitration pursuant to this Section 16 shall be conducted in
Augusta, Georgia, and governed by the Federal Arbitration Act and
administered by the AAA under its Commercial Arbitration Rules and
its Supplementary Procedures for Large, Complex Disputes, provided
that persons eligible to be selected as arbitrators shall be limited
to attorneys-at-law who (i) are on the AAA's Large, Complex Case
Panel or a CPR Panel of Distinguished Neutrals, or who have
professional credentials similar to the attorneys listed
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on such AAA and CPR panels, and (ii) have practiced law for at least
15 years as an attorney specializing in either general commercial
litigation or general corporate and commercial matters. The
arbitrator shall base its award on applicable law and judicial
precedent and include in such award a statement of the reasons upon
which the award is based. Judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
17. BROKER'S FEE.
Seller and Purchaser represent and warrant to the other that it has not
retained, and is not obligated to, any person or entity for brokerage,
finder's fees or commission or other similar charges resulting from or
arising out of the transactions contemplated in this Agreement, and each
party hereby indemnifies and holds the other party harmless from payment
of any such fees, commissions or charges.
18. SELLER'S PERFORMANCE AT CLOSING.
At the closing hereunder, Seller shall:
(a) Deliver to Purchaser an executed General Conveyance, Bill of Sale,
Assignment and Assumption, substantially in the form of Exhibit N
hereto, which General Conveyance, Bill of Sale, Assignment and
Assumption shall include, but not be limited to, an assignment to
Purchaser of (i) the licenses and all other authorizations listed on
Exhibit B, used in the operation of the Stations, transferring the
same to Purchaser, (ii) good and marketable title to all tangible
personal property described on Exhibit C hereof (subject to
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changes in the ordinary course of business since the date hereof),
(iii) the contracts, leases and agreements described on Exhibits D
and E hereof, (iv) the copyrights and service marks listed on
Exhibit F hereof, and (v) all right, title and interest of Seller in
and to the intangible assets, free and clear of all mortgages,
liens, attachments, conditional sales contracts, claims or
encumbrances of any kind except liens for ad valorem taxes not yet
due and payable.
(b) Deliver to Purchaser at the Stations the files, records and logs
referred to in Section 1(f) hereof.
(c) Deliver to Purchaser a certified copy of the resolutions of the
Board of Directors of Seller authorizing the execution of this
Agreement and the consummation of the transactions described herein.
(d) Deliver to Purchaser the written opinion of Hull, Towill, Norman and
Barrett, dated as of the Closing Date, pursuant to the provisions of
this Agreement.
(e) Deliver to Purchaser the written opinion of Holland & Knight LLP,
dated as of the Closing Date, pursuant to the provisions of this
Agreement.
(f) Deliver to Purchaser a certificate signed by a duly authorized
officer of Seller and dated as of the Closing Date to the effect
that all representations and warranties set forth in this Agreement
shall be true and correct as of and as if made on the Closing Date
and that, to Seller's knowledge, no event of default shall have
occurred and be continuing on the Closing Date which,
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with lapse of time or giving of notice, or both, would constitute a
default by Seller under this Agreement.
(g) Deliver to Purchaser Uniform Commercial Code lien searches from
Richmond County, Georgia, the Georgia Secretary of State, Aiken
County, South Carolina and the Secretary of State of South Carolina
dated as of a date not more than five (5) days prior to the Closing
Date and showing no Uniform Commercial Code, judgment, tax or other
lien filings against the Stations Assets, other than security
interests or other filings which will be released at closing.
(h) Deliver to Purchaser such other instruments and documents as may be
reasonably requested by Purchaser to effectuate the transactions
contemplated hereby.
(i) Deposit with the Indemnification Escrow Agent by wiring immediately
available funds in the Indemnification Escrow.
19. PURCHASER'S PERFORMANCE AT CLOSING.
At the closing hereunder, Purchaser shall:
(a) Pay by wiring immediately available funds the monies payable at the
closing.
(b) Deliver to Seller an executed counterpart of the General Conveyance,
Bill of Sale, Assignment and Assumption substantially in the form of
Exhibit N hereto, and such other instruments as Seller may
reasonably require evidencing Purchaser's assumption and agreement
to perform all of the contracts and agreements assigned to it
hereunder and evidencing
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Purchaser's acceptance and conveyance of title to the personal
property and other assets assigned and conveyed to it hereunder.
(c) Deliver to Seller a certified copy of the resolutions of Purchaser's
Board of Directors authorizing the execution of this Agreement and
the consummation of the transactions described herein.
(d) Deliver to Seller the written opinion of [legal counsel] dated as of
the Closing Date, pursuant to the provisions of this Agreement.
(e) Deliver to Seller a certificate signed by a duly authorized officer
of Purchaser and dated as of the Closing Date to the effect that all
representations and warranties set forth in this Agreement shall be
true as of and as if made on the Closing Date and that, to
Purchaser's knowledge, no event of default shall have occurred and
be continuing on the Closing Date which, with lapse of time or
giving of notice, or both, would constitute a default by Purchaser
under this Agreement.
(f) Deliver to Seller such other instruments and documents as may be
reasonably requested by Seller to effectuate the transactions
contemplated hereby.
20. EVENTS OF TERMINATION; DISBURSEMENT OF DEPOSIT.
(a) Failure to Close without Fault.
In the event that (i) each of the parties hereto shall have
satisfied in full all of the obligations of such party under this
Agreement which were to have been satisfied by such party prior to
the Closing Date and shall not have breached
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any representation, warranty, covenant or agreement of such party
contained in this Agreement, which breach has a material adverse
effect upon the other party, but (ii) the closing shall nevertheless
fail to take place (without any fault on the part of any party)
prior to the Termination Date because one or more conditions to the
closing in Sections 7,8, 9 and 10 hereof shall not have been
satisfied or waived, this Agreement shall terminate, and the
Deposit, together with any interest earned thereon, shall be
returned to Purchaser.
(b) Disbursement of Deposit to Seller.
If the conditions to closing specified in Sections 9(a) and 10
hereof shall have been satisfied and either (i) Purchaser shall
default in the performance of any of its material obligations or
materially breach any of its representations, warranties, covenants
or agreements hereunder and Seller shall have performed all of its
material obligations and shall not have materially breached any of
its representations, warranties, covenants or agreements hereunder,
or (ii) (1) pursuant to the terms of this Agreement, Purchaser shall
be obligated to purchase the assets and properties hereunder, (2)
Seller shall have duly satisfied each of the conditions of Section 8
above to be satisfied by it (or, in the case of any such condition
which is to be satisfied at the Closing, shall have demonstrated a
willingness and ability to satisfy such condition in the event the
Closing were to take place), except to the extent that any failure
to satisfy such condition was caused in any material respect by
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Purchaser, and (3) Purchaser shall nevertheless fail to purchase the
assets and properties in accordance herewith, Seller shall have the
right to terminate this Agreement, upon written notice to Purchaser,
and the Deposit, together with any interest earned thereon, shall be
disbursed to Seller in accordance with the terms of the Escrow
Agreement. The parties agree that such disbursement of the Deposit
is not a penalty and is a reasonable estimation of damages actually
incurred.
INITIAL HERE: SELLER: _______
PURCHASER: _______
(c) Return of Deposit to Purchaser.
If the conditions to closing specified in Sections 9(a) and 10
hereof shall have been satisfied and either (i) Seller shall default
in the performance of its material obligations or materially breach
any of its representations, warranties, covenants or agreements
hereunder and Purchaser shall have performed all of its material
obligations and shall not have materially breached any of its
representations, warranties, covenants or agreements hereunder, or
(ii) (1) pursuant to the terms of this Agreement, Seller shall be
obligated to sell the assets and properties hereunder to Purchaser,
(2) Purchaser shall have duly satisfied each of the conditions of
Section 7 above to be satisfied by it (or, in the case of any such
condition which is to be satisfied at the closing, shall have
demonstrated a willingness and ability to
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satisfy such condition in the event the closing were to take place),
except to the extent that any failure to satisfy such condition was
caused in any material respect by Seller, and (3) Seller shall
nevertheless fail to sell the assets and properties to Purchaser in
accordance herewith, Purchaser shall have the right to terminate
this Agreement, upon written notice to Seller, and the Deposit,
together with any interest earned thereon, shall forthwith be
returned to Purchaser.
(d) Mutual Agreement.
This Agreement may be terminated at any time by mutual agreement of
Seller and Purchaser, in writing, and the Deposit, together with any
interest earned thereon, shall be delivered in accordance with the
mutual agreement of the parties.
21. SPECIFIC PERFORMANCE.
The parties recognize that if Seller refuses to close as and when required
under the provisions of this Agreement, monetary damages will not be
adequate to compensate Purchaser for its injury. Purchaser shall therefore
be entitled, in addition to a right to collect money damages, to obtain
specific performance of the terms of this Agreement. If any action is
brought by Purchaser to enforce this Agreement, Seller shall waive the
defense that there is an adequate remedy at law.
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22. BULK SALES LAW.
Purchaser hereby waives compliance by Seller with the provisions of all
bulk sales laws, or other similar provisions, but Seller agrees to
indemnify and hold Purchaser harmless for any claims arising thereunder.
23. ASSET ACQUISITION STATEMENT.
The parties shall each file Internal Revenue Service Form 8594 in a timely
manner after the Closing Date and in accordance with the purchase price
allocation determined in accordance with Section 2(a) hereof.
24. EXHIBITS AND SCHEDULES.
All exhibits attached to this Agreement shall be deemed part of this
Agreement and incorporated herein as if fully set forth herein.
25. ASSIGNMENTS; SUCCESSORS AND ASSIGNS.
This Agreement shall not be assigned to a third party without the prior
written consent of the other party. In the event of an approved
assignment, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, their successors and assigns.
26. CONSTRUCTION.
This Agreement shall be construed and enforced in accordance with the laws
of the State of Georgia, excluding the choice of law rules thereof.
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27. COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
28. NOTICES.
All notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing (which shall include
notice by facsimile transmission) and shall be deemed to have been duly
made and received when personally served, or when delivered by Federal
Express or a similar overnight courier service, expenses prepaid, or, if
sent by graphic scanning or other facsimile communications equipment,
delivered by such equipment, addressed as set forth below:
(a) If to Purchaser, then to:
With a copy (which shall not constitute notice) to:
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(b) If to Seller, then to:
Medical College of Georgia Foundation
Alumni Center
919 15th Street
Augusta, GA 30912
Attention: James B. Osborne, Ph.E.
(Voice) 706-821-4001
(Fax) 706-721-6723
With a copy (which shall not constitute notice) to:
Edward W. Hummers, Jr., Esquire
Holland & Knight LLP
2100 Pennsylvania Avenue, NW
Suite 400
Washington, DC 20037
(Voice) 202-457-7145
(Fax) 202-955-5564
and
Mark S. Burgreen, Esquire
Hull, Towill, Norman and Barrett
Trust Company Bank Building
7th Floor
P.O. Box 1564
Augusta, GA 30903-1564
(Voice) 706-722-4481
(Fax) 706-722-9779
Any party may alter the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions
of this Section providing for the giving of notice.
29. ADDITIONAL DOCUMENTS.
Prior to, on or subsequent to the Closing Date, each party to this
Agreement shall, at the request of the other, furnish, execute and deliver
such documents and
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instruments as the requesting party shall reasonably require as necessary
or desirable to implement and consummate the transactions contemplated
hereunder.
30. PARAGRAPH HEADINGS.
Paragraph headings herein have been inserted for reference only and shall
not be deemed to limit or otherwise affect, in any manner, or be deemed to
interpret, in whole or part, any of the terms or provisions of this
Agreement.
31. ENTIRE AGREEMENT.
This Agreement, together with the Exhibits attached hereto, contains all
of the terms agreed upon by the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings between the
parties and may not be changed or terminated orally. No attempted change,
termination or waiver of any of the provisions hereof shall be binding
unless in writing and signed by the party against whom the same is sought
to be enforced.
32. EXPENSES.
Except as otherwise expressly provided in this Agreement, each party shall
bear its own legal, accounting and other expenses in connection with the
negotiation, preparation and consummation of this Agreement and the
transactions contemplated hereby.
33. ATTORNEYS' FEES.
In the event of a dispute between or among any of the parties hereto
arising out of or related to this Agreement or the interpretation or
enforcement of this Agreement,
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the prevailing party or parties shall be entitled to recover reasonable
attorneys' fees, costs and expenses from the other party or parties.
34. CONFIDENTIALITY.
Except as necessary for the consummation of the transactions contemplated
hereby, each party hereto will keep confidential any information which is
obtained from the other party in connection with the transactions
contemplated hereby and which is not readily available to members of the
general public, and will not use such information for any purpose other
than in furtherance of the transactions contemplated hereby. In the event
this Agreement is terminated and the purchase and sale contemplated hereby
abandoned, each party will return to the other party all documents, work
papers and other written material obtained by it in connection with the
transactions contemplated hereby.
35. TIME BROKERAGE AGREEMENT.
The parties acknowledge that simultaneously with the execution of this
Agreement, Grantor and Purchaser shall enter into the TBA substantially in
the form of Exhibit O, consistent with FCC rules and regulations, for the
period prior to the Closing Date, providing for the operation of the
Stations by Purchaser. If the Grantor and Purchaser enter into the TBA,
purchaser shall not have any claim or right, including, without
limitation, any right to terminate this Agreement, due to the inaccuracy
of any representation or warranty, the breach of any covenant, or the
failure of any condition resulting from the operation of the Stations by
Purchaser under the TBA.
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[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have hereunto set their respective
hands and seals as of the day and year first above written.
PURCHASER:
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
SELLER:
MEDICAL COLLEGE OF GEORGIA FOUNDATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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WBBQ AGREEMENT OF SALE
BETWEEN
MEDICAL COLLEGE OF GEORGIA FOUNDATION
AND
----------------------
List of Exhibits
----------------
Exhibit A Agreement to Transfer Assets
Exhibit B: FCC Licenses and Authorizations
Exhibit C: Assets Other Than Real Property
Exhibit D: Contracts, Leases and Agreements
Exhibit E: Trade Deals
Exhibit F: Copyrights and Service Marks
Exhibit G: Real Property
Exhibit H: Tower Lease Agreement
Exhibit I: Allocation of Purchase Price
Exhibit J: Escrow Agreement
Exhibit K: Required Consents
Exhibit L: Form of FCC Counsel Opinion
Exhibit M: Indemnification Escrow Agreement
Exhibit N: General Conveyance, Bill of Sale,
Assignment and Assumption
Exhibit O: Form of Time Brokerage Agreement
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PROGRAM SERVICE AND TIME BROKERAGE AGREEMENT
This Program Service and Time Brokerage Agreement ("Agreement") entered
into this 18th day of August, 1997, by and between Cumulus Broadcasting, Inc., a
Nevada Limited, ("Programmer"), and Tally Radio, LLC, a Florida limited
liability company ("Licensee"), licensee of Radio Station WWLD-FM, licensed to
Tallahassee, Florida (the "Station").
WHEREAS, Licensee holds licenses from the Federal Communications
Commission ("FCC") authorizing it to operate the Station;
WHEREAS, the studio of the Station is located at 109B Ridgeland Road,
Tallahassee, Florida ("Studio") and the transmitter facilities of the Station
are located at 109B Ridgeland Road, Tallhasssee, Florida ("Transmitter");
WHEREAS, Licensee has available for sale broadcast time on the Station;
WHEREAS, Programmer desires to purchase time on Licensee's Station for the
broadcast of programming on the Station and to sell advertising time for
inclusion in that programming; and
WHEREAS, Licensee and Programmer have entered into an Asset Purchase
Agreement of even date herewith pursuant to which Programmer and Cumulus
Licensing Corp., an affiliate of Programmer will purchase from Licensee
substantially all of the assets used or useful in the operation of the Station
(the "Asset Purchase Agreement").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties have agreed as follows:
1. Time Sale. Subject to the provisions of this Agreement, Licensee agrees
to make the Station's Studio and Transmitter broadcasting facilities, and all
other equipment used or useful in the operation of the Station, available to
Programmer for broadcast of Programmer's programs on the Station and the
Station's subcarriers. The Station time made available to Programmer is
described in Exhibit A hereto.
2. Payment. Programmer hereby agrees to pay Licensee compensation for the
broadcast of Programmer's programming in the amounts and at the times set forth
in Exhibit B hereto.
3. Term. The initial term of this Agreement shall be for a period of two
(2) years, beginning on the date above written (the "Effective Date") and ending
two years later or on the day of closing of the transactions contemplated by the
Asset Purchase Agreement between the parties, whichever is earlier.
4. Programs. Programmer shall furnish the artistic personnel and materials
for its programming. Programmer represents and warrants that all of the
programming, advertising and promotional material it broadcasts on the Station
shall be in accordance with the rules, regulations and policies of the
Commission and the Communications of 1934, as amended (the "Act"). All
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rights (including without limitation copyrights) to the use and ownership of the
programs shall be and remain vested in Programmer at all times.
5. Accounts Receivable and Existing Advertising Commitments. Licensee's
accounts receivable for performed advertising contracts shall be identified and
valued as the Effective Date. The parties agree that such accounts receivable
shall be and remain the sole property of the Licensee. Programmer agrees to use
its best efforts to collect such accounts receivable for a period of ninety (90
days) and shall remit all sums collected to Licensee once a month commencing on
the fifteenth day after the first month of operation. Any uncollected accounts
thereafter shall be returned to Licensee for collection, and Programmer shall be
relieved of any additional responsibilities with respect to such accounts. All
accounts receivable created after the Effective Date of this Agreement shall be
and remain the sole property of Programmer. Programmer shall be responsible for
the collection of such accounts receivable created after the Effective Date and
shall retain ownership of such accounts upon termination of this Agreement. All
prior existing advertising contracts signed by Licensee prior to the Effective
Date of this Agreement for commercial time to be aired during time periods to be
used by Programmer are identified on Exhibit C hereto and shall be performed by
Programmer for the benefit of Programmer.
6. Station's Facilities.
(a) Licensee Responsibility. Licensee shall be responsible for the
Station's compliance with all applicable provisions of the Act, the rules,
regulations and policies of the FCC and all other applicable laws. Licensee
represents that it holds all permits and authorizations necessary for the
operation of the Station including all FCC permits and authorizations. Licensee
will continue to hold such permits and authorizations throughout the life of
this Agreement and to maintain them in full force and effect.
(b) Broadcast Output. Licensee represents that the Station's
facilities and equipment comply with all applicable laws and regulations and
that, to its knowledge, it is not in material violation of any statute,
ordinance, rule, order or decree of any federal, state or local governmental
agency, court or authority having jurisdiction over the Licensee which would
have an adverse effect on its ability to perform this Agreement. During the term
hereof, Licensee agrees to maintain the Transmitter and other transmission
facilities and the broadcast output in compliance with the FCC's rules and
regulations to allow broadcasting at the maximum authorized power twenty-four
(24) hours a day, seven (7) days a week, except for downtime occasioned by
routine maintenance, if necessary, not to exceed two (2) hours on Sundays
between 12:00 midnight and 6:00 a.m. To the extent practicable, any maintenance
work affecting the operation of the Station at full power shall be scheduled
upon at least forty-eight (48) hours prior notice with the approval of
Programmer, which shall not be unreasonably withheld.
7. Handling of Mail and Complaints. Programmer shall promptly forward to
Licensee any mail which it may receive from any agency of government or any
correspondence from members of the public relating to the Station or to any of
Programmer's programming broadcast on the Station.
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Licensee shall advise Programmer of any public or FCC complaint or inquiry
concerning the programs provided by Programmer.
8. Programming and Operations Standards. Programmer recognizes that the
Licensee has full authority and a duty to control the operation of the Station.
The parties agree that Licensee's authority includes, but it is not limited to,
the right to reject or refuse such portions of Programmer's programming which
Licensee reasonably believes to be contrary to the public interest. Licensee
shall have no obligation to Programmer for the exercise of its rights under this
paragraph. Whenever on the Station's premises, Programmer and its employees and
agents shall be subject to the supervision and direction of Licensee's General
Manager and/or designated personnel.
9. Responsibility for Employees and Expenses. Programmer shall employ and
be responsible for the salaries, commissions, taxes, insurance and all other
related costs for all of its employees, agents contractors and personnel.
Employees of Programmer shall serve, however, as duty operators of the Station,
under the supervision and direction of the Licensee's General Manager and/or
other designated personnel of Licensee, during all hours the Station are in
operation. Licensee shall be responsible for (a) retaining a contract engineer
to maintain the Station's broadcast and transmission equipment, (b) appointment
of a Chief Operator, and (c) compliance with the FCC's main studio staffing
requirements (including, without limitation, the Station's General Manager).
Licensee shall be responsible for the salary, taxes, insurance and related costs
for its General Manager and Chief Operator.
10. Advertising and Programming Revenues. Programmer shall retain all
revenues from the sale of advertising time on the programming it broadcasts on
the Station. Programmer will provide, make available to and shall sell time to
political candidates from the time it purchases from Licensee in strict
compliance with the Act, the rules, regulations and policies and the Commission.
11. Operation of Station.
(a) Full Authority and Power. Licensee shall have full authority and
power over the operation of the Station during the term of this Agreement.
Licensee and its designated personnel shall have complete access to the
Station's Studio at all times. Licensee's General Manager shall direct the
day-to-day operation of the Station and report to and be accountable solely to
Licensee. Licensee's Chief Operator shall oversee and direct the engineering and
technical operation of the Station. Licensee shall retain the right to interrupt
and discontinue Programmer's programming at any time if Licensee determines the
programming is not in the public interest or violates this Agreement, or in case
of an emergency or EBS system activation, or for the purpose of providing
programming which Licensee in its sole discretion determines to be of greater
national, regional or local importance. Programmer will properly prepare and
provide Licensee such information, records and reports belonging to Programmer's
programming, sales or employment practices at the Station in sufficient detail
as is necessary to enable Licensee to comply with all the rules and policies of
the FCC or any other governmental agency.
(b) Political Time. Licensee shall oversee and take ultimate
responsibility with
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respect to the provision of equal opportunities, lowest unit charge, and
reasonable access to political candidates, and compliance with the political
broadcast rules of the FCC. Programmer shall cooperate with Licensee as Licensee
complies with its political broadcast responsibilities, and shall supply such
information promptly to Licensee as may be necessary to comply with the
political time record keeping and lowest unit charge requirements of federal
law. To the extent that Licensee believes necessary, in Licensee's sole
discretion, Programmer shall release advertising availabilities to Licensee
during the term of this Agreement to permit Licensee to comply with the
political broadcast rules of the FCC and the Communications Laws; provided
however, that revenues received by Licensee as a result of any such release of
advertising time shall promptly be remitted to Programmer.
(c) Facilities. During the terms of this Agreement the Licensee
shall make available to Programmer, for no additional consideration, areas in
the Station's physical Studio and offices as are reasonably necessary for
Programmer to excise its rights and perform its obligations under this
Agreement.
12. Call Signs and Station Identification. Licensee will retain all rights
to the call letters "WWLD-FM" or any other call letters that may be assigned by
the FCC for use by the Station, and shall be responsible for ensuring the proper
broadcast of Station identification announcements in accordance with the FCC
rules and regulations. Programmer is specifically authorized to use the call
letters "WWLD-FM", or any other call letters used by Licensee for the Station,
and will provide appropriate station identification announcements which, in
Licensee's sole discretion, comply with FCC requirements.
13. Payola/Plugola. Programmer agrees that neither it nor its employees
will accept any consideration, compensation or gift of any kind whatsoever,
regardless of its value or form, including, but not limited to, a commission,
discount, bonus, supplies or other merchandise (collectively "Consideration"),
unless the payer is identified in the program for which Consideration was
provided as having paid for or furnished such Consideration, in accordance with
the Act.
14. Compliance with Law. Programmer agrees that, throughout the term of
this Agreement, Programmer will comply with all laws, regulations and policies
including, but not limited to, the FCC's technical, political broadcasting,
obscenity and indecency regulations, lottery regulations, sponsorship
identification rules, sale practices regulations and all FCC rules applicable to
programming agreements of this kind. Programmer acknowledges that Licensee has
not urged, advised or agreed in any way to the use of any unfair business
practices.
15. Indemnification.
(a) Programmer's Indemnification. Programmer shall indemnify and
hold Licensee harmless for any material loss, damage or injury of any kind
sustained by Licensee resulting from Programmer's breach of this Agreement, from
any programming material broadcast by Programmer on the Station, from the sale
of or attempt by Programmer to sell advertising or program time on the
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Station, and from any material act or omission of any kind by Programmer.
(b) Licensee's Indemnification. Licensee shall indemnify and hold
Programmer harmless for any material loss, damage or injury sustained by
Programmer resulting from breach of this Agreement, from the broadcast of
Licensee's programming, from the sale of or attempt by Licensee to sell
advertising or program time on the Station (except the instant sale provided for
in this Agreement to Programmer), and from any material act or omission of any
kind whatsoever by Licensee.
(c) Survival. Any claim for indemnification must be asserted in
writing delivered to the other party. The representations and obligations of
both parties shall survive any termination of this Agreement and shall continue
until the expiration of all applicable statutes of limitations as to the parties
hereto and to claims of third parties.
16. Termination and Remedies Upon Default.
(a) Termination. In addition to other remedies available at law or
equity, this Agreement may be terminated by either party by written notice to
the other if the party seeking to terminate is not then in material default or
breach thereof, upon the occurrence of any of the following:
(i) This Agreement is declared invalid or illegal in whole or
in material part upon a final order of the FCC or any administrative agency or
court of competent jurisdiction.
(ii) The other party is in material breach of its obligations
hereunder and has failed to cure such breach within TWENTY (20) days of receipt
of written notice from the nonbreaching party.
(iii) The mutual consent of both parties.
(iv) The other party shall make a general assignment for the
benefit of creditors, files or has filed against a petition for bankruptcy,
reorganization or appointment of a receiver or a trustee for the property or
assets of such party under any federal or state insolvency law, which is filed
against such party has not been dismissed within THIRTY (30) days thereof.
(v) Not less than SIXTY (60) days prior written notice to the
other party for any reason.
Upon termination of this Agreement according to the provisions of this
paragraph, the monthly payment pursuant to Paragraph 2 above shall be prorated.
Licensee shall cooperate reasonably with the Programmer to the extent permitted
to enable Programmer to fulfill prior to the date of termination of this
Agreement advertising or other programming contacts then outstanding, provided
however, to the extent such contracts are fulfilled by Licensee after the date
of termination of this Agreement, Licensee shall receive as compensation that
which otherwise would have been paid to Programmer pursuant to such contracts.
(b) Programmer's Additional Remedies for Licensee's Technical Operation
Deficiencies. In addition to Programmer's right to termite for reasons set forth
in Paragraph (a)
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above, if the Station suffers any damage to its transmission facilities which
results in the inability of the Station to operate with its presently authorized
facilities and Licensee has not restored full-time operation of the Station with
its presently authorized facilities within SEVEN (7) days of any such
occurrence, (i) Programmer may give notice to Licensee of Programmer's
termination of this Agreement in which event this Agreement shall terminate upon
giving of such notice, any other provision of this Agreement notwithstanding,
and (ii) any payment due Licensee pursuant to Paragraph 2 above shall be
prorated for such period of time within which full-time operation of the Station
has not been restored.
(c) Termination Upon Sale. Notwithstanding anything herein to the
contrary, this Agreement shall terminate upon the Closing of the transactions
contemplated by the Asset Purchase Agreement.
17. Certification. Pursuant to Section 73.3555(a)(2)(ii) of the FCC's
Rules, the following certifications are made: Tally Radio, LLC certifies that it
shall maintain ultimate control over the Station's facilities, including
specifically control over Station finances, personnel and programming.
Programmer certifies that implementation of this Agreement complies with Section
202 of the Telecommunications Act of 1996.
18. Notices. All necessary notices, demands, requests permitted or
required under this Agreement shall be in writing and shall be deemed given FOUR
(4) days after being mailed by certified mail, return receipt requested,
addressed as follows:
If to Licensee:
Tally Radio, LLC
3113 Clint Moore Road
Apt. 206
Boca Raton, Florida 33496
Attn: Gisela Huberman
If to Programmer:
Cumulus Broadcasting, Inc.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Copy to:
Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
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205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
(Neither of which copies shall constitute notice to Buyer)
19. Modification and Waiver. No modification of any provision of this
Agreement shall in any event be effective unless it is in writing, and such
modification shall be effective only in the specific instance as for the purpose
for which given.
20. Construction. This Agreement shall be construed in accordance with the
laws of Florida, and the obligations of the parties hereto are subject to all
federal, state and local laws and regulations now or hereafter in force and to
the rules, regulations and policies of the FCC and all other governmental
entities or authorities.
21. No Partnership or Joint Venture Created. Nothing In this Agreement
shall be construed or interpreted to make licensee and Programmer partners or
joint venturers, or to make one an agent or representative of the other.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
PROGRAMMER:
CUMULUS BROADCASTING, INC.
By:
-------------------------
LICENSEE:
TALLY RADIO, LLC
By:
-------------------------
Gisela B. Huberman
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EXHIBIT A
PROGRAMMING
Subject to all other provisions of this Agreement, Programmer will have
the exclusive right to broadcast on the Station and the Station subcarriers up
to TWENTY-FOUR (24) hours of programming each day during the term of this
Agreement, provided however, Licensee reserves THREE (3) hours of Station time
for its own use on Sunday morning, between 7:00 a.m. and 11:00 am. Licensee
shall have the sole responsibility to decide the scheduling of such Sunday hours
but shall consult with Programmer as to that schedule.
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EXHIBIT B
COMPENSATION PAYMENT SCHEDULE
Programmer shall pay to Licensee Twelve Thousand and 00/100 Dollars
($12,000.00) on the first day of each month. Each such payment shall constitute
a monthly installment towards the purchase price of the Station and be deducted
from the aggregate purchase price to be paid at closing of the transactions
contemplated by the Asset Purchase Agreement. In addition, Programmer will
reimburse Licensee for Licensee's expenses of operating the Station. Such
reimbursement payments will be made by Programmer within SEVEN (7) days of
Programmer's receipt of evidence of such expenses.
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EXHIBIT C
PRIOR EXISTING ADVERTISING CONTRACTS
Licensee has attached hereto a list of all advertising contracts signed by
Licensee prior to the Effective Date.
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of August __, 1997, by and
between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation ("Licensing"), and The Midwestern Broadcasting
Company, an Ohio corporation (the "Seller"). Broadcasting and Licensing are
referred to collectively herein as the "Buyers." The Buyers and the Seller are
referred to collectively herein as the "Parties." Capitalized terms used in this
Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
stations WWWM-FM, licensed to Sylvania, Ohio, and WLQR-AM, licensed to Toledo,
Ohio (collectively, the "Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Licensing agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to Licensing, all of
the Station Licenses. In addition, Broadcasting agrees to purchase from the
Seller, and the Seller agrees to sell, transfer, convey, and deliver to
Broadcasting, all of the Acquired Assets other than the Station Licenses. Both
such sales shall take place at the Closing for the consideration specified below
in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyers agree to pay to the Seller at the Closing
Ten Million Dollars ($10,000,000) (the "Purchase Price") payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Five Hundred Thousand Dollars ($500,000) (the
"Earnest Money Deposit") by delivery of cash payable by wire transfer or
delivery of other immediately available funds; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Nine Million Four Hundred Fifty Thousand Dollars ($9,450,000), less
interest earned on the Earnest Money Deposit; and
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(iii) on the Closing Date, the Buyer shall pay to the Seller, on
behalf of all parties to the Postclosing Agreement, the amount of Fifty Thousand
Dollars ($50,000).
The Earnest Money Deposit referenced in this Section l(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), and shall
be deposited by the Escrow Agent with a federally insured financial institution
in an interest bearing account. Interest earned on the Earnest Money Deposit
shall accrue to the benefit of the Buyer, and, together with the principal
amount of the Earnest Money Deposit, shall be payable to the Seller and credited
against the Purchase Price on the Closing Date. If this Agreement is terminated
without Closing of the transaction contemplated herein, the Earnest Money and
all accrued interest shall be paid to the Buyer or the Seller as provided in the
Earnest Money Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Stations in
Toledo, Ohio, commencing at 9:00 am. local time on the date set by the Buyers
not earlier than the fifth business day or later than the tenth business day
after the FCC approval of the Assignment Application becomes a Final Order, by
which date all other conditions to the obligations of the Parties to consummate
the transactions contemplated hereby will have been satisfied or waived or such
other date as the Parties may mutually determine (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in Section 5(a) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including real property lease assignments and
Intellectual Property transfer documents) in the forms attached hereto as
Exhibits B-1 through B-2 and (B) such other instruments of sale, transfer,
conveyance, and assignment as the Buyers and its counsel reasonably may request;
(iv) the Buyers will execute, acknowledge (if appropriate), and deliver to the
Seller (A) an assumption in the form attached hereto as Exhibit C and (B) such
other instruments of assumption as the Seller and its counsel reasonably may
request; and (v) the Buyers will deliver to the Seller the consideration
specified in Section 1(c) above.
(f) Postclosing Agreement. On the Closing Date, the Seller shall execute,
and shall cause shareholders Lewis W. Dickey, Sr. and Patricia L. Dickey to
execute, a Postclosing Agreement with the Buyer including covenants not to
compete with the Buyer in the markets served by the Stations and to indemnify
the Buyer in the form of Exhibit D attached hereto. A portion of the Purchase
Price equal to Fifty Thousand Dollars ($50,000) shall be paid to the Seller by
the Buyers on the Closing Date as consideration for the agreements set forth in
the Postclosing Agreement.
(g) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit E.
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2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyers that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The owners of the Seller are Lewis W. Dickey, Sr. and Patricia L. Dickey.
(b) Authorization of Transaction. The Seller has full power and authority
(including full partnership power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the Board of Directors of the Seller has duly
authorized the execution, delivery, and performance of this Agreement by the
Seller. This Agreement constitutes the valid and legally binding obligation of
the Seller, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which any of the Seller is subject or any provision of the charter
or bylaws of any of the Seller; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
Security Interest, or other arrangement to which any of the Seller is a party or
by which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). Other than with
respect to the Assignment Application described in Section 4(b) the Seller does
not need to give any notice to, make any filing with, or obtain any Licenses,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement (including
the assignments and assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Other than the Security Interests set forth
on Section 2(d) of the Disclosure Schedule (which shall be released at or before
the Closing) the Seller has good and marketable title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1993, December 31, 1994,
December 31, 1995 and December 31, 1996, for the Seller; and
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(ii) unaudited statements of income, as of and for each month during 1995 and
1996 and each month ending May 31 in 1997 for the Seller. The Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, are correct and complete, and are
consistent with the books and records of the Seller (which books and records are
correct and complete).
(f) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(f) of the Disclosure Schedule, there has not been any
adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the Seller with
respect to the operation of the Stations. Without limiting the generality of the
foregoing and with respect to the operation of the Stations since that date:
(i) the Seller has not sold, leased, transferred, or assigned any of its
material assets, tangible or intangible, other than for a fair consideration in
the Ordinary Course of Business;
(ii) the Seller has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts, leases, subleases,
licenses, and sublicenses) outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled any
contract, lease, sublease, license, or sublicense (or series of related
contracts, leases, subleases, licenses, and sublicenses) involving more than
$5,000 to which the Seller is a party or by which it is bound;
(iv) no Security Interest has been imposed upon any of its assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of related
capital expenditures) outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of any other person (or series of
related capital investments, loans, and acquisitions) outside the Ordinary
Course of Business;
(vii) the Seller has not created, incurred, assumed, or guaranteed any
indebtedness (including capitalized lease obligations) outside the Ordinary
Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the Ordinary
Course of Business;
(x) the Seller has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
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(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property or any action adversely
affecting the FCC Licenses of the Stations;
(xii) the Seller 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 giving rise to any claim or right on its part
against the person or on the part of the person against it;
(xiii) the Seller has not entered into any employment contract, consulting
contract or severance agreement or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;
(xiv) the Seller has not granted any increase outside the Ordinary Course
of Business in the base compensation of any of its directors, officers, and
employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing, (C)
incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other plan,
contract, or commitment for any of its directors, officers, and employees, or
modified or terminated any existing such plan, contract, or commitment;
(xvi) the Seller has not made any other change in employment terms for any
of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or other
capital contribution outside the Ordinary Course of Business;
(xviii) the Seller has not paid any amount to any third party with respect
to any Liability or obligation (including any costs and expenses the Seller has
incurred or may incur in connection with this Agreement or any of the
transactions contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing;
(xix) there has not been any other occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business involving
any of the Seller;
(xx) the Seller has not altered its credit and collection policies or its
accounting policies;
(xxi) the Seller has not materially altered the programming, format or
call letters of the Stations, or its promotional and marketing activities;
(xxii) the Seller has not applied to the FCC for any modification of the
FCC Licenses or failed to take any action necessary to preserve the FCC Licenses
and has operated the Stations in compliance therewith and with all FCC rules and
regulations; or
(xxiii) the Seller has not committed to any of the foregoing.
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(g) Tax Matters. The Seller has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all respects. All
Taxes owed by the Seller (whether or not shown on any Tax Return) have been
paid. The Seller has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. No claim has ever been made by an
authority in a jurisdiction where the Seller does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Seller that arose in connection with any
failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Stations.
The Seller owns or leases all tangible assets necessary for the conduct of the
operation and business of the Stations as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used. No such tangible asset
is in need of replacement.
(i) Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to the Seller. Section
2(i) of the Disclosure Schedule also identifies the leased or subleased
properties for which title insurance policies are to be procured in accordance
with Section 4(i) below. The Seller has delivered to the Buyer correct and
complete copies of the leases and subleases listed in of the Disclosure Schedule
(as amended to date). With respect to each lease and sublease listed in Section
2(i) of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing will continue to
be, legal, valid, binding, enforceable, and in full force and effect;
(ii) no party to the lease or sublease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with notice
or lapse of time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance programs in
effect as to the lease or sublease;
(iv) with respect to each sublease, the representations and warranties set
forth in subsections (i) through (iii) above are true and correct with respect
to the underlying lease;
(v) the Seller has not assigned, transferred, conveyed, mortgaged, deeded
in trust, or encumbered any interest in the leasehold or subleasehold;
(vi) to the Seller's Knowledge, all facilities leased or subleased
thereunder have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required
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in connection with the operation thereof and have been operated and maintained
in accordance with applicable laws, rules, and regulations;
(vii) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said facilities; and
(viii) to the Seller's Knowledge, the owner of the facility leased or
subleased has good and marketable title to the parcel of real property, free and
clear of any Security Interest, easement, covenant, or other restriction, except
for recorded easements, covenants, and other restrictions that do not impair the
current use, occupancy, or value, or the marketability of title, of the property
subject thereto.
(j) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder will be owned or available for use by the Buyer on identical
terms and conditions immediately subsequent to the Closing hereunder. The Seller
has taken all necessary or desirable action to protect each item of Intellectual
Property that it owns or uses.
(i) The Seller has not interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, claim, or
notice alleging any such interference, infringement, misappropriation, or
violation. To the Knowledge of the Seller, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller.
(ii) Section 2(j) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller with
respect to any of its Intellectual Property and the call letters (current and
past) of the Stations, identifies each pending patent, trademark or copyright
application for registration which the Seller has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which the Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). The Seller has
delivered to the Buyer correct and complete copies of all such patents,
trademarks or copyright registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. With respect to each item of
Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in and to
the item;
(B) the item is not subject to any outstanding judgment, order,
decree, stipulation, injunction, or charge;
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(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or entity
for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each item of
Intellectual Property that any third party owns and that the Seller uses
pursuant to license, sublicense, agreement, or permission including, but not
limited to the call letters of the Stations. The Seller has supplied the Buyer
with correct and complete copies of all such licenses, sublicenses, agreements,
and permissions (as amended to date). With respect to each such item of used
Intellectual Property:
(A) the license, sublicense, agreement, or permission covering the
item is, and following the Closing will continue to be on identical terms,
legal, valid, binding, enforceable, and in full force and effect;
(B) no party to the license, sublicense, agreement, or permission is
in breach or default (or has repudiated any provision thereof), and no
event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and correct
with respect to the underlying license;
(D) the underlying item of Intellectual Property is not subject to
any outstanding judgment, order, decree, stipulation, injunction, or
charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of the
Seller, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or entity for
or against any interference, infringement, misappropriation, or other
conflict with respect to the underlying item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
(iv) The Seller has no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or other third parties
have developed which reasonably could be expected to supersede or make obsolete
any product or process of any of the Seller.
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(k) Contracts. Section 2(k) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time) to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under which
it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, employment
agreement, or severance agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations;
(viii) any arrangement with any third party under which it has
created, incurred, assumed, or guaranteed an obligation to provide
advertising or air time in an amount in excess of $1000 ("Advertising
Contract"); or
(ix) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
Other than Advertising Contracts, the Seller has delivered to the Buyer a
correct and complete copy of each written arrangement listed in Section 2(k) of
the Disclosure Schedule (as amended to date). Other than Advertising Contracts,
with respect to each written arrangement so listed: (A) the written arrangement
is legal, valid, binding, enforceable, and in full force and effect; (B) the
written arrangement will continue to be legal, valid, binding, and enforceable
and in full
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force and effect on identical terms following the Closing (if the arrangement
has not expired according to its terms); (C) no party is in breach or default,
and no event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration, under
the written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(k) of the Disclosure Schedule under the terms
of this Section 2(k). To the Knowledge of Seller, no advertiser of the Stations
has indicated within the past year that it will stop, or decrease the rate of,
buying services from them.
(l) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates of
compliance, and consents of governmental bodies, including, without limitation,
the FCC Licenses, used or useful in the operation of the Stations as they are
now being operated are (A) in full force and effect, (B) unimpaired by any acts
or omissions of the Seller or the Seller's employees or agents, (C) free and
clear of any restrictions which might limit the full operation of the Stations,
and (D) detailed in Section 2(1) of the Disclosure Schedule. With respect to the
licenses, permits, authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(1) of the Disclosure
Schedule also sets forth, without limitation, the date of the last renewal, the
expiration date thereof, and any conditions or contingencies related thereto.
Except as set forth in Section 2(1) of the Disclosure Schedule, no condition
exists or event has occurred that permits, or after notice or lapse of time, or
both, would permit, the revocation or termination of any such license, permit,
consent, franchise, or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction or limitation
upon the operation of the Stations as now conducted. Except as set forth in
Section 2(1) of the Disclosure Schedule, the Seller is not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or revoked.
(ii) The Stations are each in compliance with the FCC's policy on exposure
to radio frequency radiation. No renewal of any FCC License would constitute a
major environmental action under the FCC's rules or policies. Access to the
Stations' transmission facilities is restricted in accordance with the policies
of the FCC.
(iii) Except as set forth in Section 2(1) of the Disclosure Schedule, to
the best of the Seller's knowledge, the Seller is not the subject of any FCC or
other governmental investigation or any notice of violation or order, or any
material complaint, objection, petition to deny, or opposition issued by or
filed with the FCC or any other governmental authority in connection with the
operation of or authorization for the Stations, and there are no proceedings
(other than rulemaking proceedings of general applicability) before the FCC or
any other governmental authority that could adversely affect any of the FCC
Licenses or the authorizations listed in Section 2(1) of the Disclosure
Schedule.
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(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of. the agent;
(ii) the name of the insurer, the name of the policyholder, and the name
of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was on a
claims made, occurrence, or other basis) and amount (including a description of
how deductibles and ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms through the Closing Date.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(n) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
the Seller. To the Knowledge of the Seller, no key employee or group of
employees has any plans to terminate employment with the Seller. The
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Seller is not a party to or bound by any collective bargaining agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. To the Seller's Knowledge, it has not
committed any unfair labor practice. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of any of the Seller.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists all
Employee Benefit Plans that the Seller maintains or to which the Seller
contributes for the benefit of any current or former employee of the Seller.
Each Employee Benefit Plan (and each related trust or insurance contract)
complies in form and in operation in all respects with the applicable
requirements of ERISA and the Code.
(q) Environment, Health, and Safety.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof) concerning the environment, public
health and safety, and employee health and safety, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has been filed or commenced against any of them alleging
any failure to comply with any such law or regulation.
(ii) The Seller has no Liability (and to Seller's Knowledge there is
no Basis related to the past or present operations, and its respective
predecessors for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Federal Water Pollution Control
Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of
1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899, or
the Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), or any other law (or rule or regulation thereunder) of any
federal, state, local, or foreign government (or agency thereof,
concerning release or threatened release of hazardous substances, public
health and safety, or pollution or protection of the environment, or for
damage to any site, location, or body of water (surface or subsurface) or
for illness or personal injury.
(iii) The Seller has no Liability (and to Seller's Knowledge there
is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Occupational Safety and Health
Act, as amended, or any other law (or rule or regulation thereunder) of
any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal
injury to any employee.
(iv) The Seller has obtained and has been in compliance in all
material respects with all of the terms and conditions of all permits,
licenses, and other authorizations
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which are required under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
federal, state, local, and foreign laws (including rules, regulations,
codes, plans, judgments, orders, decrees, stipulations, injunctions, and
charges thereunder) relating to public health and safety, worker health
and safety, and pollution or protection of the environment, including laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes.
(v) All properties and equipment used in the business of the Seller
have been free of asbestos, PCB's, methylene chloride, trichloroethylene,
1, 2-trans- dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
(vi) No pollutant, contaminant, or chemical, industrial, hazardous,
or toxic material or waste ever has been buried, stored, spilled, leaked,
discharged, emitted, or released on any real property that the Seller owns
or ever has owned or that the Seller leases or ever has leased.
(r) Legal Compliance.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof, and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has been filed or
commenced against the Seller alleging any failure to comply with any such law or
regulation, including those relating to the employment of labor, employee civil
rights, and equal employment opportunities and relating to antitrust matters.
(ii) The Seller has filed in a timely manner all reports, documents, and
other materials it was required to file (and the information contained therein
was correct and complete in all material respects) under all applicable laws
(including rules and regulations thereunder). To the Seller's Knowledge, it has
possession of all records and documents it was required to retain under all
applicable laws (including rules and regulations thereunder).
(s) Advertising Agreements. Section 2(s) of the Disclosure Schedule lists
all arrangements for the sale of air time or advertising on the Stations in
excess of $1000, and the amount to be paid to the Company therefor.
(t) Brokers' Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
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(u) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyers. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
(b) Authorization of Transaction. Buyers have full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Buyers, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Buyers are subject or any provision of their articles of
organization or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which the Buyers are a party or by which they
are bound or to which any of their assets is subject. Other than the Assignment
Application described in Section 4(b), the Buyers do not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 1 above).
(d) Brokers' Fees. The Buyers have no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
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(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Seller to the Buyer (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use the commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have material adverse effect upon the Stations or
upon any affiliated entity). If the FCC imposes any condition on either party to
the Assignment Application, such party shall use commercially reasonable efforts
to comply with such condition, provided, that neither party shall be required
hereunder to comply with any condition that would have a material adverse effect
upon the Stations or any Affiliate. The Seller and the Buyers shall jointly
oppose any requests for reconsideration or judicial review of FCC approval of
the Assignment Application and shall jointly request from the FCC extension of
the effective period of FCC approval of the Assignment Application if the
Closing shall not have occurred prior to the expiration of the original
effective period of the FCC Consent. Nothing in this Section 4(b) shall be
construed to limit either party's right to terminate this Agreement pursuant to
Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyers may, at their option, extend offers of employment to all or any of
the Seller's employees effective on the Closing Date. From and after the
execution of this Agreement, the Seller will not take any action to preclude or
discourage any of the Seller's employees from accepting any offer of employment
extended by the Buyers.
(d) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its commercially reasonable efforts to obtain
any third party consents, that the Buyers reasonably may request in connection
with the matters pertaining to the Seller disclosed or required to be disclosed
in the Disclosure Schedule. Each of the Parties will take any additional action
that may be necessary, proper, or advisable in connection with any other notices
to, filings with, and authorizations, consents, and approvals of governments,
governmental agencies, and third parties that it may be required to give, make,
or obtain.
(e) Operation of Business. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of
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Business. Without limiting the generality of the foregoing, the Seller will not
engage in any practice, take any action, embark on any course of inaction, or
enter into any transaction of the sort described in Section 2(f) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Stations for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
(g) Operating Statements. The Seller shall deliver to the Buyers, for the
Buyers' informational purposes only, monthly unaudited statements of operating
revenues and operating expenses of the Stations within ten (10) days after each
such statement is prepared by or for the Seller.
(h) Contracts. The Seller will not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on Section 2(k)
of the Disclosure Schedule in any material respect. The Seller will not without
prior written consent of the Buyers enter into any new contracts respecting the
Stations or their properties, except (i) contracts for the sale of time on the
Stations for cash, goods or services which comply with the representations and
warranties pertaining to such contracts set forth in Section 2(k) above, (ii)
contracts entered into in the Ordinary Course of Business which are cancelable
on not more than thirty-one (31) days' notice without penalty or premium, and
(iii) contracts entered into in the Ordinary Course of Business each of which
does not involve more than Five Thousand Dollars ($5,000) or all of which do not
involve more than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Stations. The Seller shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
(j) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Stations and with respect to collecting accounts receivable arising from
such extension of credit.
(k) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensers,
advertisers, suppliers, customers, and employees, all of the confidential
information, call letters and trade secrets of the Stations, and the FCC
Licenses.
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(l) Full Access and Consultation. The Seller will permit representatives
of the Buyers to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Stations, to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to the Seller. The Seller will consult with the Buyers' management
with a view to informing Buyer's management as to the operations, management and
business of the Stations.
(m) Notice of Developments. The Seller will give prompt written notice to
the Buyers of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller. Each Party will give prompt written notice to the other
of any material development affecting the ability of the Parties to consummate
the transactions contemplated by this Agreement. No disclosure by any Party
pursuant to this Section 4(m), however, shall be deemed to amend or supplement
the Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving any of the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Seller will notify
the Buyers immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. The Seller
will obtain with respect to each parcel of real estate that the Seller leases,
(i) a leasehold owner's policy issued by a title insurer reasonably satisfactory
to the Buyer, in an amount equal to the fair market value of such real property
(including all improvements located thereon), insuring leasehold title to such
real property in the Buyer as of the Closing subject only to the title
exceptions which do not impair the current use, occupancy or value or the
marketability of title of the property and are disclosed in Section 2(i) of the
Disclosure Schedule, together with such endorsements for zoning, contiguity,
public access and extended coverage as the Buyer reasonably requests, (ii) a
current survey of the real property certified to the Buyer, prepared by a
licensed surveyor and conforming to current ALTA Minimum Detail Requirements for
Land Title Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other matters shown
customarily on such surveys, and showing access affirmatively to public streets
and roads (the "Survey") which shall not disclose any survey defect or
encroachment from or onto the real property which has not been cured or insured
over prior to the Closing; and (iii) a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Buyer which shall not disclose or recommend any action with respect to
any condition to be remediated or investigated or any contamination on the site
assessed. The Buyer and the Seller will each pay one-half (1/2) of the costs of
these title policies, surveys and environmental assessments.
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(p) Control of Stations. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyer
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will repair or replace such Acquired Assets as soon
as possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Seller's notice to the Buyers, and the Buyers determine that the Seller's
failure to repair or replace, alone or in the aggregate, would have a material
adverse effect on the operation of the Stations:
(a) the Buyers may elect to terminate this Agreement; or
(b) the Buyers may postpone the Closing Date until such time as the
property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
(c) the Buyers may choose to accept the Acquired Asset in their
"then" condition, together with the Seller's assignment to the Buyer of
all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers any proceeds under any such
insurance policies, previously received by the Seller with respect
thereto.
In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyers. The obligation of the Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
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(i) the representations and warranties set forth in Section 2 above shall
be true and correct in all material respects at and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to those relating to
transmitter and studio leases, all of the title insurance commitments (and
endorsements), Surveys and environmental site assessments described in Section
4(o) above;
(iv) no action, suit, or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or (C)
affect adversely the right of the Buyer to own, operate, or control the Acquired
Assets (and no such judgment, order, decree, stipulation, injunction, or charge
shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified above in Section 5(a)(i)(iv) is satisfied in
all respects;
(vi) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyer shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Postclosing
Agreement;
(viii) the relevant parties shall have entered into the Tower Lease
Agreement;
(ix) the Buyer shall have received from counsel to the Seller an opinion
with respect to the matters set forth in Exhibit F attached hereto, addressed to
the Buyer and dated as of the Closing Date; and
(x) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
The Buyer may waive any condition specified in this Section 5(a) if it executes
a writing so stating at or prior to the Closing.
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(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above shall
be true and correct in all material respects at and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and no
such judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(iv) the Buyers shall have delivered to the Seller a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect that
each of the conditions specified above in Section 5(b)(i)-(iii) is satisfied in
all respects;
(v) each of the Assignment Applications shall have been approved by a
Final Order of the FCC and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement; and
(vii) the relevant parties shall have entered into the Tower Lease
Agreement;
(viii) all actions to be taken by the Buyers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
The Seller may waive any condition specified in this Section 5(b) if it executes
a writing so stating at or prior to the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further
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action (including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all the sole cost and
expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Seller, each of the other Parties will cooperate with the
contesting or defending Party and its counsel in the contest or defense, make
available his or its personnel, and provide such testimony and access to its
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below).
(c) Adjustments. Operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the leases and contracts
being assigned hereunder (inducing any contracts for the sale of time for cash,
trade or barter so assigned) shall be prorated between the Seller and the Buyers
as of the Closing Date in accordance with the foregoing principle. Contractual
arrangements that do not reflect an equal rate of compensation to the station
over the term of the Agreement shall be equitably adjusted as of the Closing
Date. The prorations and adjustments hereunder shall be made and paid insofar as
feasible on the Closing Date, with a final settlement sixty (60) days after the
Closing Date. In the event of any disputes between the Parties as to such
adjustments, the amounts not in dispute shall nonetheless be paid at such time
and such disputes shall be determined by the accounting firm and the fees and
expenses of such accounting firm shall be paid one-half (1/2)by the Seller and
one-half (1/2) by the Buyer.
(d) Collection of Accounts Receivable. At the Closing, the Seller will
turn over to the Buyers, for collection only, the accounts receivable of the
Stations owing to the Seller as of the close of business on the Closing Date. A
schedule of such accounts receivable will be delivered by the Seller to the
Buyers on the Closing Date or as soon thereafter as possible. The Buyers agree
to use commercially reasonable efforts in the ordinary course of business (but
without responsibility to institute legal or collection proceedings) to collect
such accounts receivable during the 120-day period following the Closing Date,
and will remit all payments received on such accounts during each calendar month
during this 120-day period to the Seller within fifteen (15) business days after
the end of that calendar month. The Buyers shall provide the Seller with a
monthly accounting of all payments received on such accounts within fifteen (15)
business days after the end of each calendar month during the 120-day collection
period. In the event the Buyers receive monies during the 120-day period
following the Closing Date from
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an advertiser who, after the Closing Date, is advertising over any of the
Stations, and that advertiser was included among the accounts receivable as of
the Closing Date, the Buyer shall apply said monies to the oldest outstanding
balance due on the particular account, except in the case of a "disputed"
account receivable. For purposes of this Section 6(d), a "disputed" account
receivable means one which the account debtor refuses to pay because he asserts
that the money is not owed or the amount is incorrect. In the case of such a
disputed account, the Buyers shall immediately return the account to the Seller
prior to expiration of the 120-day period following the Closing Date. If the
Buyers return a disputed account to the Seller, the Buyers shall have no further
responsibility for its collection and may accept payment from the account debtor
for advertising carried on any of the Stations after the Closing Date. At the
end of the 120-day period following the Closing Date, the Buyers will turn back
to the Seller all of the accounts receivable of the Stations as of the Closing
Date owing to the Seller which have not yet been collected, and the Buyers will
thereafter have no further responsibility with respect to the collection of such
receivables. During the 120-day period following the Closing Date, the Buyers
shall afford the Seller reasonable access to the accounts receivable "aging
list."
(e) Severance Obligations. In the event an offer of employment is extended
by the Buyers to and accepted by an employee of the Seller pursuant to Section
4(c) and such subsequent employment by the Buyers is terminated within sixty
(60) days from the Closing Date, the Seller shall be responsible for, and shall
pay to such accepting employee, all severance benefits (if any, pursuant to the
Seller's practices as in effect on the Closing Date) that may be due and owing
such employee by reason of his or her employment with either the Seller or the
Buyer, as long as there has been no material change in the terms of employee's
employment by Buyer.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), and 2(d) hereof
or relating to the Seller's title to the Acquired Assets) shall survive the
Closing (even if the Buyers knew or had reason to know of any misrepresentation
or breach of warranty at the time of Closing) and continue in full force and
effect for a period of one (1) year thereafter, or in the case of claims by
third parties, for a period until 90 days after the applicable statute of
limitations has expired. The representations, warranties, and covenants of the
Buyers and those of the Seller contained in Sections 2(a), 2(b), 2(c), and 2(d)
hereof or relating to the Seller's title to the Acquired Assets in this
Agreement shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty or covenant at the
time of Closing) and continue in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyers.
Except as described below in Section 7(e) with respect to a breach of a
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of
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any Adverse Consequences the Buyers may suffer resulting from, arising out of,
relating to, in the nature of, or caused by:
(i) any breach of any of the Seller's representations, warranties, and
covenants contained in this Agreement (so long as the particular representation,
warranty, or covenant survives the Closing and the Buyers make a written claim
for indemnification within the applicable survival period);
(ii) any Liability of the Seller which is not an Assumed Liability; or
(iii) any Liability of the Buyers arising by operation of law (including
under any bulk transfer law of any jurisdiction or under any common law doctrine
of defacto merger or successor liability) which is not an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a breach of a covenant prior to
the Closing Date, the Buyer agrees to indemnify the Seller from and against the
entirety of any Adverse Consequences the Seller may suffer resulting from,
arising out of, relating to, in the nature of, or caused by (i) the breach of
any of the Buyers' representations, warranties, and covenants contained in this
Agreement (so long as the particular representation, warranty, or covenant
survives the Closing and the Seller makes a written claim for indemnification
within the applicable survival period) or (ii) any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that not withstanding the provision in
Section 7(e) with respect to the remedy of liquidated damages upon a breach of a
covenant of this Agreement prior to the Closing, money damages would not be an
adequate remedy for a breach of any provision of this Agreement.
(e) Liquidated Damages. The Buyer and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
lieu of indemnification pursuant to Section 5(b) or 7(c), the non-defaulting
Party shall be entitled to receive from the defaulting Party for such default
the sum of Five Hundred Thousand Dollars ($500,000) as liquidated damages
without the need for proof of damages, subject only to successfully proving in a
court of competent jurisdiction that the other Party has materially breached
this Agreement and that the transactions contemplated
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thereby have not occurred; provided however, that the Buyers shall retain the
option to receive, pursuant to Section 7(d), and in lieu of receiving the
liquidated damages provided in this Section 7(e), the remedy of specific
performance with respect to a breach of this Agreement prior to the Closing. The
Buyers and the Seller agree to pay said sum of liquidated damages within ten
(10) days of the date that the non-defaulting party obtains such a judgment.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within 15 days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
is assuming the defense thereof, (i) the Indemnifying Party will defend the
Indemnified Party against the matter with counsel of its choice reasonably
satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
to the extent the Indemnified Party concludes reasonably that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iv) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
Liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event the Indemnifying Party
does not notify the Indemnified Party within 15 days after the Indemnified Party
has given notice of the matter that the Indemnifying Party is assuming the
defense thereof, however, the Indemnified Party may defend against, or enter
into any settlement with respect to, the matter in any manner it reasonably may
deem appropriate.
(g) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory or common
law remedy any Party may have for breach of representation, warranty, or
covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets that are used or useful in
the operation of the Stations, including but not limited to all of its (a)
leaseholds and other interests of any kind therein, improvements, fixtures, and
fittings thereon (such as towers and antennae), and easements, rights-of-way,
and other appurtenants thereto); (b) tangible personal property (such as
computers, electrical devices, monitoring equipment, test equipment, switching,
terminal and
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studio equipment, transmitters, transformers, receivers, broadcast facilities,
inventories of compact disks, records, tapes and other supplies, vehicles, and
all assignable warranties with respect thereto; (c) Intellectual Property,
goodwill associated therewith, licenses and sublicenses granted and obtained
with respect thereto, and rights thereunder, remedies against infringements
thereof, and rights to protection of interests therein under the laws of all
jurisdictions; (d) rights under orders and agreements (including those barter
agreements identified on the Disclosure Schedule) now existing or entered into
in the Ordinary Course of Business for the sale of advertising time on the
Stations; (e) contracts, indentures, Security Interests, guaranties, other
similar arrangements, and rights thereunder; (f) call letters of the Stations,
jingles, logos, slogans, and business goodwill of the Stations; (g) claims,
deposits, prepayments, refunds, causes of action, choses in action, rights of
recovery (including rights under policies of insurance), rights of set off, and
rights of recoupment (including any such item relating to the payment of Taxes);
(h) Licenses and similar rights obtained from governments and governmental
agencies; and (i) FCC logs and records and all other books, records, ledgers,
logs, files, documents, correspondence, lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means (a) obligations of the Seller under the
licenses, sublicenses, leases, subleases, contracts, and other arrangements
referred to in the definition of Acquired Assets either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyers" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
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"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement as amended.
"Escrow Agent" means Franklin National Bank of Washington, D.C., 1722 Eye
Street, N.W., Washington, DC 20006.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communication Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the
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time in which such reconsideration or review is permitted has passed; and (d) no
appeal to a court, or request for stay by a court, of the FCC's action is
pending or in effect, and the deadline for filing any such appeal or request has
passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (b) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
27
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller
Stockholders entered into concurrently herewith and attached hereto as Exhibit
D.
"Post-Closing Escrow" has the meaning set forth in Section 1(c) above.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables; (iv) the real property located at 2965
Pickle Road, Toledo, Ohio and 716 North Westwood Avenue, Toledo, Ohio, including
any transmission tower located thereon or improvement thereto; and (v) Cash.
"Retained Liabilities" means any other obligations or liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
28
<PAGE>
"Seller" has the meaning set forth in the preface above.
"Station Licenses" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations as detailed in Section 2(l) of the Disclosure Schedule.
"Stations" means the radio broadcast stations having the call letters
WWWM-FM and WLQR-AM, licensed by the FCC to operate in Sylvania, Ohio and
Toledo, Ohio, respectively.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 4(j) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tower Lease Agreement" means that Tower Lease pertaining to the broadcast
tower and real estate sites at 2965 Pickle Road, Toledo, Ohio and 716 North
Westwood Avenue, Toledo, Ohio, the forms of which are attached hereto as Exhibit
G.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing in the event the Seller is in breach
of any material representation,
29
<PAGE>
warranty, or covenant contained in this Agreement in any material respect if
such breach remains uncured for twenty (20) days after notice of breach is
received from the Buyers;
(iii) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing in the event the Buyers are in
breach of any material representation, warranty, or covenant contained in this
Agreement in any material respect if such breach remains uncured for twenty (20)
days after notice of breach is received from the Seller;
(iv) the Buyers may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(a) hereof
(unless the failure results primarily from the Buyers itself breaching any
representation, warranty, or covenant contained in this Agreement);
(v) the Seller may terminate this Agreement by giving written notice to
the Buyers at any time prior to the Closing if the Closing shall not have
occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under Section 5(b) hereof
(unless the failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this Agreement); or
(vi) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 9(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in the Post-Closing Agreement with Seller Stockholders.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
30
<PAGE>
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that the Buyers may assign all of its right, title
and interest in, to and under this Agreement to one or more affiliated entities,
who shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Seller the Purchase Price therefor (in any or all of which cases the
Buyers nonetheless shall remain liable and responsible for the performance of
all of their obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller:
Midwestern Broadcasting Company
2965 Pickle Road
Toledo, Ohio 43616
Attn: Lew Dickey, Sr.
Copy to:
Holland & Knight
2100 Pennsylvania Avenue, NW
31
<PAGE>
Suite 400
Washington, DC 20037
Attn: Marvin Rosenberg, Esquire
If to the Buyers:
Cumulus Broadcasting, Inc.
c/o QUAESTUS Management Corporation
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
With a copy to:
Cumulus Broadcasting, Inc.
875 N. Michigan Avenue, Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, Indiana 46601
Attn: Peter Trybula
(Neither of which copies shall constitute notice to Buyers)
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Ohio.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver
32
<PAGE>
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in Section 4(b) with regard to the Assignment Applications. The Seller will pay
all income taxes. The Seller and the Buyers will each pay one-half (1/2) of any
transfer or sales taxes and other recording or similar fees necessary to vest
title to each of the Acquired Assets in the Buyers.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Toledo, Ohio, in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising
33
<PAGE>
out of or relating to this Agreement in any other court. Each of the Parties
waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security that might
be required of any other Party with respect thereto. Any Party may make service
on the other Party by sending or delivering a copy of the process to the Party
to be served at the address and in the manner provided for the giving of notices
in Section 10(h) above. Nothing in this Section 10(h), however, shall affect the
right of any Party to serve legal process in any other manner permitted by law.
Each Party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law.
(p) Bulk Transfer Laws. The Seller has, or will as of the Closing Date,
comply with the provisions of any bulk transfer laws of Ohio or any other
jurisdiction applicable to the transactions contemplated by this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
-----------------------------------------------
(printed)
-----------------------------------------------
Title:
-----------------------------------------------
CUMULUS LICENSING CORPORATION
By:
-----------------------------------------------
(printed)
-----------------------------------------------
Title:
-----------------------------------------------
THE MIDWESTERN BROADCASTING COMPANY
By:
-----------------------------------------------
(printed)
-----------------------------------------------
Title:
-----------------------------------------------
34
<PAGE>
ASSET PURCHASE AGREEMENT
BETWEEN
TALLY RADIO, LLC
AND
CUMULUS BROADCASTING, INC.
AND
CUMULUS LICENSING CORP.
August 18, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction..................................................1
(a) Purchase and Sale of Assets.................................1
(b) Assumption of Liabilities...................................1
(c) Purchase Price..............................................1
(d) Local Marketing Agreement...................................2
(e) The Closing.................................................2
(f) Deliveries at the Closing...................................2
(g) Postclosing Agreement.......................................3
(h) Allocation..................................................3
2. Representations and Warranties of the Seller.......................3
(a) Organization of the Seller..................................3
(b) Authorization of Transaction................................3
(c) Noncontravention............................................3
(d) Title to Acquired Assets....................................4
(e) Financial Statements........................................4
(f) Events Subsequent to .......................................4
(g) Tax Matters.................................................6
(h) Tangible Assets.............................................6
(i) Real Property...............................................7
(j) Intellectual Property.......................................8
(k) Contracts...................................................9
(l) Commission Licenses and Compliance with Commission
Requirements.............................................11
(m) Insurance..................................................11
(n) Litigation.................................................12
(o) Employees..................................................12
(p) Employee Benefits..........................................13
(q) Environment, Health, and Safety............................13
(r) Legal Compliance...........................................14
(s) Brokers' Fees..............................................14
(t) Advertising Agreements.....................................14
(u) Disclosure.................................................15
3. Representations and Warranties of the Buyer.......................15
(a) Organization of the Buyer..................................15
(b) Authorization of Transaction...............................15
(c) Noncontravention...........................................15
(d) Brokers' Fees..............................................16
(e) Qualification of Buyer.....................................16
4. Pre-Closing Covenants.............................................16
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<PAGE>
(a) General....................................................16
(b) Assignment Applications....................................16
(c) Employment Offers..........................................16
(d) Notices and Consents.......................................17
(e) Operation of Business......................................17
(f) Advertising Obligations....................................17
(g) Operating Statements.......................................17
(h) Contracts..................................................17
(i) Operation of Station.......................................17
(j) Preservation of Business...................................18
(k) Credit and Receivables.....................................18
(l) Full Access................................................18
(m) Notice of Developments.....................................18
(n) Exclusivity................................................18
(o) Title Insurance, Surveys and Environmental Assessments.....18
(p) Control of Station.........................................19
(q) Risk of Loss...............................................19
5. Conditions to Obligation to Close.................................20
(a) Conditions to Obligation of the Buyer......................20
(b) Conditions to Obligation of the Seller.....................21
6. Post-Closing Covenants............................................22
(a) General....................................................22
(b) Litigation Support.........................................22
(c) Adjustments................................................22
7. Remedies for Breaches of this Agreement...........................23
(a) Survival...................................................23
(b) Indemnification Provisions for the Benefit of the Buyer....23
(c) Indemnification Provisions for the Benefit of the Seller...23
(d) Specific Performance.......................................24
(e) Liquidated Damages.........................................24
(f) Matters Involving Third Parties............................24
(g) Other Indemnification Provisions...........................25
8. Definitions.......................................................25
9. Termination.......................................................30
(a) Termination of Agreement...................................30
(b) Effect of Termination......................................30
10. Miscellaneous....................................................31
(a) Survival...................................................31
-ii-
<PAGE>
(b) Press Releases and Announcements...........................31
(c) No Third Party Beneficiaries...............................31
(d) Entire Agreement...........................................31
(e) Succession and Assignment..................................31
(f) Counterparts...............................................31
(g) Headings...................................................31
(h) Notices....................................................32
(i) Governing Law..............................................32
(j) Amendments and Waivers.....................................32
(k) Severability...............................................33
(l) Expenses...................................................33
(m) Construction...............................................33
(n) Incorporation of Exhibits and Schedules....................33
(o) Submission to Jurisdiction.................................33
(p) Bulk Transfer Laws.........................................34
-iii-
<PAGE>
EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Forms of Assignments
Exhibit C--Form of Assumption
Exhibit D--Form of Postclosing Agreement
Exhibit E--Allocation Schedule
Exhibit F--Form of Local Marketing Agreement
Exhibit G--Form of Opinion of Counsel to the Seller
SCHEDULES
Description Section Reference
----------- -----------------
Exceptions To Seller's Good Title 2(d)
Financial Statements 2(e)
Events Subsequent to January 1, 1997 2(f)
Tangible Personal Property 2(h)
Real Property 2(i)
Intellectual Property 2(j)
Material Contracts 2(k)
FCC Licenses 2(l)
Insurance 2(m)
Litigation 2(n)
Employees 2(o)
Employee Benefit Plans 2(p)
Advertising Agreements 2(t)
-iv-
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of August 18, 1997, by and
between Cumulus Broadcasting, Inc. a Nevada corporation (the "Operating
Company"); Cumulus Licensing Corp., a Nevada corporation (the "Licensing
Company"); and Tally Radio, LLC, a Florida limited liability company (the
"Seller"). The Operating Company and the Licensing Company are collectively
referred to herein as the "Buyer". The Buyer and the Seller are referred to
collectively herein as the "Parties." Capitalized terms used in this Agreement
are defined in Section 8 hereof.
This Agreement contemplates a transaction in which the Buyer will purchase
substantially all of the assets (and assume certain of the liabilities) of the
Seller that are used or useful in the operation of radio station WWLD-FM,
licensed to operate in Tallahassee, Florida (the "Station") in return for Cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the
Seller, and the Seller agrees to sell, transfer, convey, and deliver
to the Buyer, all of the Acquired Assets at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The
Buyer will not assume or have any responsibility, however, with
respect to any other obligation or Liability of the Seller not
included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyer agrees to pay to the Seller at the
Closing One Million Two Hundred Thousand and 00/100 Dollars
($1,200,000.00) (the "Purchase Price") payable as follows:
(i) on the date of this Agreement, the Buyer will deposit with the
Escrow Agent the amount of Sixty Thousand and 00/100 Dollars
($60,000.00) (the "Earnest Money Deposit") by delivery of Cash
payable by wire transfer or delivery of other immediately
available funds; and
(ii) on the Closing Date, the Buyer shall pay to the Seller the
amount of Eight Hundred Ninety Thousand and 00/100 Dollars
($890,000.00) by delivery of
<PAGE>
of Cash payable by wire transfer or delivery of other
immediately available funds; and
(iii) on the Closing Date, the Buyer shall pay to the Seller, on
behalf of all parties to the Postclosing Agreement, the amount
of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00)
by delivery of Cash payable by wire transfer or delivery of
other immediately available funds.
The Earnest Money Deposit referenced in this Section 1(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), which
requires that such Earnest Money Deposit shall be deposited by the Escrow Agent
with a federally insured financial institution in an interest bearing account.
Interest earned on the Earnest Money Deposit shall accrue to the benefit of the
Buyer, and, together with the principal amount of the Earnest Money Deposit,
shall be payable to the Seller and credited against the Purchase Price on the
Closing Date. If this Agreement is terminated without Closing of the transaction
contemplated herein, the Earnest Money and all accrued interest shall be paid to
the Buyer or the Seller as provided in the Earnest Money Escrow Agreement.
(d) Local Marketing Agreement. Concurrent with the execution of this
Agreement, the Operating Company and the Seller have executed the
Local Marketing Agreement attached hereto as Exhibit F which
includes the terms and conditions pursuant to which the Operating
Company will operate on behalf of the Seller substantially all of
the programming and the sale of advertising time on the Station
prior to the Closing. Upon execution of this Agreement, the accounts
receivable of the Station shall be collected pursuant to the terms
and conditions of the Local Marketing Agreement.
(e) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
the Station in Tallahassee, Florida, commencing at 9:00 a.m. local
time on the date during January, 1998, set by the Buyer, but not
earlier than the fifth (5th) business day after the FCC approval of
the Assignment Application becomes a Final Order, by which date all
other conditions to the obligations of the Parties to consummate the
transactions contemplated hereby will have been satisfied or waived
or such other date as the Parties may mutually determine (the
"Closing Date").
(f) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 5(a) below; (ii) the Buyer will
deliver to the Seller the various certificates, instruments, and
documents referred to in Section 5(b) below; (iii) the Seller will
execute, acknowledge (if appropriate), and deliver to the Buyer (A)
assignments (including real property lease assignments and
Intellectual Property transfer documents) in the form attached
hereto as Exhibit B and (B) such other instruments of sale,
transfer,
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<PAGE>
conveyance, and assignment as the Buyer and its counsel reasonably
may request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Seller (A) an assumption in the
form attached hereto as Exhibit C and (B) such other instruments of
assumption as the Seller and its counsel reasonably may request; and
(v) the Buyer will deliver to the Seller the consideration specified
in Section 1(c) above.
(g) Postclosing Agreement. On the Closing Date, the Seller shall
execute, and shall cause all members of the Seller to execute, a
Postclosing Agreement with the Buyer including covenants not to
compete with the Buyer in the markets served by the Station and to
indemnify the Buyer in the form of Exhibit D attached hereto. A
portion of the Purchase Price equal to Two Hundred Fifty Thousand
Dollars ($250,000) shall be paid to the Seller, on behalf of all
parties other than the Buyer, on the Closing Date as consideration
for the agreements set forth in the Postclosing Agreement.
(h) Allocation. The Parties agree to allocate the Purchase Price
(and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with the allocation schedule attached hereto as Exhibit
E.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyer that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Organization of the Seller. The Seller is a limited liability
company duly organized, validly existing, and in good standing under
the laws of the State of Florida. The Seller does not have any
Subsidiaries.
(b) Authorization of Transaction. The Seller has full power and
authority (including full limited liability company power and
authority) to execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the
foregoing, the members of the Seller have duly authorized the
execution, delivery, and performance of this Agreement by the
Seller. This Agreement constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms
and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 1 above), will (i) violate any
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<PAGE>
statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government,
governmental agency, or court to which the Seller or any member of
the Seller is subject or any provision of the operating agreement of
the Seller or charter or bylaws of any member of the Seller; or (ii)
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice
under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest, or other arrangement
to which any of the Seller is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with
respect to the Assignment Application described in Section 4(b), the
Seller does not need to give any notice to, make any filing with, or
obtain any Licenses, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be
released at or before Closing), the Seller has good and marketable
title to all of the Acquired Assets, free and clear of any Security
Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the
"Financial Statements"): (i) unaudited balance sheets and statements
of income, and Cash flow as of and for the fiscal years ended
December 31, 1993, December 31, 1994, December 31, 1995 and December
31, 1996, for the Seller; and (ii) unaudited statements of income,
as of and for each month during 1995 and 1996 and the months ended
January 31, February 28, March 31, April 30, May 31, and June 30,
1997 for the Seller. The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, are correct and complete, and are
consistent with the books and records of the Seller (which books and
records are correct and complete). Without limiting the generality
of the foregoing, all material revenues and expenses of the Seller
(A) are properly reflected in the Financial Statements, (B) have
arisen in the Ordinary Course of Business, (C) are valid and subject
to no counterclaims, and (D) will be or have been collected or paid
at their recorded amounts subject only to the reserve for bad debts
set forth on the face of the most recent Financial Statements.
(f) Events Subsequent to January 1, 1997. Since January 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule,
there has not been any adverse change in the assets, Liabilities,
business, financial condition, operations, results of operations, or
future prospects of the Seller with respect to the operation of the
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Station. Without limiting the generality of the foregoing and with
respect to the operation of the Station since that date:
(i) the Seller has not sold, leased, transferred, or assigned any
of its material assets, tangible or intangible, other than for
a fair consideration in the Ordinary Course of Business;
(ii) the Seller has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts,
leases, subleases, licenses, and sublicenses) outside the
Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled
any contract, lease, sublease, license, or sublicense (or
series of related contracts, leases, subleases, licenses, and
sublicenses) involving more than $5,000 to which the Seller is
a party or by which it is bound;
(iv) no Security Interest has been imposed upon any of its assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of
Business;
(vi) the Seller has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of any
other person (or series of related capital investments, loans,
and acquisitions) outside the Ordinary Course of Business;
(vii) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations)
outside the Ordinary Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other
Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims)
outside the Ordinary Course of Business;
(x) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property or
any action adversely affecting the FCC Licenses of the
Station;
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(xii) the Seller 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 giving rise
to any claim or right on its part against the person or on the
part of the person against it;
(xiii) the Seller has not entered into any employment contract,
consulting contract or severance agreement or collective
bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(xiv) the Seller has not granted any increase outside the Ordinary
Course of Business in the base compensation of any of its
directors, officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F)
medical, hospitalization, life, or other insurance, (G)
severance, or (H) other plan, contract, or commitment for any
of its directors, officers, and employees, or modified or
terminated any existing such plan, contract, or commitment;
(xvi) the Seller has not made any other change in employment terms
for any of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of
Business;
(xviii) the Seller has not paid any amount to any third party with
respect to any Liability or obligation (including any costs
and expenses the Seller has incurred or may incur in
connection with this Agreement or any of the transactions
contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing;
(xix) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary
Course of Business involving the Seller;
(xx) the Seller has not altered its credit and collection policies
or its accounting policies;
(xxi) the Seller has not materially altered the programming, format
or call letters of the Station, or its promotional and
marketing activities;
(xxii) the Seller has not applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses
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and has operated the Station in compliance therewith and with
all FCC rules and regulations; and
(xxiii) the Seller has not committed to any of the foregoing.
(g) Tax Matters. The Seller has filed and will file all Tax Returns
that it was required to file and may be required to file. All such
Tax Returns were correct and complete in all respects. All Taxes
owed by the Seller (whether or not shown on any Tax Return) have
been paid. The Seller has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other third
party. The Sellers have not waived any statute of limitations with
respect to Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency. The Seller is not a party to a
pending Tax audit and is aware of no threatened Tax audit. No claim
has ever been made by an authority in a jurisdiction where the
Seller does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Seller that arose in connection with any
failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing by Station of all transmitter and station equipment,
vehicles and other tangible personal property used in conducting the
operation and business of the Station. The Seller owns or leases all
tangible assets necessary for the conduct of the operation and
business thereof as presently conducted and as presently proposed to
be conducted. Each tangible asset listed in Section 2(h) of the
Disclosure Schedule is free from defects (patent and latent), has
been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is
used. No such tangible asset is in need of replacement.
(i) Real Property. The Seller does not own any fee interest in any
real property that is used or useful in the operation of the
Station. Section 2(i) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to the Seller. Section
2(i) of the Disclosure Schedule also identifies the leased or
subleased properties for which title insurance policies are to be
procured in accordance with Section 4(i) below. The Seller has
delivered to the Buyer correct and complete copies of the leases and
subleases listed in Section 2(i) of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in
Section 2(i) of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing will
continue to be, legal, valid, binding, enforceable, and in
full force and effect;
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(ii) no party to the lease or sublease is in breach or default (or
has repudiated any provision thereof), and no event has
occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification, or
acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above
are true and correct with respect to the underlying lease;
(v) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold
or subleasehold;
(vi) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses,
permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in all
material respects in accordance with applicable laws, rules,
and regulations;
(vii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation
of said facilities; and
(viii) the owner of the facility leased or subleased has good and
marketable title to the parcel of real property, free and
clear of any Security Interest, easement, covenant, or other
restriction, except for recorded easements, covenants, and
other restrictions impair the current use, occupancy, or
value, or the marketability of title, of the property subject
thereto.
(j) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the businesses
of the Seller as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by the
Seller immediately prior to the Closing hereunder will be owned or
available for use by the Buyer on identical terms and conditions
immediately subsequent to the Closing hereunder. The Seller has
taken all necessary or desirable action to protect each item of
Intellectual Property that it owns or uses.
(i) The Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and the Seller
has never received any charge, complaint, claim, or notice
alleging any such interference, infringement,
misappropriation, or violation. To the Knowledge of the
Seller, no third party has interfered with,
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infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of the Seller.
(ii) Section 2(j) of the Disclosure Schedule identifies each
patent, trademark or copyright registration which has been
issued to the Seller with respect to any of its Intellectual
Property, identifies each pending patent, trademark or
copyright application for registration which the Seller has
made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which
the Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions).
The Seller has delivered to the Buyer correct and complete
copies of all such patents, trademarks or copyright
registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the
Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if
applicable) of each such item. With respect to each item of
Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in
and to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the
Knowledge of the Seller, is threatened which challenges
the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person
or entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the
item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and
that the Seller uses pursuant to license, sublicense,
agreement, or permission including, but not limited to the
call letters of the Station. The Seller has supplied the Buyer
with correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date).
With respect to each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission
covering the item is, and following the Closing will
continue to be on identical terms, legal, valid,
binding, enforceable, and in full force and effect;
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(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated
any provision thereof), and no event has occurred which
with notice or lapse of time would constitute a breach
or default or permit termination, modification, or
acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above
are true and correct with respect to the underlying
license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree,
stipulation, injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the
Knowledge of the Seller, is threatened which challenges
the legality, validity, or enforceability of the
underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the
underlying item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar
right with respect to the license, sublicense,
agreement, or permission.
(iv) The Seller has no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or
other third parties have developed which reasonably could be
expected to supersede or make obsolete any product or process
of any of the Seller.
(k) Contracts. Other than Advertising Contracts, Section 2(k) of the
Disclosure Schedule lists the following contracts, agreements, and
other written arrangements to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to
third parties providing for lease payments in excess of $1,000
per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products,
or other personal property or for the furnishing or receipt of
services which either calls for performance over a period of
more than one year or involves more than the sum of $1,000;
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(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed,
or guaranteed (or may create, incur, assume, or guarantee)
indebtedness (including capitalized lease obligations)
involving more than $1,000 or under which it has imposed (or
may impose) a Security Interest on any of its assets, tangible
or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the
nature of a collective bargaining agreement, consulting
agreement, employment agreement, or severance agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the
assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the
Seller or the Station; and
(viii) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered
into in the Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement listed in Section 2(k) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed: (A) the
written arrangement is legal, valid, binding, enforceable, and in full force and
effect; (B) the written arrangement will continue to be legal, valid, binding,
and enforceable and in full force and effect on identical terms following the
Closing; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the written arrangement; and
(D) no party has repudiated any provision of the written arrangement. The Seller
is not a party to any verbal contract, agreement, or other arrangement which, if
reduced to written form, would be required to be listed in Section 2(k) of the
Disclosure Schedule under the terms of this Section 2(k).
(l) Commission Licenses and Compliance with Commission
Requirements.
(i) All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental
bodies, including, without limitation, the FCC Licenses, used
or useful in the operation of the Station as they are now
being operated (A) are in full force and effect, (B) are
unimpaired by any acts or omissions of the Seller or the
Seller's employees or agents, (C) are free and
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clear of any restrictions which might limit the full operation
of the Station, and (D) are detailed in Section 2(l) of the
Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(l) of
the Disclosure Schedule also sets forth, without limitation,
the date of the last renewal, the expiration date thereof, and
any conditions or contingencies related thereto. Except as set
forth in Section 2(l) of the Disclosure Schedule, no condition
exists or event has occurred that permits, or after notice or
lapse of time, or both, would permit, the revocation or
termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction
or limitation upon the operation of the Station as now
conducted. Except as set forth in Section 2(l) of the
Disclosure Schedule, the Seller is not aware of any reason why
the FCC licenses might not be renewed in the ordinary course
or revoked.
(ii) The Station is in compliance with the current FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC
License would constitute a major environmental action under
the FCC's rules or policies. Access to the Station's
transmission facilities is restricted in accordance with the
policies of the FCC.
(iii) Except as set forth in Section 2(l) of the Disclosure
Schedule, to the best of the Seller's Knowledge, the Seller is
not the subject of any FCC or other governmental investigation
or any notice of violation or order, or any material
complaint, objection, petition to deny, or opposition issued
by or filed with the FCC or any other governmental authority
in connection with the operation of or authorization for the
Station, and there are no proceedings (other than rulemaking
proceedings of general applicability) before the FCC or any
other governmental authority that could adversely affect any
of the FCC Licenses or the authorizations listed in Section
2(l) of the Disclosures Schedule.
(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Station all material
reports, applications, documents, instruments, and other
information required to be filed, and will continue to make
such filings through the Closing Date.
(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and
workers' compensation coverage and bond and surety arrangements) to
which the Seller is a party, a named insured, or otherwise the
beneficiary of coverage:
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(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) neither the Seller
nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination, modification, or acceleration, under the
policy; and (C) no party to the policy has repudiated any provision thereof. The
Seller has been covered during the past fifteen (15) months by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during that three-year period. Section 2(m) of the Disclosure Schedule
describes any self-insurance arrangements affecting the Seller.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied
judgement, order, decree, stipulation, injunction, or charge; or
(ii) is a party or, to the Knowledge of the Seller, is threatened to
be made a party to any charge, complaint, action, suit, proceeding,
hearing, or investigation of or in any court or quasijudicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 2(n) of the Disclosure Schedule
could result in any adverse change in the assets, Liabilities,
business, financial condition, operations, results of operations, or
future prospects of the Seller or the Station taken as a whole. The
Seller has no reason to believe that any such charge, complaint,
action, suit, proceeding, hearing, or investigation may be brought
or threatened against the Seller.
(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage
rates and all other forms of compensation paid for work at the
Station of each employee of Seller. To the Knowledge of the Seller,
no key employee or group of employees has any plans to terminate
employment with the Seller. The Seller is not a party to or bound by
any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. To the
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Seller's knowledge the Seller has not committed any unfair labor
practice. The Seller has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor
union with respect to employees of the Seller.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans and other executive compensation plans
that the Seller maintains or to which the Seller contributes for the
benefit of any current or former employee of the Seller. Each
Employee Benefit Plan (and each related trust or insurance contract)
complies in form and in operation in all respects with the
applicable requirements of ERISA and the Code. The Seller does not
contribute to, ever has contributed to, or ever has been required to
contribute to any Multiemployer Plan. The Seller has not incurred
and has no reason to expect that it will incur any Liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV
of ERISA (including any withdrawal liability) or under the Code with
respect to any Employee Pension Benefit Plan that the Seller
maintains or ever has maintained or to which it contributes, ever
has contributed, or ever has been required to contribute. The Seller
does not maintain and has not maintained, contributed or been
required to contribute to any Employee Welfare Benefit Plan
providing health, accident, or life insurance benefits to former
employees, their spouses, or their dependents (other than in
accordance with Code Sec. 4980B).
(q) Environment, Health, and Safety.
(i) The Seller has complied with all material laws (including
rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof) concerning the
environment, public health and safety, and employee health and
safety, and no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice has been
filed or commenced against any of them alleging any failure to
comply with any such law or regulation.
(ii) The Seller has no Liability (and to the Knowledge of the
Seller there is no Basis related to the past or present
operations, and its respective predecessors for any present or
future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Seller giving rise
to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Federal Water
Pollution Control Act of 1972, the Clean Air Act of 1970, the
Safe Drinking Water Act of 1974, the Toxic Substances Control
Act of 1976, the Refuse Act of 1899, or the Emergency Planning
and Community Right-to-Know Act of 1986 (each as amended), or
any other law (or rule or regulation thereunder) of any
federal, state, local, or foreign government (or agency
thereof, concerning release or threatened release of hazardous
substances, public health and safety, or pollution or
protection of the
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environment, or for damage to any site, location, or body of
water (surface or subsurface) or for illness or personal
injury.
(iii) The Seller has no Liability (and to the Knowledge of the
Seller there is no Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against the Seller giving rise to any
Liability) under the Occupational Safety and Health Act, as
amended, or any other law (or rule or regulation thereunder)
of any federal, state, local, or foreign government (or agency
thereof) concerning employee health and safety, or for any
illness of or personal injury to any employee.
(iv) The Seller has obtained and has been in material compliance
with all of the terms and conditions of all permits, licenses,
and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all federal, state,
local, and foreign laws (including rules, regulations, codes,
plans, judgments, orders, decrees, stipulations, injunctions,
and charges thereunder) relating to public health and safety,
worker health and safety, and pollution or protection of the
environment, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or
wastes into ambient air, surface water, ground water, or lands
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
(v) All properties and equipment used in the business of the
Seller have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(vi) No pollutant, contaminant, or chemical, industrial, hazardous,
or toxic material or waste ever has been buried, stored,
spilled, leaked, discharged, emitted, or released on any real
property that the Seller owns or ever has owned or that the
Seller leases or ever has leased.
(r) Legal Compliance.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal,
state, and local governments (and all agencies thereof, and no
charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or
commenced against the Seller alleging any failure to comply
with any such law or regulation,
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including those relating to the employment of labor, employee
civil rights, and equal employment opportunities and relating
to antitrust matters.
(ii) The Seller has filed in a timely manner all reports,
documents, and other materials it was required to file (and
the information contained therein was correct and complete in
all material respects) under all applicable laws (including
rules and regulations thereunder). The Seller has possession
of all records and documents it was required to retain under
all applicable laws (including rules and regulations
thereunder).
(s) Brokers' Fees. The Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.
(t) Advertising Agreements. Section 2(t) of the Disclosure Schedule
lists all Advertising Contracts and the amount to be paid therefore
as of __________, 1997. Other than to employees of the Seller or as
disclosed in Section 2(t) of the Disclosure Schedule, no commission
or other form of remuneration is paid by the Seller in connection
with any Advertising Contract and any remuneration so listed shall
be paid by the Seller at or prior to Closing. No advertiser of the
Station or a party to an Advertising Contract listed in Section 2(t)
of the Disclosure Schedule has indicated within the past year that
it will stop or decrease the rate of buying services from the
Station or the Seller.
(u) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to
state any fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyer. The Operating Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada. The Licensing Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada.
(b) Authorization of Transaction. The Buyer has full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. This
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Agreement constitutes the valid and legally binding obligation of
the Buyer, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 1 above), will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to
which the Buyer is subject or any provision of its articles of
organization or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or
other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject. Other than the
Assignment Application described in Section 4(b), the Buyer does not
need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 1 above).
(d) Brokers' Fees. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which the
Seller could become liable or obligated.
(e) Qualification of the Licensing Company. The Licensing Company
knows of no fact that would under Telecommunications Act of 1996 and
the existing FCC Rules, or Policies disqualify the Licensing Company
as owner and operator of the Station.
4. Pre-Closing Covenants. Except as may be modified pursuant to the Local
Marketing Agreement, the Parties agree as follows with respect to the period
between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper,
or advisable to consummate and make effective the transactions
contemplated by this Agreement (including satisfying the closing
conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Licensing Company
shall jointly file with the FCC an application for assignment of the
FCC Licenses, permits and authorizations pertaining to the Station
from the Seller to the Licensing Company (the "Assignment
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Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the
Seller and the Licensing Company. The Seller and the Licensing
Company shall each pay its own attorneys' fees. The Seller and the
Licensing Company shall thereafter prosecute the Assignment
Application with all reasonable diligence and otherwise use the
commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither
the Seller nor the Licensing Company shall have any obligation to
satisfy complainants or the FCC by taking any steps which would have
material adverse effect upon the Station or upon any Affiliate). If
the FCC imposes any condition on either the Seller or the Licensing
Company to the Assignment Application, such party shall use
commercially reasonable efforts to comply with such condition,
provided that neither shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Station
or any Affiliate. The Seller and the Licensing Company shall jointly
oppose any requests for reconsideration or judicial review of FCC
approval of the Assignment Application and shall jointly request
from the FCC extension of the effective period of FCC approval of
the Assignment Application if the Closing shall not have occurred
prior to the expiration of the original effective period of the FCC
Consent. Nothing in this Section 4(b) shall be construed to limit
any Party's right to terminate this Agreement pursuant to Section 9
of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyer to meet with its
employees prior to the Closing Date. The Buyer may, at its option,
and upon its terms and conditions, extend offers of employment to
all or any of the Seller's employees effective on the Closing Date.
The Seller will not take any action to preclude or discourage any of
the Seller's employees from accepting any offer of employment
extended by the Buyer.
(d) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its commercially reasonable efforts
to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters pertaining to the Seller
disclosed or required to be disclosed in the Disclosure Schedule.
Each of the Parties will file any notification and report forms and
related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its
best efforts to obtain an early termination of the applicable
waiting period and will make any further filings pursuant thereto
that may be necessary, proper, or advisable. Each of the Parties
will take any additional action that may be necessary, proper, or
advisable in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make,
or obtain.
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(e) Operation of Business. The Seller will not engage in any
practice, take any action, embark on any course of inaction, or
enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, the Seller will
not engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction of the sort described in
Section 2(f) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations for goods or services under its Advertising Contracts
such that the outstanding aggregate balance owing thereunder as of
the Closing Date shall not exceed Five Thousand Dollars ($5,000)
worth of air time without the Buyer's consent. At Closing, the
Seller shall deliver to the Operating Company a schedule, certified
by an officer of the Seller, reflecting the aggregate outstanding
balance under all such Advertising Contracts as of the Closing Date.
(g) Operating Statements. The Seller shall deliver to the Buyer, for
the Buyer's informational purposes only, monthly unaudited
statements of operating revenues and operating expenses of the
Station within ten (10) days after each such statement is prepared
by or for the Seller.
(h) Contracts. The Seller will not without the prior written consent
of the Operating Company amend, change, or modify any of the
contracts listed on Section 2(l) of the Disclosure Schedule in any
material respect. The Seller will not without prior written consent
of the Operating Company enter into any new contracts respecting the
Station, except (i) contracts for the sale of time on the Station
for Cash, goods or services which comply with the representations
and warranties pertaining to such contracts set forth in Section
2(u), (ii) contracts entered into in the Ordinary Course of Business
which are cancelable on not more than thirty-one (31) days' notice
without penalty or premium, and (iii) contracts entered into in the
Ordinary Course of Business each of which does not involve more than
Five Thousand Dollars ($5,000) or all of which do not involve more
than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Station. The Seller shall operate the Station in
compliance with the FCC Licenses and the rules and regulations of
the FCC, and the FCC Licenses shall at all times remain in full
force and effect. The Seller shall file with the FCC all material
reports, applications, documents, instruments and other information
required to be filed in connection with the operation of the
Station.
(j) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its physical facilities,
working conditions, relationships with lessors, licensers,
advertisers, suppliers, customers, and employees, all of the
confidential information, call letters and trade secrets of the
Station, and the FCC Licenses.
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(k) Credit and Receivables. The Seller will follow its usual and
customary policies with respect to extending credit for Advertising
Contracts and collecting accounts receivable arising from such
extension of credit.
(l) Full Access and Consultation. The Seller will permit
representatives of the Buyer to have full access at all reasonable
times, and in a manner so as not to interfere with the normal
business operations of the Station, to all premises, properties,
books, records, contracts, Tax records, and documents of or
pertaining to the Seller. The Seller will consult with the Buyer's
management with a view to informing Buyer's management as to the
operations, management and business of the Station.
(m) Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material development affecting the
assets, Liabilities, business, financial condition, operations,
results of operations, or future prospects of the Seller. Each Party
will give prompt written notice to the other of any material
development affecting the ability of the Parties to consummate the
transactions contemplated by this Agreement. No disclosure by any
Party pursuant to this Section 4(n), however, shall be deemed to
amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person
relating to any (A) liquidation, dissolution, or recapitalization,
(B) merger or consolidation, (C) acquisition or purchase of
securities or assets, or (D) similar transaction or business
combination involving any of the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other
manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyer immediately if any
person makes any proposal, offer, inquiry, or contact with respect
to any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. The
Seller will obtain with respect to each parcel of real estate that
the Seller leases, (i) an owner's or a leasehold owner's policy
issued by a title insurer reasonably satisfactory to the Operating
Company, in an amount equal to the fair market value of such real
property (including all improvements located thereon), insuring
leasehold title to such real property in the Operating Company as of
the Closing subject only to the title exceptions which do not impair
the current use, occupancy or value or the marketability of title of
the property and are disclosed in Sections 2(i) and 2(j) of the
Disclosure Schedule, together with such endorsements for zoning,
contiguity, public access and extended coverage as the Operating
Company reasonably requests; (ii) a current survey of the real
property certified to the Operating Company, prepared by a licensed
surveyor and conforming to current ALTA Minimum Detail Requirements
for Land Title Surveys, disclosing the location of all improvements,
easements, party
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walls, sidewalks, roadways, utility lines, and other matters shown
customarily on such surveys, and showing access affirmatively to
public streets and roads (the "Survey") which shall not disclose any
survey defect or encroachment from or onto the real property which
has not been cured or insured over prior to the Closing; and (iii) a
current Phase I environmental site assessment from an environmental
consultant or engineer reasonably satisfactory to the Operating
Company which shall not disclose or recommend any action with
respect to any condition to be remediated or investigated or any
contamination on the site assessed. The Operating Company and the
Seller will each pay one-half (1/2) of the costs of these title
policies, surveys and environmental assessments.
(p) Control of Station. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its
consent and approval to the Assignment Application. Except as
modified by the terms and conditions of the Local Marketing
Agreement, between the date of this Agreement and the Closing Date,
the Operating Company and its employees or agents shall not directly
or indirectly control, supervise, or direct, or attempt to control,
supervise, or direct, the operation of the Station, and such
operation shall be the sole responsibility of and in the control of
the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing.
In the event of any such loss, damage, or destruction the Seller
will promptly notify the Buyer of all particulars thereof, stating
the cause thereof (if known) and the extent to which the cost of
restoration, replacement and repair of the Acquired Assets lost,
damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will repair or replace such
Acquired Assets as soon as possible after loss, damage or
destruction thereof and shall use its best efforts to restore as
promptly as possible transmissions as authorized in the FCC
Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or
replacement. If repair or replacement cannot be accomplished within
sixty (60) days of the date of the Seller's notice to the Buyer, and
the Buyer determines that the Seller's failure to repair or replace,
alone or in the aggregate, would have a material adverse effect on
the operation of the Station:
(i) the Buyer may elect to terminate this Agreement; or
(ii) the Buyer may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyer, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's notice
to the Buyer, in which case either party may terminate this Agreement; or
(iii) the Buyer may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to the Buyer all
rights under any insurance claims
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covering the loss, damage or destruction and payment over to the Buyer any
proceeds under any such insurance policies, previously received by the Seller
with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 2
above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to
those relating to transmitter and studio leases, all of the
title insurance commitments, and endorsements specified in
Section 4(l) above; all of the surveys specified in Section
4(l) above; and all the Phase I environmental site assessments
described in Section 4(l) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction,
or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of
the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the
right of the Buyer to own, operate, or control the Acquired
Assets (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified
above in Section 5(a)(i)-(iv) is satisfied in all respects;
(vi) each of the Assignment Applications shall have been approved
by a Final Order of the FCC, all applicable waiting periods
(and any extensions thereof) under the Hart-Scott-Rodino Act
shall have expired or otherwise been terminated, and the
Seller and the Buyer shall have received all governmental
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approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
(vii) the Buyer shall have completed its review and verification of
the Seller's Financial Statements, its review of the FCC
Licenses of the Station, its engineering audit of the Seller's
studio and transmitter facilities and equipment, all with
results satisfactory to the Buyer in its sole judgment;
(viii) the relevant parties shall have entered into the Postclosing
Agreement;
(ix) the relevant parties shall have entered into the Local
Marketing Agreement;
(x) the Buyer shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit G
attached hereto, addressed to the Buyer and dated as of the
Closing Date; and
(xi) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 5(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction,
or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any
of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in
effect);
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(iv) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified
above in Section 5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Assignment Applications shall have been approved
by a Final Order of the FCC, all applicable waiting periods
(and any extensions thereof) under the Hart-Scott-Rodino Act
shall have expired or otherwise been terminated, and the
Seller and the Buyer shall have received all governmental
approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement;
(vii) the relevant parties shall have entered into the Local
Marketing Agreement; and
(viii) all actions to be taken by the Buyer in connection with the
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the
Seller.
The Seller may waive any condition specified in this Section 5(b) if it executes
a writing so stating at or prior to the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments
and documents) as any other Party reasonably may request, all the
sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 7
below).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand
in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing
Date involving the Seller, each of the other Parties will cooperate
with the contesting or defending Party and its counsel in the
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contest or defense, make available his or its personnel, and provide
such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification
therefor under Section 7 below).
(c) Adjustments. Operation of the Station and the income and
expenses attributable thereto up through the close of business on
the day before the Closing Date shall be for the account of the
Seller and thereafter for the account of the Operating Company. Such
items as employee salaries, vacation, sick day and personal time
accruals, and fringe benefits, power and utilities charges,
insurance real and personal property taxes, prepared expenses,
deposits, music license fees, and rents and payments pertaining to
the leases and contracts being assigned hereunder (inducing any
contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Operating
Company as of the Closing Date in accordance with the foregoing
principle. Contractual arrangements that do not reflect an equal
rate of compensation to the station over the term of the Agreement
shall be equitably adjusted as of the Closing Date. The prorations
and adjustments hereunder shall be made and paid insofar as feasible
on the Closing Date, with a final settlement sixty (60) days after
the Closing Date. In the event of any disputes between the Parties
as to such adjustments, the amounts not in dispute shall nonetheless
be paid at such time and such disputes shall be determined by the
accounting firm and the fees and expenses of such accounting firm
shall be paid one-half (1/2) by the Seller and one-half (1/2) by the
Operating Company.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the
Seller contained in Section 2 of this Agreement (other than the
representations and warranties of the Seller contained in Sections
2(a), 2(b), 2(c), 2(g), 2(q) and 2(r) hereof or relating to the
Seller's title to the Acquired Assets) shall survive the Closing
(even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of three (3) years
thereafter. All of the other representations, warranties, and
covenants of the Buyer and the Seller contained in this Agreement
(including the representations and warranties of the Seller
contained in Sections 2(a), 2(b), 2(c), 2(g), 2(q) and 2(r) hereof
or relating to the Seller's title to the Acquired Assets) and in
this Agreement shall survive the Closing (even if the damaged Party
knew or had reason to know of any misrepresentation or breach of
warranty or covenant at the time of Closing) and continue in full
force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyer. Except
as described below in Section 7(e) with respect to a breach of a
covenant prior to the Closing Date, the Seller agrees to indemnify
the Buyer from and against the entirety
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of any Adverse Consequences the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by:
(i) any breach of any of the Seller's representations, warranties,
and covenants contained in this Agreement (so long as the
particular representation, warranty, or covenant survives the
Closing and the Buyer makes a written claim for
indemnification within the applicable survival period);
(ii) any Liability of the Seller which is not an Assumed Liability;
or
(iii) any Liability of the Buyer arising by operation of law
(including under any bulk transfer law of any jurisdiction or
under any common law doctrine of defacto merger or successor
liability) which is not an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Seller. Except
as described below in Section 7(e) with respect to a breach of a
covenant prior to the Closing Date, the Buyer agrees to indemnify
the Seller from and against the entirety of any Adverse Consequences
the Seller may suffer resulting from, arising out of, relating to,
in the nature of, or caused by (i) the breach of any of the Buyer's
representations, warranties, and covenants contained in this
Agreement (so long as the particular representation, warranty, or
covenant survives the Closing and the Seller makes a written claim
for indemnification within the applicable survival period) or (ii)
any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and
agrees that the Station to be acquired pursuant to this Agreement
are unique and that the Buyer would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the Buyer shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter (subject to the
provisions set forth in Section 10(o) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each
of the Parties acknowledge and agrees that not withstanding the
provisions in Section 7(e) with respect to the remedy of liquidated
damages upon breach of a covenant of this agreement prior to the
Closing, money damages would not be an adequate remedy for a breach
of any provision of this Agreement.
(e) Liquidated Damages. The Buyer and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are
not closed because of a default by either Party, the Adverse
Consequences as a result of such a default may be difficult, if not
impossible, to ascertain. Accordingly, in lieu of relief pursuant to
Sections 7(b) or 7(c), the non-defaulting Party shall receive from
the
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defaulting Party for such default an amount equal to five percent
(5%) of the Purchase Price as liquidated damages without the need
for proof of damages, subject only to successfully proving in a
court of competent jurisdiction that the other Party has materially
breached this Agreement and that the transactions contemplated
thereby have not occurred; provided, however, that the Buyer retains
the option to seek and recover (pursuant to Section 7(d)), in lieu
of the remedy of liquidated damages pursuant to this Section 7(e),
the remedy of specific performance with respect to a breach of this
Agreement. The Buyer and the Seller agree to pay said sum of
liquidated damages within ten (10) days of the date that the
non-defaulting party obtains such a judgment.
(f) Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which
may give rise to a claim for indemnification against any other Party
(the "Indemnifying Party") under this Section 7, then the
Indemnified Party shall notify the Indemnifying Party thereof
promptly; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is damaged. In the event any Indemnifying Party notifies the
Indemnified Party within 15 days after the Indemnified Party has
given notice of the matter that the Indemnifying Party is assuming
the defense thereof, (i) the Indemnifying Party will defend the
Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost
and expense (except that the Indemnifying Party will be responsible
for the fees and expenses of the separate co-counsel to the extent
the Indemnified Party concludes reasonably that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii)
the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (iv) the Indemnifying Party will not consent to
the entry of any judgment with respect to the matter, or enter into
any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party
from all Liability with respect thereto, without the written consent
of the Indemnified Party (not to be withheld unreasonably). In the
event the Indemnifying Party does not notify the Indemnified Party
within 15 days after the Indemnified Party has given notice of the
matter that the Indemnifying Party is assuming the defense thereof,
however, the Indemnified Party may defend against, or enter into any
settlement with respect to, the matter in any manner it reasonably
may deem appropriate.
(g) Other Indemnification Provisions. The foregoing indemnification
provisions of Sections 7(a), 7(b), 7(c) and 7(f) are in addition to,
and not in derogation of, any statutory or common law remedy any
Party may have for breach of representation, warranty, or covenant.
The remedies provided in Sections 7(d) and
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7(e) shall be the exclusive remedies of the Parties prior to the
Closing for any breach of representation, warranty or covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller (other than Retained Assets) that are used or useful in
the operation of the Station, including but not limited to all of its (a) real
property, leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenants thereto; (b) tangible personal property
(such as computers, electrical devices, monitoring equipment, test equipment,
switching, terminal and studio equipment, transmitters, transformers, receivers,
broadcast facilities, inventories of compact disks, records, tapes and other
supplies, vehicles, and all assignable warranties with respect thereto; (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions; (d) rights under orders and agreements
(including those barter agreements identified on the Disclosure Schedule) now
existing or entered into in the Ordinary Course of Business for the sale of
advertising time on the Station; (e) contracts, indentures, Security Interests,
guaranties, other similar arrangements, and rights thereunder; (f) call letters
of the Station, jingles, logos, slogans, and business goodwill of the Station;
(g) Licenses and similar rights obtained from governments and governmental
agencies; and (h) FCC logs and records and all other books, records, ledgers,
logs, files, documents, correspondence, lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Advertising Contracts" means any arrangement between the Seller and any
third party under which the Seller has created, incurred, assumed, or guaranteed
an obligation to provide advertising or air time on the Station.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
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"Assumed Liabilities" means obligations of the Seller under the licenses,
sublicenses, leases, subleases, contracts, and other arrangements referred to in
the definition of Acquired Assets either: (a) to furnish services, and other
non-Cash benefits to another party after the Closing; or (b) to pay for goods,
services, and other non-Cash benefits that another party will furnish to it
after the Closing. The Assumed Liabilities shall not include any Retained
Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means The Whittle Agency.
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<PAGE>
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(f) above.
"Indemnifying Party" has the meaning set forth in Section 7(f) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
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<PAGE>
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Licensing Company" has the meaning set forth in the preface above.
"Local Marketing Agreement means the Local Marketing Agreement entered
into concurrently herewith and attached hereto as Exhibit F.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Operating Company" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post-Closing Agreement " means the Post-Closing Agreement with Seller
Members entered into concurrently herewith and attached hereto as Exhibit D.
"Process Agent" has the meaning set forth in Section 10(o) below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Retained Assets" means (a) the limited liability company charter,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, membership transfer books, blank
membership certificates, and other documents relating to the organization,
maintenance, and existence of the Seller as a limited liability company; (b) any
of the rights of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyer on the other hand entered into
on or after the date of this Agreement); (c) accounts, notes and other
receivables; and (d) the Seller's Cash.
"Retained Liabilities" means any other obligations or liabilities of
Seller, including but not limited to: (a) any Liability relating to the
ownership or operation (except as modified by the Local
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<PAGE>
Marketing Agreement) of the Station prior to the Closing; (b) any Liability of
the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (c) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby; or (d) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyer on the other hand entered into
on or after the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Station" means the radio broadcast station having the call letters
WWLD-FM, licensed by the FCC to operate in Tallahassee, Florida.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 4(j) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
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<PAGE>
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the
event the Seller is in breach of any material representation,
warranty, or covenant contained in this Agreement in any
material respect if such breach remains uncured for twenty
(20) days after notice of breach is received from the Buyer;
(iii) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing in the
event the Buyer is in breach of any material representation,
warranty or covenant contained in this Agreement in any
material respects if such breach remains uncured for twenty
(20) days after notice of breach is received from the Seller;
(iv) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the
Closing shall not have occurred on or before the 270th day
following the date of this Agreement by reason of the failure
of any condition precedent under Section 5(a) hereof (unless
the failure results primarily from the Buyer itself breaching
any representation, warranty, or covenant contained in this
Agreement);
(v) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing if the
Closing shall not have occurred on or before the 270th day
following the date of this Agreement by reason of the failure
of any condition precedent under Section 5(b) hereof (unless
the failure results primarily from the Seller itself breaching
any representation, warranty, or covenant contained in this
Agreement);or
(vi) the Buyer or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties
hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants
of the Parties contained in this Agreement shall survive the Closing
hereunder as and to the extent provided in the Post-Closing
Agreement with the members of the Seller.
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<PAGE>
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of
the other Party; provided, however, that any Party may make any
public disclosure it believes in good faith is required by law or
regulation (in which case the disclosing Party will advise the other
Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the
Parties and supersedes any prior understandings, agreements, or
representations by or between the Parties, written or oral, that may
have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign
either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the
other Party, provided that the Buyer may assign all of its right,
title and interest in, to and under this Agreement to one or more
affiliated entities, who shall then, subject to the terms and
conditions of this Agreement, have the right to receive the Acquired
Assets, assume the Assumed Liabilities, and to pay to the Seller the
Purchase Price therefor, and provided further, that no such
assignment shall materially delay the Assignment Application..
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
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<PAGE>
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered
or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Seller: Tally Radio, LLC
3113 Clint Moore Road
#206
Boca Raton, FL 33496
If to the Buyer: Cumulus Licensing Corp.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrance J. Leahy
Copy to: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts)
of the State of Florida.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by the Buyer and the Seller. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to
-35-
<PAGE>
extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any
rights arising by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid
or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
(l) Expenses. The Buyer and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby, other than as set forth in Section 4(b) with regard to the
Assignment Applications. The Seller will pay all income taxes,
transfer or sales taxes and other recording or similar fees
necessary to vest title to each of the Acquired Assets in the Buyer.
(m) Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against
any Party. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty
made herein unless the Disclosure Schedule identifies the exception
with reasonable particularity and describes the relevant facts in
reasonable detail. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that
there exists another representation, warranty, or covenant relating
to the same subject matter (regardless of the relative levels of
specificity) which the Party has not breached shall not detract from
or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
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<PAGE>
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Tallahassee,
Florida, in any action or proceeding arising out of or relating to
this Agreement, agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court, and agrees
not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. The
Seller and the Buyer each appoint CT Corporation (each a "Process
Agent") as their respective agents to receive on their behalf
service of copies of the summons and complaint and any other process
that might be served in the action or proceeding. Any Party may make
service on the other Party by sending or delivering a copy of the
process (i) to the Party to be served at the address and in the
manner provided for the giving of notices in Section 10(h) above or
(ii) to the Party to be served in care of the appropriate Process
Agent at the address and in the manner provided for the giving of
notices in Section 10(h) above. Nothing in this Section 10(p),
however, shall affect the right of any Party to serve legal process
in any other manner permitted by law. Each Party agrees that a final
judgment in any action or proceeding so brought shall be conclusive
and may be enforced by suit on the judgment or in any other manner
provided by law.
(p) Bulk Transfer Laws. The Seller has, or will as of the Closing
Date, comply with the provisions of any bulk transfer laws of
Florida or any other jurisdiction applicable to the transactions
contemplated by this Agreement.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By: ____________________________
____________________________ (printed)
Title: ____________________________
"Operating Company"
CUMULUS LICENSING CORP.
By: ____________________________
____________________________ (printed)
Title: ____________________________
"Licensing Company"
TALLY RADIO, LLC
By: ____________________________
____________________________ (printed)
Title: ____________________________
"Seller"
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<PAGE>
ASSET PURCHASE AGREEMENT
BETWEEN
HVS PARTNERS
AND
CUMULUS BROADCASTING, INC.
AND
CUMULUS LICENSING CORP.
August 18, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction..................................................1
(a) Purchase and Sale of Assets.................................1
(b) Assumption of Liabilities...................................1
(c) Purchase Price..............................................1
(d) Local Marketing Agreement...................................2
(e) The Closing.................................................2
(f) Deliveries at the Closing...................................2
(g) Postclosing Agreement.......................................3
(h) Lease Agreement and Purchase Option.........................3
(i) Allocation..................................................3
2. Representations and Warranties of the Seller.......................3
(a) Organization of the Seller..................................3
(b) Authorization of Transaction................................3
(c) Noncontravention............................................3
(d) Title to Acquired Assets....................................4
(e) Financial Statements........................................4
(f) Events Subsequent to .......................................4
(g) Tax Matters.................................................6
(h) Tangible Assets.............................................6
(i) Real Property...............................................7
(j) Intellectual Property.......................................8
(k) Contracts..................................................10
(l) Commission Licenses and Compliance with Commission
Requirements..............................................11
(m) Insurance..................................................11
(n) Litigation.................................................12
(o) Employees..................................................12
(p) Employee Benefits..........................................13
(q) Environment, Health, and Safety............................13
(r) Legal Compliance...........................................14
(s) Brokers' Fees..............................................15
(t) Advertising Agreements.....................................15
(u) Disclosure.................................................15
3. Representations and Warranties of the Buyer.......................15
(a) Organization of the Buyer..................................15
(b) Authorization of Transaction...............................15
(c) Noncontravention...........................................15
(d) Brokers' Fees..............................................16
4. Pre-Closing Covenants.............................................16
(a) General....................................................16
<PAGE>
(b) Assignment Applications....................................16
(c) Employment Offers..........................................17
(d) Notices and Consents.......................................17
(e) Operation of Business......................................17
(h) Contracts..................................................17
(i) Operation of Stations......................................18
(j) Preservation of Business...................................18
(l) Full Access................................................18
(m) Notice of Developments.....................................18
(n) Exclusivity................................................18
(o) Title Insurance, Surveys and Environmental Assessments.....19
(p) Control of Stations........................................19
(q) Risk of Loss...............................................19
5. Conditions to Obligation to Close.................................20
(a) Conditions to Obligation of the Buyer......................20
(b) Conditions to Obligation of the Seller.....................21
6. Post-Closing Covenants............................................22
(a) General....................................................22
(b) Litigation Support.........................................22
(c) Adjustments................................................23
(d) Severance Obligations......................................23
7. Remedies for Breaches of this Agreement...........................23
(a) Survival...................................................23
(b) Indemnification Provisions for the Benefit of the Buyer....24
(c) Indemnification Provisions for the Benefit of the Seller...24
(d) Specific Performance.......................................24
(e) Liquidated Damages.........................................24
(f) Matters Involving Third Parties............................25
(g) Other Indemnification Provisions...........................25
8. Definitions.......................................................25
9. Termination.......................................................30
(a) Termination of Agreement...................................30
(b) Effect of Termination......................................31
10. Miscellaneous....................................................31
(a) Survival...................................................31
(b) Press Releases and Announcements...........................31
(c) No Third Party Beneficiaries...............................31
(d) Entire Agreement...........................................31
-ii-
<PAGE>
(e) Succession and Assignment..................................32
(f) Counterparts...............................................32
(g) Headings...................................................32
(h) Notices....................................................32
(i) Governing Law..............................................33
(j) Amendments and Waivers.....................................33
(k) Severability...............................................33
(l) Expenses...................................................33
(m) Construction...............................................33
(n) Incorporation of Exhibits and Schedules....................34
(o) Submission to Jurisdiction.................................34
(p) Bulk Transfer Laws.........................................34
-iii-
<PAGE>
EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Forms of Assignments
Exhibit C--Form of Assumption
Exhibit D--Form of Postclosing Agreement
Exhibit E--Form of Lease Agreement and Purchase Option
Exhibit F--Allocation Schedule
Exhibit G--Form of Opinion of Counsel to the Seller
Exhibit H--Local Marketing Agreement
SCHEDULES
Description Section Reference
----------- -----------------
Exceptions To Seller's Good Title 2(d)
Financial Statements 2(e)
Events Subsequent to January 1, 1997 2(f)
Tangible Personal Property 2(h)
Real Property 2(i)
Intellectual Property 2(j)
Material Contracts 2(k)
FCC Licenses 2(l)
Insurance 2(m)
Litigation 2(n)
Employees 2(o)
Employee Benefit Plans 2(p)
Advertising Agreements 2(t)
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of August 18, 1997, by and
between Cumulus Broadcasting, Inc. a Nevada corporation (the "Operating
Company"); Cumulus Licensing Corp., a Nevada corporation (the "Licensing
Company"); and HVS Partners, a Florida general partnership (the "Seller"). The
Operating Company and the Licensing Company are collectively referred to herein
as the "Buyer". The Buyer and the Seller are referred to collectively herein as
the "Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
This Agreement contemplates a transaction in which the Buyer will purchase
substantially all of the assets (and assume certain of the liabilities) of the
Seller that are used or useful in the operation of radio stations WBZE-FM,
WHBT-AM and WHBX-FM, each licensed to operate in Tallahassee, Florida,
(collectively, the "Stations") in return for Cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the
Seller, and the Seller agrees to sell, transfer, convey, and deliver
to the Buyer, all of the Acquired Assets at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The
Buyer will not assume or have any responsibility, however, with
respect to any other obligation or Liability of the Seller not
included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyer agrees to pay to the Seller at the
Closing Fifteen Million Four Hundred Thousand and 00/100 Dollars
($15,400,000.00) (the "Purchase Price") payable as follows:
(i) on the date of this Agreement, the Buyer will deposit with the
Escrow Agent the amount of Seven Hundred Seventy Thousand and
00/100 Dollars ($770,000.00) (the "Earnest Money Deposit") by
delivery of cash payable by wire transfer or delivery of other
immediately available funds; and
(ii) on the Closing Date, the Buyer shall pay to the Seller the
amount of Thirteen Million Ninety Thousand and 00/100 Dollars
($13,090,000.00) less any
<PAGE>
amount paid by Operating Company to Seller pursuant to
Paragraph 2 of the Local Marketing Agreement by delivery of
Cash or other immediately available funds; and
(iii) on the Closing Date, the Buyer shall pay to the Seller, on
behalf of all parties to the Postclosing Agreement, the amount
of One Million Five Hundred Forty Thousand and 00/100 Dollars
($1,540,000.00) by delivery of Cash or other immediately
available funds.
The Earnest Money Deposit referenced in this Section 1(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), which
requires that such Earnest Money Deposit shall be deposited by the Escrow Agent
with a federally insured financial institution in an interest bearing account.
Interest earned on the Earnest Money Deposit shall accrue to the benefit of the
Buyer, and, together with the principal amount of the Earnest Money Deposit,
shall be payable to the Seller and credited against the Purchase Price on the
Closing Date. If this Agreement is terminated without Closing of the transaction
contemplated herein, the Earnest Money and all accrued interest shall be paid to
the Buyer or the Seller as provided in the Earnest Money Escrow Agreement.
(d) Local Marketing Agreement. Concurrent with the execution of this
Agreement, the Seller and the Operating Company shall execute the
Local Marketing Agreement which includes the terms and conditions
pursuant to which the Operating Company will operate the programming
and sale of advertising time on the Stations. The accounts
receivable of the Stations in existence as of the date of this
Agreement shall be collected pursuant to the terms and conditions of
the Local Marketing Agreement.
(e) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
the Stations in Tallahassee, Florida, commencing at 9:00 a.m. local
time on the date set by the Buyer during January, 1998, but not
earlier than the fifth (5th) business day after the FCC approval of
the Assignment Application becomes a Final Order, by which date all
other conditions to the obligations of the Parties to consummate the
transactions contemplated hereby will have been satisfied or waived
or such other date as the Parties may mutually determine (the
"Closing Date").
(f) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 5(a) below; (ii) the Buyer will
deliver to the Seller the various certificates, instruments, and
documents referred to in Section 5(b) below; (iii) the Seller will
execute, acknowledge (if appropriate), and deliver to the Buyer (A)
assignments (including real property lease assignments and
Intellectual Property transfer documents) in the forms attached
hereto as Exhibit B and (B) such other instruments of sale,
transfer, conveyance, and assignment as the Buyer and its
counsel reasonably may request;
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(iv) the Buyer will execute, acknowledge (if appropriate), and
deliver to the Seller (A) an assumption in the form attached hereto
as Exhibit C and (B) such other instruments of assumption as the
Seller and its counsel reasonably may request; and (v) the Buyer
will deliver to the Seller the consideration specified in Section
1(c) above.
(g) Postclosing Agreement. On the Closing Date, the Seller shall
execute, and shall cause all partners of the Seller to execute, a
Postclosing Agreement with the Buyer including covenants not to
compete with the Buyer in the markets served by the Stations and to
indemnify the Buyer in the form of Exhibit D attached hereto. A
portion of the Purchase Price equal to One Million Five Hundred
Forty Thousand and 00/100 Dollars ($1,540,000.00) shall be paid to
the Seller, on behalf of all parties other than the Buyer, on the
Closing Date as consideration for the agreements set forth in the
Postclosing Agreement.
(h) Lease Agreement and Purchase Option. On the Closing Date, the
Buyer and the Seller shall execute a lease agreement and a purchase
option including those terms and conditions pursuant to which the
Buyer will lease and be granted an option to purchase from the
Seller certain real property used or useful in the operation of the
Stations, the form of each of which is attached hereto at Exhibit E.
(i) Allocation. The Parties agree to allocate the Purchase Price
(and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with the allocation schedule attached hereto as Exhibit
F.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyer that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Organization of the Seller. The Seller is a general partnership
duly organized, validly existing, and in good standing under the
laws of the State of Florida. The Seller does not have any
Subsidiaries. The partners of the Seller are GHB Radio, Inc., a
Florida corporation, and TS Radio, Inc., a Florida corporation.
(b) Authorization of Transaction. The Seller has full power and
authority (including full partnership power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. Without limiting the generality of the foregoing, the
partners of the Seller have duly authorized the execution, delivery,
and performance of this Agreement by the Seller. This
Agreement
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constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 1 above), will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to
which the Seller or any partner of the Seller is subject or any
provision of the partnership agreement of the Seller or charter or
bylaws of any partner of the Seller; or (ii) conflict with, result
in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which any
of the Seller is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b), the Seller does
not need to give any notice to, make any filing with, or obtain any
Licenses, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and
assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be
released at or before Closing), the Seller has good and marketable
title to all of the Acquired Assets, free and clear of any Security
Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the
"Financial Statements"): (i) unaudited balance sheets and statements
of income, and Cash flow as of and for the fiscal years ended
December 31, 1993, December 31, 1994, December 31, 1995 and December
31, 1996, for the Seller; and (ii) unaudited statements of income,
as of and for each month during 1995 and 1996 and the months ended
January 31, February 28, March 31, and April 30, 1997 for the
Seller. The Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods
covered thereby, are correct and complete, and are consistent with
the books and records of the Seller (which books and records are
correct and complete). Without limiting the generality of the
foregoing, all material revenues and expenses of the Seller (A) are
properly reflected in the Financial Statements, (B) have arisen in
the Ordinary Course of Business, (C) are valid and subject to no
counterclaims, and (D) will be or have been collected or paid at
their recorded amounts subject only to the reserve for bad debts set
forth on the face of the most recent Financial Statements.
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(f) Events Subsequent to January 1, 1997. Since January 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule,
there has not been any adverse change in the assets, Liabilities,
business, financial condition, operations, results of operations, or
future prospects of the Seller with respect to the operation of the
Stations. Without limiting the generality of the foregoing and with
respect to the operation of the Stations since that date:
(i) the Seller has not sold, leased, transferred, or assigned any
of its material assets, tangible or intangible, other than for
a fair consideration in the Ordinary Course of Business;
(ii) the Seller has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts,
leases, subleases, licenses, and sublicenses) outside the
Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled
any contract, lease, sublease, license, or sublicense (or
series of related contracts, leases, subleases, licenses, and
sublicenses) involving more than $5,000 to which the Seller is
a party or by which it is bound;
(iv) no Security Interest has been imposed upon any of its assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of
Business;
(vi) the Seller has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of any
other person (or series of related capital investments, loans,
and acquisitions) outside the Ordinary Course of Business;
(vii) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations)
outside the Ordinary Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other
Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims)
outside the Ordinary Course of Business;
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(x) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property or
any action adversely affecting the FCC Licenses of the
Stations;
(xii) the Seller 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 giving rise
to any claim or right on its part against the person or on the
part of the person against it;
(xiii) the Seller has not entered into any employment contract,
consulting contract or severance agreement or collective
bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(xiv) the Seller has not granted any increase outside the Ordinary
Course of Business in the base compensation of any of its
directors, officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F)
medical, hospitalization, life, or other insurance, (G)
severance, or (H) other plan, contract, or commitment for any
of its directors, officers, and employees, or modified or
terminated any existing such plan, contract, or commitment;
(xvi) the Seller has not made any other change in employment terms
for any of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of
Business;
(xviii) the Seller has not paid any amount to any third party with
respect to any Liability or obligation (including any costs
and expenses the Seller has incurred or may incur in
connection with this Agreement or any of the transactions
contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing;
(xix) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary
Course of Business involving the Seller;
(xx) the Seller has not altered its credit and collection policies
or its accounting policies;
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(xxi) the Seller has not materially altered the programming, format
or call letters of the Stations, or its promotional and
marketing activities;
(xxii) the Seller has not applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in
compliance therewith and with all FCC rules and regulations;
and
(xxiii) the Seller has not committed to any of the foregoing.
(g) Tax Matters. The Seller has filed and will file all Tax Returns
that it was required to file and may be required to file. All such
Tax Returns were correct and complete in all respects. All Taxes
owed by the Seller (whether or not shown on any Tax Return) have
been paid. The Seller has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other third
party. The Sellers have not waived any statute of limitations with
respect to Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency. The Seller is not a party to a
pending Tax audit and is aware of no threatened Tax audit. No claim
has ever been made by an authority in a jurisdiction where the
Seller does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Seller that arose in connection with any
failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing by Station of all transmitter and station equipment,
vehicles and other tangible personal property used in conducting the
operation and business of the Stations. The Seller owns or leases
all tangible assets necessary for the conduct of the operation and
business thereof as presently conducted and as presently proposed to
be conducted. Each tangible asset listed in Section 2(h) of the
Disclosure Schedule is free from defects (patent and latent), has
been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is
used. No such tangible asset is in need of replacement.
(i) Real Property. The Parties acknowledge and agree that all real
property that is owned by the Seller and used or useful in the
conduct of the operations and business of the Stations is included
within the definition of Retained Assets. Section 2(i) of the
Disclosure Schedule lists and describes briefly all real property
leased or subleased to the Seller. Section 2(i) of the Disclosure
Schedule also identifies the leased or subleased properties for
which title insurance policies are to be procured in accordance with
Section 4(i) below. The Seller has delivered to the Buyer correct
and complete copies of the leases and subleases listed in Section
2(i) of the Disclosure
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Schedule (as amended to date). With respect to each lease and
sublease listed in Section 2(i) of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing will
continue to be, legal, valid, binding, enforceable, and in
full force and effect;
(ii) no party to the lease or sublease is in breach or default (or
has repudiated any provision thereof), and no event has
occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification, or
acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above
are true and correct with respect to the underlying lease;
(v) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold
or subleasehold;
(vi) to the Knowledge of the Seller, all facilities leased or
subleased thereunder have received all approvals of
governmental authorities (including licenses, permits and
zoning approvals) required in connection with the operation
thereof and have been operated and maintained in accordance
with applicable laws, rules, and regulations;
(vii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation
of said facilities; and
(viii) to the Knowledge of the Seller, the owner of the facility
leased or subleased has good and marketable title to the
parcel of real property, free and clear of any Security
Interest, easement, covenant, or other restriction, except for
recorded easements, covenants, and other restrictions impair
the current use, occupancy, or value, or the marketability of
title, of the property subject thereto.
(j) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the businesses
of the Seller as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by the
Seller immediately prior to the Closing hereunder will be owned or
available for use by the Buyer on identical terms and conditions
immediately subsequent to the
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Closing hereunder. The Seller has taken all necessary or desirable
action to protect each item of Intellectual Property that it owns or
uses.
(i) The Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and the Seller
has never received any charge, complaint, claim, or notice
alleging any such interference, infringement,
misappropriation, or violation. To the Knowledge of the
Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller.
(ii) Section 2(j) of the Disclosure Schedule identifies each
patent, trademark or copyright registration which has been
issued to the Seller with respect to any of its Intellectual
Property, identifies each pending patent, trademark or
copyright application for registration which the Seller has
made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which
the Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions).
The Seller has delivered to the Buyer correct and complete
copies of all such patents, trademarks or copyright
registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the
Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if
applicable) of each such item. With respect to each item of
Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in
and to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the
Knowledge of the Seller, is threatened which challenges
the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person
or entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the
item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and
that the Seller uses pursuant to license, sublicense,
agreement, or permission including, but not limited to the
call letters of the Stations. The Seller has supplied the
Buyer with correct and complete copies of all such licenses,
sublicenses,
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agreements, and permissions (as amended to date). With respect
to each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission
covering the item is, and following the Closing will
continue to be on identical terms, legal, valid,
binding, enforceable, and in full force and effect;
(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated
any provision thereof), and no event has occurred which
with notice or lapse of time would constitute a breach
or default or permit termination, modification, or
acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above
are true and correct with respect to the underlying
license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree,
stipulation, injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the
Knowledge of the Seller, is threatened which challenges
the legality, validity, or enforceability of the
underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the
underlying item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar
right with respect to the license, sublicense,
agreement, or permission.
(iv) The Seller has no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or
other third parties have developed which reasonably could be
expected to supersede or make obsolete any product or process
of any of the Seller.
(k) Contracts. Other than Advertising Contracts, Section 2(k) of the
Disclosure Schedule lists the following contracts, agreements, and
other written arrangements to which the Seller is a party:
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(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to
third parties providing for lease payments in excess of $1,000
per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products,
or other personal property or for the furnishing or receipt of
services which either calls for performance over a period of
more than one year or involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed,
or guaranteed (or may create, incur, assume, or guarantee)
indebtedness (including capitalized lease obligations)
involving more than $1,000 or under which it has imposed (or
may impose) a Security Interest on any of its assets, tangible
or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the
nature of a collective bargaining agreement, consulting
agreement, employment agreement, or severance agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the
assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the
Seller or the Stations; and
(viii) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered
into in the Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement listed in Section 2(k) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed: (A) the
written arrangement is legal, valid, binding, enforceable, and in full force and
effect; (B) the written arrangement will continue to be legal, valid, binding,
and enforceable and in full force and effect on identical terms following the
Closing; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the written arrangement; and
(D) no party has repudiated any provision of the written arrangement. The Seller
is not a party to any verbal contract, agreement, or other arrangement which, if
reduced to written form, would be required to be listed in Section 2(k) of the
Disclosure Schedule under the terms of this Section 2(k).
(l) Commission Licenses and Compliance with Commission
Requirements.
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(i) All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental
bodies, including, without limitation, the FCC Licenses, used
or useful in the operation of the Stations as they are now
being operated (A) are in full force and effect, (B) are
unimpaired by any acts or omissions of the Seller or the
Seller's employees or agents, (C) are free and clear of any
restrictions which might limit the full operation of the
Stations, and (D) are detailed in Section 2(l) of the
Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(l) of
the Disclosure Schedule also sets forth, without limitation,
the date of the last renewal, the expiration date thereof, and
any conditions or contingencies related thereto. Except as set
forth in Section 2(l) of the Disclosure Schedule, no condition
exists or event has occurred that permits, or after notice or
lapse of time, or both, would permit, the revocation or
termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction
or limitation upon the operation of the Stations as now
conducted. Except as set forth in Section 2(l) of the
Disclosure Schedule, the Seller is not aware of any reason why
the FCC licenses might not be renewed in the ordinary course
or revoked.
(ii) The Stations are each in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC
License would constitute a major environmental action under
the FCC's rules or policies. Access to the Stations'
transmission facilities is restricted in accordance with the
policies of the FCC.
(iii) Except as set forth in Section 2(l) of the Disclosure
Schedule, to the best of the Seller's Knowledge, the Seller is
not the subject of any FCC or other governmental investigation
or any notice of violation or order, or any material
complaint, objection, petition to deny, or opposition issued
by or filed with the FCC or any other governmental authority
in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rulemaking
proceedings of general applicability) before the FCC or any
other governmental authority that could adversely affect any
of the FCC Licenses or the authorizations listed in Section
2(l) of the Disclosures Schedule.
(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material
reports, applications, documents, instruments, and other
information required to be filed, and will continue to make
such filings through the Closing Date.
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(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and
workers' compensation coverage and bond and surety arrangements) to
which the Seller is a party, a named insured, or otherwise the
beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing Date; (C) neither the Seller nor
any other party to the policy is in breach or default (including with respect to
the payment of premiums or the giving of notices), and no event has occurred
which, with notice or the lapse of time, would constitute such a breach or
default or permit termination, modification, or acceleration, under the policy;
and (D) no party to the policy has repudiated any provision thereof. The Seller
has been covered during the past 3 years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during that
three-year period. Section 2(m) of the Disclosure Schedule describes any
self-insurance arrangements affecting the Seller.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied
judgement, order, decree, stipulation, injunction, or charge; or
(ii) is a party or, to the Knowledge of the Seller, is threatened to
be made a party to any charge, complaint, action, suit, proceeding,
hearing, or investigation of or in any court or quasijudicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 2(n) of the Disclosure Schedule
could result in any adverse change in the assets, Liabilities,
business, financial condition, operations, results of operations, or
future prospects of the Seller or the Stations taken as a whole. The
Seller has no reason to believe that any such charge, complaint,
action, suit, proceeding, hearing, or investigation may be brought
or threatened against the Seller.
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(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage
rates and all other forms of compensation paid for work at the
Stations of each employee of Seller. To the Knowledge of the Seller,
no key employee or group of employees has any plans to terminate
employment with the Seller. The Seller is not a party to or bound by
any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. To the Knowledge of the Seller, the
Seller has not committed any unfair labor practice. The Seller has
no Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to
employees of the Seller.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans and other executive compensation plans
that the Seller maintains or to which the Seller contributes for the
benefit of any current or former employee of the Seller. Each
Employee Benefit Plan (and each related trust or insurance contract)
complies in form and in operation in all respects with the
applicable requirements of ERISA and the Code. The Seller does not
contribute to, ever has contributed to, or ever has been required to
contribute to any Multiemployer Plan. The Seller has not incurred
and has no reason to expect that it will incur any Liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV
of ERISA (including any withdrawal liability) or under the Code with
respect to any Employee Pension Benefit Plan that the Seller
maintains or ever has maintained or to which it contributes, ever
has contributed, or ever has been required to contribute. The Seller
does not maintain and has not maintained, contributed or been
required to contribute to any Employee Welfare Benefit Plan
providing health, accident, or life insurance benefits to former
employees, their spouses, or their dependents (other than in
accordance with Code Sec. 4980B).
(q) Environment, Health, and Safety.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal,
state, and local governments (and all agencies thereof)
concerning the environment, public health and safety, and
employee health and safety, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against any of them
alleging any failure to comply with any such law or
regulation.
(ii) The Seller has no Liability (and to the Knowledge of the
Seller there is no Basis related to the past or present
operations, and its respective predecessors for any present or
future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Seller giving rise
to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976,
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the Federal Water Pollution Control Act of 1972, the Clean Air
Act of 1970, the Safe Drinking Water Act of 1974, the Toxic
Substances Control Act of 1976, the Refuse Act of 1899, or the
Emergency Planning and Community Right-to-Know Act of 1986
(each as amended), or any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign
government (or agency thereof, concerning release or
threatened release of hazardous substances, public health and
safety, or pollution or protection of the environment, or for
damage to any site, location, or body of water (surface or
subsurface) or for illness or personal injury.
(iii) The Seller has no Liability (and to the Knowledge of the
Seller there is no Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against the Seller giving rise to any
Liability) under the Occupational Safety and Health Act, as
amended, or any other law (or rule or regulation thereunder)
of any federal, state, local, or foreign government (or agency
thereof) concerning employee health and safety, or for any
illness of or personal injury to any employee.
(iv) The Seller has obtained and has been in compliance in all
material respects with all of the terms and conditions of all
permits, licenses, and other authorizations which are required
under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all federal, state, local, and foreign laws
(including rules, regulations, codes, plans, judgments,
orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, worker
health and safety, and pollution or protection of the
environment, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or
wastes into ambient air, surface water, ground water, or lands
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
(v) All properties and equipment used in the business of the
Seller have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans- dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(vi) No pollutant, contaminant, or chemical, industrial, hazardous,
or toxic material or waste ever has been buried, stored,
spilled, leaked, discharged, emitted, or released on any real
property that the Seller owns or ever has owned or that the
Seller leases or ever has leased.
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(r) Legal Compliance.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal,
state, and local governments (and all agencies thereof, and no
charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or
commenced against the Seller alleging any failure to comply
with any such law or regulation, including those relating to
the employment of labor, employee civil rights, and equal
employment opportunities and relating to antitrust matters.
(ii) The Seller has filed in a timely manner all reports,
documents, and other materials it was required to file (and
the information contained therein was correct and complete in
all respects) under all applicable laws (including rules and
regulations thereunder). To the Knowledge of the Seller, the
Seller has possession of all records and documents it was
required to retain under all applicable laws (including rules
and regulations thereunder).
(s) Brokers' Fees. Except for seventy-five percent (75%) of the
total fees due to The Whittle Agency (the Buyer shall pay the
remaining 25% of such fees), the Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this
Agreement.
(t) Advertising Agreements. Section 2(t) of the Disclosure Schedule
lists all Advertising Contracts and the amount to be paid therefore
as of __________, 1997. Other than to employees of the Seller or as
disclosed in Section 2(t) of the Disclosure Schedule, no commission
or other form of remuneration is paid by the Seller in connection
with any Advertising Contract and any remuneration so listed shall
be paid by the Seller at or prior to Closing. No advertiser of the
Stations or a party to an Advertising Contract listed in Section
2(t) of the Disclosure Schedule has indicated within the past year
that it will stop or decrease the rate of buying services from the
Stations or the Seller.
(u) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to
state any fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
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(a) Organization of the Buyer. The Operating Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada. The Licensing Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada.
(b) Authorization of Transaction. The Buyer has full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Buyer, enforceable in accordance
with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 1 above), will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to
which the Buyer is subject or any provision of its articles of
organization or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or
other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject. Other than the
Assignment Application described in Section 4(b), the Buyer does not
need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 1 above).
(d) Brokers' Fees. Except for twenty-five percent (25%) of the total
fees due to The Whittle Agency (the Seller shall pay the remaining
75% of such fees), the Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which the
Seller could become liable or obligated.
4. Pre-Closing Covenants. Except as may be modified pursuant to the Local
Marketing Agreement, the Parties agree as follows with respect to the period
between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper,
or advisable to consummate and make effective the transactions
contemplated by this Agreement (including satisfying the closing
conditions set forth in Section 5 below).
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(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Licensing Company
shall jointly file with the FCC an application for assignment of the
FCC Licenses, permits and authorizations pertaining to the Stations
from the Seller to the Licensing Company (the "Assignment
Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the
Seller and the Licensing Company. The Seller and the Licensing
Company shall each pay its own attorneys' fees. The Seller and the
Licensing Company shall thereafter prosecute the Assignment
Application with all reasonable diligence and otherwise use the
commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither
the Seller nor the Licensing Company shall have any obligation to
satisfy complainants or the FCC by taking any steps which would have
material adverse effect upon the Stations or upon any Affiliate). If
the FCC imposes any condition on either the Seller or the Licensing
Company to the Assignment Application, such party shall use
commercially reasonable efforts to comply with such condition,
provided that neither shall be required hereunder to comply with any
condition that would have a material adverse effect upon the
Stations or any Affiliate. The Seller and the Licensing Company
shall jointly oppose any requests for reconsideration or judicial
review of FCC approval of the Assignment Application and shall
jointly request from the FCC extension of the effective period of
FCC approval of the Assignment Application if the Closing shall not
have occurred prior to the expiration of the original effective
period of the FCC Consent. Nothing in this Section 4(b) shall be
construed to limit any Party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyer to meet with its
employees prior to the Closing Date. Not earlier than one (1) week
prior to the Closing, the Buyer may, at its option, and upon its
terms and conditions, extend offers of employment to all or any of
the Seller's employees effective on the Closing Date. The Seller
will not take any action to preclude or discourage any of the
Seller's employees from accepting any offer of employment extended
by the Buyer.
(d) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its commercially reasonable efforts
to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters pertaining to the Seller
disclosed or required to be disclosed in the Disclosure Schedule.
Each of the Parties will file any notification and report forms and
related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its
best efforts to obtain an early termination of the applicable
waiting period and will make any further filings pursuant thereto
that may be necessary, proper, or advisable. Each of the Parties
will take any additional action that may be necessary, proper, or
advisable in connection with any other notices to,
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filings with, and authorizations, consents, and approvals of
governments, governmental agencies, and third parties that it may be
required to give, make, or obtain.
(e) Operation of Business. The Seller will not engage in any
practice, take any action, embark on any course of inaction, or
enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, the Seller will
not engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction of the sort described in
Section 2(f) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations for goods or services under its Advertising Contracts
such that the outstanding aggregate balance owing thereunder as of
the Closing Date shall not exceed Five Thousand Dollars ($5,000)
worth of air time without the Buyer's consent. At Closing, the
Seller shall deliver to the Operating Company a schedule, certified
by an officer of the Seller, reflecting the aggregate outstanding
balance under all such Advertising Contracts as of the Closing Date.
(g) Operating Statements. The Seller shall deliver to the Buyer, for
the Buyer's informational purposes only, monthly unaudited
statements of operating revenues and operating expenses of the
Stations within ten (10) days after each such statement is prepared
by or for the Seller.
(h) Contracts. The Seller will not without the prior written consent
of the Operating Company amend, change, or modify any of the
contracts listed on Section 2(k) of the Disclosure Schedule in any
material respect. The Seller will not without prior written consent
of the Operating Company enter into any new contracts respecting the
Stations, except (i) contracts for the sale of time on the Stations
for Cash, goods or services which comply with the representations
and warranties pertaining to such contracts set forth in Section
2(t), (ii) contracts entered into in the Ordinary Course of Business
which are cancelable on not more than thirty-one (31) days' notice
without penalty or premium, and (iii) contracts entered into in the
Ordinary Course of Business each of which does not involve more than
Five Thousand Dollars ($5,000) or all of which do not involve more
than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Stations. The Seller shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of
the FCC, and the FCC Licenses shall at all times remain in full
force and effect. The Seller shall file with the FCC all material
reports, applications, documents, instruments and other information
required to be filed in connection with the operation of the
Stations.
(j) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its physical facilities,
working conditions,
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relationships with lessors, licensers, advertisers, suppliers,
customers, and employees, all of the confidential information, call
letters and trade secrets of the Stations, and the FCC Licenses.
(k) Credit and Receivables. The Seller will follow its usual and
customary policies with respect to extending credit for Advertising
Contracts and collecting accounts receivable arising from such
extension of credit.
(l) Full Access and Consultation. The Seller will permit
representatives of the Buyer to have full access at all reasonable
times, and in a manner so as not to interfere with the normal
business operations of the Stations, to all premises, properties,
books, records, contracts, Tax records, and documents of or
pertaining to the Seller. The Seller will consult with the Buyer's
management with a view to informing Buyer's management as to the
operations, management and business of the Stations.
(m) Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material development affecting the
assets, Liabilities, business, financial condition, operations,
results of operations, or future prospects of the Seller. Each Party
will give prompt written notice to the other of any material
development affecting the ability of the Parties to consummate the
transactions contemplated by this Agreement. No disclosure by any
Party pursuant to this Section 4(m), however, shall be deemed to
amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person
relating to any (A) liquidation, dissolution, or recapitalization,
(B) merger or consolidation, (C) acquisition or purchase of
securities or assets, or (D) similar transaction or business
combination involving any of the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other
manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyer immediately if any
person makes any proposal, offer, inquiry, or contact with respect
to any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. The
Seller will obtain with respect to each parcel of real estate that
the Seller leases, (i) a leasehold owner's policy issued by a title
insurer reasonably satisfactory to the Operating Company, in an
amount equal to the fair market value of such real property
(including all improvements located thereon), insuring leasehold
title to such real property in the Operating Company as of the
Closing subject only to the title exceptions which do not impair the
current use, occupancy or value or the marketability of title of the
property and are disclosed in Section 2(i) of the Disclosure
Schedule, together with such endorsements for zoning, contiguity,
public
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access and extended coverage as the Operating Company reasonably
requests; (ii) a current survey of the real property certified to
the Operating Company, prepared by a licensed surveyor and
conforming to current ALTA Minimum Detail Requirements for Land
Title Surveys, disclosing the location of all improvements,
easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey") which shall
not disclose any survey defect or encroachment from or onto the real
property which has not been cured or insured over prior to the
Closing; and (iii) a current Phase I environmental site assessment
from an environmental consultant or engineer reasonably satisfactory
to the Operating Company which shall not disclose or recommend any
action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. The
Operating Company and the Seller will each pay one-half (1/2) of the
costs of these title policies, surveys and environmental
assessments.
(p) Control of Stations. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its
consent and approval to the Assignment Application. Between the date
of this Agreement and the Closing Date, the Operating Company and
its employees or agents shall not directly or indirectly control,
supervise, or direct, or attempt to control, supervise, or direct,
the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing.
In the event of any such loss, damage, or destruction the Seller
will promptly notify the Buyer of all particulars thereof, stating
the cause thereof (if known) and the extent to which the cost of
restoration, replacement and repair of the Acquired Assets lost,
damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will repair or replace such
Acquired Assets as soon as possible after loss, damage or
destruction thereof and shall use its best efforts to restore as
promptly as possible transmissions as authorized in the FCC
Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or
replacement. If repair or replacement cannot be accomplished within
sixty (60) days of the date of the Seller's notice to the Buyer, and
the Buyer determines that the Seller's failure to repair or replace,
alone or in the aggregate, would have a material adverse effect on
the operation of the Stations:
(i) the Buyer may elect to terminate this Agreement; or
(ii) the Buyer may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyer, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's notice
to the Buyer, in which case either party may terminate this Agreement; or
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(iii) the Buyer may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to the Buyer all
rights under any insurance claims covering the loss, damage or destruction and
payment over to the Buyer any proceeds under any such insurance policies,
previously received by the Seller with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 2
above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to
those relating to transmitter and studio leases, all of the
title insurance commitments, and endorsements specified in
Section 4(l) above, all of the surveys specified in Section
4(l) above; and all the Phase I environmental site assessments
described in Section 4(l) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction,
or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of
the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the
right of the Buyer to own, operate, or control the Acquired
Assets (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified
above in Section 5(a)(i)-(iv) is satisfied in all respects;
(vi) each of the Assignment Applications shall have been approved
by a Final Order of the FCC, all applicable waiting periods
(and any extensions thereof)
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under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated, and the Seller and the Buyer shall
have received all governmental approvals required to transfer
all other authorizations, consents, and approvals of
governments and governmental agencies set forth in the
Disclosure Schedule;
(vii) the Buyer shall have completed its review and verification of
the Seller's Financial Statements, its review of the FCC
Licenses of the Stations, its engineering audit of the
Seller's studio and transmitter facilities and equipment, all
with results satisfactory to the Buyer in its sole judgment;
(viii) the relevant parties shall have entered into the Postclosing
Agreement;
(ix) the relevant parties shall have entered into the Lease
Agreement and Purchase Option;
(x) the Buyer shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit G
attached hereto, addressed to the Buyer and dated as of the
Closing Date; and
(xi) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 5(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction,
or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any
of the
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transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified
above in Section 5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Assignment Applications shall have been approved
by a Final Order of the FCC, all applicable waiting periods
(and any extensions thereof) under the Hart-Scott-Rodino Act
shall have expired or otherwise been terminated, and the
Seller and the Buyer shall have received all governmental
approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement;
(vii) the relevant parties shall have entered into the Lease
Agreement and Purchase Option; and
(viii) all actions to be taken by the Buyer in connection with the
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the
Seller.
The Seller may waive any condition specified in this Section 5(b) if it executes
a writing so stating at or prior to the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments
and documents) as any other Party reasonably may request, all the
sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 7
below).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand
in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status,
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condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing
Date involving the Seller, each of the other Parties will cooperate
with the contesting or defending Party and its counsel in the
contest or defense, make available his or its personnel, and provide
such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification
therefor under Section 7 below).
(c) Adjustments. Operation of the Stations and the income and
expenses attributable thereto up through the close of business on
the day before the Closing Date shall be for the account of the
Seller and thereafter for the account of the Operating Company. Such
items as employee salaries, vacation, sick day and personal time
accruals, and fringe benefits, power and utilities charges,
insurance real and personal property taxes, prepared expenses,
deposits, music license fees, and rents and payments pertaining to
the leases and contracts being assigned hereunder (including any
contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Operating
Company as of the Closing Date in accordance with the foregoing
principle. Contractual arrangements that do not reflect an equal
rate of compensation to the station over the term of the Agreement
shall be equitably adjusted as of the Closing Date. The prorations
and adjustments hereunder shall be made and paid insofar as feasible
on the Closing Date, with a final settlement sixty (60) days after
the Closing Date. In the event of any disputes between the Parties
as to such adjustments, the amounts not in dispute shall nonetheless
be paid at such time and such disputes shall be determined by the
accounting firm and the fees and expenses of such accounting firm
shall be paid one-half (1/2) by the Seller and one-half (1/2) by the
Operating Company.
(d) Severance Obligations. In the event an offer of employment is
extended by the Buyer to and accepted by an employee of the Seller
pursuant to Section 4(c) and such subsequent employment by the Buyer
is terminated within sixty (60) days from the Closing Date, the
Seller shall be exclusively responsible for, and shall pay to such
accepting employee, all severance benefits, if any (pursuant to the
Seller's practices as in effect on the Closing Date) that may be due
and owing such employee by reason of his or her employment with
either the Seller or the Buyer.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the
Seller contained in Section 2 of this Agreement (other than the
representations and warranties of the Seller contained in Sections
2(a), 2(b), 2(c), 2(g), 2(q) and 2(r) hereof or relating to the
Seller's title to the Acquired Assets) shall survive the Closing
(even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of three (3) years
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thereafter. All of the other representations, warranties, and
covenants of the Buyer and the Seller contained in this Agreement
(including the representations and warranties of the Seller
contained in Sections 2(a), 2(b), 2(c), 2(g), 2(q) and 2(r) hereof
or relating to the Seller's title to the Acquired Assets) and in
this Agreement shall survive the Closing (even if the damaged Party
knew or had reason to know of any misrepresentation or breach of
warranty or covenant at the time of Closing) and continue in full
force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyer.
Except as described below in Section 7(e) with respect to a breach
of a covenant prior to the Closing Date, the Seller agrees to indemnify the
Buyer from and against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by:
(i) any breach of any of the Seller's representations, warranties,
and covenants contained in this Agreement (so long as the
particular representation, warranty, or covenant survives the
Closing and the Buyer makes a written claim for
indemnification within the applicable survival period);
(ii) any Liability of the Seller which is not an Assumed Liability;
or
(iii) any Liability of the Buyer arising by operation of law
(including under any bulk transfer law of any jurisdiction or
under any common law doctrine of defacto merger or successor
liability) which is not an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Seller. Except
as described below in Section 7(e) with respect to a breach of a
covenant prior to the Closing Date, the Buyer agrees to indemnify
the Seller from and against the entirety of any Adverse Consequences
the Seller may suffer resulting from, arising out of, relating to,
in the nature of, or caused by (i) the breach of any of the Buyer's
representations, warranties, and covenants contained in this
Agreement (so long as the particular representation, warranty, or
covenant survives the Closing and the Seller makes a written claim
for indemnification within the applicable survival period) or (ii)
any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and
agrees that the Stations to be acquired pursuant to this Agreement
are unique and that the Buyer would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached.
Accordingly, each of the Parties agrees that the Buyer shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof
having
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jurisdiction over the Parties and the matter (subject to the
provisions set forth in Section 10(o) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each
of the Parties acknowledges and agrees that not withstanding the
provisions in Section 7(e) with respect to the remedy of liquidated
damages upon breach of a covenant of this agreement prior to the
Closing, money damages would not be an adequate remedy for a breach
of any provision of this Agreement.
(e) Liquidated Damages. The Buyer and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are
not closed because of a default by either Party, the Adverse
Consequences as a result of such a default may be difficult, if not
impossible, to ascertain. Accordingly, in lieu of relief pursuant to
Sections 7(b) or 7(c), the non-defaulting Party shall receive from
the defaulting Party for such default an amount equal to five
percent (5%) of the Purchase Price as liquidated damages without the
need for proof of damages, subject only to successfully proving in a
court of competent jurisdiction that the other Party has materially
breached this Agreement and that the transactions contemplated
thereby have not occurred; provided, however, that the Buyer retains
the option to seek and recover (pursuant to Section 7(d)) in lieu of
the remedy of liquidated damages pursuant to this Section 7(e) the
remedy of specific performance with respect to a breach of this
Agreement. The Buyer and the Seller agree to pay said sum of
liquidated damages within ten (10) days of the date that the
non-defaulting party obtains such a judgment.
(f) Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which
may give rise to a claim for indemnification against any other Party
(the "Indemnifying Party") under this Section 7, then the
Indemnified Party shall notify the Indemnifying Party thereof
promptly; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is damaged. In the event any Indemnifying Party notifies the
Indemnified Party within 15 days after the Indemnified Party has
given notice of the matter that the Indemnifying Party is assuming
the defense thereof, (i) the Indemnifying Party will defend the
Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost
and expense (except that the Indemnifying Party will be responsible
for the fees and expenses of the separate co-counsel to the extent
the Indemnified Party concludes reasonably that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii)
the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (iv) the Indemnifying Party will not consent to
the entry of any judgment with respect to the matter, or enter into
any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the
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Indemnified Party from all Liability with respect thereto, without
the written consent of the Indemnified Party (not to be withheld
unreasonably). In the event the Indemnifying Party does not notify
the Indemnified Party within 15 days after the Indemnified Party has
given notice of the matter that the Indemnifying Party is assuming
the defense thereof, however, the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in
any manner it reasonably may deem appropriate.
(g) Other Indemnification Provisions. The indemnification provisions
of Sections 7(a), 7(b), 7(c) and 7(f) are in addition to, and not in
derogation of, any statutory or common law remedy any Party may have
for breach of representation, warranty, or covenant. The remedies
provided in Sections 7(d) and 7(e) shall be the exclusive remedies
of the Parties prior to the Closing for any breach of
representation, warranty or covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller (other than Retained Assets) that are used or useful in
the operation of the Stations, including but not limited to all of its (a)
leaseholds and other interests in real property and all improvements, fixtures,
and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenants thereto; (b) tangible personal property
(such as computers, electrical devices, monitoring equipment, test equipment,
switching, terminal and studio equipment, transmitters, transformers, receivers,
broadcast facilities, inventories of compact disks, records, tapes and other
supplies, vehicles, and all assignable warranties with respect thereto; (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions; (d) rights under orders and agreements
(including those barter agreements identified on the Disclosure Schedule) now
existing or entered into in the Ordinary Course of Business for the sale of
advertising time on the Stations; (e) contracts, indentures, Security Interests,
guaranties, other similar arrangements, and rights thereunder; (f) call letters
of the Stations, jingles, logos, slogans, and business goodwill of the Stations;
(g) Licenses and similar rights obtained from governments and governmental
agencies; and (h) FCC logs and records and all other books, records, ledgers,
logs, files, documents, correspondence, lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
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"Advertising Contracts" means any arrangement between the Seller and any
third party under which the Seller has created, incurred, assumed, or guaranteed
an obligation to provide advertising or air time on any of the Stations.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means obligations of the Seller under the licenses,
sublicenses, leases, subleases, contracts, and other arrangements referred to in
the definition of Acquired Assets either: (a) to furnish services, and other
non-Cash benefits to another party after the Closing; or (b) to pay for goods,
services, and other non-Cash benefits that another party will furnish to it
after the Closing. The Assumed Liabilities shall not include any Retained
Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
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Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means The Whittle Agency.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(f) above.
"Indemnifying Party" has the meaning set forth in Section 7(f) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data,
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and documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, market and other
research information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information), (g) other proprietary rights, and (h) copies
and tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Lease Agreement and Purchase Option " means the lease agreement and
purchase option by and between the Seller and the Operating Company, a form of
each of which is attached hereto as Exhibit E.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Licensing Company" has the meaning set forth in the preface above.
"Local Marketing Agreement" means the Program Service and Time Brokerage
Agreement attached hereto as Exhibit H.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Operating Company" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post-Closing Agreement " means the Post-Closing Agreement with Seller
Partners entered into concurrently herewith and attached hereto as Exhibit D.
"Process Agent" has the meaning set forth in Section 10(o) below.
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"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Retained Assets" means (a) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (b) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyer on the
other hand entered into on or after the date of this Agreement); (c) accounts,
notes and other receivables; (d) any and all of Seller's rights with respect to
the real property located in Wakulla County, Florida and Leon County, Florida
that is the subject of the Lease Agreement and Purchase Option; and (e) the
Seller's Cash.
"Retained Liabilities" means any other obligations or liabilities of
Seller, including but not limited to: (a) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (b) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (c) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby; or (d) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyer on the other hand entered into
on or after the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WBZE-FM, WHBT- AM, and WHBX-FM, each licensed by the FCC to operate in
Tallahassee, Florida.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 4(j) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental
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(including taxes under Code Sec. 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the
event the Seller is in breach of any material representation,
warranty, or covenant contained in this Agreement in any
material respect if such breach remains uncured for twenty
(20) days after notice of breach is received from the Buyer;
(iii) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing in the
event the Buyer is in breach of any material representation,
warranty or covenant contained in this Agreement in any
material respects if such breach remains uncured for twenty
(20) days after notice of breach is received from the Seller;
(iv) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the
Closing shall not have occurred on or before the 270th day
following the date of this Agreement by reason of the failure
of any condition precedent under Section 5(a) hereof (unless
the failure results primarily from the Buyer itself breaching
any representation, warranty, or covenant contained in this
Agreement);
(v) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing if the
Closing shall not have occurred on or before the 270th day
following the date of this Agreement by reason of the failure
of any condition precedent under Section 5(b) hereof (unless
the failure results primarily from the Seller itself breaching
any representation, warranty, or covenant contained in this
Agreement);or
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(vi) the Buyer or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties
hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants
of the Parties contained in this Agreement shall survive the Closing
hereunder as and to the extent provided in the Post-Closing
Agreement with the partners of the Seller.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of
the other Party; provided, however, that any Party may make any
public disclosure it believes in good faith is required by law or
regulation (in which case the disclosing Party will advise the other
Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the
Parties and supersedes any prior understandings, agreements, or
representations by or between the Parties, written or oral, that may
have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign
either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the
other Party, provided that the Buyer may assign all of its right,
title and interest in, to and under this Agreement to one or more
affiliated entities, who shall then, subject to the terms and
conditions of this Agreement, have the right to receive the Acquired
Assets, assume the Assumed Liabilities, and to pay to the Seller the
Purchase Price therefor.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
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(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered
or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Seller: HVS Partners
8900 Harvest Square Court
Potomac, MD 20854-4474
ATTN: Ms. Gisela Huberman
Copy to:
------------------------------------
------------------------------------
------------------------------------
If to the Buyer: Cumulus Licensing Corp.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrance J. Leahy
Copy to: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
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(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts)
of the State of Florida.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by the Buyer and the Seller. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid
or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
(l) Expenses. The Buyer and the Seller, will each bear own costs and
expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other
than as set forth in Section 4(b) with regard to the Assignment
Applications. The Seller will pay all income taxes, transfer or
sales taxes and other recording or similar fees necessary to vest
title to each of the Acquired Assets in the Buyer.
(m) Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied against
any Party. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty
made herein unless the Disclosure Schedule identifies the exception
with reasonable particularity and describes the relevant facts in
reasonable detail. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that
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there exists another representation, warranty, or covenant relating
to the same subject matter (regardless of the relative levels of
specificity) which the Party has not breached shall not detract from
or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Tallahassee,
Florida, in any action or proceeding arising out of or relating to
this Agreement, agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court, and agrees
not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Each
Party appoints CT Corporation (the "Process Agent") as its agent to
receive on its behalf service of copies of the summons and complaint
and any other process that might be served in the action or
proceeding. Any Party may make service on the other Party by sending
or delivering a copy of the process (i) to the Party to be served at
the address and in the manner provided for the giving of notices in
Section 10(h) above or (ii) to the Party to be served in care of the
appropriate Process Agent at the address and in the manner provided
for the giving of notices in Section 10(h) above. Nothing in this
Section 10(p), however, shall affect the right of any Party to serve
legal process in any other manner permitted by law. Each Party
agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or
in any other manner provided by law.
(p) Bulk Transfer Laws. The Seller has, or will as of the Closing
Date, comply with the provisions of any bulk transfer laws of
Florida or any other jurisdiction applicable to the transactions
contemplated by this Agreement.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:__________________________________
__________________________________
(printed)
Title:__________________________________
"Operating Company"
CUMULUS LICENSING CORP.
By:__________________________________
__________________________________
(printed)
Title:__________________________________
"Licensing Company"
HVS PARTNERS
By:__________________________________
__________________________________
(printed)
Title:__________________________________
"Seller"
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EXHIBIT H
FORM OF
PROGRAM SERVICE AND TIME BROKERAGE AGREEMENT
This Program Service and Time Brokerage Agreement ("Agreement") entered
into this 18th day of August, 1997, by and between Cumulus Broadcasting, Inc., a
Nevada Corporation, ("Programmer"), and HVS Partners, a Florida general
partnership ("Licensee"), licensee of Radio Stations WBZE-FM, WHBX-FM, and
WHBT-FM, licensed to Tallahassee, Florida (the "Stations").
WHEREAS, Licensee holds licenses from the Federal Communications
Commission ("FCC") authorizing it to operate the Stations;
WHEREAS, the studio of the Stations is located at 109B Ridgeland Road,
Tallahassee, Florida ("Studio") and the transmitter facilities of the Stations
are located in Wakula County, Florida ("Transmitter");
WHEREAS, Licensee has available for sale broadcast time on the Stations;
WHEREAS, Programmer desires to purchase time on Licensee's Stations for
the broadcast of programming on the Stations and to sell advertising time for
inclusion in that programming; and
WHEREAS, Licensee and Programmer have entered into an Asset Purchase
Agreement of even date herewith pursuant to which Programmer and Cumulus
Licensing Corp., an affiliate of Programmer will purchase from Licensee
substantially all of the assets used or useful in the operation of the Stations
(the "Asset Purchase Agreement").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties have agreed as follows:
1. TIME SALE. Subject to the provisions of this Agreement, Licensee agrees
to make the Stations' Studio and Transmitter broadcasting facilities, and all
other equipment used or useful in the operation of the Stations, available to
Programmer for broadcast of Programmer's programs on the Stations and the
Stations' subcarriers. The Stations time made available to Programmer is
described in Exhibit A hereto.
2. PAYMENT. Programmer hereby agrees to pay Licensee compensation for the
broadcast of Programmer's programming in the amounts and at the times set forth
in Exhibit B hereto.
3. TERM. The initial term of this Agreement shall be for a period of two
(2) years, beginning on the date above written (the "Effective Date") and ending
two years later or on the day of closing of the transactions contemplated by the
Asset Purchase Agreement between the parties, whichever is earlier.
<PAGE>
4. PROGRAMS. Programmer shall furnish the artistic personnel and materials
for its programming. Programmer represents and warrants that all of the
programming, advertising and promotional material it broadcasts on the Stations
shall be in accordance with the rules, regulations and policies of the
Commission and the Communications of 1934, as amended (the "Act"). All rights
(including without limitation copyrights) to the use and ownership of the
programs shall be and remain vested in Programmer at all times.
5. ACCOUNTS RECEIVABLE AND EXISTING ADVERTISING COMMITMENTS. Licensee's
accounts receivable for performed advertising contracts shall be identified and
valued as the Effective Date. The parties agree that such accounts receivable
shall be and remain the sole property of the Licensee. Programmer agrees to use
its best efforts to collect such accounts receivable for a period of ninety (90
days) and shall remit all sums collected to Licensee once a month commencing on
the fifteenth day after the first month of operation. Any uncollected accounts
thereafter shall be returned to Licensee for collection, and Programmer shall be
relieved of any additional responsibilities with respect to such accounts. All
accounts receivable created after the Effective Date of this Agreement shall be
and remain the sole property of Programmer. Programmer shall be responsible for
the collection of such accounts receivable created after the Effective Date and
shall retain ownership of such accounts upon termination of this Agreement. All
prior existing advertising contracts signed by Licensee prior to the Effective
Date of this Agreement for commercial time to be aired during time periods to be
used by Programmer are identified on Exhibit C hereto and shall be performed by
Programmer for the benefit of Programmer.
6. STATIONS' FACILITIES.
(a) Licensee Responsibility. Licensee shall be responsible for the
Stations' compliance with all applicable provisions of the Act, the rules,
regulations and policies of the FCC and all other applicable laws. Licensee
represents that it holds all permits and authorizations necessary for the
operation of the Stations including all FCC permits and authorizations. Licensee
will continue to hold such permits and authorizations throughout the life of
this Agreement and to maintain them in full force and effect.
(b) Broadcast Output. Licensee represents that the Stations'
facilities and equipment comply with all applicable laws and regulations and
that, to its knowledge, it is not in material violation of any statute,
ordinance, rule, order or decree of any federal, state or local governmental
agency, court or authority having jurisdiction over the Licensee which would
have an adverse effect on its ability to perform this Agreement. During the term
hereof, Licensee agrees to maintain the Transmitter and other transmission
facilities and the broadcast output in compliance with the FCC's rules and
regulations to allow broadcasting at the maximum authorized power twenty-four
(24) hours a day, seven (7) days a week, except for downtime occasioned by
routine maintenance, if necessary, not to exceed two (2) hours on Sundays
between 12:00 midnight and 6:00 a.m. To the extent practicable, any maintenance
work affecting the operation of the Stations at full power shall be scheduled
upon at least forty-eight (48) hours prior notice with the approval of
Programmer, which shall not be unreasonably withheld.
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<PAGE>
7. HANDLING OF MAIL AND COMPLAINTS. Programmer shall promptly forward to
Licensee any mail which it may receive from any agency of government or any
correspondence from members of the public relating to the Stations or to any of
Programmer's programming broadcast on the Stations. Licensee shall advise
Programmer of any public or FCC complaint or inquiry concerning the programs
provided by Programmer.
8. PROGRAMMING AND OPERATIONS STANDARDS. Programmer recognizes that the
Licensee has full authority and a duty to control the operation of the Stations.
The parties agree that Licensee's authority includes, but it is not limited to,
the right to reject or refuse such portions of Programmer's programming which
Licensee reasonably believes to be contrary to the public interest. Licensee
shall have no obligation to Programmer for the exercise of its rights under this
paragraph. Whenever on the Stations' premises, Programmer and its employees and
agents shall be subject to the supervision and direction of Licensee's General
Manager and/or designated personnel.
9. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES. Programmer shall employ and
be responsible for the salaries, commissions, taxes, insurance and all other
related costs for all of its employees, agents contractors and personnel.
Employees of Programmer shall serve, however, as duty operators of the Stations,
under the supervision and direction of the Licensee's General Manager and/or
other designated personnel of Licensee, during all hours the Stations are in
operation. Licensee shall be responsible for (a) retaining a contract engineer
to maintain the Stations' broadcast and transmission equipment, (b) appointment
of a Chief Operator, and (c) compliance with the FCC's main studio staffing
requirements (including, without limitation, the Stations' General Manager).
Licensee shall be responsible for the salary, taxes, insurance and related costs
for its General Manager and Chief Operator.
10. ADVERTISING AND PROGRAMMING REVENUES. Programmer shall retain all
revenues from the sale of advertising time on the programming it broadcasts on
the Stations. Programmer will provide, make available to and shall sell time to
political candidates from the time it purchases from Licensee in strict
compliance with the Act, the rules, regulations and policies and the Commission.
11. OPERATION OF STATIONS.
(a) Full Authority and Power. Licensee shall have full authority and
power over the operation of the Stations during the term of this Agreement.
Licensee and its designated personnel shall have complete access to the
Stations' studios at all times. Licensee's General Manager shall direct the
day-to-day operation of the Stations and report to and be accountable solely to
Licensee. Licensee's Chief Operator shall oversee and direct the engineering and
technical operation of the Stations. Licensee shall retain the right to
interrupt and discontinue Programmer's programming at any time if Licensee
determines the programming is not in the public interest or violates this
Agreement, or in case of an emergency or EBS system activation, or for the
purpose of providing programming which Licensee in its sole discretion
determines to be of greater national, regional or local importance. Programmer
will properly prepare and provide Licensee such information, records and reports
belonging to Programmer's programming, sales or employment practices at the
Stations
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<PAGE>
in sufficient detail as is necessary to enable Licensee to comply with all the
rules and policies of the FCC or any other governmental agency.
(b) Political Time. Licensee shall oversee and take ultimate
responsibility with respect to the provision of equal opportunities, lowest unit
charge, and reasonable access to political candidates, and compliance with the
political broadcast rules of the FCC. Programmer shall cooperate with Licensee
as Licensee complies with its political broadcast responsibilities, and shall
supply such information promptly to Licensee as may be necessary to comply with
the political time record keeping and lowest unit charge requirements of federal
law. To the extent that Licensee believes necessary, in Licensee's sole
discretion, Programmer shall release advertising availabilities to Licensee
during the term of this Agreement to permit Licensee to comply with the
political broadcast rules of the FCC and the Communications Laws; provided
however, that revenues received by Licensee as a result of any such release of
advertising time shall promptly be remitted to Programmer.
(c) Facilities. During the terms of this Agreement the Licensee
shall make available to Programmer, for no additional consideration, areas in
the Stations' physical studios and offices as are reasonably necessary for
Programmer to excise its rights and perform its obligations under this
Agreement.
12. CALL SIGNS AND STATION IDENTIFICATION. Licensee will retain all rights
to the call letters "WBZE-FM", "WHBX-FM", and "WHBT-FM" or any other call
letters that may be assigned by the FCC for use by the Stations, and shall be
responsible for ensuring the proper broadcast of Station identification
announcements in accordance with the FCC rules and regulations. Programmer is
specifically authorized to use the call letters "WBZE-FM", "WHBX-FM", and
"WHBT-FM", or any other call letters used by Licensee for the Stations, and will
provide appropriate station identification announcements which, in Licensee's
sole discretion, comply with FCC requirements.
13. PAYOLA/PLUGOLA. Programmer agrees that neither it nor its employees
will accept any consideration, compensation or gift of any kind whatsoever,
regardless of its value or form, including, but not limited to, a commission,
discount, bonus, supplies or other merchandise (collectively "Consideration"),
unless the payer is identified in the program for which Consideration was
provided as having paid for or furnished such Consideration, in accordance with
the Act.
14. COMPLIANCE WITH LAW. Programmer agrees that, throughout the term of
this Agreement, Programmer will comply with all laws, regulations and policies
including, but not limited to, the FCC's technical, political broadcasting,
obscenity and indecency regulations, lottery regulations, sponsorship
identification rules, sale practices regulations and all FCC rules applicable to
programming agreements of this kind. Programmer acknowledges that Licensee has
not urged, advised or agreed in any way to the use of any unfair business
practices.
15. INDEMNIFICATION.
(a) Programmer's Indemnification. Programmer shall indemnify and
hold Licensee
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<PAGE>
harmless for any material loss, damage or injury of any kind sustained by
Licensee resulting from Programmer's breach of this Agreement, from any
programming material broadcast by Programmer on the Stations, from the sale of
or attempt by Programmer to sell advertising or program time on the Stations,
and from any material act or omission of any kind by Programmer.
(b) Licensee's Indemnification. Licensee shall indemnify and hold
Programmer harmless for any material loss, damage or injury sustained by
Programmer resulting from breach of this Agreement, from the broadcast of
Licensee's programming, from the sale of or attempt by Licensee to sell
advertising or program time on the Stations (except the instant sale provided
for in this Agreement to Programmer), and from any material act or omission of
any kind whatsoever by Licensee.
(c) Survival. Any claim for indemnification must be asserted in
writing delivered to the other party. The representations and obligations of
both parties shall survive any termination of this Agreement and shall continue
until the expiration of all applicable statutes of limitations as to the parties
hereto and to claims of third parties.
16. TERMINATION AND REMEDIES UPON DEFAULT.
(a) Termination. In addition to other remedies available at law or
equity, this Agreement may be terminated by either party by written notice to
the other if the party seeking to terminate is not then in material default or
breach thereof, upon the occurrence of any of the following:
(i) This Agreement is declared invalid or illegal in whole or
in material part upon a final order of the FCC or any administrative agency or
court of competent jurisdiction.
(ii) The other party is in material breach of its obligations
hereunder and has failed to cure such breach within twenty (20) days of receipt
of written notice from the nonbreaching party.
(iii) The mutual consent of both parties.
(iv) The other party shall make a general assignment for the
benefit of creditors, files or has filed against a petition for bankruptcy,
reorganization or appointment of a receiver or a trustee for the property or
assets of such party under any federal or state insolvency law, which is filed
against such party has not been dismissed within thirty (30) days thereof.
(v) Not less than sixty (60) days prior written notice to the
other party for any reason.
Upon termination of this Agreement according to the provisions of this
paragraph, the monthly payment pursuant to Paragraph 2 above shall be prorated.
Licensee shall cooperate reasonably with the Programmer to the extent permitted
to enable Programmer to fulfill prior to the date of termination of this
Agreement advertising or other programming contacts then outstanding,
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<PAGE>
provided however, to the extent such contracts are fulfilled by Licensee after
the date of termination of this Agreement, Licensee shall receive as
compensation that which otherwise would have been paid to Programmer pursuant to
such contracts.
(b) Programmer's Additional Remedies for Licensee's Technical
Operation Deficiencies. In addition to Programmer's right to termite for reasons
set forth in Paragraph (a) above, if the Station suffers any damage to its
transmission facilities which results in the inability of the Stations to
operate with its presently authorized facilities and Licensee has not restored
full-time operation of the Stations with its presently authorized facilities
within seven (7) days of any such occurrence, (i) Programmer may give notice to
Licensee of Programmer's termination of this Agreement in which event this
Agreement shall terminate upon giving of such notice, any other provision of
this Agreement notwithstanding, and (ii) any payment due Licensee pursuant to
Paragraph 2 above shall be prorated for such period of time within which
full-time operation of the Stations has not been restored.
(c) Termination Upon Sale. Notwithstanding anything herein to the
contrary, this Agreement shall terminate upon the Closing of the transactions
contemplated by the Asset Purchase Agreement.
17. CERTIFICATION. Pursuant to Section 73.3555(a)(2)(ii) of the FCC's
Rules, the following certifications are made: HVS Partners certifies that it
shall maintain ultimate control over the Stations' facilities, including
specifically control over Stations finances, personnel and programming.
Programmer certifies that implementation of this Agreement complies with Section
202 of the Telecommunications Act of 1996.
18. NOTICES. All necessary notices, demands, requests permitted or
required under this Agreement shall be in writing and shall be deemed given four
(4) days after being mailed by certified mail, return receipt requested,
addressed as follows:
If to Licensee:
HVS Partners
3113 Clint Moore Road
Apt. 206
Boca Raton, Florida 33496
Attn: Gisela Huberman
If to Programmer:
Cumulus Broadcasting, Inc.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
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<PAGE>
Copy to:
Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
(Neither of which copies shall constitute notice to Buyer)
19. MODIFICATION AND WAIVER. No modification of any provision of this
Agreement shall in any event be effective unless it is in writing, and such
modification shall be effective only in the specific instance as for the purpose
for which given.
20. CONSTRUCTION. This Agreement shall be construed in accordance with the
laws of Florida, and the obligations of the parties hereto are subject to all
federal, state and local laws and regulations now or hereafter in force and to
the rules, regulations and policies of the FCC and all other governmental
entities or authorities.
21. NO PARTNERSHIP OR JOINT VENTURE CREATED. Nothing In this
Agreement shall be construed or interpreted to make licensee and Programmer
partners or joint venturers, or to make one an agent or representative of the
other.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
PROGRAMMER:
CUMULUS BROADCASTING, INC.
By: _____________________________
LICENSEE:
HVS PARTNERS
By: _____________________________
Gisela B. Huberman
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<PAGE>
EXHIBIT A
PROGRAMMING
Subject to all other provisions of this Agreement, Programmer will have
the exclusive right to broadcast on the Stations and the Station's subcarriers
up to twenty-four (24) hours of programming each day during the term of this
Agreement, provided however, Licensee reserves three (3) hours of Stations time
for its own use on Sunday morning, between 7:00 a.m. and 11:00 am. Licensee
shall have the sole responsibility to decide the scheduling of such Sunday hours
but shall consult with Programmer as to that schedule.
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<PAGE>
EXHIBIT B
COMPENSATION PAYMENT SCHEDULE
Programmer shall pay to Licensee Forty Thousand and 00/100 Dollars
($40,000.00) on the first day of each month. Each such payment shall constitute
a monthly installment towards the purchase price of the Stations and be deducted
from the aggregate purchase price to be paid at closing of the transactions
contemplated by the Asset Purchase Agreement. In addition, Programmer will
reimburse Licensee for reasonable expenses of operating the Stations approved by
Programmer before they are incurred by Licensee. Such reimbursement payments
will be made by Programmer within seven (7) days of Programmer's receipt of
evidence of such expenses.
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<PAGE>
EXHIBIT C
PRIOR EXISTING ADVERTISING CONTRACTS
[To Come From HVS Partners]
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<PAGE>
ASSET PURCHASE AGREEMENT
BETWEEN
HVS PARTNERS
AND
CUMULUS BROADCASTING, INC.
AND
CUMULUS LICENSING CORP.
August 25, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction..................................................1
(a) Purchase and Sale of Assets.................................1
(b) Assumption of Liabilities...................................1
(c) Purchase Price..............................................1
(d) Local Marketing Agreement...................................2
(e) The Closing.................................................2
(f) Deliveries at the Closing...................................2
(g) Postclosing Agreement.......................................3
(h) Lease Agreement and Purchase Option.........................3
(i) Allocation..................................................3
2. Representations and Warranties of the Seller.......................3
(a) Organization of the Seller..................................3
(b) Authorization of Transaction................................3
(c) Noncontravention............................................3
(d) Title to Acquired Assets....................................4
(e) Financial Statements........................................4
(f) Events Subsequent to .......................................4
(g) Tax Matters.................................................6
(h) Tangible Assets.............................................7
(i) Real Property...............................................7
(j) Intellectual Property.......................................8
(k) Contracts..................................................10
(l) Commission Licenses and Compliance with Commission
Requirements..............................................11
(m) Insurance..................................................12
(n) Litigation.................................................12
(o) Employees..................................................12
(p) Employee Benefits..........................................13
(q) Environment, Health, and Safety............................13
(r) Legal Compliance...........................................14
(s) Brokers' Fees..............................................15
(t) Advertising Agreements.....................................15
(u) Disclosure.................................................15
3. Representations and Warranties of the Buyer.......................15
(a) Organization of the Buyer..................................15
(b) Authorization of Transaction...............................15
(c) Noncontravention...........................................15
(d) Brokers' Fees..............................................16
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<PAGE>
4. Pre-Closing Covenants.............................................16
(a) General....................................................16
(b) Assignment Applications....................................16
(c) Employment Offers..........................................17
(d) Notices and Consents.......................................17
(e) Operation of Business......................................17
(h) Contracts..................................................17
(i) Operation of Stations......................................18
(j) Preservation of Business...................................18
(l) Full Access................................................18
(m) Notice of Developments.....................................18
(n) Exclusivity................................................18
(o) Title Insurance, Surveys and Environmental
Assessments...............................................19
(p) Control of Stations........................................19
(q) Risk of Loss...............................................19
5. Conditions to Obligation to Close.................................20
(a) Conditions to Obligation of the Buyer......................20
(b) Conditions to Obligation of the Seller.....................21
6. Post-Closing Covenants............................................22
(a) General....................................................22
(b) Litigation Support.........................................22
(c) Adjustments................................................23
(d) Severance Obligations......................................23
7. Remedies for Breaches of this Agreement...........................23
(a) Survival...................................................23
(b) Indemnification Provisions for the Benefit of the
Buyer.....................................................24
(c) Indemnification Provisions for the Benefit of the
Seller....................................................24
(d) Specific Performance.......................................24
(e) Liquidated Damages.........................................24
(f) Matters Involving Third Parties............................25
(g) Other Indemnification Provisions...........................25
8. Definitions.......................................................25
9. Termination.......................................................30
(a) Termination of Agreement...................................30
(b) Effect of Termination......................................31
10. Miscellaneous....................................................31
(a) Survival...................................................31
(b) Press Releases and Announcements...........................31
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<PAGE>
(c) No Third Party Beneficiaries...............................32
(d) Entire Agreement...........................................32
(e) Succession and Assignment..................................32
(f) Counterparts...............................................32
(g) Headings...................................................32
(h) Notices....................................................32
(i) Governing Law..............................................33
(j) Amendments and Waivers.....................................33
(k) Severability...............................................33
(l) Expenses...................................................34
(m) Construction...............................................34
(n) Incorporation of Exhibits and Schedules....................34
(o) Submission to Jurisdiction.................................34
(p) Bulk Transfer Laws.........................................35
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<PAGE>
EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Form of Assignment
Exhibit C--Form of Assumption
Exhibit D--Form of Postclosing Agreement
Exhibit E--Form of Lease Agreement and Purchase Option
Exhibit F--Allocation Schedule
Exhibit G--Form of Opinion of Counsel to the Seller
Exhibit H--Copy of Seller's Promissory Note
Exhibit I--Local Marketing Agreement
SCHEDULES
Description Section Reference
Exceptions To Seller's Good Title 2(d)
Financial Statements 2(e)
Events Subsequent to January 1, 1997 2(f)
Tangible Personal Property 2(h)
Real Property 2(i)
Intellectual Property 2(j)
Material Contracts 2(k)
FCC Licenses 2(l)
Insurance 2(m)
Litigation 2(n)
Employees 2(o)
Employee Benefit Plans 2(p)
Advertising Agreements 2(t)
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<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of August 25, 1997, by and
between Cumulus Broadcasting, Inc. a Nevada corporation (the "Operating
Company"); Cumulus Licensing Corp., a Nevada Corporation (the "Licensing
Company"); and HVS Partners, a Florida general partnership (the "Seller"). The
Operating Company and the Licensing Company are collectively referred to herein
as the "Buyer." The Buyer and the Seller are referred to collectively herein as
the "Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
This Agreement contemplates a transaction in which the Buyer will purchase
substantially all of the assets (and assume certain of the liabilities) of the
Seller that are used or useful in the operation of radio stations WQHQ-FM,
WLVW-FM and WTGM-AM, each licensed to operate in Salisbury, Maryland; WLBW-FM,
licensed to operate in Fenwick Island, Delaware; and WRXS-FM licensed to operate
in Ocean City, Maryland (collectively, the "Stations") in return for the
Purchase Price.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the
Seller, and the Seller agrees to sell, transfer, convey, and deliver
to the Buyer, all of the Acquired Assets at the Closing for the
consideration specified below in this Section 1.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The
Buyer will not assume or have any responsibility, however, with
respect to any other obligation or Liability of the Seller not
included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyer agrees to pay to the Seller at the
Closing Nine Million Two Hundred Thousand and 00/100 Dollars
($9,200,000.00) (the "Purchase Price")
payable as follows:
(i) on the date of this Agreement, the Buyer will deposit with the
Escrow Agent the amount of Four Hundred Sixty Thousand and
00/100 Dollars ($460,000.00) (the "Earnest Money Deposit") by
delivery of cash payable by wire transfer or delivery of other
immediately available funds; and
<PAGE>
(ii) on the Closing Date, the Buyer shall pay to the Seller the
amount of Seven Million Eight Hundred Twenty Thousand and
00/100 Dollars ($7,820,000.00) less any amount paid by
Operating Company to Seller pursuant to Paragraph 2 of the
Local Marketing Agreement by delivery of Cash or other
immediately available funds; and
(iii) on the Closing Date, the Buyer shall pay to the Seller, on
behalf of all parties to the Postclosing Agreement, the amount
of Nine Hundred Twenty Thousand and 00/100 Dollars
($920,000.00) by delivery of Cash or other immediately
available funds.
The Earnest Money Deposit referenced in this Section 1(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), which
requires that such Earnest Money Deposit shall be deposited by the Escrow Agent
with a federally insured financial institution in an interest bearing account.
Interest earned on the Earnest Money Deposit shall accrue to the benefit of the
Buyer, and, together with the principal amount of the Earnest Money Deposit,
shall be payable to the Seller and credited against the Purchase Price on the
Closing Date. If this Agreement is terminated without Closing of the transaction
contemplated herein, the Earnest Money and all accrued interest shall be paid to
the Buyer or the Seller as provided in the Earnest Money Escrow Agreement.
(d) Local Marketing Agreement. Concurrent with the execution of this
Agreement, the Seller and the Operating Company shall execute the
Local Marketing Agreement which includes the terms and conditions
pursuant to which the Operating Company will operate the programming
and sale of advertising time on the Stations. The accounts
receivable of the Stations in existence as of the date of this
Agreement shall be collected pursuant to the terms and conditions of
the Local Marketing Agreement.
(e) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
the Stations in Salisbury, Maryland, commencing at 9:00 a.m. local
time on the date set by the Buyer not earlier than the fifth (5th)
business day or later than the tenth (10th) business day after the
FCC approval of the Assignment Application becomes a Final Order, by
which date all other conditions to the obligations of the Parties to
consummate the transactions contemplated hereby will have been
satisfied or waived or such other date as the Parties may mutually
determine (the "Closing Date").
(f) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 5(a) below; (ii) the Buyer will
deliver to the Seller the various certificates, instruments, and
documents referred to in Section 5(b) below; (iii) the Seller will
execute, acknowledge (if appropriate), and deliver to the Buyer (A)
assignments (including real property lease assignments and
Intellectual Property transfer documents) in the
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<PAGE>
form attached hereto as Exhibit B and (B) such other instruments of
sale, transfer, conveyance, and assignment as the Buyer and its
counsel reasonably may request; (iv) the Buyer will execute,
acknowledge (if appropriate), and deliver to the Seller (A) an
assumption in the form attached hereto as Exhibit C and (B) such
other instruments of assumption as the Seller and its counsel
reasonably may request; and (v) the Buyer will deliver to the Seller
the consideration specified in Section 1(c) above.
(g) Postclosing Agreement. On the Closing Date, the Seller shall
execute, and shall cause all partners of the Seller to execute, a
Postclosing Agreement with the Buyer including covenants not to
compete with the Buyer in the markets served by the Stations and to
indemnify the Buyer in the form of Exhibit D attached hereto. A
portion of the Purchase Price equal to Fifty Thousand Dollars
($50,000) shall be paid to the Seller, on behalf of all parties
other than the Buyer, on the Closing Date as consideration for the
agreements set forth in the Postclosing Agreement.
(h) Lease Agreement and Purchase Option. On the Closing Date, the
Buyer and the Seller shall execute a lease agreement and a purchase
option, including those terms and conditions pursuant to which the
Buyer will lease, and be granted an option to purchase from the
Seller certain real property used or useful in the operation of the
Stations, the form of each of which is attached hereto at Exhibit E.
(i) Allocation. The Parties agree to allocate the Purchase Price
(and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in
accordance with the allocation schedule attached hereto as Exhibit
F.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyer that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 2),
except as set forth in the lettered and numbered paragraphs contained in the
disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule") corresponding to the lettered and numbered sections
of this Section 2.
(a) Organization of the Seller. The Seller is a general partnership
duly organized, validly existing, and in good standing under the
laws of the State of Florida. The Seller does not have any
Subsidiaries. The partners of the Seller are GHB Radio, Inc., a
Florida corporation, and TS Radio, Inc., a Florida corporation.
(b) Authorization of Transaction. The Seller has full power and
authority (including full partnership power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. Without limiting the generality of the foregoing, the
partners of the Seller have duly authorized the execution,
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delivery, and performance of this Agreement by the Seller. This
Agreement constitutes the valid and legally binding obligation of
the Seller, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 1 above), will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to
which the Seller or any partner of the Seller is subject or any
provision of the partnership agreement of the Seller or charter or
bylaws of any partner of the Seller; or (ii) conflict with, result
in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which any
of the Seller is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b), the Seller does
not need to give any notice to, make any filing with, or obtain any
Licenses, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and
assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be
released at or before Closing), the Seller has good and marketable
title to all of the Acquired Assets, free and clear of any Security
Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the
"Financial Statements"): (i) unaudited balance sheets and statements
of income, and Cash flow as of and for the fiscal years ended
December 31, 1993, December 31, 1994, December 31, 1995 and December
31, 1996, for the Seller; and (ii) unaudited statements of income,
as of and for each month during 1995 and 1996 and the months ended
January 31, February 28, March 31, and April 30, 1997 for the
Seller. The Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods
covered thereby, are correct and complete, and are consistent with
the books and records of the Seller (which books and records are
correct and complete). Without limiting the generality of the
foregoing, all material revenues and expenses of the Seller (A) are
properly reflected in the Financial Statements, (B) have arisen in
the Ordinary Course of Business, (C) are valid and subject to no
counterclaims, and (D) will be or have been collected or paid at
their recorded amounts subject only
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to the reserve for bad debts set forth on the face of the most
recent Financial Statements.
(f) Events Subsequent to January 1, 1997. Since January 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule,
there has not been any adverse change in the assets, Liabilities,
business, financial condition, operations, results of operations, or
future prospects of the Seller with respect to the operation of the
Stations. Without limiting the generality of the foregoing and with
respect to the operation of the Stations since that date:
(i) the Seller has not sold, leased, transferred, or assigned any
of its material assets, tangible or intangible, other than for
a fair consideration in the Ordinary Course of Business;
(ii) the Seller has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts,
leases, subleases, licenses, and sublicenses) outside the
Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled
any contract, lease, sublease, license, or sublicense (or
series of related contracts, leases, subleases, licenses, and
sublicenses) involving more than $5,000 to which the Seller is
a party or by which it is bound;
(iv) no Security Interest has been imposed upon any of its assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of
Business;
(vi) the Seller has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of any
other person (or series of related capital investments, loans,
and acquisitions) outside the Ordinary Course of Business;
(vii) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations)
outside the Ordinary Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other
Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims)
outside the Ordinary Course of Business;
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(x) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property or
any action adversely affecting the FCC Licenses of the
Stations;
(xii) the Seller 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 giving rise
to any claim or right on its part against the person or on the
part of the person against it;
(xiii) the Seller has not entered into any employment contract,
consulting contract or severance agreement or collective
bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(xiv) the Seller has not granted any increase outside the Ordinary
Course of Business in the base compensation of any of its
directors, officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F)
medical, hospitalization, life, or other insurance, (G)
severance, or (H) other plan, contract, or commitment for any
of its directors, officers, and employees, or modified or
terminated any existing such plan, contract, or commitment;
(xvi) the Seller has not made any other change in employment terms
for any of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of
Business;
(xviii) the Seller has not paid any amount to any third party with
respect to any Liability or obligation (including any costs
and expenses the Seller has incurred or may incur in
connection with this Agreement or any of the transactions
contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing;
(xix) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary
Course of Business involving the Seller;
(xx) the Seller has not altered its credit and collection policies
or its accounting policies;
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(xxi) the Seller has not materially altered the programming, format
or call letters of the Stations, or its promotional and
marketing activities;
(xxii) the Seller has not applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in
compliance therewith and with all FCC rules and regulations;
and
(xxiii) the Seller has not committed to any of the foregoing.
(g) Tax Matters. The Seller has filed and will file all Tax Returns
that it was required to file and may be required to file. All such
Tax Returns were correct and complete in all respects. All Taxes
owed by the Seller (whether or not shown on any Tax Return) have
been paid. The Seller has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor, or other third
party. The Sellers have not waived any statute of limitations with
respect to Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency. The Seller is not a party to a
pending Tax audit and is aware of no threatened Tax audit. No claim
has ever been made by an authority in a jurisdiction where the
Seller does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Seller that arose in connection with any
failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets
forth a listing by Station of all transmitter and station equipment,
vehicles and other tangible personal property used in conducting the
operation and business of the Stations. The Seller owns or leases
all tangible assets necessary for the conduct of the operation and
business thereof as presently conducted and as presently proposed to
be conducted. Each tangible asset listed in Section 2(h) of the
Disclosure Schedule is free from defects (patent and latent), has
been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is
used. No such tangible asset is in need of replacement.
(i) Real Property. The Parties acknowledge and agree that all real
property that is owned by the Seller and used or useful in the
conduct of the operations and business of the Stations is included
within the definition of Retained Assets. Section 2(i) of the
Disclosure Schedule lists and describes briefly all real property
leased or subleased to the Seller. Section 2(i) of the Disclosure
Schedule also identifies the leased or subleased properties for
which title insurance policies are to be procured in accordance with
Section 4(i) below. The Seller has delivered to the Buyer correct
and complete copies of the leases and subleases listed in Section
2(i) of the Disclosure
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Schedule (as amended to date). With respect to each lease and
sublease listed in Section 2(i) of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing will
continue to be, legal, valid, binding, enforceable, and in
full force and effect;
(ii) no party to the lease or sublease is in breach or default (or
has repudiated any provision thereof), and no event has
occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification, or
acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above
are true and correct with respect to the underlying lease;
(v) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold
or subleasehold;
(vi) to the Knowledge of the Seller, all facilities leased or
subleased thereunder have received all approvals of
governmental authorities (including licenses, permits and
zoning approvals) required in connection with the operation
thereof and have been operated and maintained in accordance
with applicable laws, rules, and regulations;
(vii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation
of said facilities; and
(viii) to the Knowledge of the Seller, the owner of the facility
leased or subleased has good and marketable title to the
parcel of real property, free and clear of any Security
Interest, easement, covenant, or other restriction, except for
recorded easements, covenants, and other restrictions impair
the current use, occupancy, or value, or the marketability of
title, of the property subject thereto.
(j) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the businesses
of the Seller as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned or used by the
Seller immediately prior to the Closing hereunder will be owned or
available for use by the Buyer on identical terms and conditions
immediately subsequent to the
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Closing hereunder. The Seller has taken all necessary or desirable
action to protect each item of Intellectual Property that it owns or
uses.
(i) The Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and the Seller
has never received any charge, complaint, claim, or notice
alleging any such interference, infringement,
misappropriation, or violation. To the Knowledge of the
Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller.
(ii) Section 2(j) of the Disclosure Schedule identifies each
patent, trademark or copyright registration which has been
issued to the Seller with respect to any of its Intellectual
Property, identifies each pending patent, trademark or
copyright application for registration which the Seller has
made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which
the Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions).
The Seller has delivered to the Buyer correct and complete
copies of all such patents, trademarks or copyright
registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to the
Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if
applicable) of each such item. With respect to each item of
Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in
and to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the
Knowledge of the Seller, is threatened which challenges
the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person
or entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the
item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and
that the Seller uses pursuant to license, sublicense,
agreement, or permission including, but not limited to the
call letters of the Stations. The Seller has supplied the
Buyer with correct and complete copies of all such licenses,
sublicenses,
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agreements, and permissions (as amended to date). With respect
to each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission
covering the item is, and following the Closing will
continue to be on identical terms, legal, valid,
binding, enforceable, and in full force and effect;
(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated
any provision thereof), and no event has occurred which
with notice or lapse of time would constitute a breach
or default or permit termination, modification, or
acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above
are true and correct with respect to the underlying
license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree,
stipulation, injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the
Knowledge of the Seller, is threatened which challenges
the legality, validity, or enforceability of the
underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the
underlying item of Intellectual Property; and
(G) the Seller has not granted any sublicense or similar
right with respect to the license, sublicense,
agreement, or permission.
(iv) The Seller has no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or
other third parties have developed which reasonably could be
expected to supersede or make obsolete any product or process
of any of the Seller.
(k) Contracts. Other than Advertising Contracts, Section 2(k) of the
Disclosure Schedule lists the following contracts, agreements, and
other written arrangements to which the Seller is a party:
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(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to
third parties providing for lease payments in excess of $1,000
per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products,
or other personal property or for the furnishing or receipt of
services which either calls for performance over a period of
more than one year or involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed,
or guaranteed (or may create, incur, assume, or guarantee)
indebtedness (including capitalized lease obligations)
involving more than $1,000 or under which it has imposed (or
may impose) a Security Interest on any of its assets, tangible
or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the
nature of a collective bargaining agreement, consulting
agreement, employment agreement, or severance agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the
assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the
Seller or the Stations; and
(viii) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered
into in the Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement listed in Section 2(k) of the Disclosure Schedule (as
amended to date). With respect to each written arrangement so listed: (A) the
written arrangement is legal, valid, binding, enforceable, and in full force and
effect; (B) the written arrangement will continue to be legal, valid, binding,
and enforceable and in full force and effect on identical terms following the
Closing; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the written arrangement; and
(D) no party has repudiated any provision of the written arrangement. The Seller
is not a party to any verbal contract, agreement, or other arrangement which, if
reduced to written form, would be required to be listed in Section 2(k) of the
Disclosure Schedule under the terms of this Section 2(k).
(l) Commission Licenses and Compliance with Commission Requirements.
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(i) All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental
bodies, including, without limitation, the FCC Licenses, used
or useful in the operation of the Stations as they are now
being operated (A) are in full force and effect, (B) are
unimpaired by any acts or omissions of the Seller or the
Seller's employees or agents, (C) are free and clear of any
restrictions which might limit the full operation of the
Stations, and (D) are detailed in Section 2(l) of the
Disclosure Schedules. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and
consents referenced in the preceding sentence, Section 2(l) of
the Disclosure Schedule also sets forth, without limitation,
the date of the last renewal, the expiration date thereof, and
any conditions or contingencies related thereto. Except as set
forth in Section 2(l) of the Disclosure Schedule, no condition
exists or event has occurred that permits, or after notice or
lapse of time, or both, would permit, the revocation or
termination of any such license, permit, consent, franchise,
or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction
or limitation upon the operation of the Stations as now
conducted. Except as set forth in Section 2(l) of the
Disclosure Schedule, the Seller is not aware of any reason why
the FCC licenses might not be renewed in the ordinary course
or revoked.
(ii) The Stations are each in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC
License would constitute a major environmental action under
the FCC's rules or policies. Access to the Stations'
transmission facilities is restricted in accordance with the
policies of the FCC.
(iii) Except as set forth in Section 2(l) of the Disclosure
Schedule, to the best of the Seller's Knowledge, the Seller is
not the subject of any FCC or other governmental investigation
or any notice of violation or order, or any material
complaint, objection, petition to deny, or opposition issued
by or filed with the FCC or any other governmental authority
in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rulemaking
proceedings of general applicability) before the FCC or any
other governmental authority that could adversely affect any
of the FCC Licenses or the authorizations listed in Section
2(l) of the Disclosures Schedule.
(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material
reports, applications, documents, instruments, and other
information required to be filed, and will continue to make
such filings through the Closing Date.
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(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and
workers' compensation coverage and bond and surety arrangements) to
which the Seller is a party, a named insured, or otherwise the
beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing Date; (C) neither the Seller nor
any other party to the policy is in breach or default (including with respect to
the payment of premiums or the giving of notices), and no event has occurred
which, with notice or the lapse of time, would constitute such a breach or
default or permit termination, modification, or acceleration, under the policy;
and (D) no party to the policy has repudiated any provision thereof. The Seller
has been covered during the past 3 years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during that
three-year period. Section 2(m) of the Disclosure Schedule describes any
self-insurance arrangements affecting the Seller.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied
judgement, order, decree, stipulation, injunction, or charge; or
(ii) is a party or, to the Knowledge of the Seller, is threatened to
be made a party to any charge, complaint, action, suit, proceeding,
hearing, or investigation of or in any court or quasijudicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and
investigations set forth in Section 2(n) of the Disclosure Schedule
could result in any adverse change in the assets, Liabilities,
business, financial condition, operations, results of operations, or
future prospects of the Seller or the Stations taken as a whole. The
Seller has no reason to believe that any such charge, complaint,
action, suit, proceeding, hearing, or investigation may be brought
or threatened against the Seller.
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(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage
rates and all other forms of compensation paid for work at the
Stations of each employee of Seller. To the Knowledge of the Seller,
no key employee or group of employees has any plans to terminate
employment with the Seller. The Seller is not a party to or bound by
any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. To the Knowledge of the Seller, the
Seller has not committed any unfair labor practice. The Seller has
no Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to
employees of the Seller.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans and other executive compensation plans
that the Seller maintains or to which the Seller contributes for the
benefit of any current or former employee of the Seller. Each
Employee Benefit Plan (and each related trust or insurance contract)
complies in form and in operation in all respects with the
applicable requirements of ERISA and the Code. The Seller does not
contribute to, ever has contributed to, or ever has been required to
contribute to any Multiemployer Plan. The Seller has not incurred
and has no reason to expect that it will incur any Liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV
of ERISA (including any withdrawal liability) or under the Code with
respect to any Employee Pension Benefit Plan that the Seller
maintains or ever has maintained or to which it contributes, ever
has contributed, or ever has been required to contribute. The Seller
does not maintain and has not maintained, contributed or been
required to contribute to any Employee Welfare Benefit Plan
providing health, accident, or life insurance benefits to former
employees, their spouses, or their dependents (other than in
accordance with Code Sec. 4980B).
(q) Environment, Health, and Safety.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal,
state, and local governments (and all agencies thereof)
concerning the environment, public health and safety, and
employee health and safety, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against any of them
alleging any failure to comply with any such law or
regulation.
(ii) The Seller has no Liability (and to the Knowledge of the
Seller there is no Basis related to the past or present
operations, and its respective predecessors for any present or
future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Seller giving rise
to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976,
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the Federal Water Pollution Control Act of 1972, the Clean Air
Act of 1970, the Safe Drinking Water Act of 1974, the Toxic
Substances Control Act of 1976, the Refuse Act of 1899, or the
Emergency Planning and Community Right-to-Know Act of 1986
(each as amended), or any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign
government (or agency thereof, concerning release or
threatened release of hazardous substances, public health and
safety, or pollution or protection of the environment, or for
damage to any site, location, or body of water (surface or
subsurface) or for illness or personal injury.
(iii) The Seller has no Liability (and to the Knowledge of the
Seller there is no Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against the Seller giving rise to any
Liability) under the Occupational Safety and Health Act, as
amended, or any other law (or rule or regulation thereunder)
of any federal, state, local, or foreign government (or agency
thereof) concerning employee health and safety, or for any
illness of or personal injury to any employee.
(iv) The Seller has obtained and has been in compliance in all
material respects with all of the terms and conditions of all
permits, licenses, and other authorizations which are required
under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all federal, state, local, and foreign laws
(including rules, regulations, codes, plans, judgments,
orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, worker
health and safety, and pollution or protection of the
environment, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or
wastes into ambient air, surface water, ground water, or lands
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
(v) All properties and equipment used in the business of the
Seller have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans- dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(vi) No pollutant, contaminant, or chemical, industrial, hazardous,
or toxic material or waste ever has been buried, stored,
spilled, leaked, discharged, emitted, or released on any real
property that the Seller owns or ever has owned or that the
Seller leases or ever has leased.
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(r) Legal Compliance.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal,
state, and local governments (and all agencies thereof, and no
charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or
commenced against the Seller alleging any failure to comply
with any such law or regulation, including those relating to
the employment of labor, employee civil rights, and equal
employment opportunities and relating to antitrust matters.
(ii) The Seller has filed in a timely manner all reports,
documents, and other materials it was required to file (and
the information contained therein was correct and complete in
all respects) under all applicable laws (including rules and
regulations thereunder). To the Knowledge of the Seller, the
Seller has possession of all records and documents it was
required to retain under all applicable laws (including rules
and regulations thereunder).
(s) Brokers' Fees. Except for seventy-five percent (75%) of the
total fees due to The Whittle Agency (the Buyer shall pay the
remaining 25% of such fees), the Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this
Agreement.
(t) Advertising Agreements. Section 2(t) of the Disclosure Schedule
lists all Advertising Contracts and the amount to be paid therefore
as of __________, 1997. Other than to employees of the Seller or as
disclosed in Section 2(t) of the Disclosure Schedule, no commission
or other form of remuneration is paid by the Seller in connection
with any Advertising Contract and any remuneration so listed shall
be paid by the Seller at or prior to Closing. No advertiser of the
Stations or a party to an Advertising Contract listed in Section
2(t) of the Disclosure Schedule has indicated within the past year
that it will stop or decrease the rate of buying services from the
Stations or the Seller.
(u) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to
state any fact necessary in order to make the statements and
information contained in this Section 2 not misleading.
3. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
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(a) Organization of the Buyer. The Operating Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada. The Licensing Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada.
(b) Authorization of Transaction. The Buyer has full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Buyer, enforceable in accordance
with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 1 above), will (i) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to
which the Buyer is subject or any provision of its articles of
organization or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or
other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject. Other than the
Assignment Application described in Section 4(b), the Buyer does not
need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 1 above).
(d) Brokers' Fees. Except for twenty-five percent (25%) of the total
fees due to The Whittle Agency (the Seller shall pay the remaining
75% of such fees), the Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which the
Seller could become liable or obligated.
4. Pre-Closing Covenants. Except as may be modified pursuant to the Local
Marketing Agreement, the Parties agree as follows with respect to the period
between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper,
or advisable to consummate and make effective the transactions
contemplated by this Agreement (including satisfying the closing
conditions set forth in Section 5 below).
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(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Licensing Company
shall jointly file with the FCC an application for assignment of the
FCC Licenses, permits and authorizations pertaining to the Stations
from the Seller to the Licensing Company (the "Assignment
Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the
Seller and the Licensing Company. The Seller and the Licensing
Company shall each pay its own attorneys' fees. The Seller and the
Licensing Company shall thereafter prosecute the Assignment
Application with all reasonable diligence and otherwise use the
commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither
the Seller nor the Licensing Company shall have any obligation to
satisfy complainants or the FCC by taking any steps which would have
material adverse effect upon the Stations or upon any Affiliate). If
the FCC imposes any condition on either the Seller or the Licensing
Company to the Assignment Application, such party shall use
commercially reasonable efforts to comply with such condition,
provided that neither shall be required hereunder to comply with any
condition that would have a material adverse effect upon the
Stations or any Affiliate. The Seller and the Licensing Company
shall jointly oppose any requests for reconsideration or judicial
review of FCC approval of the Assignment Application and shall
jointly request from the FCC extension of the effective period of
FCC approval of the Assignment Application if the Closing shall not
have occurred prior to the expiration of the original effective
period of the FCC Consent. Nothing in this Section 4(b) shall be
construed to limit any party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyer to meet with its
employees prior to the Closing Date. Not earlier than one (1) week
prior to the Closing, the Buyer may, at its option, and upon its
terms and conditions, extend offers of employment to all or any of
the Seller's employees effective on the Closing Date. The Seller
will not take any action to preclude or discourage any of the
Seller's employees from accepting any offer of employment extended
by the Buyer.
(d) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its commercially reasonable efforts
to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters pertaining to the Seller
disclosed or required to be disclosed in the Disclosure Schedule.
Each of the Parties will file any notification and report forms and
related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its
best efforts to obtain an early termination of the applicable
waiting period and will make any further filings pursuant thereto
that may be necessary, proper, or advisable. Each of the Parties
will take any additional action that may be necessary, proper, or
advisable in connection with any other notices to,
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filings with, and authorizations, consents, and approvals of
governments, governmental agencies, and third parties that it may be
required to give, make, or obtain.
(e) Operation of Business. The Seller will not engage in any
practice, take any action, embark on any course of inaction, or
enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, the Seller will
not engage in any practice, take any action, embark on any course of
inaction, or enter into any transaction of the sort described in
Section 2(f) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations for goods or services under its Advertising Contracts
such that the outstanding aggregate balance owing thereunder as of
the Closing Date shall not exceed Five Thousand Dollars ($5,000)
worth of air time without the Buyer's consent. At Closing, the
Seller shall deliver to the Operating Company a schedule, certified
by an officer of the Seller, reflecting the aggregate balance under
all such Advertising Contracts as of the Closing Date.
(g) Operating Statements. The Seller shall deliver to the Buyer, for
the Buyer's informational purposes only, monthly unaudited
statements of operating revenues and operating expenses of the
Stations within ten (10) days after each such statement is prepared
by or for the Seller.
(h) Contracts. The Seller will not without the prior written consent
of the Operating Company amend, change, or modify any of the
contracts listed on Section 2(k) of the Disclosure Schedule in any
material respect. The Seller will not without prior written consent
of the Operating Company enter into any new contracts respecting the
Stations, except (i) contracts for the sale of time on the Stations
for Cash, goods or services which comply with the representations
and warranties pertaining to such contracts set forth in Section
2(t), (ii) contracts entered into in the Ordinary Course of Business
which are cancelable on not more than thirty-one (31) days' notice
without penalty or premium, and (iii) contracts entered into in the
Ordinary Course of Business each of which does not involve more than
Five Thousand Dollars ($5,000) or all of which do not involve more
than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Stations. The Seller shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of
the FCC, and the FCC Licenses shall at all times remain in full
force and effect. The Seller shall file with the FCC all material
reports, applications, documents, instruments and other information
required to be filed in connection with the operation of the
Stations.
(j) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its physical facilities,
working conditions,
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relationships with lessors, licensers, advertisers, suppliers,
customers, and employees, all of the confidential information, call
letters and trade secrets of the Stations, and the FCC Licenses.
(k) Credit and Receivables. The Seller will follow its usual and
customary policies with respect to extending credit for Advertising
Contracts and collecting accounts receivable arising from such
extension of credit.
(l) Full Access and Consultation. The Seller will permit
representatives of the Buyer to have full access at all reasonable
times, and in a manner so as not to interfere with the normal
business operations of the Stations, to all premises, properties,
books, records, contracts, Tax records, and documents of or
pertaining to the Seller. The Seller will consult with the Buyer's
management with a view to informing Buyer's management as to the
operations, management and business of the Stations.
(m) Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material development affecting the
assets, Liabilities, business, financial condition, operations,
results of operations, or future prospects of the Seller. Each Party
will give prompt written notice to the other of any material
development affecting the ability of the Parties to consummate the
transactions contemplated by this Agreement. No disclosure by any
Party pursuant to this Section 4(m), however, shall be deemed to
amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person
relating to any (A) liquidation, dissolution, or recapitalization,
(B) merger or consolidation, (C) acquisition or purchase of
securities or assets, or (D) similar transaction or business
combination involving any of the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other
manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyer immediately if any
person makes any proposal, offer, inquiry, or contact with respect
to any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. The
Seller will obtain with respect to each parcel of real estate that
the Seller leases, (i) a leasehold owner's policy issued by a title
insurer reasonably satisfactory to the Operating Company, in an
amount equal to the fair market value of such real property
(including all improvements located thereon), insuring leasehold
title to such real property in the Operating Company as of the
Closing subject only to the title exceptions which do not impair the
current use, occupancy or value or the marketability of title of the
property and are disclosed in Section 2(i) of the Disclosure
Schedule, together with such endorsements for zoning, contiguity,
public
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access and extended coverage as the Operating Company reasonably
requests; (ii) a current survey of the real property certified to
the Operating Company, prepared by a licensed surveyor and
conforming to current ALTA Minimum Detail Requirements for Land
Title Surveys, disclosing the location of all improvements,
easements, party walls, sidewalks, roadways, utility lines, and
other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey") which shall
not disclose any survey defect or encroachment from or onto the real
property which has not been cured or insured over prior to the
Closing; and (iii) a current Phase I environmental site assessment
from an environmental consultant or engineer reasonably satisfactory
to the Operating Company which shall not disclose or recommend any
action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. The
Operating Company and the Seller will each pay one-half (1/2) of the
costs of these title policies, surveys and environmental
assessments.
(p) Control of Stations. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its
consent and approval to the Assignment Application. Between the date
of this Agreement and the Closing Date, the Operating Company and
its employees or agents shall not directly or indirectly control,
supervise, or direct, or attempt to control, supervise, or direct,
the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing.
In the event of any such loss, damage, or destruction the Seller
will promptly notify the Buyer of all particulars thereof, stating
the cause thereof (if known) and the extent to which the cost of
restoration, replacement and repair of the Acquired Assets lost,
damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will repair or replace such
Acquired Assets as soon as possible after loss, damage or
destruction thereof and shall use its best efforts to restore as
promptly as possible transmissions as authorized in the FCC
Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or
replacement. If repair or replacement cannot be accomplished within
sixty (60) days of the date of the Seller's notice to the Buyer, and
the Buyer determines that the Seller's failure to repair or replace,
alone or in the aggregate, would have a material adverse effect on
the operation of the Stations:
(i) the Buyer may elect to terminate this Agreement; or
(ii) the Buyer may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyer, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's notice
to the Buyer, in which case either party may terminate this Agreement; or
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(iii) the Buyer may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to the Buyer all
rights under any insurance claims covering the loss, damage or destruction and
payment over to the Buyer any proceeds under any such insurance policies,
previously received by the Seller with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(q),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 2
above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(d) above, including but not limited to
those relating to transmitter and studio leases, all of the
title insurance commitments, and endorsements specified in
Section 4(l) above, all of the surveys specified in Section
4(l) above; and all the Phase I environmental site assessments
described in Section 4(l) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction,
or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of
the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the
right of the Buyer to own, operate, or control the Acquired
Assets (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified
above in Section 5(a)(i)-(iv) is satisfied in all respects;
(vi) each of the Assignment Applications shall have been approved
by a Final Order of the FCC, all applicable waiting periods
(and any extensions thereof)
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under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated, and the Seller and the Buyer shall
have received all governmental approvals required to transfer
all other authorizations, consents, and approvals of
governments and governmental agencies set forth in the
Disclosure Schedule;
(vii) the Buyer shall have completed its review and verification of
the Seller's Financial Statements, its review of the FCC
Licenses of the Stations, its engineering audit of the
Seller's studio and transmitter facilities and equipment, all
with results satisfactory to the Buyer in its sole judgment;
(viii) the relevant parties shall have entered into the Postclosing
Agreement;
(ix) the relevant parties shall have entered into the Lease
Agreement and Purchase Option;
(x) the Buyer shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit G
attached hereto, addressed to the Buyer and dated as of the
Closing Date; and
(xi) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 5(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction,
or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any
of the
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transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified
above in Section 5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Assignment Applications shall have been approved
by a Final Order of the FCC, all applicable waiting periods
(and any extensions thereof) under the Hart-Scott-Rodino Act
shall have expired or otherwise been terminated, and the
Seller and the Buyer shall have received all governmental
approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental
agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement;
(vii) the relevant parties shall have entered into the Lease
Agreement and Purchase Option; and
(viii) all actions to be taken by the Buyer in connection with the
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the
Seller.
The Seller may waive any condition specified in this Section 5(b) if it executes
a writing so stating at or prior to the Closing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments
and documents) as any other Party reasonably may request, all the
sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 7
below).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand
in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status,
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condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing
Date involving the Seller, each of the other Parties will cooperate
with the contesting or defending Party and its counsel in the
contest or defense, make available his or its personnel, and provide
such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification
therefor under Section 7 below).
(c) Adjustments. Operation of the Stations and the income and
expenses attributable thereto up through the close of business on
the day before the Closing Date shall be for the account of the
Seller and thereafter for the account of the Operating Company. Such
items as employee salaries, vacation, sick day and personal time
accruals, and fringe benefits, power and utilities charges,
insurance real and personal property taxes, prepared expenses,
deposits, music license fees, and rents and payments pertaining to
the leases and contracts being assigned hereunder (inducing any
contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Operating
Company as of the Closing Date in accordance with the foregoing
principle. Contractual arrangements that do not reflect an equal
rate of compensation to the station over the term of the Agreement
shall be equitably adjusted as of the Closing Date. The prorations
and adjustments hereunder shall be made and paid insofar as feasible
on the Closing Date, with a final settlement sixty (60) days after
the Closing Date. In the event of any disputes between the Parties
as to such adjustments, the amounts not in dispute shall nonetheless
be paid at such time and such disputes shall be determined by the
accounting firm and the fees and expenses of such accounting firm
shall be paid one-half (1/2) by the Seller and one-half (1/2) by the
Operating Company.
(d) Severance Obligations. In the event an offer of employment is
extended by the Buyer to and accepted by an employee of the Seller
pursuant to Section 4(c) and such subsequent employment by the Buyer
is terminated within sixty (60) days from the Closing Date, the
Seller shall be exclusively responsible for, and shall pay to such
accepting employee, all severance benefits, if any (pursuant to the
Seller's practices as in effect on the Closing Date) that may be due
and owing such employee by reason of his or her employment with
either the Seller or the Buyer.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the
Seller contained in Section 2 of this Agreement (other than the
representations and warranties of the Seller contained in Sections
2(a), 2(b), 2(c), 2(g), 2(q) and 2(r) hereof or relating to the
Seller's title to the Acquired Assets) shall survive the Closing
(even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect for a period of three (3) years
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thereafter. All of the other representations, warranties, and
covenants of the Buyer and the Seller contained in this Agreement
(including the representations and warranties of the Seller
contained in Sections 2(a), 2(b), 2(c), 2(g), 2(q) and 2(r) hereof
or relating to the Seller's title to the Acquired Assets) and in
this Agreement shall survive the Closing (even if the damaged Party
knew or had reason to know of any misrepresentation or breach of
warranty or covenant at the time of Closing) and continue in full
force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyer.
Except as described below in Section 7(e) with respect to a breach
of a covenant prior to the Closing Date, the Seller agrees to indemnify the
Buyer from and against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by:
(i) any breach of any of the Seller's representations, warranties,
and covenants contained in this Agreement (so long as the
particular representation, warranty, or covenant survives the
Closing and the Buyer makes a written claim for
indemnification within the applicable survival period);
(ii) any Liability of the Seller which is not an Assumed Liability;
or
(iii) any Liability of the Buyer arising by operation of law
(including under any bulk transfer law of any jurisdiction or
under any common law doctrine of defacto merger or successor
liability) which is not an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Seller. Except
as described below in Section 7(e) with respect to a breach of a
covenant prior to the Closing Date, the Buyer agrees to indemnify
the Seller from and against the entirety of any Adverse Consequences
the Seller may suffer resulting from, arising out of, relating to,
in the nature of, or caused by (i) the breach of any of the Buyer's
representations, warranties, and covenants contained in this
Agreement (so long as the particular representation, warranty, or
covenant survives the Closing and the Seller makes a written claim
for indemnification within the applicable survival period) or (ii)
any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and
agrees that the Stations to be acquired pursuant to this Agreement
are unique and that the Buyer would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached.
Accordingly, each of the Parties agrees that the Buyer shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof
having
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jurisdiction over the Parties and the matter (subject to the
provisions set forth in Section 10(o) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each
of the Parties acknowledges and agrees that not withstanding the
provisions in Section 7(e) with respect to the remedy of liquidated
damages upon breach of a covenant of this Agreement prior to the
Closing, money damages would not be an adequate remedy for a breach
of any provision of this Agreement.
(e) Liquidated Damages. The Buyer and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are
not closed because of a default by either Party, the Adverse
Consequences as a result of such a default may be difficult, if not
impossible, to ascertain. Accordingly, in lieu of relief pursuant to
Sections 7(b) or 7(c), the non-defaulting Party shall receive from
the defaulting Party for such default an amount equal to Five
percent (5%) of the Purchase Price as liquidated damages without the
need for proof of damages, subject only to successfully proving in a
court of competent jurisdiction that the other Party has materially
breached this Agreement and that the transactions contemplated
thereby have not occurred; provided, however, that the Buyer retains
the option to seek and recover (pursuant to Section 7(d)) in lieu of
the remedy of liquidated damages pursuant to this Section 7(e) the
remedy of specific performance with respect to a breach of this
Agreement. The Buyer and the Seller agree to pay said sum of
liquidated damages within ten (10) days of the date that the
non-defaulting party obtains such a judgment.
(f) Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which
may give rise to a claim for indemnification against any other Party
(the "Indemnifying Party") under this Section 7, then the
Indemnified Party shall notify the Indemnifying Party thereof
promptly; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party
thereby is damaged. In the event any Indemnifying Party notifies the
Indemnified Party within 15 days after the Indemnified Party has
given notice of the matter that the Indemnifying Party is assuming
the defense thereof, (i) the Indemnifying Party will defend the
Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost
and expense (except that the Indemnifying Party will be responsible
for the fees and expenses of the separate co-counsel to the extent
the Indemnified Party concludes reasonably that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii)
the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (iv) the Indemnifying Party will not consent to
the entry of any judgment with respect to the matter, or enter into
any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the
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Indemnified Party from all Liability with respect thereto, without
the written consent of the Indemnified Party (not to be withheld
unreasonably). In the event the Indemnifying Party does not notify
the Indemnified Party within 15 days after the Indemnified Party has
given notice of the matter that the Indemnifying Party is assuming
the defense thereof, however, the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in
any manner it reasonably may deem appropriate.
(g) Other Indemnification Provisions. The indemnification provisions
of Sections 7(a), 7(b), 7(c), and 7(f) are in addition to, and not
in derogation of, any statutory or common law remedy any Party may
have for breach of representation, warranty, or covenant. The
remedies provided in Sections 7(d) and 7(e) shall be the exclusive
remedies of the Parties prior to the Closing for any breach of
representation, warranty or covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller (other than Retained Assets) that are used or useful in
the operation of the Stations, including but not limited to all of its (a)
leaseholds and other interests in real property, improvements, fixtures, and
fittings thereon (such as towers and antennae), and easements, rights-of-way,
and other appurtenants thereto; (b) tangible personal property (such as
computers, electrical devices, monitoring equipment, test equipment, switching,
terminal and studio equipment, transmitters, transformers, receivers, broadcast
facilities, inventories of compact disks, records, tapes and other supplies,
vehicles, and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those barter agreements identified on the Disclosure Schedule) now existing or
entered into in the Ordinary Course of Business for the sale of advertising time
on the Stations; (e) contracts, indentures, Security Interests, guaranties,
other similar arrangements, and rights thereunder; (f) call letters of the
Stations, jingles, logos, slogans, and business goodwill of the Stations; (g)
Licenses and similar rights obtained from governments and governmental agencies;
and (h) FCC logs and records and all other books, records, ledgers, logs, files,
documents, correspondence, lists, plats, architectural plans, drawings, and
specifications, creative materials, advertising and promotional materials,
studies, reports, and other printed or written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
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"Advertising Contracts" means any arrangement between the Seller and any
third party under which the Seller has created, incurred, assumed, or guaranteed
an obligation to provide advertising or air time on any of the Stations.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means obligations of the Seller under (a) that
certain promissory note in the original principal amount of Three Hundred Sixty
Thousand and 00/100 Dollars ($360,000) having a ten (10) year amortization with
an annual interest rate of eight percent (8%), a form of which is attached
hereto at Exhibit H; and (b) the licenses, sublicenses, leases, subleases,
contracts, and other arrangements referred to in the definition of Acquired
Assets either: (i) to furnish services, and other non-Cash benefits to another
party after the Closing; or (ii) to pay for goods, services, and other non-Cash
benefits that another party will furnish to it after the Closing. The Assumed
Liabilities shall not include any Retained Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(e) above.
"Closing Date" has the meaning set forth in Section 1(e) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution
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retirement plan or arrangement which is an Employee Pension Benefit Plan, (c)
qualified defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare
Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means The Whittle Agency.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs,
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programming materials, copyrights and registrations and applications for
registration thereof, (d) mask works and registrations and applications for
registration thereof, (e) computer software, data, and documentation, (f) trade
secrets and confidential business information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Lease Agreement and Purchase Option " means the lease agreement purchase
option by and between the Seller and the Operating Company, a form of each of
which is and attached hereto as Exhibit E.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Licensing Company" has the meaning set forth in the preface above.
"Local Marketing Agreement" means the Program Service and Time Brokerage
Agreement attached hereto as Exhibit I.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Operating Company" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller
Partners entered into concurrently herewith and attached hereto as Exhibit D.
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"Process Agent" has the meaning set forth in Section 10(o) below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Retained Assets" means (a) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (b) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyer on the
other hand entered into on or after the date of this Agreement); (c) accounts,
notes and other receivables; (d) any and all of the Seller's rights with respect
to the real property that is the subject of the Lease Agreement and Purchase
Option which is located at (i) 31455 Winter Place Parkway, Salisbury, Maryland;
(ii) adjacent to Hall Road in Whaleysville, Maryland; and (iii) adjacent to West
Road in Salisbury, Maryland; and (e) the Seller's Cash.
"Retained Liabilities" means any obligations or liabilities of Seller that
are not Assumed Liabilities, including but not limited to: (a) any Liability
relating to the ownership or operation of the Stations prior to the Closing; (b)
any Liability of the Seller for income, transfer, sales, use, and other Taxes
arising in connection with the consummation contemplated hereby; (c) any
Liability of the Seller for costs and expenses incurred in connection with this
Agreement or the consummation of the transactions contemplated hereby; or (d)
any Liability or obligation of the Seller under this Agreement (or under any
side agreement between the Seller on the one hand and the Buyer on the other
hand entered into on or after the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WQHQ-FM, WLVW-FM and WTGM-AM, each licensed by the FCC to operate in Salisbury,
Maryland; WLBW-FM licensed by the FCC to operate in Fenwick Island, Maryland;
and WRXS-FM licensed by the FCC to operate in Ocean City, Maryland.
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"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 4(j) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the
event the Seller is in breach of any material representation,
warranty, or covenant contained in this Agreement in any
material respect if such breach remains uncured for twenty
(20) days after notice of such breach is received from the
Buyer;
(iii) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing in the
event the Buyer is in breach of any material representation,
warranty or covenant contained in this Agreement in any
material respect if such breach remains uncured for twenty
(20) days after notice of such breach is received from Seller;
(iv) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the
Closing shall not have occurred on or before the 270th day
following the date of this Agreement by reason of the failure
of any condition precedent under Section 5(a) hereof (unless
the failure results primarily from the Buyer itself breaching
any representation, warranty, or covenant contained in this
Agreement);
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(v) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing if the
Closing shall not have occurred on or before the 270th day
following the date of this Agreement by reason of the failure
of any condition precedent under Section 5(b) hereof (unless
the failure results primarily from the Seller itself breaching
any representation, warranty, or covenant contained in this
Agreement);or
(vi) the Buyer or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties
hereunder shall terminate without any Liability of any Party to any
other Party (except for any Liability of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants
of the Parties contained in this Agreement shall survive the Closing
hereunder as and to the extent provided in the Post-Closing
Agreement with the partners of the Seller.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of
the other Party; provided, however, that any Party may make any
public disclosure it believes in good faith is required by law or
regulation (in which case the disclosing Party will advise the other
Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the
Parties and supersedes any prior understandings, agreements, or
representations by or between the Parties, written or oral, that may
have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign
either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the
other Party, provided that the Buyer may assign all of its right,
title and interest in, to and under this Agreement to one or more
affiliated entities, who shall then, subject to the terms and
conditions of this Agreement, have the right to receive the Acquired
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Assets, assume the Assumed Liabilities, and to pay to the Seller the
Purchase Price therefor.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered
or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Seller: HVS Partners
8900 Harvest Square Court
Potomac, MD 20854-4474
ATTN: Ms. Gisela Huberman
Copy to:
------------------------------------
------------------------------------
------------------------------------
If to the Buyer: Cumulus Licensing Corp.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrance J. Leahy
Copy to: Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
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Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts)
of the State of Maryland.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by the Buyer and the Seller. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid
or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
(l) Expenses. The Buyer and the Seller, will each bear own costs and
expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other
than as set forth in Section 4(b) with regard to the Assignment
Applications. The Seller will pay all income taxes. The Seller and
the Buyer will each pay one-half (1/2) of any transfer or sales
taxes and other recording or similar fees necessary to vest title to
each of the Acquired Assets in the Buyer.
(m) Construction. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual
intent, and no rule of strict
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construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. Nothing in the Disclosure
Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure
Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties
intend that each representation, warranty, and covenant contained
herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein
in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party
has not breached shall not detract from or mitigate the fact that
the Party is in breach of the first representation, warranty, or
covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Salisbury,
Maryland, in any action or proceeding arising out of or relating to
this Agreement, agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court, and agrees
not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Each
Party appoints CT Corporation (the "Process Agent") as its agent to
receive on its behalf service of copies of the summons and complaint
and any other process that might be served in the action or
proceeding. Any Party may make service on the other Party by sending
or delivering a copy of the process (i) to the Party to be served at
the address and in the manner provided for the giving of notices in
Section 10(h) above or (ii) to the Party to be served in care of the
appropriate Process Agent at the address and in the manner provided
for the giving of notices in Section 10(h) above. Nothing in this
Section 10(p), however, shall affect the right of any Party to serve
legal process in any other manner permitted by law. Each Party
agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or
in any other manner provided by law.
(p) Bulk Transfer Laws. The Seller has, or will as of the Closing
Date, comply with the provisions of any bulk transfer laws of
Maryland or any other jurisdiction applicable to the transactions
contemplated by this Agreement.
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* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:__________________________________
__________________________________
(printed)
Title:__________________________________
"Operating Company"
CUMULUS LICENSING CORP.
By:__________________________________
__________________________________
(printed)
Title:__________________________________
"Licensing Company"
HVS PARTNERS
By:__________________________________
__________________________________
(printed)
Title:__________________________________
"Seller"
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EXHIBIT I
PROGRAM SERVICE AND TIME BROKERAGE AGREEMENT
This Program Service and Time Brokerage Agreement ("Agreement") entered
into this 18th day of August, 1997, by and between Cumulus Broadcasting, Inc., a
Nevada Corporation, ("Programmer"), and HVS Partners, a Florida general
partnership ("Licensee"), licensee of Radio Stations WQHQ-FM, WLVW-FM, and
WTGM-AM, licensed to Salisbury, Maryland; WLBW-FM, licensed to Fenwick Island,
Delaware and WRXS-FM, licensed to Ocean City, Maryland (the "Stations").
WHEREAS, Licensee holds licenses from the Federal Communications
Commission ("FCC") authorizing it to operate the Stations;
WHEREAS, the studio of the Stations is located at ___________________
("Studio") and the transmitter facilities of the Stations are located at
_______________ ("Transmitter");
WHEREAS, Licensee has available for sale broadcast time on the Stations;
WHEREAS, Programmer desires to purchase time on Licensee's Stations for
the broadcast of programming on the Stations and to sell advertising time for
inclusion in that programming; and
WHEREAS, Licensee and Programmer have entered into an Asset Purchase
Agreement of even date herewith pursuant to which Programmer and Cumulus
Licensing Corp., an affiliate of Programmer will purchase from Licensee
substantially all of the assets used or useful in the operation of the Stations
(the "Asset Purchase Agreement").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties have agreed as follows:
1. TIME OFF. Subject to the provisions of this Agreement, Licensee agrees
to make the Stations' Studio and Transmitter broadcasting facilities, and all
other equipment used or useful in the operation of the Stations, available to
Programmer for broadcast of Programmer's programs on the Stations and the
Stations' subcarriers. The Stations time made available to Programmer is
described in Exhibit A hereto.
2. PAYMENT. Programmer hereby agrees to pay Licensee compensation for the
broadcast of Programmer's programming in the amounts and at the times set forth
in Exhibit B hereto.
3. TERM. The initial term of this Agreement shall be for a period of two
(2) years, beginning on the date above written (the "Effective Date") and ending
two years later or on the day of closing of the transactions contemplated by the
Asset Purchase Agreement between the parties,
<PAGE>
whichever is earlier.
4. PROGRAMS. Programmer shall furnish the artistic personnel and materials
for its programming. Programmer represents and warrants that all of the
programming, advertising and promotional material it broadcasts on the Stations
shall be in accordance with the rules, regulations and policies of the
Commission and the Communications of 1934, as amended (the "Act"). All rights
(including without limitation copyrights) to the use and ownership of the
programs shall be and remain vested in Programmer at all times.
5. ACCOUNTS RECEIVABLE AND EXISTING ADVERTISING COMMITMENTS. Licensee's
accounts receivable for performed advertising contracts shall be identified and
valued as the Effective Date. The parties agree that such accounts receivable
shall be and remain the sole property of the Licensee. Programmer agrees to use
its best efforts to collect such accounts receivable for a period of ninety (90
days) and shall remit all sums collected to Licensee once a month commencing on
the fifteenth day after the first month of operation. Any uncollected accounts
thereafter shall be returned to Licensee for collection, and Programmer shall be
relieved of any additional responsibilities with respect to such accounts. All
accounts receivable created after the Effective Date of this Agreement shall be
and remain the sole property of Programmer. Programmer shall be responsible for
the collection of such accounts receivable created after the Effective Date and
shall retain ownership of such accounts upon termination of this Agreement. All
prior existing advertising contracts signed by Licensee prior to the Effective
Date of this Agreement for commercial time to be aired during time periods to be
used by Programmer are identified on Exhibit C hereto and shall be performed by
Programmer for the benefit of Programmer.
6. STATIONS' FACILITIES.
(a) Licensee Responsibility. Licensee shall be responsible for the
Stations' compliance with all applicable provisions of the Act, the rules,
regulations and policies of the FCC and all other applicable laws. Licensee
represents that it holds all permits and authorizations necessary for the
operation of the Stations including all FCC permits and authorizations. Licensee
will continue to hold such permits and authorizations throughout the life of
this Agreement and to maintain them in full force and effect.
(b) Broadcast Output. Licensee represents that the Stations'
facilities and equipment comply with all applicable laws and regulations and
that, to its knowledge, it is not in material violation of any statute,
ordinance, rule, order or decree of any federal, state or local governmental
agency, court or authority having jurisdiction over the Licensee which would
have an adverse effect on its ability to perform this Agreement. During the term
hereof, Licensee agrees to maintain the Transmitter and other transmission
facilities and the broadcast output in compliance with the FCC's rules and
regulations to allow broadcasting at the maximum authorized power twenty-four
(24) hours a day, seven (7) days a week, except for downtime occasioned by
routine maintenance, if necessary, not to exceed two (2) hours on Sundays
between 12:00 midnight and 6:00
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<PAGE>
a.m. To the extent practicable, any maintenance work affecting the operation of
the Stations at full power shall be scheduled upon at least forty-eight (48)
hours prior notice with the approval of Programmer, which shall not be
unreasonably withheld.
7. HANDLING OF MAIL AND COMPLAINTS. Programmer shall promptly forward to
Licensee any mail which it may receive from any agency of government or any
correspondence from members of the public relating to the Stations or to any of
Programmer's programming broadcast on the Stations. Licensee shall advise
Programmer of any public or FCC complaint or inquiry concerning the programs
provided by Programmer.
8. PROGRAMMING AND OPERATIONS STANDARDS. Programmer recognizes that the
Licensee has full authority and a duty to control the operation of the Stations.
The parties agree that Licensee's authority includes, but it is not limited to,
the right to reject or refuse such portions of Programmer's programming which
Licensee reasonably believes to be contrary to the public interest. Licensee
shall have no obligation to Programmer for the exercise of its rights under this
paragraph. Whenever on the Stations' premises, Programmer and its employees and
agents shall be subject to the supervision and direction of Licensee's General
Manager and/or designated personnel.
9. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES. Programmer shall employ and
be responsible for the salaries, commissions, taxes, insurance and all other
related costs for all of its employees, agents contractors and personnel.
Employees of Programmer shall serve, however, as duty operators of the Stations,
under the supervision and direction of the Licensee's General Manager and/or
other designated personnel of Licensee, during all hours the Stations are in
operation. Licensee shall be responsible for (a) retaining a contract engineer
to maintain the Stations' broadcast and transmission equipment, (b) appointment
of a Chief Operator, and (c) compliance with the FCC's main studio staffing
requirements (including, without limitation, the Stations' General Manager).
Licensee shall be responsible for the salary, taxes, insurance and related costs
for its General Manager and Chief Operator.
10. ADVERTISING AND PROGRAMMING REVENUES. Programmer shall retain all
revenues from the sale of advertising time on the programming it broadcasts on
the Stations. Programmer will provide, make available to and shall sell time to
political candidates from the time it purchases from Licensee in strict
compliance with the Act, the rules, regulations and policies and the Commission.
11. OPERATION OF STATIONS.
(a) Full Authority and Power. Licensee shall have full authority and
power over the operation of the Stations during the term of this Agreement.
Licensee and its designated personnel shall have complete access to the
Stations' studios at all times. Licensee's General Manager shall direct the
day-to-day operation of the Stations and report to and be accountable solely to
Licensee. Licensee's Chief Operator shall oversee and direct the engineering and
technical operation of the
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<PAGE>
Stations. Licensee shall retain the right to interrupt and discontinue
Programmer's programming at any time if Licensee determines the programming is
not in the public interest or violates this Agreement, or in case of an
emergency or EBS system activation, or for the purpose of providing programming
which Licensee in its sole discretion determines to be of greater national,
regional or local importance. Programmer will properly prepare and provide
Licensee such information, records and reports belonging to Programmer's
programming, sales or employment practices at the Stations in sufficient detail
as is necessary to enable Licensee to comply with all the rules and policies of
the FCC or any other governmental agency.
(b) Political Time. Licensee shall oversee and take ultimate
responsibility with respect to the provision of equal opportunities, lowest unit
charge, and reasonable access to political candidates, and compliance with the
political broadcast rules of the FCC. Programmer shall cooperate with Licensee
as Licensee complies with its political broadcast responsibilities, and shall
supply such information promptly to Licensee as may be necessary to comply with
the political time record keeping and lowest unit charge requirements of federal
law. To the extent that Licensee believes necessary, in Licensee's sole
discretion, Programmer shall release advertising availabilities to Licensee
during the term of this Agreement to permit Licensee to comply with the
political broadcast rules of the FCC and the Communications Laws; provided
however, that revenues received by Licensee as a result of any such release of
advertising time shall promptly be remitted to Programmer.
(c) Facilities. During the terms of this Agreement the Licensee
shall make available to Programmer, for no additional consideration, areas in
the Stations' physical studios and offices as are reasonably necessary for
Programmer to excise its rights and perform its obligations under this
Agreement.
12. CALL SIGNS AND STATION IDENTIFICATION. Licensee will retain all rights
to the call letters "WBZE-FM", "WHBX-FM", and "WHBT-FM" or any other call
letters that may be assigned by the FCC for use by the Stations, and shall be
responsible for ensuring the proper broadcast of Station identification
announcements in accordance with the FCC rules and regulations. Programmer is
specifically authorized to use the call letters "WBZE-FM", "WHBX-FM", and
"WHBT-FM", or any other call letters used by Licensee for the Stations, and will
provide appropriate station identification announcements which, in Licensee's
sole discretion, comply with FCC requirements.
13. PAYOLA/PLUGOLA. Programmer agrees that neither it nor its employees
will accept any consideration, compensation or gift of any kind whatsoever,
regardless of its value or form, including, but not limited to, a commission,
discount, bonus, supplies or other merchandise (collectively "Consideration"),
unless the payer is identified in the program for which Consideration was
provided as having paid for or furnished such Consideration, in accordance with
the Act.
14. COMPLIANCE WITH LAW. Programmer agrees that, throughout the term of
this Agreement, Programmer will comply with all laws, regulations and policies
including, but not
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<PAGE>
limited to, the FCC's technical, political broadcasting, obscenity and indecency
regulations, lottery regulations, sponsorship identification rules, sale
practices regulations and all FCC rules applicable to programming agreements of
this kind. Programmer acknowledges that Licensee has not urged, advised or
agreed in any way to the use of any unfair business practices.
15. INDEMNIFICATION.
(a) Programmer's Indemnification. Programmer shall indemnify and
hold Licensee harmless for any material loss, damage or injury of any kind
sustained by Licensee resulting from Programmer's breach of this Agreement, from
any programming material broadcast by Programmer on the Stations, from the sale
of or attempt by Programmer to sell advertising or program time on the Stations,
and from any material act or omission of any kind by Programmer.
(b) Licensee's Indemnification. Licensee shall indemnify and hold
Programmer harmless for any material loss, damage or injury sustained by
Programmer resulting from breach of this Agreement, from the broadcast of
Licensee's programming, from the sale of or attempt by Licensee to sell
advertising or program time on the Stations (except the instant sale provided
for in this Agreement to Programmer), and from any material act or omission of
any kind whatsoever by Licensee.
(c) Survival. Any claim for indemnification must be asserted in
writing delivered to the other party. The representations and obligations of
both parties shall survive any termination of this Agreement and shall continue
until the expiration of all applicable statutes of limitations as to the parties
hereto and to claims of third parties.
16. TERMINATION AND REMEDIES UPON DEFAULT.
(a) Termination. In addition to other remedies available at law or
equity, this Agreement may be terminated by either party by written notice to
the other if the party seeking to terminate is not then in material default or
breach thereof, upon the occurrence of any of the following:
(i) This Agreement is declared invalid or illegal in whole or
in material part upon a final order of the FCC or any administrative agency or
court of competent jurisdiction.
(ii) The other party is in material breach of its obligations
hereunder and has failed to cure such breach within twenty (20) days of receipt
of written notice from the nonbreaching party.
(iii) The mutual consent of both parties.
(iv) The other party shall make a general assignment for the
benefit of creditors, files or has filed against a petition for bankruptcy,
reorganization or appointment of a
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<PAGE>
receiver or a trustee for the property or assets of such party under any federal
or state insolvency law, which is filed against such party has not been
dismissed within thirty (30) days thereof.
(v) Not less than sixty (60) days prior written notice to the
other party for any reason.
Upon termination of this Agreement according to the provisions of this
paragraph, the monthly payment pursuant to Paragraph 2 above shall be prorated.
Licensee shall cooperate reasonably with the Programmer to the extent permitted
to enable Programmer to fulfill prior to the date of termination of this
Agreement advertising or other programming contacts then outstanding, provided
however, to the extent such contracts are fulfilled by Licensee after the date
of termination of this Agreement, Licensee shall receive as compensation that
which otherwise would have been paid to Programmer pursuant to such contracts.
(b) Programmer's Additional Remedies for Licensee's Technical
Operation Deficiencies. In addition to Programmer's right to termite for reasons
set forth in Paragraph (a) above, if the Station suffers any damage to its
transmission facilities which results in the inability of the Stations to
operate with its presently authorized facilities and Licensee has not restored
full-time operation of the Stations with its presently authorized facilities
within seven (7) days of any such occurrence, (i) Programmer may give notice to
Licensee of Programmer's termination of this Agreement in which event this
Agreement shall terminate upon giving of such notice, any other provision of
this Agreement notwithstanding, and (ii) any payment due Licensee pursuant to
Paragraph 2 above shall be prorated for such period of time within which
full-time operation of the Stations has not been restored.
(c) Termination Upon Sale. Notwithstanding anything herein to the
contrary, this Agreement shall terminate upon the Closing of the transactions
contemplated by the Asset Purchase Agreement.
17. CERTIFICATION. Pursuant to Section 73.3555(a)(2)(ii) of the FCC's
Rules, the following certifications are made: HVS Partners certifies that it
shall maintain ultimate control over the Stations' facilities, including
specifically control over Stations finances, personnel and programming.
Programmer certifies that implementation of this Agreement complies with Section
202 of the Telecommunications Act of 1996.
18. NOTICES. All necessary notices, demands, requests permitted or
required under this Agreement shall be in writing and shall be deemed given four
(4) days after being mailed by certified mail, return receipt requested,
addressed as follows:
If to Licensee:
HVS Partners
3113 Clint Moore Road
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<PAGE>
Apt. 206
Boca Raton, Florida 33496
Attn: Gisela Huberman
If to Programmer:
Cumulus Broadcasting, Inc.
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Copy to:
Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
(Neither of which copies shall constitute notice to Buyer)
19. MODIFICATION AND WAIVER. No modification of any provision of this
Agreement shall in any event be effective unless it is in writing, and such
modification shall be effective only in the specific instance as for the purpose
for which given.
20. CONSTRUCTION. This Agreement shall be construed in accordance with the
laws of Florida, and the obligations of the parties hereto are subject to all
federal, state and local laws and regulations now or hereafter in force and to
the rules, regulations and policies of the FCC and all other governmental
entities or authorities.
21. NO PARTNERSHIP OR JOINT VENTURE CREATED. Nothing In this Agreement
shall be construed or interpreted to make licensee and Programmer partners or
joint venturers, or to make one an agent or representative of the other.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
PROGRAMMER:
CUMULUS BROADCASTING, INC.
By: _____________________________
LICENSEE:
HVS PARTNERS
By: _____________________________
Gisela B. Huberman
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<PAGE>
EXHIBIT A
PROGRAMMING
Subject to all other provisions of this Agreement, Programmer will have
the exclusive right to broadcast on the Stations and the Station's subcarriers
up to twenty-four (24) hours of programming each day during the term of this
Agreement, provided however, Licensee reserves three (3) hours of Stations time
for its own use on Sunday morning, between 7:00 a.m. and 11:00 am. Licensee
shall have the sole responsibility to decide the scheduling of such Sunday hours
but shall consult with Programmer as to that schedule.
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<PAGE>
EXHIBIT B
COMPENSATION PAYMENT SCHEDULE
Programmer shall pay to Licensee Forty Thousand and 00/100 Dollars
($40,000.00) on the first day of each month. Each such payment shall constitute
a monthly installment towards the purchase price of the Stations and be deducted
from the aggregate purchase price to be paid at closing of the transactions
contemplated by the Asset Purchase Agreement. In addition, Programmer will
reimburse Licensee for reasonable expenses of operating the Stations approved by
Programmer before they are incurred by Licensee. Such reimbursement payments
will be made by Programmer within seven (7) days of Programmer's receipt of
evidence of such expenses.
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<PAGE>
EXHIBIT C
PRIOR EXISTING ADVERTISING CONTRACTS
[To Come From HVS Partners]
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<PAGE>
Benchmark Radio Acquisition Fund IV Limited Partnership
600 Congress Avenue, Suite 1400
Austin, Texas 78701
(512) 404-6800
January 16, 1998
Mr. Richard Weening
Chairman
Cumulus Broadcasting, Inc.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, Wisconsin 53202
Re: Letter Agreement for the purchase of the radio stations referred to
herein
Dear Mr. Weening:
This letter agreement (this "Agreement") contains the terms and conditions
upon which Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"), is
willing to acquire the assets, other than the licenses issued by the Federal
Communications Commission (the "FCC"), of radio stations WOSC-FM (Bethany Beach,
Delaware) and WWFG-FM (Ocean City, Maryland) (the "Stations") from Benchmark
Radio Acquisition Fund IV Limited Partnership, a Maryland limited partnership
("Fund IV"), and upon which Cumulus Licensing Corp., a Nevada corporation
("Licensing"), is willing to acquire the FCC licenses for the Stations from WOSC
License Limited Partnership, a Maryland limited partnership, with respect to
WOSC-FM ("Licensee 1") and WWFG License Limited Partnership, a Maryland limited
partnership, with respect to WWFG-FM ("Licensee 2") (Fund IV, Licensee 1 and
Licensee 2 being referred to herein collectively as "Seller"). (Broadcasting and
Licensing are referred to herein, collectively, as "Buyer"):
1. Assets. On the Closing Date (as hereinafter defined), Buyer shall
purchase from Seller, and Seller shall sell to Buyer, all of the assets,
properties, interests and rights of Seller, real and personal, tangible and
intangible, owned or leased by Seller which are used or held for use in the
operation of the Stations including, but not limited to, all the following: (i)
licenses, permits and authorizations of any governmental authority, including
the FCC, which FCC licenses, authorizations and permits are listed on Schedule
10(c) hereto; (ii) all real property (whether leased or owned), together with
all appurtenant easements thereto, and all equipment, office furniture and other
tangible personal property, including the real and personal property listed on
Schedules 10(f) and 10(k) hereto; (iii) all documents, files, books and records,
including the local public file; (iv) the right to use the call letters of each
Station; (v) all slogans, programs, computer programs and
<PAGE>
Mr. Richard Weening
Page 2
January 16, 1998
software (to the extent assignable), programming material, trade names, service
marks and copyrights; (vi) all leases, contracts and agreements listed on
Schedule 1 hereto (the "Assumed Contracts") and the rights to any security
deposits thereunder; and (vii) goodwill related to each Station; but excluding
cash or cash equivalents and accounts receivable of Seller, contracts or
agreements to which Seller is a party (other than any Assumed Contracts),
tangible and intangible personal property disposed of or consumed in the
ordinary course of business and employee benefit plans and assets relating
thereto (collectively, the "Excluded Assets"). The assets conveyed (the
"Assets") will include all replacements and additions thereto between the date
of this Agreement and the date on which the transactions contemplated hereby are
consummated (the "Closing Date"). Seller agrees that it shall convey the Assets
to Buyer free and clear of all liens, encumbrances and debts of any kind except
to the extent expressly assumed by Buyer and except for Permitted Encumbrances.
Permitted Encumbrances means (a) statutory liens for current taxes not yet due
and payable or being contested in good faith by appropriate proceedings and for
which adequate reserves have been established, (b) mechanics', carriers',
workers', repairers', and other similar liens imposed by law arising or incurred
in the ordinary course of business for obligations which are not overdue for a
period of more than 90 days or which are being contested in good faith by
appropriate proceedings, (c) in the case of leases of vehicles, rolling stock,
and other personal property, encumbrances which do not, individually or in the
aggregate, materially impair the use of such assets in the operation of the
business at the facility at which such leased equipment or other personal
property is located, (d) other liens, charges, easements, restrictions or other
encumbrances incidental to the operation of the Stations or the ownership of the
Stations' assets which were not incurred in connection with the borrowing of
money or the advance of credit and which do not materially detract from the
value of the assets of the Stations or materially interfere with the use thereof
or the operation of such assets or the Stations, taken as a whole, (e) liens on
leases of real property arising from the provisions of such leases, including,
in relation to leased real property, any agreements and/or conditions imposed on
the issuance of land use permits, zoning, business licenses, use permits, or
other entitlements of various types issued by any governmental entity, necessary
or beneficial to the continued use and occupancy of the Stations' assets or the
continuation of the operation of the operation of the Stations, (f) pledges or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other social security legislation, (g)
deposits to secure the performance of bids, contracts (other than for borrowed
money), leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of
business, (h) unviolated zoning regulations and restrictive covenants and
easements of record which do not detract from the value of the Real Property
(hereinafter defined) and do not materially and adversely affect, impair or
interfere with the use of any property affected thereby, and (i) public utility
easements of record, in customary form, to serve the Real Property.
<PAGE>
Mr. Richard Weening
Page 3
January 16, 1998
2. Purchase Price. Subject to the adjustments set forth in paragraph 3,
the total purchase price for the Assets (the "Purchase Price") will be
$7,500,000 payable by Buyer to Seller or its assigns in cash or wire transfer
funds at the Closing (as hereinafter defined).
3. Adjustments and Prorations. (a) All revenues arising from the operation
of any Station earned or accrued up until 11:59 p.m. on the day prior to the
Closing Date, and all operating expenses arising therefrom incurred, accrued or
payable up until such time, including operating expenses arising under the
Assumed Contracts, tower rentals, business and license fees, utility charges,
real and personal property taxes levied against the Assets, property and
equipment rentals, applicable copyright or other fees, sales and service
charges, other taxes, wages, salaries, vacation, and sick and employee
compensation pay shall be prorated between Buyer and Seller in accordance with
the principle that, subject to the terms of the LMA (hereinafter defined), (i)
Seller shall receive all revenues, refunds and deposits of Seller held by third
parties, and shall be responsible for all operating expenses incurred, payable
or allocable to the conduct of the business and operations of any Station for
the period ending at 11:59 p.m. on the day prior to the Closing Date and (ii)
Buyer shall receive all revenues earned or accrued and shall be responsible for
all operating expenses incurred, payable or allocable to the conduct of the
business and operations of any Station for the period commencing on and
continuing after the Closing Date. An adjustment of the Purchase Price and
proration shall be made in favor of Buyer to the extent that Buyer assumes any
liability under any Assumed Contract to refund (or to credit against payments
otherwise due) any security deposit or similar prepayment paid to Seller by any
lessee or other third party which is not otherwise credited to Buyer. Subject to
Buyer's receipt of appropriate estoppel certificates, an adjustment of the
Purchase Price and proration shall be made in favor of Seller to the extent that
Seller has made (A) any security deposit under any Assumed Contract whether or
not there is a proration under such Assumed Contract or (B) other prepayment
under any Assumed Contract for which there is a proration, to the extent Buyer
receives the post-Closing benefits associated with such prepayment. Subject to
the terms of the LMA, Seller shall be liable for all the costs of employee
compensation relating to a Station properly attributable to or accruable on
account of service with the Seller through 11:59 p.m. on the date prior to the
Closing Date, including (1) all taxes and related contributions, vacations and
sick pay and (2) all group medical, dental or death benefits for expenses
incurred, related to or arising from events occurring on or prior to 11:59 p.m.
on the date prior to the Closing Date, or death or disability occurring on or
prior to 11:59 p.m. on the date prior to the Closing Date, whether reported by
the Closing Date or thereafter. Subject to the terms of the LMA, Buyer will be
liable for all of the costs of employee compensation (including the types of
costs referred to in clauses (1) and (2) above) relating to a Station, properly
attributable or accruable thereafter on account of service with Buyer.
<PAGE>
Mr. Richard Weening
Page 4
January 16, 1998
(b) Adjustments or prorations pursuant to this paragraph 3 will,
insofar as feasible, be determined and paid on the Closing Date based upon
Seller's good faith calculation delivered to Buyer five days prior to the
Closing Date and reasonably approved by Buyer, with final settlement and payment
by the appropriate party occurring no later than 90 days after the Closing Date,
unless there is a dispute with respect thereto (in which event the payment shall
be made as set forth below). Within 60 days after the Closing Date, Buyer shall
submit to Seller its good faith determination of the adjustments or prorations
required by this paragraph 3. Buyer's determination of the amount of adjustment
under this paragraph 3 shall be made in accordance with generally accepted
accounting principles, consistently applied. If Seller disagrees with the
determination made by Buyer of the adjustment, Seller shall give prompt written
notice thereof, but in no event later than 20 days after notice of Buyer's
determination, specifying in reasonable detail the nature and extent of the
disagreement, and Buyer and Seller shall have a period of 30 days in which to
resolve the disagreement. If the parties are unable to resolve the disagreement
within the 30-day period, the matter shall be submitted to Ernst & Young, an
independent certified public accounting firm, which accounting firm shall be
directed to submit a final resolution within 30 days. The accounting firm's
determination shall be binding on Buyer and Seller. Each party shall bear the
fees and expenses of its own representatives, including its independent
accountants, if any, and shall share equally the fees and expenses of Ernst &
Young, if engaged, to resolve any disagreement between the parties. Within five
business days following a final determination hereunder, the party obligated to
make payment will make the payments determined to be due and owing in accordance
with this paragraph 3.
4. Assumption of Liabilities and Obligations. (a) Subject to the
provisions of paragraph 7, as of the Closing Date, Broadcasting shall assume and
undertake to pay, discharge and perform all the obligations and liabilities of
Seller relating to a Station under the Assumed Contracts relating to the time
period beginning on or arising out of events occurring on or after the Closing
Date. Subject to the LMA, all other obligations and liabilities of Seller,
including, without limitation, (i) obligations or liabilities under any contract
not included in the Assumed Contracts, (ii) obligations or liabilities under any
Assumed Contract for which a consent to assignment, if required, has not been
obtained as of the Closing Date, (iii) any obligations and liabilities arising
under the Assumed Contracts that relate to the time period prior to the Closing
Date and (iv) any forfeiture, claim or pending litigation or proceeding relating
to the business or operations of any Station prior to the Closing Date, shall
remain and be the obligation and liability solely of Seller. Other than as
specified in the first sentence of this paragraph 4, Buyer, directly or
indirectly, shall assume no liabilities or obligations of Seller and shall not
be liable therefor. If Buyer is liable by operation of law for liabilities of
Seller not expressly assumed by Buyer, then Seller shall not be liable to Buyer
with respect to such liabilities unless and to the extent Seller is liable to
Buyer under Seller's indemnification obligations under paragraph 18.
<PAGE>
Mr. Richard Weening
Page 5
January 16, 1998
(b) On the Closing Date, Broadcasting shall assume Seller's
obligations under Trade Deals (hereinafter defined). The Trade Deals assumed by
Broadcasting pursuant to the terms of this paragraph 4 shall be considered
Assumed Contracts. "Trade Deals" means the exchanges prior to the commencement
of the LMA by a Station of its advertising time for goods or services, other
than in connection with the licensing of programs and programming material.
Schedule 4(b) sets forth a list of all the Trade Deals in effect as of the date
hereof and the balance, in dollar value, of either Seller's obligations to the
other party under such Trade Deals or the amount due Seller under such Trade
Deals. The goods and services to be provided to Broadcasting under the Trade
Deals after the Closing Date will be useful in connection with the operation of
the Stations. All Trade Deals have been reduced in full to writing and Seller
has made available to Buyer true and complete copies of each of such writings.
Seller will enter into no Trade Deals, nor increase the liability of Seller to
be assumed by Buyer at Closing under any Trade Deals, without the prior written
consent of Buyer.
5. Allocation. Within 30 days after the Closing Date, Seller and Buyer
shall negotiate in good faith an allocation of the Purchase Price among the
Assets (as well as liabilities assumed by Buyer) that complies with Section 1060
of the Internal Revenue Code with respect to the allocation of the Purchase
Price. If the allocation is not agreed upon within 30 days after the Closing
Date, then Buyer and Seller agree that the allocation shall be made and
consistently reported by Buyer and Seller in compliance with Section 1060 based
upon an asset valuation supplied by Broadcast Investment Analysts. The cost of
such appraisal shall be shared equally by Buyer and Seller. Buyer will order
such appraisal from Broadcast Investment Analysts promptly after such date as
Buyer and Seller fail to agree on such allocation. The appraisal, if required,
shall be provided to Seller within 45 days after the order of such appraisal.
6. Deposit Escrow Deposit. Simultaneously with the execution hereof,
Broadcasting, Fund IV and Media Venture Partners, as escrow agent, shall execute
an escrow agreement in the form of Exhibit A hereto (the "Deposit Escrow
Agreement") and, immediately after such execution, Broadcasting shall deposit
$750,000 in the form of a letter of credit reasonably acceptable to Fund IV (the
"Escrow Deposit"), in an escrow account to be governed by the terms of the
Deposit Escrow Agreement and this Agreement. At the Closing, the Escrow Deposit
and the accrued interest thereon, if any, shall be returned to Broadcasting. In
the event the parties fail to close this transaction due to Buyer's material
breach of this Agreement, and Seller terminates this Agreement pursuant to
paragraph 19 due to such breach, the Escrow Deposit and any accrued interest
thereon shall be paid to Fund IV as liquidated damages. In the event the parties
fail to close this transaction for any other reason, then the Escrow Deposit and
any accrued interest thereon shall be returned to Broadcasting.
<PAGE>
Mr. Richard Weening
Page 6
January 16, 1998
7. Local Marketing Agreement. Simultaneously with the execution of this
Agreement, Buyer and Seller shall enter into a local marketing agreement
substantially in the form of Exhibit B hereto pursuant to which Seller shall
make the Stations' broadcasting facilities available to Buyer prior to the
Closing (the "LMA"). Upon execution of the LMA, then, notwithstanding any other
provisions of this Agreement:
(a) Seller shall not be liable for the breach of a representation or
warranty of Seller contained in paragraph 10 (other than subparagraph (a)
or (b) thereof) if the fact, event or circumstance that gave rise to such
breach occurs after the commencement date referred to in the LMA (the
"Commencement Date") and was caused by a failure by Buyer to perform its
obligations under the LMA;
(b) Seller shall not be liable for the failure to perform or observe
any covenant contained in paragraph 12 if such failure was caused by a
failure of Buyer to perform its obligations under the LMA; and
(c) Buyer shall not be entitled to fail to consummate the
transactions contemplated by this Agreement or to terminate this Agreement
as a result of a breach of any such representation, warranty, covenant or
agreement by Seller caused by the failure of Buyer to perform its
obligations under the LMA.
8. FCC and Closing. Buyer and Seller agree that the purchase of the Assets
is subject to the prior consent and approval of the FCC without the imposition
of any conditions materially adverse to Buyer or its affiliates (other than any
Divestiture Condition, as hereinafter defined). Within ten (10) days after the
execution of this Agreement, Buyer and Seller will file an application with the
FCC seeking consent (the "FCC Consent") for the sale of the Stations
contemplated hereby. Each party will bear its own expenses in connection with
the preparation, filing and prosecution of said application. Subject to the
satisfaction or waiver of the conditions contained in this Agreement, the
Closing will take place at the offices of Vinson & Elkins L.L.P., in Dallas,
Texas, at 10:00 a.m., local time, on the fifteenth day after the day on which
the initial grant of the FCC Consent (the "Initial Grant") has become a Final
Order. At the election of Buyer, the receipt of a Final Order may be waived, and
in such case the Closing will occur after the Initial Grant on a date selected
by Buyer on at least five days' prior notice to Seller. "Final Order" means the
written action or order issued by the FCC setting forth the FCC Consent (without
the inclusion of any materially adverse conditions affecting Buyer's operation
or ownership of any Station, other than any Divestiture Condition) and (a) which
has not been reversed, stayed, enjoined, set aside, annulled or suspended and
(b) with respect to which (i) no requests have been filed for administrative or
judicial review, reconsideration, appeal or stay, and the time for filing any
such requests and for the FCC to set aside
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Mr. Richard Weening
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January 16, 1998
the action on its own motion has expired or (ii) in the event of review,
reconsideration or appeal, such review, reconsideration or appeal has been
denied and the time for further review, reconsideration or appeal has expired.
In addition to any other conditions specifically contained in this Agreement,
unless waived by Buyer, the obligation of Buyer to effect the transactions
contemplated hereby is subject to Seller having performed in all material
respects all obligations required to be performed by it under this Agreement on
or prior to the Closing Date, and, unless waived by Seller, the obligation of
Seller to effect the transactions contemplated hereby is subject to Buyer having
performed in all material respects all obligations required to be performed by
it under this Agreement on or prior to the Closing Date. At the Closing, Buyer
and Seller, as applicable, shall enter into the Bill of Sale and Assignment, the
License Assignment and the Assumption Agreement substantially in the forms of
Exhibit C-1, Exhibit C-2 and Exhibit D hereto, respectively, and such other
documents, instruments and certificates required pursuant to this Agreement or
as reasonably requested by Buyer or Seller to effect the transactions
contemplated hereby.
9. Representations and Warranties of Buyer. Except as disclosed on
Schedule 9 hereto, Buyer, jointly and severally, hereby represents and warrants
to Seller as follows, and Buyer and Seller agree that Seller's obligations
hereunder are subject to these representations and warranties being true and
correct, in all material respects, as of the Closing Date:
(a) Each of Broadcasting and Licensing is a corporation duly
organized, validly existing and in good standing in the state of its
incorporation and has all necessary corporate power and authority to
execute this Agreement and the other documents to be executed by it in
connection herewith (collectively with this Agreement, "Buyer's
Agreements") and consummate the transactions contemplated hereby and
thereby;
(b) Buyer's execution, delivery and performance of Buyer's
Agreements and the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary action on its part and,
assuming the due execution and delivery of Seller's Agreements
(hereinafter defined) by Seller, will constitute the valid and binding
obligation of Buyer, enforceable against it in accordance with their
respective terms, except as limited by laws affecting creditors' rights or
equitable principles generally;
(c) Except for the FCC Consent, the execution, delivery and
performance of Buyer's Agreements by Buyer does not require the consent of
a governmental entity or a third party not affiliated with Buyer;
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Mr. Richard Weening
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January 16, 1998
(d) There are no facts relating to Buyer or any affiliate of Buyer
that would disqualify it or any affiliate of Buyer from qualifying as an
assignee of the FCC licenses relating to the Stations, that would prevent
it from consummating the transactions contemplated by this Agreement or
delay the grant of the FCC Consent, or that would cause the FCC to impose
any Divestiture Condition on Buyer or any affiliate of Buyer (or any
person in which Buyer or any affiliate of Buyer has an attributable
interest under FCC rules). It is not necessary for Buyer or any affiliate
of Buyer (or any person in which Buyer or any affiliate of Buyer has an
attributable interest under FCC rules) to seek or obtain any waiver from
the FCC or, pursuant to the FCC requirements, dispose of any interest in
any media or communications property or interest (including, without
limitation, any Station), terminate any venture, arrangement, or
agreement, or effectuate any changes or restructuring of its ownership,
including, without limitation, the withdrawal or removal of officers or
directors or the conversion or repurchase of equity securities of Buyer or
any affiliate of Buyer owned by Buyer or any affiliate of Buyer (or any
person in which Buyer or any affiliate of Buyer has any attributable
interest under FCC rules). Buyer is able to certify on an FCC Form 314
that it is financially qualified. "Divestiture Condition" means any
condition imposed or required by the FCC as a condition for its consent to
or approval of the transfer of control of any of the FCC licenses related
to the Station or otherwise to any transaction contemplated hereby or as a
condition for its agreement not to institute litigation or any other
proceedings to prevent the transfer of control of any of the FCC licenses
related to the Stations or otherwise to prevent any of the transactions
contemplated hereby which would require Buyer or any affiliate of Buyer
(or any person in which Buyer or any affiliate of Buyer has an
attributable interest under FCC rules) to dispose of any interest in any
media or communications property or interest (including, without
limitation, any of the Stations), terminate any venture, arrangement, or
contract, or effectuate any change or restructuring of its ownership,
including, without limitation, the withdrawal or removal of officers or
directors or the conversion or repurchase of equity securities of Buyer or
any affiliate of Buyer or owned by Buyer or any affiliate of Buyer (or any
person in which Buyer or any affiliate of Buyer has an attributable
interest under FCC rules).
(e) Schedule 9 hereto sets forth, for the radio stations owned or to
be acquired by Buyer and identified in such Schedule, the revenues during
calendar year 1996 for each such station, determined in accordance with
generally accepted accounting principles, and the revenues during the ten
months ended October 31, 1997 for each such station, determined in
accordance with generally accepted accounting principles.
10. Representations and Warranties of Seller. Seller, jointly and
severally, hereby represents and warrants to Buyer as follows, and, subject to
the provisions of paragraph 7, Buyer and
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Mr. Richard Weening
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January 16, 1998
Seller agree that Buyer's obligations hereunder are subject to these
representations and warranties (without giving effect to any Material Adverse
Effect or other materiality qualifier contained therein) being true and correct
as of the Closing Date, except to the extent that any inaccuracies in such
representations and warranties that have not been waived by Buyer would not, in
the aggregate, have a Material Adverse Effect (as hereinafter defined):
(a) Seller is a limited partnership duly organized and validly
existing in the State of Maryland and has all necessary partnership power
and authority to execute this Agreement and the other documents to be
executed by it in connection herewith (collectively with this Agreement,
"Seller's Agreements") and consummate the transactions contemplated hereby
and thereby. Seller's execution, delivery and performance of Seller's
Agreements and the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary action on its part and,
assuming the due execution and delivery of Buyer's Agreements by Buyer,
will constitute the valid and binding obligations of Seller, enforceable
against it in accordance with their respective terms, except as limited by
laws affecting creditors' rights or equitable principles generally. No
person other than Seller has any interest in any of the Assets;
(b) Except for the FCC Consent and except as set forth on Schedule
10(b) hereto, the execution, delivery and performance of Seller's
Agreements by Seller does not require the consent of any governmental
entity or third party, will not conflict with or violate the provisions of
Seller's partnership agreement or any applicable law or any judgment,
order or ruling of any government authority having jurisdiction over
Seller, will not, directly or indirectly, conflict with or constitute a
breach or default under any agreement, license or permit to which Seller
is a party or is subject, and will not result in the creation of any lien
or encumbrance on the Assets, except to the extent that such conflict,
violation, breach, default, lien, or encumbrance would not have a Material
Adverse Effect. "Material Adverse Effect" means a material adverse effect
on the business, operations, properties, financial condition, results of
operations, or assets of the Stations, in each case taken as a whole, or
on Seller's ability to perform its obligations under, or to consummate the
transactions contemplated by, this Agreement;
(c) Seller is the authorized legal holder of all licenses, permits
and authorizations from governmental and regulatory authorities which are
required for the lawful operation of each Station as now being conducted,
except to the extent that the failure to hold such licenses, permits, or
authorizations would not have a Material Adverse Effect. All of such
licenses, permits or authorizations, including all licenses, permits and
authorizations issued by the FCC, are in full force and effect, are not
subject to any restrictions or conditions
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Mr. Richard Weening
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January 16, 1998
materially limiting or restricting the full operation of any Station as
now being conducted and are listed on Schedule 10(c) hereto. There are no
pending or, to the knowledge of Seller, threatened proceedings which could
result in the revocation, modification or nonrenewal of such licenses,
permits and authorizations, and Seller has no reason to believe that such
licenses, permits and authorizations will not be renewed in their ordinary
course. To the knowledge of Seller, there are no facts which would
disqualify Seller as assignor of any FCC license for any Station;
(d) Seller is in compliance with all laws, regulations, rules and
governmental orders applicable to any Station and the Assets and
operations of each Station, and Seller has not violated such laws,
regulations, rules or governmental orders in the operation of any Station,
except to the extent that any such non-compliance or violation would not
have a Material Adverse Effect, and Seller has duly and timely made all
filings with governmental and regulatory authorities that are required to
have been made except to the extent any failure to file would not have a
Material Adverse Effect;
(e) Seller is not subject to any judgment, injunction, order or
arbitration decision relating to the Assets or operations of any Station
and there is no litigation or administrative proceeding pending or, to
Seller's knowledge, threatened against Seller or any Station relating to
the Assets or operations of any Station which would reasonably be expected
to have a Material Adverse Effect;
(f) Seller owns and has, and following the Closing Buyer will have,
good and marketable title to the Assets, which Assets include all real and
personal property necessary to conduct the business and operations of each
Station as now conducted. Subject to Section 12(i), all of the personal
property to be transferred to Buyer is in good and technically sound
operating condition and repair in all material respects, normal wear and
tear excepted, complies in all material respects with the rules of the FCC
and the FCC licenses for the Stations, is sufficient to operate the
Stations in material compliance with the rules of the FCC and the FCC
licenses, is suitable in all material respects for the purposes for which
it is now being used and has been maintained in all material respects in a
manner consistent with generally accepted standards of good engineering
practice. All material items of personal property to be transferred to
Buyer are listed on Schedule 10(f). Each of the Assumed Contracts is a
valid and binding obligation of Seller and is in full force and effect,
and Seller is not, and, to the knowledge of Seller, no other party is, in
default in any material respect under any Assumed Contract;
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Mr. Richard Weening
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January 16, 1998
(g) All trade names, service marks, copyrights and other
intellectual property used by Seller in the operations of any Station is
licensed to or owned by Seller and Seller's rights thereto shall be
assignable to Buyer on the Closing Date. All licenses of such intellectual
property are valid and uncontested and Seller has received no notice of
infringements or unlawful use of such property in connection with the
operations of any Station;
(h) Since the time that Capstar Broadcasting Corporation acquired
control of Seller (the "Acquisition Date"), and to Seller's knowledge
prior to such time, no condition has occurred that has resulted in any
hazardous substances in, on or under the Assets in violation of any
applicable laws or that has required or would require remediation under
applicable laws or give rise to a claim for damages or compensation by any
affected person or that would cause any material loss, cost, liability or
expense in connection with any violation of any applicable law, any order
of any governmental entity or any claim by any private or public person
arising out of any exposure of any person or property to any hazardous
substance, except for any violation, remediation, damages, compensation,
loss, cost, liability or expense that would not have a Material Adverse
Effect;
(i) Since November 30, 1997 to the date of this Agreement, there has
not occurred, and Seller has not incurred or suffered, any event,
circumstance, or fact that would result in a Material Adverse Effect.
Since the November 30, 1997, to the date of this Agreement, Seller has
conducted its business only in the ordinary course consistent with past
practice and nothing has occurred that would have been prohibited by
paragraph 12 if the terms of such paragraph had been in effect as of and
after November 30, 1997. Subject to Section 12(i), since November 30,
1997, there has not occurred, and Seller has not incurred or suffered, any
event, circumstance or fact that materially impairs the physical assets of
any of the Stations;
(j) Since the Acquisition Date, Seller has held insurance issued by
sound and reputable insurers against such risks as companies engaged in
the radio broadcast business, in accordance with good business practice,
would customarily be insured;
(k) Schedule 10(k) sets forth a true and complete list of all
parcels of real property included in the Assets, whether owned or leased
by Seller (the "Real Property"). Seller has good and marketable fee simple
title to all such parcels of owned Real Property, and a valid leasehold
interest in each parcel of leased Real Property;
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Mr. Richard Weening
Page 12
January 16, 1998
(l) Except as set forth on Schedule 10(l), the Assets are free and
clear of all mortgages, deeds of trust, liens, security interests, or
other encumbrances other than Permitted Encumbrances;
(m) Seller is not a party to any collective bargaining agreement and
has not agreed to recognize any union or other collective bargaining
representative, nor has any union or collective bargaining representative
been certified as the exclusive bargaining representative of any of its
employees. To Seller's knowledge, no union organizational campaign or
representation petition is currently pending with respect to any employees
of Seller; and
(n) Seller has delivered to Buyer Seller's unaudited balance sheet
and income statement with respect to the Stations as of November 30, 1997,
and for the eleven-month period then ended (collectively, the "Financial
Statements"). The Financial Statements present accurately the information
purported to be presented therein as of the date or for the period of the
Financial Statements.
11. Certain Buyer Covenants. Buyer hereby makes the following covenants to
Seller, the compliance with which in all material respects shall be a condition
to Seller's obligations hereunder:
(a) Buyer shall not knowingly take any action which is materially
inconsistent with its obligations under this Agreement and shall notify
Seller of any litigation or administrative proceeding pending or, to
Buyer's knowledge, threatened against Buyer that challenges the
transactions contemplated hereby;
(b) Buyer shall not knowingly take any action that would cause any
representation or warranty of Buyer contained herein to become false or
invalid, and Buyer shall notify Seller of any change in Buyer's
representations and warranties contained herein; provided, however, that
such notice shall not operate to cure any breach of such representations
or warranties; and
(c) Buyer shall not, directly or indirectly, control, supervise or
direct the operations of any Station and such control, supervision and
direction shall remain and shall be the sole responsibility of Seller.
12. Certain Seller Covenants. Subject to paragraph 7, Seller hereby makes
the following covenants to Buyer, the compliance with which covenants (without
giving effect to any Material Adverse Effect or other materiality qualifier
contained therein) shall be a condition to Buyer's
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Mr. Richard Weening
Page 13
January 16, 1998
obligations hereunder, except to the extent that the failure of compliance with
which that has not been waived by Buyer would not, in the aggregate, have a
Material Adverse Effect:
(a) Seller shall conduct the operations of each Station in the
ordinary and prudent course of business consistent with past practices,
shall not sell, lease or dispose of any Asset to be conveyed hereunder,
and shall preserve the business of the customers, suppliers and others
having business relations with any Station;
(b) Seller shall operate each Station in all material respects in
accordance with the FCC license for such Station and all laws, regulations
and rules applicable to such Station;
(c) Seller shall not knowingly take any action that would cause any
representation or warranty of Seller contained herein to become false or
invalid, and Seller shall notify Buyer of any change in any of Seller's
representations and warranties contained herein; provided, however, that
such notice shall not operate to cure any breach of such representations
or warranties;
(d) Seller shall not knowingly take any action which is materially
inconsistent with Seller's obligations under this Agreement;
(e) Seller shall notify Buyer of any litigation or administrative
proceeding or investigation pending or, to Seller's knowledge, threatened
which challenges the transactions contemplated hereby;
(f) Seller shall promptly notify Buyer if any Station's normal
broadcast transmissions are interrupted, interfered with or in any way
impaired for more than twenty-four (24) hours with notice of the problem
and the measures being taken to correct such problem; provided, however,
that if operation of such Station is not resumed to full licensed power
and antenna height within five (5) days after such event or if more than
five (5) such events occur within any thirty (30) day period, then Buyer
shall, for a period of five (5) days after such occurrence, have the right
to terminate this Agreement;
(g) Until the Closing, Seller shall afford to Buyer and its
representatives full access, during normal business hours, upon reasonable
notice and in a manner that will not unreasonably interfere with the
conduct of the business of Seller, to all the Assets, books and records,
and the employees of the Stations, and shall deliver to Buyer copies of
such
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Mr. Richard Weening
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January 16, 1998
financial and other information, prepared by Seller in the ordinary course
and relating to the Stations, as Buyer may reasonably request;
(h) Seller shall use commercially reasonable efforts to obtain the
consents of third parties to Assumed Contracts and the landlord estoppel
contemplated by Section 13(b) as promptly as is practicable; provided,
however, that Seller shall not be required to make any payments to any
third party in connection with such efforts; and
(i) The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the Assets from any cause whatsoever shall be borne
by Seller at all times prior to the Closing, unless (x) caused by Buyer or
(y) such loss, damage, impairment, confiscation, or condemnation resulted
from Buyer's breach of the LMA, in which case under clause (x) or (y) such
risk shall be borne by Buyer (a "Buyer's Loss"). In the event of any loss,
damage, impairment, confiscation, or condemnation, whether or not covered
by insurance, to be borne by Seller (a "Seller's Loss"), Seller shall
promptly notify Buyer of such loss, damage, impairment, confiscation, or
condemnation. If Seller, at its expense, repairs, replaces, or restores
such Assets to their prior condition to the satisfaction of Buyer before
the Closing in connection with a Seller's Loss, Seller shall be entitled
to all insurance proceeds and condemnation awards, if any, by reason of
such award or loss. If Seller does not or cannot restore or replace lost,
damaged, impaired, confiscated or condemned Assets or informs Buyer that
it does not intend to restore or replace such Assets in connection with a
Seller's Loss, Buyer may at its option:
(i) terminate this Agreement by written notice forthwith
without any further obligation hereunder if the replacement cost of
such Assets exceeds $375,000 in the aggregate; or
(ii) proceed to the Closing without Seller completing the
restoration and replacement of such Assets, provided that Seller
shall assign all rights under applicable insurance policies and
condemnation awards, if any, to Buyer, and that the Purchase Price
shall be reduced by the repair or replacement cost of any Assets to
the extent not covered by such insurance proceeds or condemnation
awards, and in such event, Seller shall have no further liability
with respect to the condition of the Assets directly attributable to
the loss, damage, impairment, confiscation, or condemnation.
Buyer will notify Seller of a decision under the options described
in Section 12(i)(i) or (ii) above within ten business days after Seller's notice
to Buyer of the damage or destruction of Assets and the estimate of the costs to
repair or replace; provided, however, that if Seller states that
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Mr. Richard Weening
Page 15
January 16, 1998
it intends to restore the damaged Assets and if Seller has not restored such
damaged Assets prior to the Closing Date, notwithstanding Buyer's prior delivery
of a notice to proceed pursuant to this Section 12(i), Buyer shall have the
right to either postpone the Closing or terminate this Agreement by notice
forthwith.
If a Buyer's Loss occurs, Buyer shall promptly notify Seller
thereof. At Buyer's request, Seller shall cooperate in Buyer's restoration or
replacement of the effected Assets at no cost to Seller. In connection with a
Buyer's Loss, Buyer shall not be permitted to terminate this Agreement;
provided, however, any insurance proceeds or condemnation awards shall be
assigned to Buyer.
13. Certain Conditions to Buyer's Obligations. Buyer and Seller agree that
Buyer's obligations hereunder are specifically conditioned upon the prior
occurrence of the following:
(a) All instruments of conveyance and transfer and other documents
delivered by Seller to effect the sale, transfer and conveyance of the
Assets to Buyer shall be reasonably satisfactory in form and substance to
Buyer and its counsel;
(b) Seller shall have delivered to Buyer the written consent of each
of the parties from whom such consent is required for the consummation by
Seller of the transactions contemplated by this Agreement, including,
without limitation, those consents set forth on Schedule 10(b), and
estoppel certificates of the landlords under the leases set forth on
Schedule 13(b) hereto;
(c) Seller shall have delivered to Buyer the opinion of Vinson &
Elkins L.L.P., its transactional counsel, and Wiley, Rein & Fielding, its
FCC counsel, in the forms of Exhibits E and F hereto, respectively; and
(d) Buyer shall have received at Buyer's sole cost title commitments
and surveys with respect to such parcels of Real Property (fee and
leasehold) included in the Assets as Buyer may reasonably require, and
such documents shall not reflect any conditions which would constitute the
failure of a condition to Buyer's obligation to consummate the
transactions contemplated by this Agreement.
14. Cooperation. Buyer and Seller agree to cooperate fully with one
another in taking any actions necessary or helpful to accomplish the
transactions contemplated hereby, including actions to obtain consents required
by the FCC or any third party and to obtain the estoppel certificates described
in Section 13(b) and the title reports and commitments and surveys with
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Mr. Richard Weening
Page 16
January 16, 1998
respect to the Real Property; provided, however, that Seller shall not be
required to make any payments in connection with obtaining any third party
consents. Buyer shall use commercially reasonable efforts to satisfy any
Divestiture Condition as promptly as is practicable. The failure of Buyer to
satisfy any Divestiture Condition shall be deemed to be a material breach of
this Agreement permitting Seller to terminate this Agreement pursuant to the
provisions of Section 19(a).
15. Bulk Sales. Buyer and Seller agree to waive compliance with all "bulk
sales" or similar laws that may be applicable to the transactions contemplated
hereby, and Seller agrees to indemnify and hold Buyer harmless against any claim
made against Buyer by any creditor of Seller as a result of failure to comply
with any such laws.
16. Confidentiality. Buyer and Seller shall each keep confidential all
information obtained by it with respect to the other in connection with this
Agreement, will use such information solely in connection with the transactions
contemplated hereby, and shall return all such information to the other party if
such transactions are not consummated for any reason.
17. Costs and Expenses. Except as otherwise expressly set forth in this
Agreement, Buyer and Seller agree that each party shall be solely responsible
for all costs and expenses incurred by it in connection with the consummation of
the transactions contemplated hereby; provided, however, that all transfer,
sales or use taxes or similar charges resulting from the transfer of the Assets
contemplated hereby shall be borne by Seller, and the filing fees with respect
to the application for the FCC Consent will be shared equally by Buyer and
Seller. In the event of a dispute between the parties in connection with this
Agreement or the transactions contemplated hereby, each of the parties hereto
agrees that the prevailing party shall be entitled to reimbursement by the other
party of reasonable legal fees and expenses incurred in connection with any
action or proceeding.
18. Indemnification. (a) From and after the Closing Date, Seller agrees to
indemnify and hold Buyer and its affiliates harmless from and against all costs,
expenses, losses and damages (including reasonable attorney fees) (collectively,
"Indemnified Costs") incurred by Buyer or such affiliates as a result of or
arising out of (i) the breach by Seller of any of its representations and
warranties (without giving effect to any Material Adverse Effect or other
materiality qualifier contained therein) contained in this Agreement, (ii) the
failure by Seller to perform its covenants (without giving effect to any
Material Adverse Effect or other materiality qualifier contained therein) set
forth in this Agreement, (iii) the conduct of the operation of each Station
prior to the Closing Date, and (iv) any and all obligations or liabilities of
Seller not expressly assumed by Buyer pursuant to the terms hereof. From and
after the Closing Date, Buyer agrees to indemnify and hold Seller and its
affiliates harmless from and against all Indemnified Costs incurred by Seller or
such affiliates as
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Mr. Richard Weening
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January 16, 1998
a result of or arising out of (w) the breach by Buyer of any of its
representations and warranties (without giving effect to any Material Adverse
Effect or other materiality qualifier contained therein) contained in this
Agreement, (x) the failure by Buyer to perform its covenants (without giving
effect to any Material Adverse Effect or other materiality qualifier contained
therein) set forth in this Agreement, (y) the conduct of the operations of each
Station after the Closing Date, including any and all liabilities arising under
any FCC license or Assumed Contract which relates to events occurring after the
Closing Date and (z) any and all obligations or liabilities expressly assumed by
Buyer pursuant to the terms hereof. The indemnified party shall make no
settlement, compromise, admission or acknowledgment that would give rise to
liability on the part of the indemnifying party without the prior written
consent of the indemnifying party.
(b) The following provisions shall govern the indemnification rights
and obligations hereunder:
(i) The indemnifying party shall not be required to indemnify
the indemnified party or its affiliates hereunder with respect to the
matters described in Section 18(a)(i) and (ii) and Section 18(a)(w) and
(x) unless and until the aggregate amount of all Indemnified Costs
incurred by the indemnified party or such affiliate and to which
indemnification hereunder applies exceeds $50,000 (the "Minimum Loss").
After the Minimum Loss is exceeded, the indemnified party or its
affiliates shall be entitled to be paid the entire amount of the
Indemnified Costs of the indemnified party or its affiliates in excess of
(but not including ) the Minimum Loss, subject to the limitations on
recourse and recovery set forth in this paragraph 18(b).
(ii) Seller shall not be liable for any Indemnified Costs of
Buyer or its affiliates, and Buyer shall not be liable for any Indemnified
Costs of Seller or its affiliates, unless a written claim for
indemnification is given by Buyer or its affiliates to Seller, or by
Seller or its affiliates to Buyer, as applicable, with respect thereto (x)
at any time after the Closing Date (but subject to applicable statutes of
limitation) with respect to a breach by Seller of the representations and
warranties set forth in paragraph 10(a) or the first sentence of paragraph
10(f), (y) on or before 5:00 p.m. Dallas, Texas time on the ninetieth day
after expiration of the applicable statute of limitations with respect to
claims asserted by third parties, and (z) on or before 5:00 p.m. Dallas,
Texas time on the eighteenth month anniversary of the Closing Date with
respect to any other claim.
(iii) The aggregate liability of Seller pursuant to this
paragraph 18 shall be limited to $750,000.
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Mr. Richard Weening
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January 16, 1998
(iv) The parties acknowledge and agree that, after the
Closing, notwithstanding any other provision of this Agreement to the
contrary, a party's sole and exclusive remedy with respect to Indemnified
Costs and any and all other claims relating to the subject matter of this
Agreement and the transactions contemplated hereof and by any other
document or agreement executed in connection herewith shall be in
accordance with, and limited by, the provisions set forth in this
paragraph 18.
(c) All representations, warranties, agreements and covenants
contained herein shall survive the Closing in full force and effect (i) without
limitation as to duration with respect to the representations and warranties of
Seller set forth in paragraph 10(a) and the first sentence of paragraph 10(f),
(ii) until the ninetieth day after expiration of the applicable statute of
limitations with respect to those representations, warranties, agreements and
covenants that are alleged to be breached based on third party claims, and (iii)
until the eighteenth month anniversary of the Closing Date with respect to all
other claims, and following termination of a representation, warranty, agreement
or covenant, no claim can be brought with respect to a breach thereof, but such
termination shall not affect any claim for a breach thereof that was asserted
before the date of termination.
19. Termination. This Agreement may be terminated at any time prior to
Closing as follows:
(a) by written notice of Buyer to Seller or Seller to Buyer if the
other breaches any of its representations or warranties or defaults in the
performance of its covenants or agreements contained herein, in any case
which would give rise to the failure of a condition to the Closing
hereunder, and such breach or default shall not be cured within thirty
(30) days after the date notice of such breach or default is served by the
party seeking to terminate this Agreement; provided, however, that (i)
there shall be no cure period for Buyer's failure to obtain all funds on
or prior to the Closing Date necessary to pay the Purchase Price (which
failure will constitute a material breach hereunder) and (ii) in no event
may the cure period be extended beyond the termination date set forth in
paragraph 19(d) in the event the breach being cured relates to one or more
Divestiture Conditions;
(b) by written notice of Buyer to Seller or Seller to Buyer, if the
FCC denies granting the FCC Consent by a Final Order;
(c) by written notice of Buyer to Seller or Seller to Buyer, if
there shall be in effect any judgment, decree or order that would prevent
or make unlawful the Closing of the transactions contemplated by this
Agreement;
<PAGE>
Mr. Richard Weening
Page 19
January 16, 1998
(d) by ten days written notice of Buyer to Seller, or by Seller to
Buyer, if the Closing shall not have been consummated on or before the
first anniversary of the filing by the parties of the application for the
FCC Consent; provided, however, that the right to terminate this Agreement
under any of clauses (a) through (d) of this paragraph 19 shall not be
available to Buyer in the event that Buyer's failure to satisfy or remove
all Divestiture Conditions, if any, has been the cause of, or resulted in,
the matter giving rise to the termination rights set forth in the
applicable clause; and provided, further, that if the Closing shall not
have occurred on or before the first anniversary of the filing by parties
of the application for the FCC Consent due to Buyer's failure to satisfy
or remove a Divestiture Condition, such failure shall constitute a
material breach of this Agreement by Buyer; or
(e) By written notice under the circumstances provided for in
paragraph 12(f) or 12(i);
provided, however, that no party hereto may effect a termination hereof if such
party is then in material breach or default of this Agreement; and provided
further, that the termination of this Agreement pursuant to this paragraph shall
not relieve any party of any liability for breach of this Agreement prior to the
date of termination and shall not terminate the covenants and agreements
contained in paragraphs 6, 16, 17, 19, 20, 21, 22, 23, 24, 25, 26, 27 and 28.
Prior to the Closing, Seller and Buyer each acknowledge and agree that such
party's sole and exclusive remedy with respect to any and all claims for any
breach or liability under this Agreement and the transactions contemplated
hereby shall be solely in accordance with, and limited by, this paragraph 19 and
paragraph 6. In the event this Agreement is properly terminated prior to Closing
by either party pursuant to Section 19(a), the liability of the non-terminating
party shall be $750,000, which amount shall be paid to the terminating party as
liquidated damages. The parties agree that the foregoing liquidated damages are
reasonable considering all the circumstances existing as of the date hereof and
constitute the parties' good faith estimate of the actual damages reasonably
expected to result from the termination of this Agreement by a party due to the
other party's breach of this Agreement. Each party agrees that, to the fullest
extent permitted by law, such party's right to payment of such liquidated
damages shall be its sole and exclusive remedy if the Closing does not occur,
including its sole and exclusive remedy with respect to any damages whatsoever
that such party may suffer or allege to suffer as a result of any claim or cause
of action asserted by such party relating to or arising from breaches of this
Agreement by the other party.
20. Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No party may voluntarily or involuntarily assign its interest
under this Agreement without the prior written consent of the other parties
hereto.
<PAGE>
Mr. Richard Weening
Page 20
January 16, 1998
21. Amendment. No amendment, waiver of compliance with any provision or
condition hereof or consent pursuant to this Agreement shall be effective unless
evidenced by an instrument in writing signed by the party against whom
enforcement of any waiver, amendment or consent is sought.
22. Governing Law. This Agreement, including, without limitation, the
interpretation, construction, validity and enforceability thereof, shall be
governed by the laws (other than the conflict of laws rules) of the State of
Maryland.
23. Notice. All notices, requests, consents, waivers and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been given (a) if transmitted by facsimile, upon
acknowledgment of receipt thereof in writing by facsimile or otherwise; (b) if
personally delivered, upon delivery or refusal of delivery; (c) if mailed by
registered or certified United States mail, return receipt requested, postage
prepaid, upon delivery or refusal of delivery; or (d) if sent by a nationally
recognized overnight delivery service, upon delivery or refusal of delivery. All
notices, consents, waivers or other communications required or permitted to be
given hereunder shall be addressed to the respective party to whom such notice,
consent, waiver or other communication relates at the following addresses:
To Buyer: Cumulus Broadcasting, Inc.
330 E. Kilbourn Avenue
Suite 250
Milwaukee, Wisconsin 53202
Attention: Richard Weening
Fax: (414) 283-4505
Copy to: Paul, Hastings, Janofsky & Walker LLP
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2400
Attention: David Burns
Fax: (202) 508-9700
To Seller: Benchmark Radio Acquisition Fund IV Limited
Partnership
600 Congress Avenue, Suite 1400
Austin, Texas 78701
Attention: William S. Banowsky, Jr.
Fax: (512) 404-6850
<PAGE>
Mr. Richard Weening
Page 21
January 16, 1998
Copy to: Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley
Fax: (214) 999-7732
24. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
25. Severability. Buyer and Seller agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
26. Entire Agreement. This Agreement and the exhibits hereto embody the
entire agreement and understanding of the parties hereto and supersede any and
all prior agreements, arrangements and understandings relating to the matters
provided for herein.
27. No Liability. Buyer agrees that no stockholder, director or officer of
Seller or its affiliates shall have any personal or individual liability for the
obligations of Seller under this Agreement or any other agreement entered into
in connection with this Agreement. Seller agrees that it will retain assets, or
cause any affiliate of Seller who shall assume Seller's obligations under this
Agreement to retain such assets, with a fair market value at least equal to the
amount set forth in Section 18(a)(iii) until eighteen months after the Closing
Date and, if a claim is made by Buyer for indemnification under Section 18
within such eighteen month period, Seller shall retain such assets, or cause any
affiliate of Seller who shall assume Seller's obligations under this Agreement
to retain such assets, or provide other credit assurances reasonably
satisfactory to Buyer, until such claim is finally resolved.
28. Brokers. Neither Buyer nor Seller nor any person acting on behalf of
Buyer or Seller has agreed to pay any commission or finder's fee in connection
with this Agreement, other than to Media Venture Partners, whom Buyer and Seller
acknowledge has represented Seller. Buyer and Seller agree that the payment of
the brokerage commission due to Media Venture Partners at the Closing shall be
the sole responsibility of Seller.
<PAGE>
Mr. Richard Weening
Page 22
January 16, 1998
29. Further Actions. After the Closing Date, Seller shall execute and
deliver such other certificates, agreements, conveyances, and other documents,
and take such other action, as may be reasonably requested by Buyer in order to
transfer and assign to, and vest in, Buyer the Assets pursuant to the terms of
this Agreement.
30. No Reversionary Interest. The parties expressly agree, pursuant to
Section 73.1150 of the FCC rules, that Seller does not retain any right to
reassignment in the future of any of the FCC licenses transferred pursuant to
this Agreement or to operate or use the facilities of any of the Stations for
any period beyond the Closing Date.
<PAGE>
Mr. Richard Weening
Page 23
January 16, 1998
Kindly sign where indicated below to indicate your acceptance of this
Agreement with the terms set forth above.
Sincerely,
BENCHMARK RADIO ACQUISITION FUND IV
LIMITED PARTNERSHIP
By: BENCHMARK COMMUNICATIONS RADIO
LIMITED PARTNERSHIP,
Its General Partner
By: BENCHMARK COMMUNICATIONS
HOLDINGS, INC.,
Its General Partner
By:
--------------------------------
William S. Banowsky, Jr.
Vice President
WOSC LICENSE LIMITED PARTNERSHIP
By: BENCHMARK RADIO ACQUISITION
FUND IV LIMITED PARTNERSHIP,
Its General Partner
By: BENCHMARK COMMUNICATIONS
RADIO LIMITED PARTNERSHIP,
Its General Partner
By: BENCHMARK COMMUNICATIONS
HOLDINGS, INC.,
Its General Partner
By:
--------------------------------
William S. Banowsky, Jr.
Vice President
<PAGE>
Mr. Richard Weening
Page 24
January 16, 1998
WWFG LICENSE LIMITED PARTNERSHIP
By: BENCHMARK RADIO ACQUISITION
FUND IV LIMITED PARTNERSHIP,
Its General Partner
By: BENCHMARK COMMUNICATIONS
RADIO LIMITED PARTNERSHIP,
Its General Partner
By: BENCHMARK COMMUNICATIONS
HOLDINGS, INC.,
Its General Partner
By:
--------------------------------
William S. Banowsky, Jr.
Vice President
The foregoing reflects my understanding and agreement as outlined above this
16th day of January, 1998.
CUMULUS BROADCASTING, INC.
By:
--------------------------------
Richard Weening
Chairman
CUMULUS LICENSING CORP.
By:
--------------------------------
Richard Weening
Chairman
<PAGE>
WZNY AGREEMENT OF SALE
Between
GEORGE G. WEISS
And
Cumulus Broadcasting, Inc.
And
Cumulus Licensing Corporation
-------------------------------------------
Dated: September 4, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. ASSETS SOLD AND PURCHASED............................................ 1
2. PURCHASE PRICE; DEPOSIT; ASSUMPTION OF LIABILITIES................... 4
(a) Purchase Price................................................. 4
(b) Deposit........................................................ 4
(c) Assumption of Liabilities...................................... 5
3. PAYMENT OF CERTAIN ITEMS............................................. 6
4. SELLER'S REPRESENTATIONS AND WARRANTIES.............................. 8
(a) Authority...................................................... 8
(b) No Insolvency.................................................. 8
(c) Taxes.......................................................... 9
(d) FCC Filings.................................................... 9
(e) Compliance with Laws........................................... 9
(f) Tangible Assets................................................ 10
(g) Condition of Equipment......................................... 11
(h) FCC Licenses................................................... 11
(i) Public Inspection Files........................................ 12
(j) Financial Statements........................................... 12
(k) Contracts...................................................... 12
(l) Union Activity................................................. 13
(m) Employee Benefits.............................................. 13
(n) Adverse Conditions............................................. 14
(o) Transmitter and Studio Sites................................... 14
(p) Environmental Matters.......................................... 14
(q) Insurance...................................................... 16
(r) All Necessary Assets........................................... 17
(s) Copyrights and Service Marks................................... 17
(t) Conduct of Business............................................ 17
(u) Representations and Warranties................................. 18
5. PURCHASER'S REPRESENTATIONS AND WARRANTIES........................... 18
(a) Organization................................................... 18
(b) Due Authorization.............................................. 18
(c) Binding Agreement.............................................. 19
(d) No Conflicts................................................... 19
(e) FCC Approval................................................... 19
(f) No Conflicting Agreements...................................... 19
i
<PAGE>
(g) No Litigation.................................................. 19
(h) Representations and Warranties................................. 20
6. OPERATIONS PENDING CLOSING........................................... 20
(a) Access to Station.............................................. 20
(b) Compliance with Laws........................................... 21
(c) Maintenance of Station Assets.................................. 21
(d) Conduct of Business............................................ 21
(e) Salary Increases............................................... 22
(f) Required Consents.............................................. 22
(g) Books and Records.............................................. 22
(h) Contracts...................................................... 22
7. PURCHASER'S PERFORMANCE.............................................. 23
8. SELLER'S PERFORMANCE................................................. 25
9. FCC APPROVAL AND APPLICATION......................................... 27
10. HART-SCOTT-RODINO FILING............................................. 28
11. DATE, NOTICE AND PLACE OF CLOSING.................................... 28
12. CONTROL OF STATION................................................... 29
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES........................... 29
14. RIGHTS OF INDEMNIFICATION; DEFAULT................................... 29
15. INDEMNIFICATION ESCROW............................................... 34
16. ALTERNATIVE DISPUTE RESOLUTION....................................... 35
17. BROKER'S FEE......................................................... 39
18. SELLER'S PERFORMANCE AT CLOSING...................................... 39
19. PURCHASER'S PERFORMANCE AT CLOSING................................... 41
20. EVENTS OF TERMINATION; DISBURSEMENT OF DEPOSIT....................... 42
(a) Failure to Close without Fault................................. 42
(b) Disbursement of Deposit to Seller.............................. 43
(c) Return of Deposit to Purchaser................................. 44
(d) Mutual Agreement............................................... 45
ii
<PAGE>
21. SPECIFIC PERFORMANCE................................................. 45
22. BULK SALES LAW....................................................... 46
23. ASSET ACQUISITION STATEMENT.......................................... 46
24. EXHIBITS AND SCHEDULES............................................... 46
25. ASSIGNMENTS; SUCCESSORS AND ASSIGNS.................................. 46
26. CONSTRUCTION......................................................... 46
27. COUNTERPARTS......................................................... 46
28. NOTICES.............................................................. 47
29. ADDITIONAL DOCUMENTS................................................. 48
30. PARAGRAPH HEADINGS................................................... 48
31. ENTIRE AGREEMENT..................................................... 49
32. EXPENSES............................................................. 49
33. ATTORNEYS' FEES...................................................... 49
34. CONFIDENTIALITY...................................................... 49
35. TIME BROKERAGE AGREEMENT............................................. 50
iii
<PAGE>
WZNY AGREEMENT OF SALE
THIS WZNY AGREEMENT OF SALE ("Agreement"), made this ________ day of _____
___________, 1997, by and between GEORGE G. WEISS, a Georgia resident
("Seller"), and ________________________________, a ________________ corporation
("Purchaser").
WITNESSETH:
WHEREAS, Seller is the licensee and operator of Radio Broadcast Station
WZNY(FM), Augusta, Georgia (the "Station"), holding valid authorizations for the
operation thereof from the Federal Communications Commission ("FCC");
WHEREAS, Seller wishes to sell and Purchaser wishes to acquire the Station
Assets; and
WHEREAS, Seller and Purchaser desire to enter into a time brokerage
agreement ("TBA"), consistent with FCC rules and regulations, under which
Purchaser will operate the Station for the period commencing with the effective
date of the TBA ("TBA Commencement Date") to the Closing Date (as hereinafter
defined).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, Seller and Purchaser hereby agree as
follows:
1. ASSETS SOLD AND PURCHASED.
On the Closing Date, Seller will sell, transfer, assign and convey to
Purchaser, by appropriate instruments, and Purchaser will purchase,
subject to the terms and conditions hereinafter set forth, the following
assets and properties (the "Station
<PAGE>
Assets"), free and clear of all liens, claims, encumbrances and rights of
others, except as otherwise set forth herein:
(a) The FCC licenses and authorizations and all other licenses, permits
and authorizations issued by any other federal, state or local
governmental agency or authority for the operation of the Station,
including but not limited to those listed on Exhibit A hereto, and
all other licenses, permits and authorizations now or hereafter
obtained in connection with the operation of the Station.
(b) All fixed, tangible and intangible assets used and usable in the
operation of the Station, including, but not limited to, those
assets identified on Exhibit B hereto, subject to any changes
thereto made in the ordinary course of business between the date
hereof and the Closing Date.
(c) The contracts, leases and agreements listed and described on Exhibit
C hereto which are to be in effect on the Closing Date, except those
which may have been unilaterally canceled by a party other than
Seller, provided that legal rights, if any, accruing to Seller by
virtue of any such unilateral cancellation by a party other than
Seller shall be assigned by Seller to Purchaser. To the extent that
the assignment of any contract listed on Exhibit C may require the
consent of a third party, Seller shall exercise its best efforts to
secure such consent. In the event that Seller is unable to secure
such consent, Purchaser shall not be required to assume performance
pursuant to said contract.
-2-
<PAGE>
(d) The rights and obligations under the agreements, pursuant to which
reimbursement is or was to be made in whole or in part in services,
merchandise or other non-cash considerations ("Trade Deals"), listed
and described on Exhibit D hereto, subject to any changes thereto
made in the ordinary course of business between the date hereof and
the Closing Date.
(e) The call letters "WZNY" and all copyrights, trademarks, trade names,
logos, jingles, service marks, slogans and promotional materials
used in connection with the Station, and any registrations or
applications for registration of any of the same, including but not
limited to those copyrights, trademarks, trade names and service
marks listed and described on Exhibit E hereto.
(f) Such files, records and logs pertaining to the operation of the
Station as are required to be maintained by federal, state or local
law or regulation and as Purchaser may reasonably require; provided,
however, that Purchaser is not purchasing and will not be entitled
to receive Seller's original accounting journals, books of accounts,
ledgers, tax returns or other confidential books and records not
directly relating to the operation of the Station.
(g) The real property, the improvements thereon, fixtures and all
easements and rights for the benefit of such property ("Real
Property") as described on Exhibit F hereto, subject only to such
easements, reservations, servitudes and other non-monetary
encumbrances as described on Exhibit F and liens for taxes not yet
due and payable.
-3-
<PAGE>
(h) The goodwill and all other intangible assets used in the operation
of the Station.
This Agreement is limited to the assets herein described, and Purchaser is
not purchasing cash, cash equivalents, securities, accounts receivable for
the sale of commercial time or insurance policies, all of which shall be
and remain the exclusive property of Seller, free and clear of any claim
from Purchaser whatsoever.
2. PURCHASE PRICE; DEPOSIT; ASSUMPTION OF LIABILITIES.
(a) Purchase Price. The Purchase Price for the Station Assets shall be
____________________ Dollars ($__________). The Purchase Price for
the Station Assets shall be payable in full to Seller by wire
transfer of immediately available funds on the Closing Date. The
Purchase Price shall be allocated among the Station Assets according
to their current fair market values, as agreed to by Seller and
Purchaser and as set forth in Exhibit G.
(b) Deposit.
(i) Upon execution of this Agreement, Purchaser, by bank wire
transfer of immediately available funds, shall deposit in
escrow with _______________________, acting as escrow agent on
the parties' behalf ("Escrow Agent"), a deposit ("Deposit") in
the amount of _________ Dollars ($____________), which
represents ten percent (10%) of the Purchase Price. The
Deposit shall be security for the consummation of the sale of
the Station Assets and shall be held in escrow pursuant to a
separate escrow agreement ("Escrow
-4-
<PAGE>
Agreement") entered into between Seller, Purchaser and the
Escrow Agent in the form of Exhibit H hereto. In the event of
any conflict between this Agreement and the Escrow Agreement,
the terms of the Escrow Agreement shall control. The Deposit
shall be invested and disbursed in accordance with the terms
of the Escrow Agreement.
(ii) Subject to Section 20 of this Agreement and the Escrow
Agreement, the Deposit, together with any interest earned
thereon, shall be credited toward partial payment of the
Purchase Price on the Closing Date, disbursed to Seller, or
returned to Purchaser upon termination of this Agreement.
(c) Assumption of Liabilities.
The Station Assets shall be sold and conveyed to Purchaser free and
clear of all mortgages, liens, deeds of trust, security interests,
pledges, restrictions, prior assignments, charges, claims, defects
in title and encumbrances of any kind or type whatsoever except the
following: (i) liens for taxes not yet due and payable; and (ii) the
obligations of Seller for periods from and after the Closing Date
under leases and contracts assigned to Purchaser that are described
in Sections 1(c) and 1(d) hereof, which, subject to all necessary
consents, Purchaser hereby expressly agrees to assume.
3. PAYMENT OF CERTAIN ITEMS.
(a) All FCC filing and grant fees, if any, shall be paid by Purchaser.
-5-
<PAGE>
(b) Subject to any accounting made pursuant to the TBA referred to in
Section 35 hereof, within ninety (90) days after closing, an
accounting shall be made as follows:
(i) All prepaid income, prepaid expenses, prepayments on any
written contracts assumed by Purchaser hereunder, accrued
income and accrued expenses of the Station as of the end of
the day prior to the Closing Date shall, except as otherwise
expressly provided herein, be adjusted and allocated between
Seller and Purchaser to reflect the principle that all
expenses and income arising from the operation of the Station
before 12:01 a.m. on the Closing Date shall be for the account
of Seller, and all expenses and income arising from the
operation of the Station from and after 12:01 a.m. on the
Closing Date shall be for the account of Purchaser.
(ii) As soon as practicable following the Closing Date, and in any
event within ninety (90) days thereafter, or at such other
time as the parties mutually agree, Purchaser shall deliver to
Seller Purchaser's certificate setting forth as of the Closing
Date all adjustments to be made as provided in (i) above.
Purchaser shall provide Seller or Seller's representatives
access to copies of all books and records as Seller may
reasonably request for purposes of verifying such adjustments.
Purchaser's certificate shall be final and conclusive unless
objected to by Seller in writing within thirty (30) days after
-6-
<PAGE>
delivery. Seller and Purchaser shall attempt jointly to reach
agreement as to the amount of the adjustments to be made
hereunder within sixty (60) days after receipt by Purchaser of
such written objection by Seller, which agreement, if
achieved, shall be binding upon all parties to this Agreement
and not subject to dispute or review.
(iii) In the event of a disagreement between Purchaser and Seller
with respect to the accounting to be made hereunder, the
parties agree that a public accounting firm chosen jointly by
Purchaser and Seller shall be the final arbiter of such
disagreement. The cost of such accounting firm shall be shared
equally by the parties.
(iv) Any amounts due Purchaser or Seller for the adjustments
provided for herein shall be paid within ten (10) calendar
days after final determination.
(c) Filing and recordation fees and any other fees incurred in
connection with the transfer of title to the property being conveyed
hereunder, and any applicable transfer, sales or use taxes, and all
expenses incurred in connection with such filing or recordation,
shall be borne entirely by Purchaser.
4. SELLER'S REPRESENTATIONS AND WARRANTIES.
Seller covenants, represents and warrants the following, which
representations and warranties shall be true and correct as of the Closing
Date as if expressly restated on said date.
-7-
<PAGE>
(a) Authority.
Seller is mentally competent, of legal age and has full power and
authority to own the Station Assets, and has full power and
authority to enter into this Agreement and to consummate the
transactions contemplated herein. The making and performance of this
Agreement by Seller, subject to Seller obtaining those consents set
forth on Exhibit I hereto, does not and will not breach or
constitute a default under any agreement, instrument, order,
judgment or decree to which Seller is a party or by which Seller is
bound or violate any law or regulation applicable to Seller or the
Station. This Agreement has been duly executed and delivered by
Seller and constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
(b) No Insolvency.
No insolvency proceedings of any character, including, without
limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting
Seller or any of Seller's assets or properties are pending or, to
the best of Seller's knowledge, overtly threatened, and Seller has
made no assignment for the benefit of creditors, nor taken any
action with a view to, or which would constitute the basis for, the
institution of any such insolvency proceedings.
-8-
<PAGE>
(c) Taxes.
Seller has, and as of the Closing Date will have, paid and
discharged all taxes, assessments, excises and other levies which
are due, including any such taxes, assessments, excises and levies
which, if due and not paid, would interfere with Purchaser's
enjoyment or use of the Station Assets, excepting such taxes,
assessments and other levies which will not be due until or after
the Closing Date and which are to be prorated between Seller and
Purchaser pursuant to the provisions of Section 3(b) hereof.
(d) FCC Filings.
None of the information contained in the representations and
warranties of Seller set forth in any filing made by it with the FCC
with respect to the transfer of the Station or the assignment of the
licenses therefor contains or will contain any untrue statement of a
material fact or omits or will omit any material fact.
(e) Compliance with Laws.
The operation of the Station is now, and on the Closing Date will
be, in compliance in all material respects with all applicable laws,
rules and regulations of all federal, state and local authorities or
agencies, and there is not now, nor on the Closing Date will there
be, any judgment outstanding or litigation or proceeding pending or,
to the best of Seller's knowledge, overtly threatened which affects
the title or interest of Seller in or to any license or any other
property or asset to be sold hereunder, or its power or
-9-
<PAGE>
right to sell, convey, transfer or assign the same to Purchaser as
hereinafter provided, or which would prevent or affect the operation
and use of the same by Purchaser, as presently operated and used by
Seller. Except for the consent of the FCC, the consent contemplated
by Section 10 hereof, and any such consent set forth on Exhibit I
hereto, no authorizations, approvals or consents from any
governmental or regulatory authorities or agencies are necessary to
permit Seller to execute and deliver this Agreement and to perform
its obligations hereunder.
(f) Tangible Assets.
Exhibit B attached hereto represents a true, complete and accurate
list of all tangible assets (other than the Real Property) used and
usable in the business and/or operation of the Station. Subject to
Seller's right to dispose of any properties, equipment and assets in
the ordinary course of business, on the Closing Date, Seller will
convey to Purchaser good and valid title to such properties,
equipment and assets and any other properties, equipment and assets
acquired by it subsequent to the date hereof and used or usable in
the business or operation of the Station, free of any and all liens,
charges, assessments, taxes, mortgages, pledges, conditional sales
agreements, security agreements, encumbrances and rights of third
parties of any kind whatsoever.
-10-
<PAGE>
(g) Condition of Equipment.
Transmission and studio equipment and other equipment (mechanical
and electrical) to be transferred to Purchaser hereunder is, and
will be as of the Closing Date, in good repair and working condition
with no material defects therein, fit for the purposes for which
they are being utilized and in material compliance with all current
FCC requirements and all other applicable laws and regulations.
(h) FCC Licenses.
The FCC licenses, permits and authorizations to be assigned to
Purchaser are, and will be as of the Closing Date, valid and
existing authorizations for the purpose of operating the Station,
issued by the FCC under the Communications Act of 1934, as amended,
and in accordance with the Rules and Regulations of the FCC, and
applications, reports and other disclosures required by the FCC with
respect to the Station have been, and will be as of the Closing
Date, duly filed. Seller is an FCC licensee in good standing and, as
of the date hereof , there are no proceedings or complaints pending
or, to the best of Seller's knowledge, overtly threatened at the FCC
against Seller with respect to the Station and Seller is not aware
of any facts or circumstances that could reasonably provide a basis
for any such proceedings or complaints. Seller holds all licenses
and governmental authorizations necessary to enable the Seller to
conduct its business of operating the Station as presently
conducted.
-11-
<PAGE>
(i) Public Inspection Files.
The public inspection files for the Station are in material
compliance with the regulations of the FCC relating thereto.
(j) Financial Statements.
The 1995, 1996 and January 1 to May 31, 1997 operating and financial
statements of the Station provided to Purchaser accurately reflect
the financial condition and operations of the Station for the
periods covered and said financial statements are stated in
accordance with generally accepted accounting principles
consistently applied. There are no material liabilities associated
with the Station that are not accurately reflected in such operating
and financial statements.
(k) Contracts.
True and complete copies of all contracts, leases, understandings
and/or agreements and all modifications, amendments and renewals
thereof listed on Exhibits C and D have been furnished to Purchaser
and represent all contracts, leases, understandings and/or
agreements of Seller in conjunction with the operation of the
Station except contracts for the sale of air time. All material
provisions of the contracts, understandings, leases and agreements
listed on said Exhibits C and D and all other contracts, leases,
understandings and agreements which may be effectuated between the
date hereof and the Closing Date relating to the operations of the
Station have been complied with, and will have been complied with,
in all material
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respects as of the Closing Date, and no material default in respect
to any duties or obligations required according to the terms of such
contracts, leases, understandings and agreements are or will have
occurred. Exhibit D specifies the trade balance of all contracts
listed thereon as of _______, 1997. All contracts and other
agreements listed on Exhibits C and D are in full force and effect
and are valid and, to the best of Seller's knowledge, enforceable in
accordance with their respective terms.
(l) Union Activity.
The employees of Seller are not presently represented by and are not
seeking representation through any union or other collective
bargaining agent.
(m) Employee Benefits.
Purchaser will have no obligation or liability due to or because of
any past service liability, vested benefits, retirement plan
insolvencies or other obligation under local, state or federal law
(including the Employee Retirement Income Security Act of 1974)
resulting from the purchase of the Station or from former employees
of Seller becoming employees of Purchaser. Nothing contained in this
Agreement shall confer upon any employee of Seller any right with
respect to continued employment by Purchaser, nor shall anything
herein interfere with any right Purchaser may have after the Closing
Date to (i) terminate the employment of any of the employees at any
time, with or without cause, or (ii) establish or modify any
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of the terms or conditions of employment of the employees in the
exercise of Purchaser's independent business judgment.
(n) Adverse Conditions.
Seller does not know of any condition, including, but not limited
to, pending or threatened litigation, which may materially and
adversely affect the Station's business prospects, other than
changes in the ordinary course of business.
(o) Transmitter and Studio Sites.
The Station's transmitter and studio sites are not the subject of
any official complaint, notice of noncompliance or notice of
violation of any applicable zoning ordinance or building code or
regulation of the Federal Aviation Administration, Federal
Occupational Safety and Health Administration or Federal
Environmental Protection Agency, or regulations of local or state
agencies or departments and no such violation is known to exist, and
there is no zoning ordinance or building code or use or occupancy
restriction or condemnation proceeding pending or, to the best of
Seller's knowledge, threatened, which would include or impair the
use of such real property or the improvements thereon by Purchaser,
in the manner and for the purposes for which they are presently
used.
(p) Environmental Matters.
For the purposes of this paragraph the following terms shall have
the following meanings: (1) the term "Hazardous Material" shall mean
any
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material, substance or item that, whether by its nature or use, is
subject to regulation as of the date of this Agreement under any
Environmental Requirement, including but not limited to
Polychlorinated Biphenyls, petroleum, pesticides, herbicides,
asbestos and underground storage tanks; (2) the term "Environmental
Requirements" shall collectively mean the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Sec. 9601 et seq.), Super Fund Amendments and Reauthorization
Act of 1986, the Hazardous Materials Transportation Act (49 U.S.C.
Sec. 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Sec. 6901 et seq.), the Toxic Substances Control Act (15
U.S.C. Sec. 2601 et seq.), the Clean Air Act (42 U.S.C. Sec. 7401 et
seq.) and the Federal Water Pollution Control Act (33 U.S.C. Sec.
1251 et seq.), all as presently in effect, any regulation pursuant
thereto presently in effect, or any other law, ordinance, rule,
regulation, order or directive in effect as of the date of this
Agreement addressing environmental, health or safety issues of or by
any Governmental Authority, and (3) the term "Governmental
Authority" shall mean the federal government, any state or other
political subdivision thereof, exercising executive, legislative,
judicial, regulatory or administrative functions. Seller hereby
represents and warrants to Purchaser that, to the best of Seller's
knowledge, (1) no Hazardous Material in reportable quantities are
currently located at, on, in or under the Station or the Station
Assets, (2) no Hazardous Material in reportable quantities have been
or are currently
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located at, in, on or under the Station or the Station Assets in a
manner which violates any Environmental Requirement, (3) no
releasing, emitting, discharging, leaching, dumping or disposing of
any Hazardous Material from the Station or the Station Assets onto
or into any other property or from any other property onto or into
the Station or the Station Assets has occurred or is occurring in
reportable quantities; and (4) Seller has received no notice of
violation, lien, complaint, suit, order or other notice with respect
to the environmental condition of any of the Station or the Station
Assets, nor has any such notice been issued during Seller's
ownership of the Station or the Station Assets which has not been
fully satisfied and complied with in a timely fashion as to bring
the Station and the Station Assets into full compliance with all
Environmental Requirements.
(q) Insurance.
Seller now has in force adequate fire and other risk insurance
covering the full replacement value of the Real Property and
tangible personal property to be transferred herein and shall cause
such insurance to be maintained in full force until the Closing
Date. Seller also shall maintain in full force until the Closing
Date adequate general public liability insurance in amounts
consistent with broadcasting industry standards for similar
stations. None of the assets to be conveyed herein has been
adversely affected in any way as a result of fire, explosion,
earthquake, accident, fraud, rain, storm, drought,
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riot, Act of God or public enemy or any other casualty, whether or
not covered by insurance.
(r) All Necessary Assets.
The Station Assets described in Section 1 and set forth in the
Exhibits hereto, together with the Real Property, constitute all of
the assets, property and business owned, used or needed by Seller or
in which Seller has any interest (other than the Excluded Assets) in
carrying on the business and operation of the Station as presently
conducted. Other than the Excluded Assets, there are no other
rights, assets or property owned, used or needed by Seller in
connection with the Station or needed in the operation thereof.
(s) Copyrights and Service Marks.
Except as set forth on Exhibit E hereto, Seller does not own nor is
possessed of or is licensed under any copyrights, patents, patent
applications, service marks, trademarks, trade names, logos, emblems
or slogans used in the conduct of the business of the Station as now
operated. There is no claim pending or threatened against Seller
with respect to the alleged infringement of any such copyright,
patent, patent application, service mark, trademark, trade name,
logo, emblem or slogan owned by another, and to the best of Seller's
knowledge, there is not any basis for any such claim.
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(t) Conduct of Business.
The Station is being operated by employees of Savannah Valley
Broadcasting Company, a Georgia corporation, of which Seller is the
sole shareholder. Since July 1, 1997, the business of the Station
has been conducted in the ordinary course.
(u) Representations and Warranties.
The representations and warranties made by Seller in this Agreement
are not, and will not be on the Closing Date, false or misleading
individually or in the aggregate with respect to any material fact
and will not omit to state a material fact required to be stated
therein when necessary in order to make the statements contained
therein not materially false or misleading.
5. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Purchaser represents and warrants the following, which representations and
warranties shall be true and correct as of the Closing Date as if
expressly restated on said date.
(a) Organization.
Purchaser is now, and will be as of the Closing Date, a corporation,
duly organized, validly existing and in good standing under the laws
of the State of __________, and qualified to do business in the
State of Georgia and the State of South Carolina.
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(b) Due Authorization.
The execution, delivery and consummation of this Agreement have been
duly authorized by the Board of Directors of Purchaser and no
further corporate authorization, approval or consent is required.
(c) Binding Agreement.
This Agreement constitutes the legal, valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with and
subject to its terms.
(d) No Conflicts.
Subject to the FCC's approval of this transaction, the execution,
delivery and consummation of this Agreement do not and will not
conflict with any of the provisions of Purchaser's organizational
documents or violate any provisions of law.
(e) FCC Approval.
Purchaser knows of no reason why the FCC (i) would not approve an
application for the assignment of the Station's licenses to it or
(ii) would require any type of waiver before approving an
application for the assignment of the Station's licenses to it.
(f) No Conflicting Agreements.
There will not be as of the Closing Date any agreements, contracts,
understandings or commitments which will restrain or inhibit the
right of Purchaser to enter into this Agreement, make any
representations or
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warranties herein and/or consummate any of the transactions
contemplated herein.
(g) No Litigation.
There are no suits, legal proceedings or investigations of any
nature pending or, to Purchaser's knowledge, threatened against or
affecting it that would affect Purchaser's ability to carry out the
transactions contemplated by this Agreement.
(h) Representations and Warranties.
The representations and warranties made by Purchaser in this
Agreement are true and correct and are not, and will not be on the
Closing Date, false or misleading individually or in the aggregate
with respect to any material fact and do not and will not omit to
state a material fact required to be stated therein when necessary
in order to make the statements contained herein not materially
false or misleading.
6. OPERATIONS PENDING CLOSING.
Pending the closing hereunder and subject to the TBA referred to in
Section 35 hereof, Seller shall:
(a) Access to Station.
Give to Purchaser and its authorized representatives access during
normal business hours to the properties, books and records of the
Station and the Station Assets, and furnish Purchaser with such
information concerning the same as Purchaser may reasonably request;
provided, however, that
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Purchaser may not visit the Station without the consent of Seller,
nor may Purchaser contact any current employee of Seller without the
consent of Seller.
(b) Compliance with Laws.
Comply with all material and applicable federal, state and local
laws, ordinances and regulations, including, but not limited to, the
Communications Act of 1934 and the Rules and Regulations of the FCC.
(c) Maintenance of Station Assets.
Keep, at is own expense, in a normal state of repair and operating
efficiency the Station Assets. On the Closing Date, the operation of
the Station and the technical equipment shall be in compliance with
the FCC licenses and the FCC's Rules and Regulations and all other
applicable laws and regulations and no citations, complaints or
petitions shall be pending or, to Seller's knowledge, threatened
against Seller.
(d) Conduct of Business.
Make all reasonable efforts to maintain the business reputation and
financial condition of the Station and preserve their customers,
employees and suppliers. During the period from the date of this
Agreement to the Closing Date, the business of Seller shall be
operated in ordinary course and in the same manner as operated prior
to the execution hereof. On the Closing Date, there shall be
outstanding no liability, judgment or litigation that could result
in an encumbrance of, or otherwise substantially adversely affect,
the
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assets, licenses and property being sold, assigned and transferred
hereunder or the operation of the Station.
(e) Salary Increases.
Grant no salary increase to any officer or employee of the Station,
except normal merit, promotional and similar increases granted in
the ordinary course of business and consistent with prior practice.
(f) Required Consents.
Use its best efforts to obtain all of the consents noted on Exhibit
I hereto, and in connection therewith promptly to commence and
thereafter diligently prosecute application for all such consents,
waivers and approvals required herein, and to keep Purchaser
currently informed of the status thereof and of any difficulties
encountered in obtaining same and promptly to advise Purchaser of
all communications relevant to the transactions provided for in this
Agreement received by Seller from the FCC subsequent to the date
hereof, and to furnish the Purchaser copies of all written
communications and documents filed with the FCC by Seller and
received by Seller from the FCC subsequent to the date hereof.
(g) Books and Records.
Maintain the books of accounts and records of the Station in the
usual, regular and ordinary manner, in accordance with Seller's
standard accounting practices.
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(h) Contracts.
Not enter into or terminate any contract in an amount greater than
$10,000 or for a term exceeding one year and to be assumed by
Purchaser, or amend any provision of any contract in an amount
greater than $10,000 or for a term exceeding one year and to be
assumed by Purchaser, whether or not in the ordinary course of
business, without the prior written consent of Purchaser, which
consent will not be unreasonably withheld. Seller shall not enter
into any Trade Deal after execution of this Agreement which shall
obligate Purchaser without Purchaser's prior written consent.
7. PURCHASER'S PERFORMANCE.
The obligations of Purchaser hereunder are subject at its election to the
conditions that on the Closing Date:
(a) The representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects and the
covenants and agreements of Seller to be performed on or prior to
the Closing Date pursuant to the terms of this Agreement shall have
been duly performed, and Seller shall have delivered to Purchaser a
certificate, dated as of the Closing Date, to that effect.
(b) The FCC authorizations, including those set forth on Exhibit A shall
be assigned and transferred to Purchaser and shall contain no
adverse modifications of the terms of such authorizations as they
presently exist. Any
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and all governmental approvals necessary to consummate the
transactions contemplated by this Agreement shall have been
received.
(c) Purchaser shall have received a written opinion of J. Larry Broyles,
Esquire, Counsel for Seller, dated as of the Closing Date, in
customary form and substance that:
(i) Seller has full power and authority to own its properties, and
has full power and authority to enter into this Agreement and
to consummate the transactions contemplated herein.
(ii) This Agreement has been duly authorized, executed and
delivered by Seller, and is a valid and binding obligation of
Seller, enforceable against Seller in accordance with its
terms.
(iii) The sale of all of the Station Assets to Purchaser hereunder
has been duly authorized by all necessary action of Seller,
and deed(s) of conveyance, bill(s) of sale and any and all
other instruments delivered to Purchaser hereunder have been
duly authorized, executed and delivered, and conform with all
legal requirements to vest in Purchaser good and valid title
to all the Station Assets.
(iv) The execution, delivery and performance of this Agreement and
all of the documents executed in conjunction therewith by
Seller do not violate, to the best of counsel's knowledge, any
provision of any material note, mortgage, agreement,
franchise, order, arbitration
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award, judgment, law, ordinance or decree to which Seller is a
party or by which Seller is bound.
(v) To the best of the knowledge of such counsel, no action,
claim, suit or proceeding or any investigation of any
governmental authority is pending or threatened against or
affecting Seller or the Station or the Station Assets which
would affect such Station Assets or the transactions
contemplated by this Agreement.
(d) Purchaser shall have received a written opinion of Holland & Knight,
LLP, FCC Counsel for Seller, dated as of the Closing Date,
substantially in the form of Exhibit J hereto.
(e) No suit, action or other proceeding against Seller shall be pending
before any court or governmental agency of competent jurisdiction in
which it is sought to restrain or prohibit any of the transactions
contemplated by this Agreement or to obtain damages or other relief
in connection with this Agreement or the transactions contemplated
hereby.
(f) Seller shall have executed and delivered to Purchaser the documents
required herein to be executed and delivered by it.
8. SELLER'S PERFORMANCE.
Seller's performance is subject at Seller's election to the conditions
that, at the Closing Date:
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(a) All payments hereunder which are due and payable by Purchaser on the
Closing Date shall have been paid in accordance with the terms of
this Agreement, and Purchaser shall have executed all of the
documents required of it herein.
(b) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects, and
the covenants and agreements of Purchaser to be performed on or
prior to the Closing Date pursuant to the terms of this Agreement
shall have been duly performed, and Purchaser shall have delivered
to Seller a certificate, dated as of the Closing Date, signed by a
duly authorized officer of Purchaser to that effect.
(c) No litigation, investigation or proceeding of any kind shall have
been instituted which would adversely affect the ability of
Purchaser to comply with the provisions of this Agreement.
(d) Seller shall have received an opinion of ______________________,
Counsel for Purchaser, dated as of the Closing Date, in customary
form and substance that:
(i) Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of ________,
and Purchaser is authorized to do business in the State of
Georgia and the State of South Carolina.
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(ii) Each of the documents executed and/or ratified by Purchaser in
accordance with the terms of this Agreement has been duly
authorized and/or ratified by all necessary corporate action.
(iii) This Agreement has been duly authorized, executed and
delivered by Purchaser and is a valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with
its terms.
(iv) The execution, delivery and performance of this Agreement and
all of the documents to be executed in conjunction therewith
by Purchaser do not violate any provisions of Purchaser's
organizational documents or, to the best of Counsel's
knowledge, after reasonable investigation, any provision of
any material note, mortgage, agreement, franchise, order,
arbitration award, judgment, law, ordinance or decree to which
Purchaser is a party or by which Purchaser is bound.
9. FCC APPROVAL AND APPLICATION.
(a) Consummation of the transactions contemplated hereunder is
conditioned upon the FCC having given its prior consent in writing
to the assignment to Purchaser of the FCC licenses and other
authorizations set forth in Exhibit A hereto and such consent having
become a Final Order. For purposes of this Agreement, such consent
shall be deemed a Final Order when it is no longer subject to timely
review by the FCC or by any court or, in the event of
reconsideration upon its own motion or otherwise by the FCC or an
appeal by any person to any court, upon the decision of such body
becoming no
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longer subject to review. The condition of finality may be waived
jointly by Seller and Purchaser.
(b) The parties agree to proceed, as expeditiously as possible, but in
no event later than ten (10) business days after the date of this
Agreement, to file or cause to be filed an application requesting
FCC consent to the transactions herein involved.
(c) If the FCC has failed or refused to grant its Final written consent
to the assignment of the aforesaid licenses and other authorizations
and/or any other transactions contemplated to be consummated
hereunder on or before December 31, 1998 (the "Termination Date"),
Purchaser or Seller, at their respective options, may terminate this
Agreement upon ten (10) days' prior written notice to the other, in
which event this Agreement shall have no further force or effect; or
if the delay in the FCC's action is due to the refusal or failure of
either party to supply the FCC with information which the FCC has
requested, only the party not at fault shall have the option of
terminating this Agreement.
10. HART-SCOTT-RODINO FILING.
In the event consummation of the transactions contemplated hereunder
requires Purchaser and Seller to file with the United States Department of
Justice ("DOJ") and Federal Trade Commission ("FTC") all notifications and
reports required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, the parties hereto each agrees to supply to the other upon request
all information needed to complete such
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notifications and reports and to proceed as expeditiously as possible (but
in no event later than thirty (30) business days after the date hereof) to
make the filing. Each party shall promptly apprise the other of the status
of any inquiries made by the DOJ, FTC or any other governmental agency
with respect to this Agreement or the transactions contemplated herein.
All filing fees payable to the DOJ and the FTC with respect to such
notifications and reports shall be paid by Purchaser.
11. DATE, NOTICE AND PLACE OF CLOSING.
The date and time of closing ("Closing Date") shall be mutually agreed
upon by Seller and Purchaser, but, in the absence of such agreement, shall
not be more than ten (10) business days after all of the conditions to
closing set forth in Sections 7, 8, 9 and 10 hereof are satisfied or
waived. In the event of the inability of the parties to agree on the
Closing Date, Seller shall have the right to fix the same on ten (10)
days' prior written notice to Purchaser. The closing shall be held at a
mutually agreeable location in Augusta, Georgia, or at such other location
as shall be mutually agreed upon by Seller and Purchaser.
12. CONTROL OF STATION.
Until the Closing Date, Seller shall have complete control of the Station,
its equipment and operation. Purchaser shall be entitled, however, to
notice of any significant problems or developments with the purpose that
an uninterrupted and efficient transfer to Purchaser of the Station and
assets and all other assets and properties to be transferred hereunder may
be accomplished.
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13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations, warranties, covenants and agreements contained in
this Agreement shall be true and correct on and as of the Closing Date as
though such representations, warranties, covenants and agreements were
made on and as of such time, and all such representations, warranties,
covenants and agreements shall survive the closing hereunder; provided,
however, that Seller shall have no liability for a misrepresentation or
breach of warranty unless written notice of claim therefor specifying with
particularity the facts upon which such claim is based has been given to
Seller by Purchaser within one (1) year from the Closing Date.
14. RIGHTS OF INDEMNIFICATION; DEFAULT.
(a) It is understood and agreed that Purchaser does not assume, and
shall not be obligated to pay, any liabilities of Seller under the
terms of this Agreement or otherwise and shall not be obligated to
perform any obligations of Seller of any kind or manner except by
reason of contracts expressly assigned and assumed by Purchaser
hereunder, and, with respect to such contracts, only such
obligations which arise subsequent to the Closing Date (or, if
applicable, the TBA Commencement Date) or as is herein provided.
Seller hereby agrees to indemnify and hold Purchaser, its successors
and assigns, harmless from and against:
(i) Claims, liabilities and obligations arising from the operation
of the Station prior to the Closing Date (or, if applicable,
the TBA Commencement Date), including claims arising or
required to be
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performed prior to the Closing Date (or, if applicable, the
TBA Commencement Date) under any contract or instrument
assumed by Purchaser hereunder; and
(ii) Any and all damage or deficiency resulting from a material
misrepresentation, breach of warranty or nonfulfillment of an
agreement on the part of Seller under this Agreement, arising
out of events occurring prior to the Closing Date (or, if
applicable, the TBA Commencement Date), or from a material
misrepresentation in or omission from any certificate or other
instrument furnished to Purchaser pursuant to this Agreement,
or in connection with any of the transactions contemplated
hereby; and
(iii) Any and all actions, suits, proceeding, damages, assessments,
judgments, costs and expenses, including reasonable attorneys'
fees, incurred by Purchaser as a result of Seller's failure or
refusal to compromise or defend any claim incident to the
foregoing provisions.
Notwithstanding the foregoing, Seller shall not be required to
indemnify Purchaser under the foregoing clauses (i), (ii) or (iii)
unless the aggregate amount owed by Seller to Purchaser pursuant to
the foregoing clauses (i), (ii) and (iii) exceeds $50,000, in which
event Seller shall be required to indemnify Purchaser for the entire
amount owed.
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(b) If any claim for which Purchaser is entitled to indemnity is
asserted against Purchaser by a third party, Purchaser shall
promptly give Seller notice thereof and give Seller an opportunity
to defend the same with counsel of Seller's choice (subject to the
approval of Purchaser, not to be unreasonably withheld or delayed)
at Seller's expense. Purchaser, at Seller's expense, shall provide
reasonable cooperation in connection with such defense. In the event
that Seller desires to compromise or settle any such claim,
Purchaser shall have the right to consent to such settlement or
compromise; provided, however, that if such compromise or settlement
is for money damages only and will include a full release and
discharge of Purchaser, and Purchaser withholds its consent to such
compromise or settlement, Purchaser and Seller agree that (i)
Seller's liability shall be limited to the amount of the proposed
settlement and, upon payment of such sum to Purchaser, Seller shall
thereupon be relieved of any further liability with respect to such
claim, and (ii) from and after such date, Purchaser will undertake
all legal costs and expenses in connection with any such claim. If
Seller fails to defend any claim within a reasonable time, Purchaser
shall be entitled to assume the defense thereof, and Seller shall be
liable to Purchaser for its expenses reasonably incurred, including
attorneys' fees and payment of any settlement amount or judgment.
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(c) Purchaser hereby agrees to indemnify and hold Seller and its
successors and assigns harmless from and against:
(i) Claims, liabilities and obligations arising from the operation
of the Station on or after the Closing Date (or, if
applicable, the TBA Commencement Date), including claims
arising or required to be performed on or after the Closing
Date (or, if applicable, the TBA Commencement Date) under any
contract or instrument assumed by Purchaser hereunder; and
(ii) Any and all damage or deficiency resulting from a material
misrepresentation, breach of warranty, nonfulfillment of any
agreement or obligation, assumed or required to be assumed by
Purchaser under this Agreement, or from a material
misrepresentation in or omission from any certificate or other
instrument furnished to Purchaser pursuant to this Agreement,
or in connection with any of the transactions contemplated
hereby; and
(iii) Any and all actions, suits, proceedings, damages, assessments,
judgments, costs and expenses, including reasonable attorneys'
fees, incurred by Seller as the result of Purchaser's failure
or refusal to defend or compromise any claim incident to any
of the foregoing provisions.
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(d) If any claim covered by the foregoing indemnity is asserted against
Seller by a third party, Seller shall notify Purchaser promptly and
give Purchaser an opportunity to defend the same with counsel of
Purchaser's choice (subject to the approval of Seller, not to be
unreasonably withheld or delayed) at Purchaser's expense. Seller, at
Purchaser's expense, shall provide reasonable cooperation in
connection with such defense. In the event that Purchaser desires to
compromise or settle any such claim and such compromise will
adversely affect Seller, Seller shall have the right to consent to
such settlement or compromise; provided, however, that if such
compromise or settlement is for money damages only and will include
a full release and discharge of Seller, and Seller withholds its
consent to such compromise or settlement, Purchaser and Seller agree
that (i) Purchaser's liability shall be limited to the amount of the
proposed settlement and, upon payment of such sum to Seller,
Purchaser shall thereupon be relieved of any further liability with
respect to such claim, and (ii) from and after such date, Seller
will undertake all legal costs and expenses in connection with any
such claims. If Purchaser fails to defend any claim within a
reasonable time, Seller shall be entitled to assume the defense
thereof, and Purchaser shall be liable to Seller for its expenses
reasonably incurred, including attorneys' fees and payment of any
settlement amount or judgment.
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(e) In the event either party shall default in its obligations
hereunder, such party shall have a period not to exceed fifteen (15)
days after notice hereof by the other party in which to cure said
default.
15. INDEMNIFICATION ESCROW.
(a) On the Closing Date, Seller shall deposit in escrow with
____________, acting as the indemnification escrow agent on the
parties' behalf ("Indemnification Escrow Agent"), a deposit in the
amount of Fifty Thousand and No/100 Dollars ($50,000.00)
("Indemnification Escrow") by bank wire transfer of immediately
available funds, to be held in escrow for a period of twelve (12)
months from the Closing Date in accordance with the terms and
conditions of the Indemnification Escrow Agreement entered into
between Seller, Purchaser and Indemnification Escrow Agent in the
form of Exhibit K hereto.
(b) The Indemnification Escrow Agent shall retain the Indemnification
Escrow in accordance with the terms of the Indemnification Escrow
Agreement as security for Seller's obligation to indemnify Purchaser
as provided in Section 14 hereof. It is expressly understood that
the amount of the Indemnification Escrow is not a limit upon
Seller's liability for any breach of this Agreement or its indemnity
obligations hereunder, provided, however, Seller's liability for any
breach of this Agreement shall not exceed the Purchase Price.
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16. ALTERNATIVE DISPUTE RESOLUTION.
(a) Except as otherwise provided herein, in case any disagreement of
whatever nature arising out of or relating to this Agreement or the
breach, termination, enforceability or validity thereof ("Dispute")
shall arise between the parties hereto, the parties shall first
attempt in good faith to resolve the Dispute promptly by negotiation
between executives who have authority to settle the Dispute. If the
Dispute cannot be resolved through negotiation, either party may
initiate mediation of the Dispute as hereinafter provided.
(b) If the Dispute has not been resolved by negotiation as hereinabove
provided, the parties shall make a good faith attempt to settle the
Dispute by mediation pursuant to the provisions of this Section 16
before resorting to arbitration. Unless the parties agree otherwise,
the mediation shall be conducted in accordance with the Commercial
Mediation Rules of the American Arbitration Association (the "AAA")
then in effect by a mediator who (i) has the qualifications and
experience set forth in paragraph (c) of this Section 16 and (ii) is
selected as provided in paragraph (d) of this Section 16.
(c) Unless the parties agree otherwise, the mediator shall be a lawyer
licensed in the State of Georgia (i) who is or has been a partner in
(or counsel to) a highly respected law firm for at least 15 years as
a practicing attorney specializing in either general commercial
litigation or general corporate and commercial matters and (ii) who
has had both training and experience as a mediator.
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(d) Either party (the "Initiating Party") may initiate mediation of the
Dispute by giving the other party (the "Recipient Party") written
notice (a "Mediation Notice") setting forth a list of the names and
resumes of qualifications and experience of three impartial persons
who the Initiating Party believes would be qualified as a mediator
pursuant to the provisions of paragraph (c) hereof. Within 15 days
after the delivery of the Mediation Notice, the Recipient Party
shall give a counter-notice (the "Counter-Notice") to the Initiating
Party in which the Recipient Party may designate a person to serve
as the mediator from among the three persons listed by the
Initiating Party in the Mediation Notice (in which event such
designated person shall be the mediator). If none of the persons
listed in the Mediation Notice is designated by the Recipient Party
to serve as the mediator, the Counter-Notice should set forth a list
of the names and resumes of three impartial persons who the
Recipient Party believes would be qualified as a mediator pursuant
to the provisions of paragraph (c) hereof. Within 10 days after the
delivery of the Counter- Notice, the Initiating Party may designate
a person to serve as the mediator from among the three persons
listed by the Recipient Party in the Counter-Notice (in which event
such designated person shall be the mediator). If the parties cannot
agree on a mediator from the three impartial nominees submitted by
each party, each party shall strike two names from the other party's
list, and the two remaining persons on both lists will jointly
select as the mediator any person who has the qualifications and
experience set forth
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in paragraph (c) hereof. If they are unable to agree, then the
mediator will be selected by the President of the AAA.
(e) Within 30 days after the mediator has been selected as provided
above, both parties and their respective attorneys shall meet with
the mediator for one mediation session of at least six hours, it
being agreed that each party representative attending such mediation
session shall be an executive with authority to settle the Dispute.
If the Dispute cannot be settled at such mediation session or at any
mutually agreed continuation thereof, either party may give the
other and the mediator a written notice declaring the mediation
process at an end, in which event the Dispute shall be resolved by
arbitration as hereinafter provided.
(f) The costs of the mediation shall be shared equally between the
parties.
(g) If the Dispute is not settled by negotiation or mediation, then the
Dispute shall be decided by arbitration. Arbitration shall be
initiated by either party giving written notice to arbitrate to the
other party, stating the question to be arbitrated and the name of
the arbitrator selected by that party. Within ten (10) days of the
date of said notice to arbitrate certificate, the other party shall
select and give written notice of its arbitrator to the initiating
party. The two arbitrators so selected shall select a third
arbitrator and give written notice within five (5) days after the
second arbitrator is chosen. The arbitration shall be conducted
solely by the third arbitrator, who shall hear evidence and make an
award within twenty (20) days after the notice of
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selection of the third arbitrator is given to the parties, which
award, when signed by the third arbitrator, shall be final. If
either party shall refuse or neglect to appoint an arbitrator within
ten (10) days after the other shall have appointed an arbitrator and
given written notice to arbitrate to the other, requiring such party
to appoint an arbitrator, then the arbitrator so appointed by the
first party shall have power to proceed to arbitrate and determine
the matters of disagreement as if he were an arbitrator appointed by
both the parties hereto for that purpose, and his award in writing
signed by him shall be final; provided that such award shall be made
within fifteen (15) days after such refusal or neglect of the other
party to appoint an arbitrator. The party against which such award
is made shall pay all costs and expenses of the arbitration.
(h) Any arbitration pursuant to this Section 16 shall be conducted in
Augusta, Georgia, and governed by the Federal Arbitration Act and
administered by the AAA under its Commercial Arbitration Rules and
its Supplementary Procedures for Large, Complex Disputes, provided
that persons eligible to be selected as arbitrators shall be limited
to attorneys-at-law who (i) are on the AAA's Large, Complex Case
Panel or a CPR Panel of Distinguished Neutrals, or who have
professional credentials similar to the attorneys listed on such AAA
and CPR panels, and (ii) have practiced law for at least 15 years as
an attorney specializing in either general commercial litigation or
general corporate and commercial matters. The arbitrator shall base
its
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award on applicable law and judicial precedent and include in such
award a statement of the reasons upon which the award is based.
Judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
17. BROKER'S FEE.
Seller and Purchaser represent and warrant to the other that it has not
retained, and is not obligated to, any person or entity for brokerage,
finder's fees or commission or other similar charges resulting from or
arising out of the transactions contemplated in this Agreement, and each
party hereby indemnifies and holds the other party harmless from payment
of any such fees, commissions or charges.
18. SELLER'S PERFORMANCE AT CLOSING.
At the closing hereunder, Seller shall:
(a) Deliver to Purchaser an executed General Conveyance, Bill of Sale,
Assignment and Assumption, substantially in the form of Exhibit L
hereto, which General Conveyance, Bill of Sale, Assignment and
Assumption shall include, but not be limited to, an assignment to
Purchaser of (i) the licenses and all other authorizations listed on
Exhibit A, used in the operation of the Station, transferring the
same to Purchaser, (ii) good and marketable title to all tangible
personal property described on Exhibit B hereof (subject to changes
in the ordinary course of business since the date hereof), (iii) the
contracts, leases and agreements described on Exhibits C and D
hereof, (iv) the copyrights and service marks listed on Exhibit E
hereof, and (v) all
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right, title and interest of Seller in and to the intangible assets,
free and clear of all mortgages, liens, attachments, conditional
sales contracts, claims or encumbrances of any kind except liens for
ad valorem taxes not yet due and payable.
(b) Deliver to Purchaser at the Station the files, records and logs
referred to in Section 1(f) hereof.
(c) Deliver to Purchaser a certified copy of the resolutions of the
Board of Directors of Seller authorizing the execution of this
Agreement and the consummation of the transactions described herein.
(d) Deliver to Purchaser the written opinion of Counsel for Seller,
dated as of the Closing Date, pursuant to the provisions of this
Agreement.
(e) Deliver to Purchaser the written opinion of Holland & Knight, LLP,
dated as of the Closing Date, pursuant to the provisions of this
Agreement.
(f) Deliver to Purchaser a certificate signed by Seller and dated as of
the Closing Date to the effect that all representations and
warranties set forth in this Agreement shall be true and correct as
of and as if made on the Closing Date and that, to Seller's
knowledge, no event of default shall have occurred and be continuing
on the Closing Date which, with lapse of time or giving of notice,
or both, would constitute a default by Seller under this Agreement.
(g) Deliver to Purchaser Uniform Commercial Code lien searches from
Richmond County, Georgia, the Georgia Secretary of State, Aiken
County, South Carolina and the Secretary of State of South Carolina
dated as of a
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date not more than five (5) days prior to the Closing Date and
showing no Uniform Commercial Code, judgment, tax or other lien
filings against the Station Assets, other than security interests or
other filings which will be released at closing.
(h) Deliver to Purchaser such other instruments and documents as may be
reasonably requested by Purchaser to effectuate the transactions
contemplated hereby.
(i) Deposit with the Indemnification Escrow Agent by wiring immediately
available funds into the Indemnification Escrow.
19. PURCHASER'S PERFORMANCE AT CLOSING.
At the closing hereunder, Purchaser shall:
(a) Pay by wiring immediately available funds the monies payable at the
closing.
(b) Deliver to Seller an executed counterpart of the General Conveyance,
Bill of Sale, Assignment and Assumption substantially in the form of
Exhibit L hereto, and such other instruments as Seller may
reasonably require evidencing Purchaser's assumption and agreement
to perform all of the contracts and agreements assigned to it
hereunder and evidencing Purchaser's acceptance and conveyance of
title to the personal property and other assets assigned and
conveyed to it hereunder.
(c) Deliver to Seller a certified copy of the resolutions of Purchaser's
Board of Directors authorizing the execution of this Agreement and
the consummation of the transactions described herein.
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(d) Deliver to Seller the written opinion of Counsel for Purchaser dated
as of the Closing Date, pursuant to the provisions of this
Agreement.
(e) Deliver to Seller a certificate signed by a duly authorized officer
of Purchaser and dated as of the Closing Date to the effect that all
representations and warranties set forth in this Agreement shall be
true as of and as if made on the Closing Date and that, to
Purchaser's knowledge, no event of default shall have occurred and
be continuing on the Closing Date which, with lapse of time or
giving of notice, or both, would constitute a default by Purchaser
under this Agreement.
(f) Deliver to Seller such other instruments and documents as may be
reasonably requested by Seller to effectuate the transactions
contemplated hereby.
20. EVENTS OF TERMINATION; DISBURSEMENT OF DEPOSIT.
(a) Failure to Close without Fault.
In the event that (i) each of the parties hereto shall have
satisfied in full all of the obligations of such party under this
Agreement which were to have been satisfied by such party prior to
the Closing Date and shall not have breached any representation,
warranty, covenant or agreement of such party contained in this
Agreement, which breach has a material adverse effect upon the other
party, but (ii) the closing shall nevertheless fail to take place
(without any fault on the part of any party) prior to the
Termination Date because one or more conditions to the closing in
Sections 7,8, 9 and 10 hereof shall not have
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been satisfied or waived, this Agreement shall terminate, and the
Deposit, together with any interest earned thereon, shall be
returned to Purchaser.
(b) Disbursement of Deposit to Seller.
If the conditions to closing specified in Sections 9(a) and 10
hereof shall have been satisfied and either (i) Purchaser shall
default in the performance of any of its material obligations or
materially breach any of its representations, warranties, covenants
or agreements hereunder and Seller shall have performed all of its
material obligations and shall not have materially breached any of
its representations, warranties, covenants or agreements hereunder,
or (ii) (1) pursuant to the terms of this Agreement, Purchaser shall
be obligated to purchase the assets and properties hereunder, (2)
Seller shall have duly satisfied each of the conditions of Section 7
above to be satisfied by it (or, in the case of any such condition
which is to be satisfied at the Closing, shall have demonstrated a
willingness and ability to satisfy such condition in the event the
Closing were to take place), except to the extent that any failure
to satisfy such condition was caused in any material respect by
Purchaser, and (3) Purchaser shall nevertheless fail to purchase the
assets and properties in accordance herewith, Seller shall have the
right to terminate this Agreement, upon written notice to Purchaser,
and the Deposit, together with any interest earned thereon, shall be
disbursed to Seller in accordance with the terms of the Escrow
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Agreement. The parties agree that such disbursement of the Deposit
is not a penalty and is a reasonable estimation of damages actually
incurred.
INITIAL HERE: SELLER: _______
PURCHASER: _______
(c) Return of Deposit to Purchaser.
If the conditions to closing specified in Sections 9(a) and 10
hereof shall have been satisfied and either (i) Seller shall default
in the performance of its material obligations or materially breach
any of its representations, warranties, covenants or agreements
hereunder and Purchaser shall have performed all of its material
obligations and shall not have materially breached any of its
representations, warranties, covenants or agreements hereunder, or
(ii) (1) pursuant to the terms of this Agreement, Seller shall be
obligated to sell the assets and properties hereunder to Purchaser,
(2) Purchaser shall have duly satisfied each of the conditions of
Section 7 above to be satisfied by it (or, in the case of any such
condition which is to be satisfied at the closing, shall have
demonstrated a willingness and ability to satisfy such condition in
the event the closing were to take place), except to the extent that
any failure to satisfy such condition was caused in any material
respect by Seller, and (3) Seller shall nevertheless fail to sell
the assets and properties to Purchaser in accordance herewith,
Purchaser shall have the right to terminate this Agreement, upon
written notice to Seller, and
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the Deposit, together with any interest earned thereon, shall
forthwith be returned to Purchaser.
(d) Mutual Agreement.
This Agreement may be terminated at any time by mutual agreement of
Seller and Purchaser, in writing, and the Deposit, together with any
interest earned thereon, shall be delivered in accordance with the
mutual agreement of the parties.
21. SPECIFIC PERFORMANCE.
The parties recognize that if Seller refuses to close as and when required
under the provisions of this Agreement, monetary damages will not be
adequate to compensate Purchaser for its injury. Purchaser shall therefore
be entitled, in addition to a right to collect money damages, to obtain
specific performance of the terms of this Agreement. If any action is
brought by Purchaser to enforce this Agreement, Seller shall waive the
defense that there is an adequate remedy at law.
22. BULK SALES LAW.
Purchaser hereby waives compliance by Seller with the provisions of all
bulk sales laws, or other similar provisions, but Seller agrees to
indemnify and hold Purchaser harmless for any claims arising thereunder.
23. ASSET ACQUISITION STATEMENT.
The parties shall each file Internal Revenue Service Form 8594 in a timely
manner after the Closing Date and in accordance with the purchase price
allocation determined in accordance with Section 2(a) hereof.
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24. EXHIBITS AND SCHEDULES.
All exhibits attached to this Agreement shall be deemed part of this
Agreement and incorporated herein as if fully set forth herein.
25. ASSIGNMENTS; SUCCESSORS AND ASSIGNS.
This Agreement shall not be assigned to a third party without the prior
written consent of the other party. In the event of an approved
assignment, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, their successors and assigns.
26. CONSTRUCTION.
This Agreement shall be construed and enforced in accordance with the laws
of the State of Georgia, excluding the choice of law rules thereof.
27. COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
28. NOTICES.
All notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing (which shall include
notice by facsimile transmission) and shall be deemed to have been duly
made and received when personally served, or when delivered by Federal
Express or a similar overnight courier service, expenses prepaid, or, if
sent by graphic scanning or other facsimile
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communications equipment, delivered by such equipment, addressed as set
forth below:
(a) If to Purchaser, then to:
With a copy (which shall not constitute notice) to:
(b) If to Seller, then to:
George G. Weiss
P.O. Box 3321
Augusta, GA 30914
(Voice) - -
(Fax) - -
With a copy (which shall not constitute notice) to:
Edward W. Hummers, Jr., Esquire
Holland & Knight LLP
2100 Pennsylvania Avenue, NW
Suite 400
Washington, DC 20037
(Voice) 202-457-7145
(Fax) 202-955-5564
and
J. Larry Broyles, Esquire
Trust Company Bank Building
Suite 900
Augusta, GA 30901
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(Voice) 706-722-2687
(Fax) 706-722-2756
Any party may alter the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions
of this Section providing for the giving of notice.
29. ADDITIONAL DOCUMENTS.
Prior to, on or subsequent to the Closing Date, each party to this
Agreement shall, at the request of the other, furnish, execute and deliver
such documents and instruments as the requesting party shall reasonably
require as necessary or desirable to implement and consummate the
transactions contemplated hereunder.
30. PARAGRAPH HEADINGS.
Paragraph headings herein have been inserted for reference only and shall
not be deemed to limit or otherwise affect, in any manner, or be deemed to
interpret, in whole or part, any of the terms or provisions of this
Agreement.
31. ENTIRE AGREEMENT.
This Agreement, together with the Exhibits attached hereto, contains all
of the terms agreed upon by the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings between the
parties and may not be changed or terminated orally. No attempted change,
termination or waiver of any of the provisions hereof shall be binding
unless in writing and signed by the party against whom the same is sought
to be enforced.
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32. EXPENSES.
Except as otherwise expressly provided in this Agreement, each party shall
bear its own legal, accounting and other expenses in connection with the
negotiation, preparation and consummation of this Agreement and the
transactions contemplated hereby.
33. ATTORNEYS' FEES.
In the event of a dispute between or among any of the parties hereto
arising out of or related to this Agreement or the interpretation or
enforcement of this Agreement, the prevailing party or parties shall be
entitled to recover reasonable attorneys' fees, costs and expenses from
the other party or parties.
34. CONFIDENTIALITY.
Except as necessary for the consummation of the transactions contemplated
hereby, each party hereto will keep confidential any information which is
obtained from the other party in connection with the transactions
contemplated hereby and which is not readily available to members of the
general public, and will not use such information for any purpose other
than in furtherance of the transactions contemplated hereby. In the event
this Agreement is terminated and the purchase and sale contemplated hereby
abandoned, each party will return to the other party all documents, work
papers and other written material obtained by it in connection with the
transactions contemplated hereby.
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35. TIME BROKERAGE AGREEMENT.
The parties acknowledge that simultaneously with the execution of this
Agreement, Seller and Purchaser shall enter into the TBA substantially in
the form of Exhibit M hereto, consistent with FCC rules and regulations,
for the period prior to the Closing Date, providing for the operation of
the Station by Purchaser. If the Seller and Purchaser enter into the TBA,
purchaser shall not have any claim or right, including, without
limitation, any right to terminate this Agreement, due to the inaccuracy
of any representation or warranty, the breach of any covenant, or the
failure of any condition resulting from the operation of the Station by
Purchaser under the TBA.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have hereunto set their respective
hands and seals as of the day and year first above written.
PURCHASER:
-----------------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SELLER:
-----------------------------------
GEORGE G. WEISS
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WZNY AGREEMENT OF SALE
BETWEEN
GEORGE G. WEISS
AND
---------------
List of Exhibits
Exhibit A: FCC Licenses and Authorizations
Exhibit B: Assets Other Than Real Property
Exhibit C: Contracts, Leases and Agreements
Exhibit D: Trade Deals
Exhibit E: Copyrights and Service Marks
Exhibit F: Real Property
Exhibit G: Allocation of Purchase Price
Exhibit H: Escrow Agreement
Exhibit I: Required Consents
Exhibit J: Form of FCC Counsel Opinion
Exhibit K: Indemnification Escrow Agreement
Exhibit L: General Conveyance, Bill of Sale,
Assignment and Assumption
Exhibit M: Form of Time Brokerage Agreement
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ASSET PURCHASE AGREEMENT
BETWEEN
HVS PARTNERS
AND
CUMULUS MEDIA, LLC
May 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction..................................................1
(a) Purchase and Sale of Assets.................................1
(b) Assumption of Liabilities...................................1
(c) Purchase Price..............................................1
(d) The Closing.................................................2
(e) Deliveries at the Closing...................................2
(f) Postclosing Agreement.......................................2
(g) Allocation..................................................2
2. Representations and Warranties of the Seller.......................2
(a) Organization of the Seller..................................3
(b) Authorization of Transaction................................3
(c) Noncontravention............................................3
(d) Title to Acquired Assets....................................3
(e) Financial Statements........................................3
(f) Events Subsequent to January 1, 1997 .......................4
(g) Tax Matters.................................................6
(h) Tangible Assets.............................................6
(i) Real Property...............................................6
(j) Intellectual Property.......................................7
(k) Contracts...................................................9
(l) Commission Licenses and Compliance with Commission
Requirements..............................................10
(m) Insurance..................................................11
(n) Litigation.................................................11
(o) Employees..................................................12
(p) Employee Benefits..........................................12
(q) Environment, Health, and Safety............................12
(r) Legal Compliance...........................................13
(s) Advertising Agreements.....................................13
(t) Brokers' Fees..............................................14
(u) Disclosure.................................................14
3. Representations and Warranties of the Buyer.......................14
(a) Organization of the Buyer..................................14
(b) Authorization of Transaction...............................14
(c) Noncontravention...........................................14
(d) Brokers' Fees..............................................14
4. Pre-Closing Covenants.............................................15
(a) General....................................................15
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(b) Assignment Applications....................................15
(c) Employment Offers..........................................15
(d) Notices and Consents.......................................15
(e) Operation of Business......................................15
(f) Advertising Obligations....................................16
(g) Operating Statements.......................................16
(h) Contracts..................................................16
(i) Operation of Stations......................................16
(j) Credit and Receivables.....................................16
(k) Preservation of Business...................................16
(l) Full Access................................................16
(m) Notice of Developments.....................................17
(n) Exclusivity................................................17
(o) Title Insurance, Surveys and Environmental Assessments.....17
(p) Control of Stations........................................17
(q) Risk of Loss...............................................18
5. Conditions to Obligation to Close.................................18
(a) Conditions to Obligation of the Buyer......................18
(b) Conditions to Obligation of the Seller.....................19
6. Post-Closing Covenants............................................20
(a) General....................................................20
(b) Litigation Support.........................................20
(c) Adjustments................................................21
(d) Collection of Accounts Receivable..........................21
(e) Severance Obligations......................................22
7. Remedies for Breaches of this Agreement...........................22
(a) Survival...................................................22
(b) Indemnification Provisions for the Benefit of the Buyer....22
(c) Indemnification Provisions for the Benefit of the Seller...23
(d) Specific Performance.......................................23
(e) Liquidated Damages.........................................23
(f) Matters Involving Third Parties............................23
(g) Other Indemnification Provisions...........................24
8. Definitions.......................................................24
9. Termination.......................................................29
(a) Termination of Agreement...................................29
(b) Effect of Termination......................................29
10. Miscellaneous....................................................29
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(a) Survival...................................................29
(b) Press Releases and Announcements...........................30
(c) No Third Party Beneficiaries...............................30
(d) Entire Agreement...........................................30
(e) Succession and Assignment..................................30
(f) Counterparts...............................................30
(g) Headings...................................................30
(h) Notices....................................................30
(i) Governing Law..............................................31
(j) Amendments and Waivers.....................................31
(k) Severability...............................................31
(l) Expenses...................................................32
(m) Construction...............................................32
(n) Incorporation of Exhibits and Schedules....................32
(o) Submission to Jurisdiction.................................32
(p) Bulk Transfer Laws.........................................33
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EXHIBITS
Exhibit A--Form of Earnest Money Escrow Agreement
Exhibit B--Forms of Assignments
Exhibit C--Form of Assumption
Exhibit D--Form of Postclosing Agreement
Exhibit E--Allocation Schedule
Exhibit F--Form of Opinion of Counsel to the Seller
Exhibit G--Form of Tower Lease
SCHEDULES
Description Section Reference
Exceptions To Seller's Good Title 2(d)
Financial Statements 2(e)
Subsequent Events 2(f)
Tangible Personal Property 2(h)
Real Property Leases 2(i)
Intellectual Property 2(j)
Material Contracts 2(k)
FCC Licenses 2(l)
Insurance 2(m)
Litigation 2(n)
Employees 2(o)
Employee Benefit Plans 2(p)
Advertising Agreements 2(s)
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of May 1, 1997, by and
between Cumulus Media, LLC, a Wisconsin limited liability company (the "Buyer"),
and HVS Partners, Inc., a Florida general partnership (the "Seller"). The Buyer
and the Seller are referred to collectively herein as the "Parties." Capitalized
terms used in this Agreement are defined in Section 8 hereof.
This Agreement contemplates a transaction in which the Buyer will purchase
substantially all of the assets (and assume certain of the liabilities) of the
Seller that are used or useful in the operation of radio stations WWQQ-FM,
licensed to operate in Wilmington, North Carolina and WQSL-FM and WXQR-FM, each
licensed to operate in Jacksonville, North Carolina (collectively, the
"Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyer agrees to pay to the Seller at the Closing
Six Million Dollars ($6,000,000) (the "Purchase Price") payable as follows:
(i) on the date of this Agreement, the Buyer will deposit with the
Escrow Agent the amount of Six Hundred Thousand Dollars ($600,000) (the
"Earnest Money Deposit") by delivery of cash payable by wire transfer or
delivery of other immediately available funds; and
(ii) on the Closing Date, the Buyer shall pay to the Seller the
amount of Five Million Three Hundred Fifty Thousand Dollars ($5,350,000),
less interest earned on the Earnest Money Deposit; and
(iii) on the Closing Date, the Buyer shall pay to the Seller, on
behalf of all parties to the Postclosing Agreement, the amount of Fifty
Thousand Dollars ($50,000).
<PAGE>
The Earnest Money Deposit referenced in this Section 1(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit A (the "Earnest Money Escrow Agreement"), and shall
be deposited by the Escrow Agent with a federally insured financial institution
in an interest bearing account. Interest earned on the Earnest Money Deposit
shall accrue to the benefit of the Buyer, and, together with the principal
amount of the Earnest Money Deposit, shall be payable to the Seller and credited
against the Purchase Price on the Closing Date. If this Agreement is terminated
without Closing of the transaction contemplated herein, the Earnest Money and
all accrued interest shall be paid to the Buyer or the Seller as provided in the
Earnest Money Escrow Agreement.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Stations in
Wilmington, North Carolina, commencing at 9:00 a.m. local time on the date set
by the Buyer not earlier than the fifth business day or later than the tenth
business day after the FCC approval of the Assignment Application becomes a
Final Order, by which date all other conditions to the obligations of the
Parties to consummate the transactions contemplated hereby will have been
satisfied or waived or such other date as the Parties may mutually determine
(the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyer the various certificates, instruments, and documents referred to in
Section 5(a) below; (ii) the Buyer will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 5(b) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyer (A) assignments (including real property lease assignments and
Intellectual Property transfer documents) in the forms attached hereto as
Exhibits B-1 through B-[ ] and (B) such other instruments of sale, transfer,
conveyance, and assignment as the Buyer and its counsel reasonably may request;
(iv) the Buyer will execute, acknowledge (if appropriate), and deliver to the
Seller (A) an assumption in the form attached hereto as Exhibit C and (B) such
other instruments of assumption as the Seller and its counsel reasonably may
request; and (v) the Buyer will deliver to the Seller the consideration
specified in Section 1(c) above.
(f) Postclosing Agreement. On the Closing Date, the Seller shall execute,
and shall cause all partners of the Seller to execute, a Postclosing Agreement
with the Buyer including covenants not to compete with the Buyer in the markets
served by the Stations and to indemnify the Buyer in the form of Exhibit D
attached hereto. A portion of the Purchase Price equal to Fifty Thousand Dollars
($50,000) shall be paid to the Seller, on behalf of all parties other than the
Buyer, on the Closing Date as consideration for the agreements set forth in the
Postclosing Agreement.
(g) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit E.
2. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyer that the statements contained in this Section 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as
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though the Closing Date were substituted for the date of this Agreement
throughout this Section 2), except as set forth in the lettered and numbered
paragraphs contained in the disclosure schedule accompanying this Agreement and
initialed by the Parties (the "Disclosure Schedule") corresponding to the
lettered and numbered sections of this Section 2.
(a) Organization of the Seller. The Seller is a general partnership duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The partners of the Seller are GBH Radio, Inc., a Florida Corporation and TS
Radio, Inc., a Florida Corporation.
(b) Authorization of Transaction. The Seller has full power and authority
(including full partnership power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the partners of the Seller have duly authorized the
execution, delivery, and performance of this Agreement by the Seller. This
Agreement constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which any of the Seller is subject or any provision of the charter
or bylaws of any of the Seller; or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
Security Interest, or other arrangement to which any of the Seller is a party or
by which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). Other than with
respect to the Assignment Application described in Section 4(b), the Seller does
not need to give any notice to, make any filing with, or obtain any Licenses,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement (including
the assignments and assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Other than the Security Interests set forth
on Section 2(d) of the Disclosure Schedule (which shall be released at or before
the Closing) the Seller has good and marketable title to all of the Acquired
Assets, free and clear of any Security Interest or restriction on transfer.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1993, December 31, 1994,
December 31, 1995 and December 31, 1996, for the Seller; and (ii) unaudited
statements of income, as of and for each month during 1995 and 1996 and the
months ended January 31 and February 28, 1997 for the Seller. The Financial
Statements have been prepared
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in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, are correct and complete, and are consistent with the books and
records of the Seller (which books and records are correct and complete).
(f) Events Subsequent to January 1, 1997. Since January 1, 1997, except as
set forth in Section 2(f) of the Disclosure Schedule, there has not been any
adverse change in the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of the Seller with
respect to the operation of the Stations. Without limiting the generality of the
foregoing and with respect to the operation of the Stations since that date:
(i) the Seller has not sold, leased, transferred, or assigned any of
its material assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Seller has not entered into any contract, lease, sublease,
license, or sublicense (or series of related contracts, leases, subleases,
licenses, and sublicenses) outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or cancelled
any contract, lease, sublease, license, or sublicense (or series of
related contracts, leases, subleases, licenses, and sublicenses) involving
more than $5,000 to which the Seller is a party or by which it is bound;
(iv) no Security Interest has been imposed upon any of its assets,
tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions) outside
the Ordinary Course of Business;
(vii) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations) outside the
Ordinary Course of Business;
(viii) the Seller has not delayed or postponed (beyond its normal
practice) the payment of accounts payable and other Liabilities;
(ix) the Seller has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(x) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
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(xi) the Seller has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property or any action
adversely affecting the FCC Licenses of the Stations;
(xii) the Seller 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 giving rise to any claim or right on its
part against the person or on the part of the person against it;
(xiii) the Seller has not entered into any employment contract,
consulting contract or severance agreement or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement;
(xiv) the Seller has not granted any increase outside the Ordinary
Course of Business in the base compensation of any of its directors,
officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G) severance, or (H) other
plan, contract, or commitment for any of its directors, officers, and
employees, or modified or terminated any existing such plan, contract, or
commitment;
(xvi) the Seller has not made any other change in employment terms
for any of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xviii) the Seller has not paid any amount to any third party with
respect to any Liability or obligation (including any costs and expenses
the Seller has incurred or may incur in connection with this Agreement or
any of the transactions contemplated hereby) which would not constitute an
Assumed Liability if in existence as of the Closing;
(xix) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving any of the Seller;
(xx) the Seller has not altered its credit and collection policies
or its accounting policies;
(xxi) the Seller has not materially altered the programming, format
or call letters of the Stations, or its promotional and marketing
activities;
(xxii) the Seller has not applied to the FCC for any modification of
the FCC Licenses or failed to take any action necessary to preserve the
FCC Licenses and has operated the Stations in compliance therewith and
with all FCC rules and regulations; or
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(xxiii) the Seller has not committed to any of the foregoing.
(g) Tax Matters. The Seller has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all respects. All
Taxes owed by the Seller (whether or not shown on any Tax Return) have been
paid. The Seller has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. No claim has ever been made by an
authority in a jurisdiction where the Seller does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Seller that arose in connection with any
failure (or alleged failure) to pay any Tax.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment, vehicles and other tangible
personal property used in conducting the operation and business of the Stations.
The Seller owns or leases all tangible assets necessary for the conduct of the
operation and business of the Stations as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used. No such tangible asset
is in need of replacement.
(i) Real Property. The Seller owns no real property. Section 2(i) of the
Disclosure Schedule lists and describes briefly all real property leased or
subleased to the Seller. Section 2(i) of the Disclosure Schedule also identifies
the leased or subleased properties for which title insurance policies are to be
procured in accordance with Section 4(i) below. The Seller has delivered to the
Buyer correct and complete copies of the leases and subleases listed in of the
Disclosure Schedule (as amended to date). With respect to each lease and
sublease listed in Section 2(i) of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing will
continue to be, legal, valid, binding, enforceable, and in full force and
effect;
(ii) no party to the lease or sublease is in breach or default (or
has repudiated any provision thereof), and no event has occurred which,
with notice or lapse of time, would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above are true and
correct with respect to the underlying lease;
(v) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
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(vi) to the Seller's Knowledge, all facilities leased or subleased
thereunder have received all approvals of governmental authorities
(including licenses, permits and zoning approvals) required in connection
with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(vii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities; and
(viii) to the Seller's Knowledge, the owner of the facility leased
or subleased has good and marketable title to the parcel of real property,
free and clear of any Security Interest, easement, covenant, or other
restriction, except for recorded easements, covenants, and other
restrictions impair the current use, occupancy, or value, or the
marketability of title, of the property subject thereto.
(j) Intellectual Property. The Seller owns or has the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder will be owned or available for use by the Buyer on identical
terms and conditions immediately subsequent to the Closing hereunder. The Seller
has taken all necessary or desirable action to protect each item of Intellectual
Property that it owns or uses.
(i) The Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Seller has never received any
charge, complaint, claim, or notice alleging any such interference,
infringement, misappropriation, or violation. To the Knowledge of the
Seller, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Seller.
(ii) Section 2(j) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Seller
with respect to any of its Intellectual Property and the call letters
(current and past) of the Stations, identifies each pending patent,
trademark or copyright application for registration which the Seller has
made with respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission which the Seller has granted to
any third party with respect to any of its Intellectual Property (together
with any exceptions). The Seller has delivered to the Buyer correct and
complete copies of all such patents, trademarks or copyright
registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyer correct and complete
copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. With respect to each item
of Intellectual Property that the Seller owns:
(A) the Seller possesses all right, title, and interest in and
to the item;
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(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) the Seller has not ever agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iii) Section 2(j) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the
Seller uses pursuant to license, sublicense, agreement, or permission
including, but not limited to the call letters of the Stations. The Seller
has supplied the Buyer with correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date).
With respect to each such item of used Intellectual Property:
(A) the license, sublicense, agreement, or permission covering
the item is, and following the Closing will continue to be on
identical terms, legal, valid, binding, enforceable, and in full
force and effect;
(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated any provision
thereof), and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and
correct with respect to the underlying license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation,
injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the underlying
item of Intellectual Property; and
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(G) the Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(iv) The Seller has no Knowledge of any new products, inventions,
procedures, or methods of processing that any competitors or other third
parties have developed which reasonably could be expected to supersede or
make obsolete any product or process of any of the Seller.
(k) Contracts. Section 2(k) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time) to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other
personal property or for the furnishing or receipt of services which
either calls for performance over a period of more than one year or
involves more than the sum of $1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed
(or may create, incur, assume, or guarantee) indebtedness (including
capitalized lease obligations) involving more than $1,000 or under which
it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any written arrangement concerning confidentiality
or noncompetition;
(vi) any written arrangement with any of its employees in the nature
of a collective bargaining agreement, consulting agreement, employment
agreement, or severance agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets,
Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations;
(viii) any arrangement with any third party under which it has
created, incurred, assumed, or guaranteed an obligation to provide
advertising or air time ("Advertising Contract"); or
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(ix) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
Other than Advertising Contracts, the Seller has delivered to the Buyer a
correct and complete copy of each written arrangement listed in Section 2(k) of
the Disclosure Schedule (as amended to date). Other than Advertising Contracts,
with respect to each written arrangement so listed: (A) the written arrangement
is legal, valid, binding, enforceable, and in full force and effect; (B) the
written arrangement will continue to be legal, valid, binding, and enforceable
and in full force and effect on identical terms following the Closing; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default or permit termination,
modification, or acceleration, under the written arrangement; and (D) no party
has repudiated any provision of the written arrangement. The Seller is not a
party to any verbal contract, agreement, or other arrangement which, if reduced
to written form, would be required to be listed in Section 2(k) of the
Disclosure Schedule under the terms of this Section 2(k). No advertiser of the
Stations has indicated within the past year that it will stop, or decrease the
rate of, buying services from them.
(l) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates
of compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or useful in the operation of the
Stations as they are now being operated are (A) in full force and effect,
(B) unimpaired by any acts or omissions of the Seller or the Seller's
employees or agents, (C) free and clear of any restrictions which might
limit the full operation of the Stations, and (D) detailed in Section 2(l)
of the Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and consents
referenced in the preceding sentence, Section 2(l) of the Disclosure
Schedule also sets forth, without limitation, the date of the last
renewal, the expiration date thereof, and any conditions or contingencies
related thereto. Except as set forth in Section 2(l) of the Disclosure
Schedule, no condition exists or event has occurred that permits, or after
notice or lapse of time, or both, would permit, the revocation or
termination of any such license, permit, consent, franchise, or
authorization (other than pursuant to their express expiration date) or
the imposition of any material restriction or limitation upon the
operation of the Stations as now conducted. Except as set forth in Section
2(l) of the Disclosure Schedule, the Seller is not aware of any reason why
the FCC licenses might not be renewed in the ordinary course or revoked.
(ii) The Stations are each in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Stations' transmission facilities is restricted in
accordance with the policies of the FCC.
(iii) Except as set forth in Section 2(l) of the Disclosure
Schedule, to the best of the Seller's knowledge, the Seller is not the
subject of any FCC or other governmental investigation or any notice of
violation or order, or any material complaint, objection,
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petition to deny, or opposition issued by or filed with the FCC or any
other governmental authority in connection with the operation of or
authorization for the Stations, and there are no proceedings (other than
rulemaking proceedings of general applicability) before the FCC or any
other governmental authority that could adversely affect any of the FCC
Licenses or the authorizations listed in Section 2(l) of the Disclosure
Schedule.
(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(m) Insurance. Section 2(m) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) the policy will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms through the Closing Date.
(n) Litigation. Section 2(n) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgement,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(n) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no reason to believe that any such charge,
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complaint, action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Seller.
(o) Employees. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
the Seller. To the Knowledge of the Seller, no key employee or group of
employees has any plans to terminate employment with the Seller. The Seller is
not a party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. To the Seller's Knowledge, it has not committed
any unfair labor practice. The Seller has no Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of any of the Seller.
(p) Employee Benefits. Section 2(p) of the Disclosure Schedule lists all
Employee Benefit Plans that the Seller maintains or to which the Seller
contributes for the benefit of any current or former employee of the Seller.
Each Employee Benefit Plan (and each related trust or insurance contract)
complies in form and in operation in all respects with the applicable
requirements of ERISA and the Code.
(q) Environment, Health, and Safety.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof) concerning the environment, public
health and safety, and employee health and safety, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has been filed or commenced against any of them alleging
any failure to comply with any such law or regulation.
(ii) The Seller has no Liability (and to Seller's Knowledge there is
no Basis related to the past or present operations, and its respective
predecessors for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any Liability) under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Federal Water Pollution Control
Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of
1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899, or
the Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), or any other law (or rule or regulation thereunder) of any
federal, state, local, or foreign government (or agency thereof,
concerning release or threatened release of hazardous substances, public
health and safety, or pollution or protection of the environment, or for
damage to any site, location, or body of water (surface or subsurface) or
for illness or personal injury.
(iii) The Seller has no Liability (and to Seller's Knowledge there
is no Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim,
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or demand against the Seller giving rise to any Liability) under the
Occupational Safety and Health Act, as amended, or any other law (or rule
or regulation thereunder) of any federal, state, local, or foreign
government (or agency thereof) concerning employee health and safety, or
for any illness of or personal injury to any employee.
(iv) The Seller has obtained and has been in compliance in all
material respects with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which
are contained in, all federal, state, local, and foreign laws (including
rules, regulations, codes, plans, judgments, orders, decrees,
stipulations, injunctions, and charges thereunder) relating to public
health and safety, worker health and safety, and pollution or protection
of the environment, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
(v) All properties and equipment used in the business of the Seller
have been free of asbestos, PCB's, methylene chloride, trichloroethylene,
1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
(vi) No pollutant, contaminant, or chemical, industrial, hazardous,
or toxic material or waste ever has been buried, stored, spilled, leaked,
discharged, emitted, or released on any real property that the Seller owns
or ever has owned or that the Seller leases or ever has leased.
(r) Legal Compliance.
(i) The Seller has complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or notice has
been filed or commenced against the Seller alleging any failure to comply
with any such law or regulation, including those relating to the
employment of labor, employee civil rights, and equal employment
opportunities and relating to antitrust matters.
(ii) The Seller has filed in a timely manner all reports, documents,
and other materials it was required to file (and the information contained
therein was correct and complete in all material respects) under all
applicable laws (including rules and regulations thereunder). To the
Seller's Knowledge, it has possession of all records and documents it was
required to retain under all applicable laws (including rules and
regulations thereunder).
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(s) Advertising Agreements. Section 2(s) of the Disclosure Schedule lists
all arrangements for the sale of air time or advertising on the Stations, and
the amount to be paid to the Company therefor.
(t) Brokers' Fees. Except for fees due to The Whittle Agency, the Seller
has no Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(u) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyer. The Buyer is a limited liability company
duly organized, validly existing, and in good standing under the laws of
Wisconsin.
(b) Authorization of Transaction. The Buyer has full power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Buyer is subject or any provision of its articles of
organization or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject. Other than the Assignment
Application described in Section 4(b), the Buyer does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 1 above).
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(d) Brokers' Fees. Except for fees due to The Whittle Agency, the Buyer
has no Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement
for which the Seller could become liable or obligated.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyer shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Seller to the Buyer (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay their own attorneys' fees. The Seller and the Buyer shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use the commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyer shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have material adverse effect upon the Stations or
upon any affiliated entity. If the FCC imposes any condition on either party to
the Assignment Application, such party shall use commercially reasonable efforts
to comply with such condition, provided, that neither party shall be required
hereunder to comply with any condition that would have a material adverse effect
upon the Stations or any Affiliate. The Seller and the Buyer shall jointly
oppose any requests for reconsideration or judicial review of FCC approval of
the Assignment Application and shall jointly request from the FCC extension of
the effective period of FCC approval of the Assignment Application if the
Closing shall not have occurred prior to the expiration of the original
effective period of the FCC Consent. Nothing in this Section 4(b) shall be
construed to limit either party's right to terminate this Agreement pursuant to
Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyer to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyer may, at its option, extend offers of employment to all or any of the
Seller's employees effective on the Closing Date. From and after the execution
of this Agreement, the Seller will not take any action to preclude or discourage
any of the Seller's employees from accepting any offer of employment extended by
the Buyer.
(d) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its commercially reasonable efforts to obtain
any third party consents, that the Buyer reasonably may request in connection
with the matters pertaining to the Seller disclosed or required to be disclosed
in the Disclosure Schedule. Each of the Parties will take any additional action
that may be necessary, proper, or advisable in connection with any other notices
to, filings with, and
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authorizations, consents, and approvals of governments, governmental agencies,
and third parties that it may be required to give, make, or obtain.
(e) Operation of Business. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in Section 2(e) above.
(f) Advertising Obligations. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Stations for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time without the
Buyer's consent. On the Closing Date, the Seller shall deliver to the Buyer a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
(g) Operating Statements. The Seller shall deliver to the Buyer, for the
Buyer's informational purposes only, monthly unaudited statements of operating
revenues and operating expenses of the Stations within ten (10) days after each
such statement is prepared by or for the Seller.
(h) Contracts. The Seller will not without the prior written consent of
the Buyer amend, change, or modify any of the contracts listed on Section 2(1)
of the Disclosure Schedule in any material respect. The Seller will not without
prior written consent of the Buyer enter into any new contracts respecting the
Stations or their properties, except (i) contracts for the sale of time on the
Stations for cash, goods or services which comply with the representations and
warranties pertaining to such contracts set forth in Section 2(1) above, (ii)
contracts entered into in the Ordinary Course of Business which are cancelable
on not more than thirty-one (31) days' notice without penalty or premium, and
(iii) contracts entered into in the Ordinary Course of Business each of which
does not involve more than Five Thousand Dollars ($5,000) or all of which do not
involve more than Ten Thousand Dollars ($10,000) in the aggregate.
(i) Operation of Stations. The Seller shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations;
(j) Credit and Receivables. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Stations and with respect to collecting accounts receivable arising from
such extension of credit.
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(k) Preservation of Business. The Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensers,
advertisers, suppliers, customers, and employees, all of the confidential
information, call letters and trade secrets of the Stations, and the FCC
Licenses.
(l) Full Access and Consultation. The Seller will permit representatives
of the Buyer to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Stations, to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to the Seller. The Seller will consult with the Buyer's management
with a view to informing Buyer's management as to the operations, management and
business of the Stations.
(m) Notice of Developments. The Seller will give prompt written notice to
the Buyer of any material development affecting the assets, Liabilities,
business, financial condition, operations, results of operations, or future
prospects of the Seller. Each Party will give prompt written notice to the other
of any material development affecting the ability of the Parties to consummate
the transactions contemplated by this Agreement. No disclosure by any Party
pursuant to this Section 4(m), however, shall be deemed to amend or supplement
the Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
(n) Exclusivity. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving any of the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Seller will notify
the Buyer immediately if any person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
(o) Title Insurance, Surveys and Environmental Assessments. The Seller
will obtain with respect to each parcel of real estate that the Seller leases,
(i) a leasehold owner's policy issued by a title insurer reasonably satisfactory
to the Buyer, in an amount equal to the fair market value of such real property
(including all improvements located thereon), insuring leasehold title to such
real property in the Buyer as of the Closing subject only to the title
exceptions which do not impair the current use, occupancy or value or the
marketability of title of the property and are disclosed in Section 2(i) of the
Disclosure Schedule, together with such endorsements for zoning, contiguity,
public access and extended coverage as the Buyer reasonably requests; (ii) a
current survey of the real property certified to the Buyer, prepared by a
licensed surveyor and conforming to current ALTA Minimum Detail Requirements for
Land Title Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other matters shown
customarily on such surveys, and showing access affirmatively to public streets
and roads (the "Survey") which shall not disclose any survey defect or
encroachment from or onto the real property which has not been cured or insured
over prior to the Closing; and (iii) a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
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to the Buyer which shall not disclose or recommend any action with respect to
any condition to be remediated or investigated or any contamination on the site
assessed. The Buyer and the Seller will each pay one-half (1/2) of the costs of
these title policies, surveys and environmental assessments.
(p) Control of Stations. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Buyer and its employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
(q) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyer
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will repair or replace such Acquired Assets as soon
as possible after loss, damage or destruction thereof and shall use its best
efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Seller's notice to the Buyer, and the Buyer determines that the Seller's
failure to repair or replace, alone or in the aggregate, would have a material
adverse effect on the operation of the Stations:
(a) the Buyer may elect to terminate this Agreement; or
(b) the Buyer may postpone the Closing Date until such time as
the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyer, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's notice
to the Buyer, in which case either party may terminate this Agreement; or
(c) the Buyer may choose to accept the Acquired Asset in their
"then" condition, together with the Seller's assignment to the Buyer of all
rights under any insurance claims covering the loss, damage or destruction and
payment over to the Buyer any proceeds under any such insurance policies,
previously received by the Seller with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(m),
the parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
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(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) the Seller shall have procured all of the third party consents
specified in Section 4(c) above, including but not limited to those
relating to transmitter and studio leases, all of the title insurance
commitments (and endorsements), Surveys and environmental site assessments
described in Section 4(o) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (C) affect adversely the right of the
Buyer to own, operate, or control the Acquired Assets (and no such
judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(v) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section 5(a)(i)-(iv)
is satisfied in all respects;
(vi) each of the Assignment Applications shall have been approved by
a Final Order of the FCC and the Buyer shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Postclosing
Agreement;
(viii) the relevant parties shall have entered into the Tower Lease
Agreement;
(ix) the Buyer shall have received from counsel to the Seller an
opinion with respect to the matters set forth in Exhibit F attached
hereto, addressed to the Buyer and dated as of the Closing Date; and
(x) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other
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documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 5(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section
5(b)(i)-(iii) is satisfied in all respects;
(v) each of the Assignment Applications shall have been approved by
a Final Order of the FCC and the Buyer shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement; and
(vii) the relevant parties shall have entered into the Tower Lease
Agreement;
(viii) all actions to be taken by the Buyer in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Seller may waive any condition specified in this Section 5(b) if it executes
a writing so stating at or prior to the Closing.
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6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Seller, each of the other Parties will cooperate with the
contesting or defending Party and its counsel in the contest or defense, make
available his or its personnel, and provide such testimony and access to its
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below).
(c) Adjustments. Operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyer. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance real and personal property taxes, prepared expenses, deposits, music
license fees, and rents and payments pertaining to the leases and contracts
being assigned hereunder (inducing any contracts for the sale of time for cash,
trade or barter so assigned) shall be prorated between the Seller and the Buyer
as of the Closing Date in accordance with the foregoing principle. Contractual
arrangements that do not reflect an equal rate of compensation to the station
over the term of the Agreement shall be equitably adjusted as of the Closing
Date. The prorations and adjustments hereunder shall be made and paid insofar as
feasible on the Closing Date, with a final settlement sixty (60) days after the
Closing Date. In the event of any disputes between the Parties as to such
adjustments, the amounts not in dispute shall nonetheless be paid at such time
and such disputes shall be determined by the accounting firm and the fees and
expenses of such accounting firm shall be paid one-half (1/2) by the Seller and
one-half (1/2) by the Buyer.
(d) Collection of Accounts Receivable. At the Closing, the Seller will
turn over to the Buyer, for collection only, the accounts receivable of the
Stations owing to the Seller as of the close of business on the Closing Date. A
schedule of such accounts receivable will be delivered by the Seller to the
Buyer on the Closing Date or as soon thereafter as possible. The Buyer agrees to
use commercially reasonable efforts in the ordinary course of business (but
without responsibility to institute legal or collection proceedings) to collect
such accounts receivable during the 120-day period following the Closing Date,
and will remit all payments received on such accounts during each calendar month
during this 120-day period to the Seller within fifteen (15) business days after
the end of that calendar month. The Buyer shall provide the Seller with a
monthly accounting of all payments received on such accounts within fifteen (15)
business days after
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the end of each calendar month during the 120-day collection period. In the
event the Buyer receives monies during the 120-day period following the Closing
Date from an advertiser who, after the Closing Date, is advertising over any of
the Stations, and that advertiser was included among the accounts receivable as
of the Closing Date, the Buyer shall apply said monies to the oldest outstanding
balance due on the particular account, except in the case of a "disputed"
account receivable. For purposes of this Section 6(d), a "disputed" account
receivable means one which the account debtor refuses to pay because he asserts
that the money is not owed or the amount is incorrect. In the case of such a
disputed account, the Buyer shall immediately return the account to the Seller
prior to expiration of the 120-day period following the Closing Date. If the
Buyer returns a disputed account to the Seller, the Buyer shall have no further
responsibility for its collection and may accept payment from the account debtor
for advertising carried on any of the Stations after the Closing Date. At the
end of the 120-day period following the Closing Date, the Buyer will turn back
to the Seller all of the accounts receivable of the Stations as of the Closing
Date owing to the Seller which have not yet been collected, and the Buyer will
thereafter have no further responsibility with respect to the collection of such
receivables. During the 120-day period following the Closing Date, the Buyer
shall afford the Seller reasonable access to the accounts receivable "aging
list."
(e) Severance Obligations. In the event an offer of employment is extended
by the Buyer to and accepted by an employee of the Seller pursuant to Section
4(c) and such subsequent employment by the Buyer is terminated within sixty (60)
days from the Closing Date, the Seller shall be responsible for, and shall pay
to such accepting employee, all severance benefits, if any, pursuant to the
Seller's practices as in effect on the Closing Date) that may be due and owing
such employee by reason of his or her employment with either the Seller or the
Buyer.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in Sections 2(a), 2(b), 2(c), 2(g), 2(r) and
2(t) hereof or relating to the Seller's title to the Acquired Assets) shall
survive the Closing (even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of three (3) years thereafter. All of the
other representations, warranties, and covenants of the Buyer and the Seller
contained in this Agreement (including the representations and warranties of the
Seller contained in Sections 2(a), 2(b), 2(c), 2(g), 2(r) and 2(t) hereof or
relating to the Seller's title to the Acquired Assets) and in this Agreement
shall survive the Closing (even if the damaged Party knew or had reason to know
of any misrepresentation or breach of warranty or covenant at the time of
Closing) and continue in full force and effect forever thereafter.
(b) Indemnification Provisions for the Benefit of the Buyer.
Except as described below in Section 7(e) with respect to a breach
of a covenant prior to the Closing Date, the Seller agrees to indemnify the
Buyer from and against the entirety of any
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Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by:
(i) any breach of any of the Seller's representations, warranties,
and covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the Buyer
makes a written claim for indemnification within the applicable survival
period);
(ii) any Liability of the Seller which is not an Assumed Liability;
or
(iii) any Liability of the Buyer arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Seller. Except as
described below in Section 7(e) with respect to a breach of a covenant prior to
the Closing Date, the Buyer agrees to indemnify the Seller from and against the
entirety of any Adverse Consequences the Seller may suffer resulting from,
arising out of, relating to, in the nature of, or caused by (i) the breach of
any of the Buyer's representations, warranties, and covenants contained in this
Agreement (so long as the particular representation, warranty, or covenant
survives the Closing and the Seller makes a written claim for indemnification
within the applicable survival period) or (ii) any Assumed Liability.
(d) Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(p) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that not withstanding the provision in
Section 7(e) with respect to the remedy of liquidated damages upon a breach of a
covenant of this Agreement prior to the Closing, money damages would not be an
adequate remedy for a breach of any provision of this Agreement.
(e) Liquidated Damages. The Buyer and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
lieu of indemnification pursuant to Section 5(b) or 7(c), the non-defaulting
Party shall be entitled to receive from the defaulting Party for such default
the sum of Six Hundred Thousand Dollars ($600,000) as liquidated damages without
the need for proof of damages, subject only to successfully proving in a court
of competent jurisdiction that the other Party has materially breached this
Agreement and that the transactions contemplated thereby have not occurred;
provided
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however, that the Buyer shall retain the option to receive, pursuant to Section
7(d), and in lieu of receiving the liquidated damages provided in this Section
7(e), the remedy of specific performance with respect to a breach of this
Agreement prior to the Closing. The Buyer and the Seller agree to pay said sum
of liquidated damages within ten (10) days of the date that the non-defaulting
party obtains such a judgment.
(f) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within 15 days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
is assuming the defense thereof, (i) the Indemnifying Party will defend the
Indemnified Party against the matter with counsel of its choice reasonably
satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
to the extent the Indemnified Party concludes reasonably that the counsel the
Indemnifying Party has selected has a conflict of interest), (iii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iv) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
Liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event the Indemnifying Party
does not notify the Indemnified Party within 15 days after the Indemnified Party
has given notice of the matter that the Indemnifying Party is assuming the
defense thereof, however, the Indemnified Party may defend against, or enter
into any settlement with respect to, the matter in any manner it reasonably may
deem appropriate.
(g) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory or common
law remedy any Party may have for breach of representation, warranty, or
covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, other than Retained Assets that are used or useful in
the operation of the Stations, including but not limited to all of its (a) real
property, leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenants thereto); (b) tangible personal property
(such as computers, electrical devices, monitoring equipment, test equipment,
switching, terminal and studio equipment, transmitters, transformers, receivers,
broadcast facilities, inventories of compact disks, records, tapes
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<PAGE>
and other supplies, vehicles, and all assignable warranties with respect
thereto; (c) Intellectual Property, goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions; (d) rights under orders and
agreements (including those barter agreements identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Stations; (e) contracts, indentures,
Security Interests, guaranties, other similar arrangements, and rights
thereunder; (f) call letters of the Stations, jingles, logos, slogans, and
business goodwill of the Stations; (g) claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery (including rights under
policies of insurance), rights of set off, and rights of recoupment (including
any such item relating to the payment of Taxes); (h) Licenses and similar rights
obtained from governments and governmental agencies; and (i) FCC logs and
records and all other books, records, ledgers, logs, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means (a) obligations of the Seller under the
licenses, sublicenses, leases, subleases, contracts, and other arrangements
referred to in the definition of Acquired Assets either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Seller.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement as amended.
"Escrow Agent" means The Whittle Agency.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communication Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
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"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (b) copies and tangible embodiments thereof (in whatever
form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post-Closing Agreement" means the Post-Closing Agreement with Seller
Stockholders entered into concurrently herewith and attached hereto as Exhibit
D.
"Post-Closing Escrow" has the meaning set forth in Section 1(c) above.
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"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Purchase Price" has the meaning set forth in Section 1(c) above.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Retained Assets" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyer on the
other hand entered into on or after the date of this Agreement); (iii) accounts,
notes and other receivables; (iv) the real property located at Topsail, North
Carolina including any transmission tower located thereon or improvement
thereto; and (v) Cash.
"Retained Liabilities" means any other obligations or liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyer on the other hand entered into
on or after the date of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WWQQ-FM, licensed by the FCC to operate in Wilmington, North Carolina; and
WQSL-FM and WXQR-FM, each licensed by the FCC to operate in Jacksonville, North
Carolina.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
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"Survey" has the meaning set forth in Section 4(j) above.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tower Lease Agreement" means that Tower Lease pertaining to the Topsail,
North Carolina broadcast tower and real estate the form of which is attached
hereto at Exhibit G.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to the Seller at any time prior to the Closing in the event the Seller is
in breach of any material representation, warranty, or covenant contained
in this Agreement in any material respect if such breach remains uncured
for twenty (20) days after notice of breach is received from the Buyer;
(iii) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing in the event the
Buyer is in breach of any material representation, warranty, or covenant
contained in this Agreement in any material respect if such breach remains
uncured for twenty (20) days after notice of breach is received from the
Seller;
(iv) the Buyer may terminate this Agreement by giving written notice
to the Seller at any time prior to the Closing if the Closing shall not
have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyer
itself breaching any representation, warranty, or covenant contained in
this Agreement);
(v) the Seller may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing if the Closing shall not
have occurred on or before the 270th
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<PAGE>
day following the date of this Agreement by reason of the failure of any
condition precedent under Section 5(b) hereof (unless the failure results
primarily from the Seller itself breaching any representation, warranty,
or covenant contained in this Agreement);or
(vi) the Buyer or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in the Post-Closing Agreement with Seller Stockholders.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that the Buyer may assign all of its right, title
and interest in, to and under this Agreement to one or more affiliated entities,
who shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Seller the Purchase Price therefor.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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<PAGE>
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: HVS Partners
3113 Clint Moore Road
Apt. 206
Boca Raton, Florida 33496
Attn: Gisela Huberman
Copy to:
If to the Buyer: Cumulus Media, LLC
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrance J. Leahy
Copy to: Cumulus Media, LLC
c/o Century Broadcasting
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
(Neither of which copies shall constitute notice to Buyer)
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
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<PAGE>
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
North Carolina.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyer and the Seller, will each bear own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, other than as set forth in
Section 4(b) with regard to the Assignment Applications. The Seller will pay all
income taxes. The Seller and the Buyer will each pay one-half (1/2) of any
transfer or sales taxes and other recording or similar fees necessary to vest
title to each of the Acquired Assets in the Buyer.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
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(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Wilmington, North
Carolina, in any action or proceeding arising out of or relating to this
Agreement, agrees that all claims in respect of the action or proceeding may be
heard and determined in any such court, and agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Any
Party may make service on the other Party by sending or delivering a copy of the
process to the Party to be served at the address and in the manner provided for
the giving of notices in Section 10(h) above. Nothing in this Section 10(p),
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law. Each Party agrees that a final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law.
(p) Bulk Transfer Laws. The Seller has, or will as of the Closing Date,
comply with the provisions of any bulk transfer laws of North Carolina or any
other jurisdiction applicable to the transactions contemplated by this
Agreement.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS MEDIA, LLC
By:
-----------------------------------
(printed)
-----------------------------------
Title:
-----------------------------------
HVS PARTNERS
By: GBH Radio, Inc., General Partner
By:
-----------------------------------
Gisela Huberman, President
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ASSET PURCHASE AGREEMENT
BY AND AMONG
HARA BROADCASTING, INC.
AND
DLM COMMUNICATIONS, INC.
AND
CUMULUS MEDIA, LLC
April 30, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Basic Transaction...................................................1
(a) Purchase and Sale of Assets..................................1
(b) Assumption of Liabilities....................................1
(c) Purchase Price...............................................1
(d) The Closing..................................................2
(e) Deliveries at the Closing....................................2
(f) Post Closing Agreement.......................................2
(g) Allocation...................................................3
2. Representations and Warranties of the Sellers.......................3
(a) Organization of the Sellers..................................3
(b) Authorization of Transaction.................................3
(c) Noncontravention.............................................3
(d) Title to Acquired Assets.....................................4
(e) Financial Statements.........................................4
(f) Events Subsequent to ........................................4
(g) Tax Matters..................................................5
(h) Tangible Assets..............................................6
(i) Owned Real Property..........................................6
(j) Real Property Leases.........................................7
(k) Intellectual Property........................................8
(l) Contracts...................................................10
(m) Commission Licenses and Compliance with Commission
Requirements...............................................10
(n) Insurance...................................................11
(o) Litigation..................................................12
(p) Employees...................................................12
(q) Employee Benefits...........................................12
(r) Environment, Health, and Safety.............................13
(s) Legal Compliance............................................14
(t) Brokers' Fees...............................................14
(u) Disclosure..................................................14
3. Representations and Warranties of the Buyer........................14
(a) Organization of the Buyer...................................14
(b) Authorization of Transaction................................15
(c) Noncontravention............................................15
(d) Brokers' Fees...............................................15
(f) Ability to Perform..........................................15
4. Pre-Closing Covenants..............................................15
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(a) General.....................................................15
(b) Assignment Applications.....................................15
(c) Employment Offers...........................................16
(d) Notices and Consents........................................16
(e) Operation of Business.......................................16
(f) Advertising Obligations.....................................16
(g) Operating Statements........................................17
(h) Contracts...................................................17
(i) Operation of Stations.......................................17
(j) Credit and Receivables......................................17
(k) Preservation of Business....................................17
(l) Full Access.................................................17
(n) Notice of Developments......................................18
(o) Exclusivity.................................................18
(p) Title Insurance.............................................18
(q) Surveys.....................................................18
(r) Environmental Assessments...................................19
(s) Control of Stations.........................................19
(t) Risk of Loss................................................19
5. Conditions to Obligation to Close..................................20
(a) Conditions to Obligation of the Buyer.......................20
(b) Conditions to Obligation of the Sellers.....................21
6. Post Closing Covenants.............................................22
(a) General.....................................................22
(b) Litigation Support..........................................22
(c) Adjustments.................................................22
(d) Collection of Accounts Receivable...........................23
7. Remedies for Breaches of this Agreement............................23
(a) Survival....................................................23
(b) Indemnification Provisions for the Benefit of the Buyer.....24
(c) Indemnification Provisions for the Benefit of the Seller....24
(d) Minimum Liability...........................................24
(e) Specific Performance........................................24
(f) Liquidated Damages..........................................25
(g) Matters Involving Third Parties.............................25
(h) Other Indemnification Provisions............................26
8. Definitions........................................................26
9. Termination........................................................30
(a) Termination of Agreement....................................30
-ii-
<PAGE>
(b) Effect of Termination.......................................31
10. Miscellaneous.....................................................31
(a) Survival....................................................31
(b) Press Releases and Announcements............................31
(c) No Third Party Beneficiaries................................31
(d) Entire Agreement............................................31
(e) Succession and Assignment...................................31
(f) Counterparts................................................32
(g) Headings....................................................32
(h) Notices.....................................................32
(i) Governing Law...............................................33
(j) Amendments and Waivers......................................33
(k) Severability................................................33
(l) Expenses....................................................33
(m) Construction................................................33
(n) Incorporation of Exhibits and Schedules.....................34
(o) Service of Process..........................................34
(p) Bulk Transfer Laws..........................................34
-iii-
<PAGE>
EXHIBITS
Exhibit A--Form of Promissory Note
Exhibit B--Form of Earnest Money Escrow Agreement
Exhibit C--Forms of Assignments
Exhibit D--Form of Assumption
Exhibit E--Form of Post Closing Agreement
Exhibit F--Allocation Schedule
Exhibit G--Form of Opinion of Counsel to the Sellers
Exhibit H--Form of Opinion of Counsel to the Buyer
SCHEDULES
Description Section Reference
- ----------- -----------------
Financial Statements 2(e)
Subsequent Events 2(f)
Tax Matters 2(g)
Tangible Personal Property 2(h)
Owned Real Property 2(i)
Real Property Leases 2(j)
Intellectual Property 2(k)
Contracts 2(l)
FCC Licenses 2(m)
Insurance 2(n)
Litigation 2(o)
Employees 2(p)
Employee Benefit Plans 2(q)
Legal Compliance 2(s)
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of April 30, 1997, by and
between CUMULUS MEDIA, LLC, a Wisconsin limited liability company (the "Buyer"),
and HARA BROADCASTING, INC. a North Carolina Corporation, and DLM
COMMUNICATIONS, INC., a North Carolina corporation, (individually referred to
herein as a "Seller," and collectively referred to herein as the "Sellers"). The
Buyer and the Sellers are collectively referred to herein as the "Parties."
Capitalized terms used in this Agreement are defined in Section 8 hereof.
This Agreement contemplates a transaction in which the Buyer will purchase
substantially all of the assets (and assume certain of the liabilities) of the
Sellers that are used or useful in the operation of radio stations WAAV-AM and
WAAV-FM, each licensed to operate in Leland, North Carolina (collectively, the
"Stations") in return for the Purchase Price.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Sellers, and
the Sellers agree to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 1.
(b) Assumption of Liabilities. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Sellers not included within the definition of Assumed Liabilities.
(c) Purchase Price. The Buyer agrees to pay to the Sellers at the Closing
One Million Six Hundred Thousand Dollars ($1,600,000) (the "Purchase Price")
payable as follows:
(i) on the date of this Agreement, the Buyer will deposit with the
Escrow Agent the amount of Eighty Thousand Dollars ($80,000) (the "Earnest
Money Deposit") by delivery of cash payable by wire transfer or delivery
of other immediately available funds; and
(ii) on the Closing Date, the Buyer shall pay to the Sellers the
amount of One Million One Hundred Fifty Thousand Dollars ($1,150,000); and
(iii) on the Closing Date the Buyer shall deliver to the Sellers a
promissory note in a form attached hereto as Exhibit A in the aggregate
principal amount of Two Hundred Seventy Thousand Dollars ($270,000); and
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(iv) on the Closing Date, the Buyer shall pay to the Sellers, on
behalf of all parties to the Post Closing Agreement, the amount of One
Hundred Thousand Dollars ($100,000).
The Earnest Money Deposit referenced in this Section 1(c) shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as Exhibit B (the "Earnest Money Escrow Agreement"), which
requires that such Earnest Money Deposit shall be deposited by the Escrow Agent
with a federally insured financial institution in an interest bearing account.
Interest earned on the Earnest Money Deposit shall accrue to the benefit of the
Buyer, and, together with the principal amount of the Earnest Money Deposit,
shall be payable to the Sellers and credited against the Purchase Price on the
Closing Date. If this Agreement is terminated without Closing of the transaction
contemplated herein, the Earnest Money and all accrued interest shall be paid to
the Buyer or the Sellers as provided in Section 7(f) and Section 9 hereof.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Stations in
Leland, North Carolina, commencing at 9:00 a.m. local time on the date set by
the Buyer not earlier than the fifth business day or later than the tenth
business day after the FCC approval of the Assignment Application becomes a
Final Order, by which date all other conditions to the obligations of the
Parties to consummate the transactions contemplated hereby will have been
satisfied or waived or such other date as the Parties may mutually determine
(the "Closing Date"); provided, however, that the Closing Date shall be no later
than 270 days following the date of this Agreement.
(e) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyer will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Sellers will execute, acknowledge (if appropriate), and deliver
to the Buyer (A) assignments (including real property and Intellectual Property
transfer documents) in the forms attached hereto as Exhibit C and (B) such other
instruments of sale, transfer, conveyance, and assignment as the Buyer and their
counsel reasonably may request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Sellers (A) an assumption in the form attached
hereto as Exhibit D and (B) such other instruments of assumption as the Sellers
and their counsel reasonably may request; and (v) the Buyer will deliver to the
Sellers the Purchase Price.
(f) Post Closing Agreement. On the Closing Date, the Sellers shall cause
Donald Ansell to execute a Post Closing Agreement containing a covenant not to
compete and a personal guarantee of the Sellers' indemnity obligations
hereunder, in form, attached hereto as Exhibit E.
(g) Allocation. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Exhibit F.
2. Representations and Warranties of the Sellers. Each of the Sellers
jointly and severally represent and warrant to the Buyer that the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date
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(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 2), except as set forth in the
lettered and numbered paragraphs contained in the disclosure schedule
accompanying this Agreement and initialed by the Parties at Closing (the
"Disclosure Schedule") corresponding to the lettered and numbered sections of
this Section 2.
(a) Organization of the Sellers. Each Sellers is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Neither Seller has any Subsidiaries.
(b) Authorization of Transaction. Each Seller has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors and stockholders of each
Seller have duly authorized the execution, delivery, and performance of this
Agreement by each Seller. This Agreement constitutes the valid and legally
binding obligation of each Seller, enforceable in accordance with its terms and
conditions and subject only to principles affecting creditor rights generally or
other general equitable principles.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which any Seller is subject or any provision of the articles of
incorporation or bylaws of any Seller; or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which any Seller is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets),
provided that certain assets of each Seller are subject to Security Interests
which will be discharged prior to or at Closing. Other than with respect to the
assignment of the FCC Licenses, the Sellers do not need to give any notice to,
make any filing with, or obtain any Licenses, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments and
assumptions referred to in Section 1 above).
(d) Title to Acquired Assets. Sellers have good and marketable title to
all of the Acquired Assets, free and clear of any Security Interest or
restriction on transfer, provided that certain assets of Sellers are subject to
Security Interests which will be discharged prior to or at Closing.
(e) Financial Statements. Included in Section 2(e) of the Disclosure
Schedules are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1994, December 31, 1995 and December 31, 1996, for the Sellers; and
(ii) unaudited statements of income, as of and for each month during 1995 and
1996 and the months ended January 31 and February 28, 1997 for the Sellers. The
Financial Statements have been
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prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, are correct and complete, and are consistent with the
books and records of the Sellers (which books and records are correct and
complete). Without limiting the generality of the foregoing, all material
revenues and expenses of the Sellers and the Stations (i) are properly reflected
in the Financial Statements, (ii) have arisen in the Ordinary Course of
Business, (iii) are valid and to the Knowledge of the Sellers subject to no
material counterclaims, and (iv) will be or have been collected or paid at their
recorded amounts subject only to the reserve for bad debts set forth on the face
of the most recent Financial Statements.
(f) Events Subsequent to January 1, 1997. Between January 1, 1997 and the
date of this Agreement, except as set forth in Section 2(f) of the Disclosure
Schedule, there has not been any material adverse change in the assets,
Liabilities, business, financial condition, operations or results of operations
of the Sellers with respect to the operation of the Stations. Without limiting
the generality of the foregoing and with respect to the operation of the
Stations since that date, except as set forth in Section 2(f) of the Disclosure
Schedule:
(i) the Sellers have not sold, leased, transferred, or assigned any
of their material assets, tangible or intangible, other than in the
Ordinary Course of Business;
(ii) the Sellers have not entered into any contract, lease,
sublease, license, or sublicense (or series of related contracts, leases,
subleases, licenses, and sublicenses) outside the Ordinary Course of
Business;
(iii) the Sellers have not made any capital expenditure (or series
of related capital expenditures) outside the Ordinary Course of Business;
(iv) the Sellers have not made any capital investment in, any loan
to, or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions) outside
the Ordinary Course of Business;
(v) the Sellers have not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations) outside the
Ordinary Course of Business;
(vi) to the Sellers' Knowledge, the Sellers have not granted any
license or sublicense of any rights under or with respect to any
Intellectual Property owned or used by the Sellers;
(vii) the Sellers have not experienced any damage, destruction, or
loss (whether or not covered by insurance) to their property or any action
adversely affecting the FCC Licenses of the Stations in any material
respect;
(viii) the Sellers have not made any loan to, or entered into any
other transaction with, any of their directors, officers, and employees
outside the Ordinary Course of Business;
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(ix) the Sellers have not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(x) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving any of the Sellers that would adversely affect in any
material manner, (A) the Sellers' ability to consummate the transactions
contemplated by this Agreement, or (B) the Buyer's opportunity to enjoy
the full use of the Acquired Assets after the Closing;
(xi) the Sellers have not materially altered their credit and
collection policies or their accounting policies;
(xii) the Sellers have not materially altered the programming,
format or call letters of the Stations, or their promotional and marketing
activities;
(xiii) the Sellers have not applied to the FCC for any modification
of the FCC Licenses or failed to take any action necessary to preserve the
FCC Licenses and has operated the Stations in material compliance
therewith and with all FCC rules and regulations; and
(xiv) the Sellers have not committed to any of the foregoing.
(g) Tax Matters. The Sellers have filed and will file all Tax Returns that
they were required to file or may be required to file. To the Sellers' Knowledge
all such Tax Returns were correct and complete in all material respects except
as set forth in Section 2(g) of the Disclosure Schedule. To the Sellers'
Knowledge all Taxes owed by the Sellers (whether or not shown on any Tax Return)
have been paid except as set forth in Section 2(g) of the Disclosure Schedule,
which shall be paid at Closing. To the Sellers' Knowledge the Sellers have
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party except as disclosed in Section 2(g) of the
Disclosure Schedule. No claim has ever been made by an authority in a
jurisdiction where the Sellers do not file Tax Returns that they are or may be
subject to taxation by that jurisdiction. There are no Security Interests on any
of the assets of the Sellers that arose in connection with any failure (or
alleged failure) to pay any Tax. Notwithstanding anything in this Section 2(g)
to the contrary, the Sellers shall indemnify the Buyers from and against any and
all Liability for Taxes arising from Sellers' ownership of the Acquired Assets
or operation of the Stations prior to Closing. Notwithstanding anything in this
Agreement to the contrary, the foregoing indemnification obligation of the
Sellers shall forever continue in full force and effect.
(h) Tangible Assets. Section 2(h) of the Disclosure Schedule sets forth a
listing of all material tower, transmitter and station equipment including, but
not limited to, (i) the primary and backup transmitter that is used in the
operation of Station WAAV-AM; (ii) the primary transmitter that is used in the
operation of Station WAAV-FM that is approximately two (2) years old; and (iii)
vehicles and other tangible personal property used in conducting the operation
and business of the
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Stations. The Sellers own or lease all tangible assets necessary for the conduct
of the operation and business of the Stations as presently conducted and as
presently proposed to be conducted. Each such tangible asset is free from
material defects, has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used.
(i) Owned Real Property. Section 2(i) of the Disclosure Schedule lists and
describes briefly all real property that the Sellers own. With respect to each
such parcel of owned real property:
(i) Except as disclosed in Schedule 2(i), Sellers have good and
marketable title to the parcel of real property, free and clear of any
Security Interest, easement, covenant, or other restriction, (including
but not limited to leases or other agreements granting to any party the
right of use or occupancy of and options or rights of first refusal to
purchase) except for recorded easements, covenants, and other restrictions
which do not impair the current use, occupancy, or value, or the
marketability of title, of the property subject thereto;
(ii) there are no (A) pending or, to the Knowledge of the Sellers,
threatened condemnation proceedings relating to the property; or (B)
pending or, to the Knowledge of the Sellers, threatened litigation or
administrative actions relating to the property;
(iii) (A) the legal description for the parcel contained in the deed
thereof describes such parcel fully and adequately; (B) the buildings,
towers, antennae and improvements are located within the boundary lines of
the described parcels of land, are not in material violation of applicable
setback requirements, zoning laws, and ordinances (and none of the
properties or buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure"
classifications), and do not encroach on any easement which may burden the
land; (C) the land does not serve any adjoining property for any purpose
inconsistent with the use of the land; (D) the property is not located
within any flood plain or subject to any similar type restriction for
which any permit or license necessary to the use thereof has not been
obtained; and (E) access to the property is provided by paved public
right-of-way;
(iv) all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with
the ownership or operation thereof and have been operated and maintained
in material accordance with applicable laws, rules, and regulations;
(v) there are no parties (other than the Sellers) in possession of
the parcel of real property, other than tenants under any leases disclosed
in Section 2(j) of the Disclosure Schedule who are in possession of space
to which they are entitled;
(vi) all facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation of
such facilities, including gas, electricity, water,
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telephone and storm sewer, all of which services are adequate and in
material accordance with all applicable laws, ordinances, rules and
regulations; and
(vii) each parcel of real property abuts on and has direct vehicular
access to a public road or access to a public road via a permanent,
irrevocable, appurtenant easement benefitting the parcel of real property.
(j) Real Property Leases. Section 2(j) of the Disclosure Schedule lists
and describes briefly all real property leased or subleased to the Sellers.
Section 2(j) of the Disclosure Schedule also identifies the leased or subleased
properties for which title insurance policies are to be procured in accordance
with Section 4(i) below. The Sellers have delivered to the Buyer correct and
complete copies of the leases and subleases listed in Section 2(j) of the
Disclosure Schedule (as amended to date). With respect to each lease and
sublease listed in Section 2(j) of the Disclosure Schedule:
(i) the lease or sublease is and, following the Closing will
continue to be, legal, valid, binding, enforceable, and in full force and
effect;
(ii) to the Sellers' Knowledge, no party to the lease or sublease is
in breach or default (or has repudiated any provision thereof), 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;
(iii) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(iv) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (iii) above are true and
correct with respect to the underlying lease;
(v) the Sellers have not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vi) all facilities leased or subleased thereunder have received all
approvals of governmental authorities (including licenses, permits and
zoning approvals) required in connection with the operation thereof and
have been operated and maintained in accordance with applicable laws,
rules, and regulations;
(vii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities; and
(viii) the owner of the facility leased or subleased has good and
marketable title to the parcel of real property, free and clear of any
easement, covenant, or other restriction, except for recorded easements,
covenants, and other restrictions that do not impair the current use,
occupancy, or value, or the marketability of title, of the property
subject thereto.
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(k) Intellectual Property. The Sellers own or have the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Sellers as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Sellers immediately prior to the
Closing hereunder will be owned or available for use by the Buyer on identical
terms and conditions immediately subsequent to the Closing hereunder. The
Sellers have taken all necessary or desirable action to protect each item of
Intellectual Property that it owns or uses.
(i) The Sellers have not interfered with, infringed upon,
misappropriated, or otherwise come into material conflict with any
Intellectual Property rights of third parties, and the Sellers has never
received any charge, complaint, claim, or notice alleging any such
interference, infringement, misappropriation, or violation. To the
Knowledge of the Sellers, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Sellers.
(ii) Section 2(k) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which has been issued to the Sellers
with respect to any of their Intellectual Property, identifies each
pending patent, trademark or copyright application for registration which
the Sellers have made with respect to any of their Intellectual Property,
and identifies each license, agreement, or other permission which the
Sellers have granted to any third party with respect to any of their
Intellectual Property (together with any exceptions). The Sellers have
delivered to the Buyer correct and complete copies of all such patents,
trademarks or copyright registrations, applications, licenses, agreements,
and permissions (as amended to date) and have made available to the Buyer
correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. With respect
to each item of Intellectual Property that the Sellers own:
(A) the Sellers possess all right, title, and interest in
and to the item;
(B) the item is not subject to any outstanding judgment,
order, decree, stipulation, injunction, or charge;
(C) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending or, to the
Knowledge of the Sellers, is threatened which challenges
the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Sellers have not ever agreed to indemnify any person
or entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the
item.
(iii) Section 2(k) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the
Sellers use pursuant to license, sublicense,
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agreement, or permission including, but not limited to the call letters of
the Stations. The Sellers have supplied the Buyer with correct and
complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each such item of used
Intellectual Property:
(A) the license, sublicense, agreement, or permission
covering the item is, and following the Closing will
continue to be on identical terms, legal, valid,
binding, enforceable, and in full force and effect;
(B) to Sellers' Knowledge, no party to the license,
sublicense, agreement, or permission is in breach or
default (or has repudiated any provision thereof), 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) with respect to each sublicense, to the Sellers'
Knowledge, the representations and warranties set forth
in subsections (A) and (B) above are true and correct
with respect to the underlying license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree,
stipulation, injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
claim, or demand is pending, or, to the Knowledge of the
Sellers, is threatened which challenges the legality,
validity, or enforceability of the underlying material
item of Intellectual Property;
(F) the Sellers have not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the
underlying item of Intellectual Property; and
(G) the Sellers have not granted any sublicense or similar
right with respect to the license, sublicense,
agreement, or permission.
(l) Contracts. Other than any arrangement with any third party under which
the Sellers have created, incurred, assumed, or guaranteed an obligation to
provide advertising or air time ("Advertising Contract"), Section 2(l) of the
Disclosure Schedule lists the contracts, agreements, and other written
arrangements to which the Sellers are a party and either involving payment in
excess of $5,000 per year or not entered into in the Ordinary Course of
Business. The Sellers have delivered to the Buyer a correct and complete copy of
each written arrangement listed in Section 2(l) of the Disclosure Schedule (as
amended to date) and will provide to Buyer access to all
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documentation with respect to Advertising Contracts. With respect to each
written arrangement listed on Section 2(1) of the Disclosure Schedule:
(i) the written arrangement is legal, valid, binding, enforceable,
and in full force and effect;
(ii) the written arrangement will continue to be legal, valid,
binding, and enforceable and in full force and effect on identical terms
following the Closing;
(iii) to the Sellers' Knowledge, no party is in material breach or
default, and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination, modification,
or acceleration, under the written arrangement; and
(iv) to Sellers' Knowledge, no party has repudiated any provision of
the written arrangement. The Sellers are not a party to any oral agreement
or other arrangement which, if reduced to written form, would be required
to be listed in Section 2(l) of the Disclosure Schedule under the terms of
this Section 2(l). Each written arrangement listed in Section 2(1) of the
Disclosure Schedule that is designated by an asterisk is necessary for the
conduct of the operation of and business of the Stations as presently
conducted and presently proposed to be conducted and is included within
the definition of Acquired Assets.
(m) Commission Licenses and Compliance with Commission Requirements.
(i) All licenses, permits, authorizations, franchises, certificates
of compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or useful in the operation of the
Stations as they are now being operated (A) are in full force and effect,
(B) are unimpaired by any acts or omissions of the Sellers or the Sellers'
employees or agents, (C) except for conditions stated on the FCC Licenses
or in the applicable laws and governmental rules and policies, are free
and clear of any restrictions which might limit the operation of the
Stations, and (D) are included in Section 2(m) of the Disclosure
Schedules. With respect to the licenses, permits, authorizations,
franchises, certificates of compliance and consents referenced in the
preceding sentence, Section 2(m) of the Disclosure Schedules also sets
forth, without limitation, the date of the last renewal, the expiration
date thereof, and any conditions or contingencies related thereto. Except
as set forth in Section 2(m) of the Disclosure Schedules, no condition
exists or event has occurred that permits, or after notice or lapse of
time, or both, would permit, the revocation or termination of any such
license, permit, consent, franchise, or authorization (other than pursuant
to their express expiration date) or the imposition of any material
restriction or limitation upon the operation of the Stations as now
conducted. Except as set forth in Section 2(m) of the Disclosure
Schedules, the Sellers are not aware of any reason why the FCC Licenses
might not be renewed in the ordinary course or revoked or subject to any
adverse modification.
(ii) The Stations are each in material compliance with the FCC's
policy on exposure to radio frequency radiation. No renewal of any FCC
License would constitute a major
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environmental action under the FCC's rules or policies. Access to the
Station's transmission facilities is restricted in accordance with the
policies of the FCC.
(iii) Except as set forth in Section 2(m) of the Disclosure
Schedules, to the best of the Sellers' Knowledge, the Sellers are not the
subject of any FCC or other governmental investigation or any notice of
violation or order, or any material complaint, objection, petition to
deny, or opposition issued by or filed with the FCC or any other
governmental authority in connection with the operation of or
authorization for the Stations, and there are no proceedings (other than
rulemaking proceedings of general applicability) before the FCC or any
other governmental authority that could adversely affect any of the FCC
Licenses or the authorizations listed in Section 2(m) of the Disclosures
Schedules.
(iv) The Sellers have filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(n) Insurance. Section 2(n) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Sellers are a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, and enforceable and in full force and effect; (B) neither the Sellers
nor any other party to the policy is in material breach or default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default or permit termination, modification, or acceleration, under
the policy; and (C) no party to the policy has repudiated any provision thereof.
The Sellers have been covered during the past two (2) years and are presently
covered by insurance in scope and amount customary and reasonable for the
businesses in which the Sellers have been during such two (2) year period and
presently are engaged.
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Section 2(n) of the Disclosure Schedule describes any self-insurance
arrangements affecting the Sellers and their Subsidiaries.
(o) Litigation. Section 2(o) of the Disclosure Schedule sets forth each
instance in which the Sellers: (i) are subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) are a party or, to
the Knowledge of the Sellers, are threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(o) of the Disclosure Schedule could result in any material adverse change in
the assets, Liabilities, business, financial condition or operations of the
Sellers or the Stations taken as a whole. To the Sellers' Knowledge, no such
charge, complaint, action, suit, proceeding, hearing, or investigation has been
brought or threatened in writing against the Sellers.
(p) Employees. Section 2(p) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
the Sellers. Except as previously disclosed by the Sellers to the Buyer, to the
Knowledge of the Sellers, no key employee has advised either Seller that he or
she plans to terminate employment with the Sellers. The Sellers are not a party
to or bound by any collective bargaining agreement, nor have they experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Sellers have not committed any unfair labor practice.
The Sellers have no Knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees of
the Sellers.
(q) Employee Benefits Section 2(q) of the Disclosure Schedule lists all
Employee Benefit Plans that the Sellers maintain or to which the Sellers
contribute for the benefit of any current or former employee of the Sellers.
Each Employee Benefit Plan (and each related trust or insurance contract)
complies in form and in operation in all respects with the applicable
requirements of ERISA and the Code.
(r) Environment, Health, and Safety.
(i) To the Knowledge of the Sellers, the Sellers have complied in
all material respects with all laws (including rules and regulations
thereunder) of federal, state, and local governments (and all agencies
thereof) concerning the environment, public health and safety, and
employee health and safety, and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has been
filed or commenced against any of them alleging any material failure to
comply with any such law or regulation.
(ii) The Sellers have no material Liability (and to the Sellers'
Knowledge there is no Basis related to the past or present operations, and
their respective predecessors for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against
the Sellers giving rise to any Liability) under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource
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Conservation and Recovery Act of 1976, the Federal Water Pollution Control
Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of
1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899, or
the Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), or any other law (or rule or regulation thereunder) of any
federal, state, local, or foreign government (or agency thereof,
concerning release or threatened release of hazardous substances, public
health and safety, or pollution or protection of the environment, or for
damage to any site, location, or body of water (surface or subsurface) or
for illness or personal injury.
(iii) The Sellers have no material Liability (and to the Sellers'
Knowledge there is no Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against
the Sellers giving rise to any Liability) under the Occupational Safety
and Health Act, as amended, or any other law (or rule or regulation
thereunder) of any federal, state, local, or foreign government (or agency
thereof) concerning employee health and safety, or for any illness of or
personal injury to any employee.
(iv) The Sellers have obtained and have been in material compliance
with all of the terms and conditions of all material permits, licenses,
and other authorizations which are required under, and has complied with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all federal, state, local, and foreign laws (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety,
worker health and safety, and pollution or protection of the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous,
or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes.
(v) All properties and equipment used in the business of the Sellers
have been free in all material respects of asbestos, PCB's, methylene
chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(vi) No material amount of pollutant, contaminant, or chemical,
industrial, hazardous, or toxic material or waste ever has been buried,
stored, spilled, leaked, discharged, emitted, or released on any real
property that the Sellers own or that the Sellers lease with respect to
the Stations.
(s) Legal Compliance.
(i) Except as disclosed in Section 2(s) of the Disclosure Schedule,
the Sellers have complied in all material respects with all laws
(including rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof), and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand, or notice has
been filed or
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commenced against the Sellers alleging any failure to comply with any such
law or regulation, including those relating to the employment of labor,
employee civil rights, and equal employment opportunities and relating to
antitrust matters.
(ii) Except as disclosed in Section 2(s) of the Disclosure
Schedules, the Sellers have filed in a timely manner all material reports,
documents, and other materials required to be filed (and the information
contained therein was correct and complete in all material respects) under
all applicable laws (including rules and regulations thereunder). The
Sellers have possession of all records and documents required to be
retained under all applicable laws (including rules and regulations
thereunder).
(t) Brokers' Fees. Except for fees due to the Whittle Agency, the Sellers
have no Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(u) Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading in any material respect.
3. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Sellers that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
(a) Organization of the Buyer. The Buyer is a limited liability company
duly organized, validly existing, and in good standing under the laws of
Wisconsin.
(b) Authorization of Transaction. The Buyer has full power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 1 above), will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Buyer is subject or any provision of its articles of
organization or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject. The Buyer does not need to give
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any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 1 above).
(d) Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
(e) Qualification as a Broadcast Licensee. To the best of the Buyer's
Knowledge, the Buyer is legally qualified under all applicable federal, state
and local laws, rules and regulations, to acquire the FCC Licenses and the
Acquired Assets from the Sellers. The Buyer will not knowingly act in such
manner from and after the date hereof, that would, under the rules and policies
of the FCC, disqualify the Buyer as an assignee of the FCC Licenses or the Buyer
as owner and holder of the Acquired Assets.
(f) Ability to Perform. The Buyer has the financial ability to perform
this Agreement and to consummate the transactions contemplated herein in a
timely manner.
4. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use their best efforts to take all
action and to do all things necessary, proper, or advisable to consummate and
make effective the transactions contemplated by this Agreement (including
satisfying the closing conditions set forth in Section 5 below).
(b) Assignment Applications. Within ten (10) business days after the
execution of this Agreement, the Sellers and the Buyer shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Sellers to the Buyer (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
Party shall pay their own attorneys' fees. The Sellers and the Buyer shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Sellers
nor the Buyer shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon the Sellers,
the Buyer, the Stations or upon any affiliated entity.) If the FCC imposes any
condition on either Party to the Assignment Application, such Party shall use
commercially reasonable efforts to comply with such condition, provided, that
neither Party shall be required hereunder to comply with any condition that
would have a material adverse effect upon the Sellers, the Buyer, the Stations
or any Affiliate. The Sellers and the Buyer shall jointly oppose any requests
for reconsideration or judicial review of FCC approval of the Assignment
Application and shall jointly request from the FCC extension of the effective
period of FCC approval of the Assignment Application if the Closing shall not
have occurred prior to the expiration of the original
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effective period of the FCC Consent. Nothing in this Section 4(b) shall be
construed to limit either Party's right to terminate this Agreement pursuant to
Section 9 of this Agreement.
(c) Employment Offers. Upon notice to the Sellers, and at mutually
agreeable times, the Sellers will permit the Buyer to meet with their employees
prior to the Closing Date. The Buyer may, at its option, extend offers of
employment to all or any of the Sellers' employees effective on the Closing
Date. The Sellers will not take any action to preclude or discourage any of the
Sellers' employees from accepting any offer of employment extended by the Buyer.
(d) Notices and Consents. The Sellers will give any notices to third
parties, and the Sellers will use their commercially reasonable efforts to
obtain any third party consents that may be required for the consummation of the
transactions contemplated by this Agreement. Each of the Parties will take any
additional action that may be necessary, proper, or advisable in connection with
any other notices to, filings with, and authorizations, consents, and approvals
of governments, governmental agencies, and third parties that it may be required
to give, make, or obtain.
(e) Operation of Business. The Sellers will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business.
(f) Advertising Obligations. The Sellers shall satisfy their air time
obligations under their agreements for sale of air time and advertising on the
Stations for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time. On the Closing
Date, the Sellers shall deliver to the Buyer a schedule, certified by an officer
of each Seller reflecting the aggregate outstanding balances under all Barter
Agreements in existence as of the Closing Date.
(g) Operating Statements. The Sellers shall deliver to the Buyer, for the
Buyer's informational purposes only, monthly unaudited statements of operating
revenues and operating expenses of the Stations within ten (10) days after each
such statement is prepared by or for the Sellers.
(h) Contracts. The Sellers will not without the prior written consent of
the Buyer amend, change, or modify any of the contracts listed on Section 2(1)
of the Disclosure Schedule in any material respect. The Sellers will not without
prior written consent of the Buyer enter into any new contracts respecting the
Stations or their properties outside the Ordinary Course of Business, (but may
renew existing contracts on terms no less favorable to the Sellers than the
terms currently in effect) except (i) contracts for the sale of time on the
Stations for Cash, goods or services which comply with the representations and
warranties pertaining to such contracts set forth in Section 2(1) above, (ii)
contracts entered into in the Ordinary Course of Business which are cancelable
on not more than thirty-one (31) days' notice without penalty or premium, and
(iii) contracts entered into in the Ordinary Course of Business which do not
involve more than Twenty-five Thousand Dollars ($25,000) in the aggregate.
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(i) Operation of Stations. The Sellers shall operate the Stations in
material compliance with the FCC Licenses and the rules and regulations of the
FCC, and the FCC Licenses shall at all times remain in full force and effect.
The Sellers shall file with the FCC all material reports, applications,
documents, instruments and other information required to be filed in connection
with the operation of the Stations;
(j) Credit and Receivables. The Sellers will follow their usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Stations and with respect to collecting accounts receivable
arising from such extension of credit.
(k) Preservation of Business. The Sellers will use commercially reasonable
efforts to keep their business and properties substantially intact, including
their present operations, physical facilities, working conditions, relationships
with lessors, licensers, advertisers, suppliers, customers, and employees, all
of the confidential information, call letters and trade secrets of the Stations,
and the FCC Licenses. The Sellers will continue to make expenditures for
employee compensation advertising, programming, sales, technical and
administration support at a level consistent with the past practices of the
Sellers.
(l) Full Access and Consultation. The Sellers will permit representatives
of the Buyer to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Stations, to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to the Sellers. The Sellers will consult with the Buyer's
management with a view to informing Buyer's management as to the operations,
management and business of the Stations.
(m) Confidentiality and Confidential Information. If the transactions
contemplated by this Agreement are not consummated for any reason, the Buyer
shall not disclose to third parties any information designated as confidential
and received from the Sellers or their agents in the course of investigating,
negotiating, and performing the transactions contemplated by this Agreement;
provided, however, that no information shall be deemed to be confidential that
(i) becomes publicly known or available other than through disclosure by the
Buyer; (ii) is rightfully received by the Buyer from a third party; or (iii) is
independently developed by the Buyer. Upon Sellers' request, all originals of
material provided by the Sellers to the Buyer or their agents shall be returned
to the Sellers and all copies thereof destroyed.
(n) Notice of Developments. The Sellers will give prompt written notice to
the Buyer of any material development affecting the assets, Liabilities,
business, financial condition or operations of the Sellers and the Stations.
Each Party will give prompt written notice to the other of any material
development affecting the ability of the Parties to consummate the transactions
contemplated by this Agreement. No disclosure by any Party pursuant to this
Section 4(n), however, shall be deemed to amend or supplement the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
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(o) Exclusivity. The Sellers will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Sellers or the Stations; or (ii) participate
in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
effort or attempt by any person to do or seek any of the foregoing. The Sellers
will notify the Buyer immediately if any person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
(p) Title Insurance. The Sellers will obtain with respect to each parcel
of real estate that the Sellers owns or leases, an owner's or leasehold owner's
policy (as appropriate) issued by a title insurer reasonably satisfactory to the
Buyer, in an amount equal to the fair market value of such real property
(including all improvements located thereon), insuring title to such real
property in the Buyer as of the Closing subject only to the title exceptions
which do not impair the current use, occupancy or value or the marketability of
title of the property and are disclosed in Section 2(i) of the Disclosure
Schedule, together with such endorsements for zoning, contiguity, public access
and extended coverage as the Buyer reasonably requests. The fees and expenses of
any insurance policy obtained pursuant to this Section 4(p) shall be paid by the
Buyer.
(q) Surveys. With respect to each parcel of real property that the Sellers
owns, leases, or subleases, and as to which a title insurance policy is to be
procured pursuant to Section 4(p) above, the Sellers will procure in preparation
for the Closing a current survey of the real property certified to the Buyer,
prepared by a licensed surveyor and conforming to current ALTA Minimum Detail
Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other masters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). The Survey shall not
disclose any material survey defect or encroachment from or onto the real
property which has not been cured or insured over prior to the Closing. The fees
and expenses associated with procurement of any Survey shall be paid by the
Sellers.
(r) Environmental Assessments. Within fifteen (15) business days from the
date of this Agreement, the Buyer may initiate with respect to each parcel of
real estate that Sellers own, lease or sublease and as to which a title
insurance policy is to be procured pursuant to Section 4(p) above, a current
Phase I environmental site assessment from an environmental consultant or
engineer reasonably satisfactory to the Sellers and the Buyer which shall not
recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed which the Sellers are
unwilling to remedy consistent with such recommendation. The fees and expenses
associated with procurement of any site assessment obtained pursuant to this
Section 4(r) shall be paid by the Buyer.
(s) Control of Stations. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent to the
Assignment Application. Between the date of this Agreement and the Closing Date,
the Buyer and its employees or agents shall not directly
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or indirectly control, supervise, or direct, or attempt to control, supervise,
or direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Sellers.
(t) Risk of Loss. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Sellers until the Closing. In the event of
any such loss, damage, or destruction the Sellers will promptly notify the Buyer
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Sellers will repair or replace such Acquired Assets as soon
as reasonably possible after loss, damage or destruction thereof and shall use
their best efforts to restore as promptly as possible transmissions as
authorized in the FCC Licenses. In the event the cost of any such repair or
replacement (excluding any amount reimbursed or reimbursable by insurance
proceeds) exceeds Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000),
Sellers may, at their option and without further Liability to the Buyer,
terminate this Agreement, unless, however, the Buyer agrees to fund such amount
in excess of said Two Hundred Fifty Thousand and 00/100 Dollars ($250,000). The
Closing Date shall be extended (with FCC consent, if necessary) for up to sixty
(60) days to permit such repair or replacement. If repair or replacement cannot
be accomplished within sixty (60) days of the date of the Sellers' notice to the
Buyer, and the Buyer reasonably determines that the Sellers' failure to repair
or replace, alone or in the aggregate, would have a material adverse effect on
the operation of the Stations:
(a) the Buyer may elect to terminate this Agreement; or
(b) the Buyer may postpone the Closing Date until such time as
the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyer, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Sellers' notice
to Buyer, in which case either party may terminate this Agreement; or
(c) the Buyer may choose to accept the Acquired Asset in their
"then" condition, together with the Sellers' assignment to Buyer all rights
under any insurance claims covering the loss, damage or destruction and payment
over to Buyer any proceeds under any such insurance policies, previously
received by the Sellers with respect thereto.
In the event the Closing Date is postponed pursuant to this Section 4(t),
the Parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
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(i) the representations and warranties set forth in Section 2 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Sellers shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
(iii) the Buyer shall have received (A) all of the third party
consents specified in Section 4(d) above with respect to material
contracts (which shall be identified by double asterisks in Section 2(l)
of the Disclosure Schedule), including but not limited to those relating
to transmitter and studio leases; (B) all of the title insurance
commitments, and endorsements specified in Section 4(p) above; (C) those
Surveys specified in Section 4(q) above; and (D) all the Phase I
environmental site assessments described in Section 4(r) above;
(iv) no action, suit, or proceeding shall be pending or threatened
in writing before any court or quasijudicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, or (C) materially affect
adversely the right of the Buyer to own, operate, or control the Acquired
Assets (and no such judgment, order, decree, stipulation, injunction, or
charge shall be in effect);
(v) the Sellers shall have delivered to the Buyer a certificate
(without qualification as to Knowledge or otherwise) to the effect that
each of the conditions specified above in Section 5(a)(i)-(iv) is
satisfied in all material respects;
(vi) each of the Assignment Applications shall have been approved by
a Final Order of the FCC and the Buyer shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Post Closing
Agreement;
(viii) the Buyer shall have received from counsel to the Sellers an
opinion with respect to the matters set forth in Exhibit G attached
hereto, addressed to the Buyer and dated as of the Closing Date; and
(ix) all actions in consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 5(a) if it executes
a writing so stating at or prior to the Closing.
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(b) Conditions to Obligation of the Sellers. The obligation of the Sellers
to consummate the transactions to be performed by the Sellers in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasijudicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable judgment,
order, decree, stipulation, injunction, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a certificate
(without qualification as to Knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section
5(b)(i)-(iii) is satisfied in all material respects;
(v) each of the Assignment Applications shall have been approved by
a Final Order of the FCC and the Buyer shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Post Closing
Agreement; and
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Sellers; and
(viii) the Sellers shall have received from counsel to the Buyer an
opinion with respect to the matters set forth in Exhibit H attached
hereto, addressed to the Buyer and dated as of the Closing Date.
The Sellers may waive any condition specified in this Section 5(b) if the
Sellers execute a writing so stating at or prior to the Closing.
6. Post Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
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(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 7 below).
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand by any third party in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Stations, each of the other Parties will
cooperate with the contesting or defending Party and their counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 7 below).
(c) Adjustments. Operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Sellers and thereafter for the
account of the Buyer. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance real and personal property taxes, prepared expenses, deposits, music
license fees, and rents and payments pertaining to the leases and contracts
being assigned hereunder (inducing any contracts for the sale of time for cash,
trade or barter so assigned) shall be prorated between the Sellers and the Buyer
as of the Closing Date in accordance with the foregoing principle. Contractual
arrangements that do not reflect an equal rate of compensation to the Stations
over the term of the Agreement shall be equitably adjusted as of the Closing
Date. The prorations and adjustments hereunder shall be made and paid insofar as
feasible on the Closing Date, with a final settlement sixty (60) days after the
Closing Date. In the event of any disputes between the Parties as to such
adjustments, the amounts not in dispute shall nonetheless be paid at such time
and such disputes shall be determined by the accounting firm of Price
Waterhouse, and the fees and expenses of such accounting firm shall be paid
one-half (1/2) by the Sellers and one-half (1/2) by the Buyer. Any sale,
transfer or use Taxes incurred in conjunction with this Agreement and the
transactions contemplated hereby shall be shared equally by the Buyer and the
Sellers. All recording fees for the Real Property shall be paid by the Buyer.
(d) Collection of Accounts Receivable. At the Closing, the Sellers will
turn over to the Buyer, for collection only, the accounts receivable of the
Stations owing to the Sellers as of the close of business on the Closing Date. A
schedule of such accounts receivable will be delivered by the Sellers to the
Buyer on the Closing Date or as soon thereafter as possible. The Buyer agrees to
use commercially reasonable efforts in the ordinary course of business (but
without responsibility to institute legal or collection proceedings) to collect
such accounts receivable during the 120-day period following the Closing Date,
and will remit all payments received on such accounts to the Sellers every sixty
(60) days during such collection period. The Buyer shall provide the Sellers
with
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a monthly accounting of all payments received on such accounts within fifteen
(15) business days after the end of each calendar month during the 120-day
collection period. In the event the Buyer receives moneys during the 120-day
period following the Closing Date from an advertiser who, after the Closing
Date, is advertising over any of the Stations, and that advertiser was included
among the accounts receivable as of the Closing Date, the Buyer shall apply said
moneys to the oldest outstanding balance due on the particular account, except
in the case of a "disputed" account receivable. For purposes of this Section
6(d), a "disputed" account receivable means one which the account debtor refuses
to pay because he asserts that the money is not owed or the amount is incorrect.
In the case of such a disputed account, the Buyer shall immediately return the
account to the Sellers prior to expiration of the 120-day period following the
Closing Date. If the Buyer returns a disputed account to the Sellers, the Buyer
shall have no further responsibility for its collection and may accept payment
from the account debtor for advertising carried on any of the Stations after the
Closing Date. At the end of the 120-day period following the Closing Date, the
Buyer will turn back to the Sellers all of the accounts receivable of the
Station as of the Closing Date owing to the Sellers which have not yet been
collected, and the Buyer will thereafter have no further responsibility with
respect to the collection of such receivables. During the 120-day period
following the Closing Date, the Buyer shall afford the Sellers reasonable access
to the accounts receivable "aging list."
(e) Severance Obligations. The Sellers shall be exclusively responsible
for, all Employee Benefit Plans and benefits as identified in Section 2(q) of
the Disclosure Schedules that may be due and owing an employee as of the Closing
Date by reason of his or her employment with the Sellers.
7. Remedies for Breaches of this Agreement.
(a) Survival. All of the representations and warranties of the Sellers
contained in Section 2 of this Agreement (other than the representations and
warranties of the Sellers contained in Sections 2(a), 2(b) and 2(c) hereof or
relating to the Sellers' title to the Acquired Assets) shall survive the Closing
(even if the Buyer had Knowledge of or had reason to have Knowledge of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of one (1) year thereafter except that any
representation or warranty relating to the Buyer's freedom from liability to pay
a Liability of the Sellers shall continue in full force and effect for the
period of the applicable statute of limitations plus ninety (90) days. The
representations and warranties of the Sellers contained in Sections 2(a), 2(b)
and 2(c) hereof or relating to Sellers' title to the Acquired Assets and all of
the Sellers' covenants contained herein shall survive the Closing (even if the
Buyer had Knowledge of or had reason to have Knowledge of any misrepresentation
or breach of warranty or covenant at the time of the Closing) and continue in
full force and effect for two (2) years.
(b) Indemnification Provisions for the Benefit of the Buyer.
Except as described below in Section 7(e) with respect to a breach
of a covenant prior to the Closing Date, the Sellers agree to indemnify the
Buyer from and against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by:
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(i) any breach of any of the Sellers' representations, warranties,
and covenants contained in this Agreement (so long as the particular
representation, warranty, or covenant survives the Closing and the Buyer
makes a written claim for indemnification within the applicable survival
period);
(ii) any Liability of the Sellers which is not an Assumed Liability;
or
(iii) any Liability of the Buyer arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
(c) Indemnification Provisions for the Benefit of the Sellers. Except as
described below in Section 7(e) with respect to a breach of a covenant prior to
the Closing Date, the Buyer agrees to indemnify the Sellers from and against the
entirety of any Adverse Consequences the Sellers may suffer resulting from,
arising out of, relating to, in the nature of, or caused by (i) the breach of
any of the Buyer's representations, warranties, and covenants contained in this
Agreement (so long as the particular representation, warranty, or covenant
survives the Closing and the Sellers make a written claim for indemnification
within the applicable survival period) or (ii) any Assumed Liability.
(d) Minimum Liability. Notwithstanding anything in this Agreement to the
contrary, after the Closing neither the Sellers nor the Buyer shall indemnify or
otherwise be liable to the other except to the extent that the Liabilities
exceed Twenty-five Thousand Dollars ($25,000) and indemnification shall be made
only to the extent of such excess over Twenty-five Thousand Dollars ($25,000);
provided, however, that the foregoing shall not be applicable to the Sellers'
obligation to deliver clear title to the Acquired Assets or the Buyer's
obligation to pay and discharge any Liability to third parties assumed by the
Buyer hereunder.
(e) Specific Performance. Each of the Parties acknowledges and agrees that
the Stations to be acquired pursuant to this Agreement are unique and that the
other Party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(p) below), in addition
to any other remedy to which it may be entitled, at law or in equity. Each of
the Parties acknowledges and agrees that not withstanding the provision in
Section 7(f) with respect to the remedy of liquidated damages upon a default of
this Agreement by the Sellers prior to the Closing, money damages would not be
an adequate remedy for a breach of any provision of this Agreement.
(f) Liquidated Damages. In the event the transactions contemplated by this
Agreement are not consummated due to a default of this Agreement by the Buyer,
the Sellers shall be paid the Earnest Money Deposit as liquidated damages. In
the event (i) the transactions contemplated by this
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Agreement are not consummated due to a default of this Agreement by the Sellers,
and (ii) the Buyer is unable, despite the Buyer's good faith efforts, to obtain
specific performance pursuant to Section 7(e), and (iii) an application to
assign the Licenses of the Stations to any party other than the Buyer is filed
with the FCC and consummated within fifteen (15) months from the date this
Agreement is terminated, then the Sellers shall pay to the Buyer the sum of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000).
(g) Matters Involving Third Parties. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged. In the
event any Indemnifying Party notifies the Indemnified Party within fifteen (15)
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party
will defend the Indemnified Party against the matter with counsel of its choice
reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may
retain separate co-counsel at its sole cost and expense (except that the
Indemnifying Party will be responsible for the fees and expenses of the separate
co-counsel to the extent the Indemnified Party concludes reasonably that the
counsel the Indemnifying Party has selected has a conflict of interest), (iii)
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the matter without the written consent of
the Indemnifying Party (not to be withheld unreasonably or at all if the
judgment includes a full release for the Indemnified Party or an admission of
Liability and payment of any outstanding claim against the Indemnified Party),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within fifteen (15)
days after the Indemnifying Party has received notice of the matter that the
Indemnifying Party is assuming the defense thereof, however, the Indemnified
Party may defend against, or enter into any settlement with respect to, the
matter in any manner it reasonably may deem appropriate.
(h) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory or common
law remedy any Party may have for breach of representation, warranty, or
covenant.
8. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Sellers, other than Retained Assets, that are used or useful
in the operation of the Stations, including but not limited to all of their (a)
real property, leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as computers, electrical
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devices, monitoring equipment, test equipment, switching, terminal and studio
equipment, transmitters, transformers, receivers, broadcast facilities,
inventories of compact disks, records, tapes and other supplies, vehicles, and
all assignable warranties with respect thereto; (c) Intellectual Property,
goodwill associated therewith, licenses and sublicenses granted and obtained
with respect thereto, and rights thereunder, remedies against infringements
thereof, and rights to protection of interests therein under the laws of all
jurisdictions; (d) rights under orders and agreements (including those barter
agreements identified on the Disclosure Schedules) now existing or entered into
in the Ordinary Course of Business for the sale of advertising time on the
Stations; (e) contracts, indentures, Security Interests, guaranties, other
similar arrangements, and rights thereunder; (f) call letters of the Stations,
jingles, logos, slogans, and business goodwill of the Stations; (g) Licenses and
similar rights obtained from governments and governmental agencies; and (h) FCC
logs and records and all other books, records, ledgers, logs, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials.
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all reasonable attorneys' fees and court costs.
"Affiliate" means with reference to any person or entity, another person
or entity controlled by, under the control of or under common control with that
person or entity.
"Assignment Application" has the meaning set forth in Section 4(b) above.
"Assumed Liabilities" means obligations of the Sellers to be assumed by
the Buyer under the licenses, sublicenses, leases, subleases, contracts, and
other arrangements referred to in the definition of Acquired Assets either: (a)
to furnish services, and other non-Cash benefits to another party after the
Closing; or (b) to pay for goods, services, and other non-Cash benefits that
another party will furnish to it after the Closing. The Assumed Liabilities
shall not include any Retained Liability.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 1(d) above.
"Closing Date" has the meaning set forth in Section 1(d) above.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Sellers.
"Disclosure Schedule" has the meaning set forth in Section 2 above.
"Earnest Money Deposit" has the meaning set forth in Section 1(c) above.
"Earnest Money Escrow Agreement" has the meaning set forth in Section 1(c)
above.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit, bonus, profit-sharing, incentive compensation or severance plan or
program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement as amended.
"Escrow Agent" means The Whittle Agency.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Final Order" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"Financial Statements" has the meaning set forth in Section 2(e) above.
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"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indemnified Party" has the meaning set forth in Section 7(d) above.
"Indemnifying Party" has the meaning set forth in Section 7(d) above.
"Intellectual Property" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) programs, programming materials,
copyrights and registrations and applications for registration thereof, (d) mask
works and registrations and applications for registration thereof, (e) computer
software, data, and documentation, (f) trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
market and other research information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing, and
business data, pricing and cost information, business and marketing plans, and
customer and supplier lists and information), (g) other proprietary rights, and
(h) copies and tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Licenses" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Sellers with respect
to the operations of the Stations and all applications therefor, together with
any renewals, extension or modifications thereof and additions thereto.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Post Closing Agreement" means the Post Closing Agreement with Sellers'
Stockholders entered into concurrently herewith and attached hereto as Exhibit
E.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
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"Purchase Price" has the meaning set forth in Section 1(c) above.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Retained Assets" means (i) the articles of incorporation, qualifications
to conduct business as a foreign corporation, arrangements with registered
agents relating to foreign qualifications, taxpayer and other identification
numbers, seals, minute books, stock transfer books, blank stock certificates,
and other documents relating to the organization, maintenance, and existence of
each Seller as a corporation; (ii) any of the rights of the Sellers under this
Agreement; (iii) accounts, notes and other receivables; (iv) prepaid deposits
and pre-Closing claims relating to operation of the Stations; and (iv) Cash.
"Retained Liabilities" means any other obligations or liabilities of
Sellers, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Sellers for income Taxes arising in connection with the consummation
contemplated hereby; (iii) any Liability of the Sellers for costs and expenses
incurred in connection with this Agreement or the consummation of the
transactions contemplated hereby; or (iv) any Liability or obligation of the
Sellers under this Agreement (or under any side agreement between the Sellers on
the one hand and the Buyer on the other hand entered into on or after the date
of this Agreement).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Sellers" has the meaning set forth in the preface above.
"Stations" means the radio broadcast stations having the call letters
WAAV-FM and WAAV-AM, each licensed by the FCC to operate in Leland, North
Carolina.
"Subsidiary" means any corporation with respect to which another specified
corporation has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Survey" has the meaning set forth in Section 4(q) above.
"Tax" unless otherwise qualified herein, means any federal, state, local,
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Sec. 59A), customs duties, capital stock,
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franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. Termination.
(a) Termination of Agreement. The Parties may terminate this Agreement as
provided below:
(i) the Buyer and the Sellers may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to the Sellers at any time prior to the Closing in the event either of the
Sellers are in breach, and the Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing in the
event the Buyer is in breach, of any material representation, warranty, or
covenant contained in this Agreement in any material respect in each case
if such breach remains uncured for ten (10) days after notice of breach is
received from the other Party;
(iii) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing if the Closing
shall not have occurred on or before the 270th day following the date of
this Agreement by reason of the failure of any condition precedent under
Section 5(a) hereof (unless the failure results primarily from the Buyer
breaching any representation, warranty, or covenant contained in this
Agreement);
(iv) the Sellers may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under
Section 5(b) hereof (unless the failure results primarily from the Sellers
breaching any representation, warranty, or covenant contained in this
Agreement);or
(v) the Buyer or the Sellers may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 7(a) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of the Party whose breach justified such termination).
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10. Miscellaneous.
(a) Survival. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in the Post Closing Agreement with Sellers' Stockholders.
(b) Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior or contemporaneous understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and its respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that the Buyer may assign all of its right, title
and interest in, to and under this Agreement to one or more affiliated entities,
controlled by the same parties who control the Buyer and who demonstrate to the
reasonable satisfaction of the Sellers the ability to fulfill the Buyer's
financial obligations hereunder. Any permitted assignee of the Buyer shall then,
subject to the terms and conditions of this Agreement, have the right to receive
the Acquired Assets, assume the Assumed Liabilities, and to pay to the Sellers
the Purchase Price therefor.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by (i)
hand (and then immediately upon delivery), (ii) registered or certified mail,
return receipt requested, postage prepaid (and then three business days after it
is sent), (iii) facsimile (and then immediately upon receipt of a mechanical
confirmation of delivery), or (iv)
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by overnight courier service, charges prepaid (and the next business day after
its is sent), and addressed to the intended recipient as set forth below:
If to the Sellers: Donald Ansell
Hara Broadcasting, Inc.
DLM Communications, Inc.
201 Second Street
Wilmington, North Carolina 28401
Copy to: Lewis J. Paper, Esq.
Dickstein, Shapiro, Morin and Oshinsky, LLP
2101 C Street, N.W.
Washington, D.C. 20037
If to the Buyer: Cumulus Media, LLC
c/o Quaestus Management Corporation
330 E. Kilbourn Ave., Ste. 250
Milwaukee, WI 53202
Attn: Terrance J. Leahy
Copy to: Cumulus Media, LLC
c/o Century Broadcasting
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
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Baker & Daniels
205 W. Jefferson Boulevard
Suite 250
South Bend, IN 46601
Attn: Peter G. Trybula
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
North Carolina.
(j) Amendments and Waivers. No amendment or waiver of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(l) Expenses. The Buyer and the Sellers, will each bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, other than as set forth in
Section 4(b) with regard to the Assignment Applications. In the event any Party
files a lawsuit to enforce that Party's rights hereunder, the prevailing Party
shall be reimbursed by the other Party for all reasonable expenses incurred
thereby, including reasonable attorney fees.
(m) Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception
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to a representation or warranty made herein unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Service of Process. Any Party may make service on the other Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 10(h)
above. Nothing in this Section 10(o), however, shall affect the right of any
Party to serve legal process in any other manner permitted by law. Each Party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
(p) Bulk Transfer Laws. The Sellers have, or will as of the Closing Date,
comply with any applicable provisions of any bulk transfer laws of North
Carolina or any other jurisdiction applicable to the transactions contemplated
by this Agreement.
* * * * *
-34-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS MEDIA, LLC
By:
------------------------------
Title:
---------------------------
HARA BROADCASTING, INC.
By:
------------------------------
(printed)
------------------------------
Title:
------------------------------
DLM COMMUNICATIONS, INC.
By:
------------------------------
(printed)
------------------------------
Title:
------------------------------
-35-
<PAGE>
AMENDMENT NO. 1
ASSET PURCHASE AGREEMENT
This Amendment ("Amendment") is entered into as of August 28, 1997, by and
between CUMULUS BROADCASTING, INC. ("Broadcasting") and CUMULUS LICENSING CORP.
("Licensing") each a Nevada corporation and successors in interest to CUMULUS
MEDIA, LLC ("Cumulus"), a Wisconsin limited liability company (collectively the
"Buyer"), and HARA BROADCASTING, INC. a North Carolina Corporation, and DLM
COMMUNICATIONS, INC., a North Carolina corporation, (individually referred to
herein as a "Seller," and collectively referred to herein as the "Sellers"). The
Buyer and the Sellers are collectively referred to herein as the "Parties."
Capitalized terms used in this Agreement are defined in the Asset Purchase
Agreement.
WHEREAS, Broadcasting and Licensing as successors in interest to Cumulus,
and Sellers are parties to a certain Asset Purchase Agreement dated April 30,
1997 ("Asset Purchase Agreement"),
WHEREAS, the Parties desire to amend the Asset Purchase Agreement in
certain respect,
NOW, THEREFORE, in consideration of the above premises and the mutual
promises herein made the sufficiency of which is hereby acknowledged, the
Parties agree as follows:
1. Subsequent to the execution of the Asset Purchase Agreement the
Parties discovered that at least one of the monitoring points for
the night time array of radio station WAAV-AM was outside of the FCC
tolerance levels (the "WAAV-AM Array Issue"). The Parties hereby
agree to amend the Asset Purchase Agreement in full consideration
for the release of the Buyer, its stockholders, officers, directors,
employees and agents from any and all liability or right of recovery
with respect to the WAAV-AM Array Issue. Therefore, Section 1(c) of
the Asset Purchase sAgreement is hereby amended to read in its
entirety as follows:
(c) Purchase Price. The Buyer agrees to pay to the Sellers at the
Closing One Million Five Hundred Ninety Thousand Dollars
($1,590,000) (the "Purchase Price") payable as follows:
(i) on the date of this Agreement, the Buyer will deposit
with the Escrow Agent the amount of Eighty Thousand
Dollars ($80,000) (the "Earnest Money Deposit") by
delivery of cash payable by wire transfer or delivery of
other immediately available funds; and
(ii) on the Closing Date, the Buyer shall pay to the Sellers
the amount of One Million Two Hundred Thirty-Nine
Thousand Dollars ($1,239,000); and
<PAGE>
(iii) on the Closing Date the Buyer shall deliver to the
Sellers a promissory note in a form attached hereto as
Exhibit A in the aggregate principal amount of Two
Hundred Seventy Thousand Dollars ($270,000); and
(iv) on the Closing Date, the Buyer shall pay to the Sellers,
on behalf of all parties to the Post Closing Agreement,
the amount of One Thousand Dollars ($1,000).
The Earnest Money Deposit referenced in this Section 1(c) shall be
placed in escrow with the Escrow Agent pursuant to an escrow
agreement in the form attached hereto as Exhibit B (the "Earnest
Money Escrow Agreement"), which requires that such Earnest Money
Deposit shall be deposited by the Escrow Agent with a federally
insured financial institution in an interest bearing account.
Interest earned on the Earnest Money Deposit shall accrue to the
benefit of the Buyer, and, together with the principal amount of the
Earnest Money Deposit, shall be payable to the Sellers and credited
against the Purchase Price on the Closing Date. If this Agreement is
terminated without Closing of the transaction contemplated herein,
the Earnest Money and all accrued interest shall be paid to the
Buyer or the Sellers as provided in Section 7(f) and Section 9
hereof.
2. Exhibit F to the Asset Purchase Agreement shall reflect the
amendment identified in the first numbered paragraph of this
Amendment.
3. Except as set forth herein, the Asset Purchase Agreement remains
unchanged.
4. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will
constitute one and the same instrument.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
---------------------------------
Its:
--------------------------------
CUMULUS LICENSING, CORP.
By:
---------------------------------
Its:
--------------------------------
HARA BROADCASTING, INC.
By:
---------------------------------
Its:
--------------------------------
DLM COMMUNICATIONS, INC.
By:
---------------------------------
Its:
--------------------------------
<PAGE>
================================================================================
ASSET PURCHASE AGREEMENT
BY AND AMONG
62ND STREET BROADCASTING OF TOLEDO, L.L.C.,
62ND STREET BROADCASTING OF TOLEDO LICENSE, L.L.C.,
62ND STREET BROADCASTING, L.L.C.,
CUMULUS BROADCASTING, INC.
AND
CUMULUS LICENSING CORP.
DATED AS OF JUNE 24, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
ASSETS TO BE CONVEYED................................................1
1.1 Closing.....................................................1
1.2 Assets......................................................1
1.3 Excluded Assets.............................................3
ARTICLE 2
PURCHASE PRICE.......................................................3
2.1 Purchase Price..............................................3
2.2 Allocation..................................................4
2.3 Good Faith Escrow Deposit...................................4
ARTICLE 3
ASSUMPTION OF LIABILITIES............................................4
ARTICLE 4
REQUIRED CONSENTS....................................................5
4.1 FCC Application.............................................5
4.2 HSRA........................................................5
4.3 Other Governmental Consents.................................6
4.4 Consent-Pending Contracts...................................6
ARTICLE 5
PRORATIONS; ACCOUNTS RECEIVABLE......................................7
5.1 Proration of Income and Expenses............................7
5.2 Trade Agreements............................................7
5.3 Payment of Proration Items..................................8
5.4 Further Adjustments.........................................8
5.5 Collection of Accounts Receivable...........................8
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE BUYERS........................10
6.1 Organization and Standing..................................10
6.2 Authorization and Binding Obligation.......................10
6.3 FCC Qualifications.........................................10
6.4 Absence of Conflicting Agreements or Required Consents.....10
6.5 Absence of Litigation......................................10
6.6 Brokerage..................................................11
6.7 Disclosure.................................................11
6.8 Closing Date...............................................11
<PAGE>
Page
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND 62ND STREET
11
7.1 Organization and Standing..................................11
7.2 Authorization and Binding Obligation.......................11
7.3 Absence of Conflicting Agreements or Required Consents.....12
7.4 FCC Authorizations.........................................12
7.5 Title to and Condition of Real Property....................13
7.6 Condition and Operation of Improvements....................14
7.7 Title to and Condition of Personal Property................14
7.8 Contracts..................................................15
7.9 Employee Benefits..........................................16
7.10 Intellectual Property......................................17
7.11 Litigation.................................................17
7.12 Compliance With Laws.......................................18
7.13 Interests in Clients, Suppliers, Etc.......................18
7.14 Financial Statements.......................................18
7.15 Insurance..................................................19
7.16 Taxes......................................................19
7.17 Bankruptcy.................................................19
7.18 Subsidiaries; Investments..................................19
7.19 Environmental Matters......................................19
7.20 UCC Financing Statements...................................20
7.21 Disclosure.................................................20
7.22 Brokerage..................................................20
7.23 HSRA Requirements. ........................................20
7.25 Closing Date...............................................20
ARTICLE 8
COVENANTS OF THE BUYERS.............................................21
8.1 Notification...............................................21
8.2 No Inconsistent Action.....................................21
ARTICLE 9
COVENANTS OF THE SELLERS............................................21
9.1 Interim Operation..........................................21
9.2 Access to Station..........................................23
9.3 Exclusivity................................................23
9.4 Notification...............................................23
ii
<PAGE>
Page
9.5 Third-Party Consents.......................................23
9.6 Estoppel Certificates; Consent and Waiver..................24
9.7 Closing Delivery...........................................24
9.8 Payment of Indebtedness; Financing Statements..............24
9.9 No Inconsistent Action.....................................24
ARTICLE 10
JOINT COVENANTS.....................................................24
10.1 Conditions.................................................24
10.2 Best Efforts...............................................24
10.3 Control of Stations........................................24
10.4 Confidentiality............................................25
10.5 Continued Employment of Stations Employees.................25
ARTICLE 11
CONDITIONS PRECEDENT TO THE BUYERS' OBLIGATION TO CLOSE.............26
11.1 The Sellers' Ownership of Stations.........................26
11.2 Representations, Warranties and Covenants..................26
11.3 Governmental Consents......................................27
11.4 Governmental Authorizations................................27
11.5 Mandatory Third Party Consents.............................27
11.6 Adverse Proceedings........................................27
11.7 Deliveries.................................................27
11.8 No Material Adverse Change.................................27
11.9 Financing..................................................27
ARTICLE 12
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE................28
12.1 The Sellers' Ownership of Stations.........................28
12.2 Representations, Warranties and Covenants..................28
12.3 Governmental Consents......................................28
12.4 Adverse Proceedings........................................28
12.5 Deliveries.................................................28
ARTICLE 13
DOCUMENTS TO BE DELIVERED AT THE CLOSING............................28
13.1 Documents to be Delivered by the Sellers...................28
13.2 Documents to be Delivered by the Buyers....................29
iii
<PAGE>
Page
ARTICLE 14
TRANSFER TAXES; FEES AND EXPENSES...................................30
14.1 Transfer Taxes and Similar Charges.........................30
14.2 Governmental Filing or Grant Fees..........................30
14.3 Expenses...................................................30
ARTICLE 15
INDEMNIFICATION.....................................................30
15.1 Indemnification by the Sellers and 62nd Street.............30
15.2 Indemnification by the Buyers..............................31
15.3 Procedure for Indemnification..............................31
15.4 Limitations................................................32
15.5 Arbitration Procedure......................................33
ARTICLE 16
TERMINATION RIGHTS..................................................35
16.1 Termination................................................35
16.2 Effect of Termination......................................36
ARTICLE 17
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS...............36
ARTICLE 18
REMEDIES UPON DEFAULT...............................................37
ARTICLE 19
RISK OF LOSS........................................................37
ARTICLE 20
OTHER PROVISIONS....................................................38
20.1 Benefit and Assignment.....................................38
20.2 Entire Agreement...........................................38
20.3 Headings...................................................38
20.4 Computation of Time........................................38
20.5 Governing Law..............................................38
20.6 Press Releases and Announcements...........................38
20.7 Parties in Interest........................................39
20.8 Notices....................................................39
20.9 Counterparts...............................................40
20.10 Further Assurances.........................................40
iv
<PAGE>
Page
20.11 Severability...............................................40
20.12 No Strict Construction.....................................40
ARTICLE 21
DEFINITIONS.........................................................41
EXHIBIT A - Escrow Agreement
EXHIBIT B - Commitment Letter
v
<PAGE>
Defined Terms
62nd Street ............................................................1
62nd Street Accounts Receivable...............................................9
62nd Street Collection Period.................................................9
62nd Street Collections.......................................................9
Accounts Receivable........................................................3, 9
Adjustment Amount ............................................................8
Adjustment List ............................................................8
Agreement ............................................................1
Assets ............................................................3
Assumed Contracts ............................................................2
Assumed Liabilities...........................................................4
Audited Financials...........................................................18
Broadcasting ............................................................1
Buyer's Adjustment Amount.....................................................8
Buyer's Arbitrator...........................................................33
Buyer's Closing Transactions.................................................28
Buyer's Plan ...........................................................26
Buyers ............................................................1
Cap ...........................................................33
Claimant ...........................................................32
Closing ............................................................1
Closing Transactions.........................................................29
Collection Periods............................................................9
Collections ............................................................9
Commitment Letter ...........................................................27
Consent-Denied Contract.......................................................6
Consent-Pending Contract......................................................6
Deposit ............................................................4
Disputes ...........................................................33
Disputing Person ...........................................................33
DOJ ............................................................5
ERISA ...........................................................17
Escrow Agreement ............................................................4
Excluded Assets ............................................................3
Excluded Employees...........................................................25
Excluded Liabilities..........................................................5
Final Collection Report......................................................9
Final Determination..........................................................34
Financial Statements.........................................................18
Fritz ...........................................................18
Fritz Accounts Receivable.....................................................9
vi
<PAGE>
Fritz Collection Period.......................................................9
Fritz Collections ............................................................9
FTC ............................................................5
Improvements ...........................................................14
Indemnitor ...........................................................32
Intellectual Property........................................................17
Leased Real Property.........................................................13
Leases ...........................................................13
Licensing ............................................................1
Monthly Collection Report.....................................................9
Notice of Arbitration........................................................33
Notice of Disagreement........................................................8
Parties ............................................................1
Personal Property ...........................................................14
Proration Schedule............................................................8
Purchase Price ............................................................3
Real Property ...........................................................13
Referee ............................................................8
Seller ............................................................1
Seller Indemnitors...........................................................30
Seller's 401(k) Plan.........................................................26
Seller's Arbitrator..........................................................33
Seller's Closing Transactions................................................29
Stations ............................................................1
Tax ...........................................................44
Taxable ...........................................................44
Taxes ...........................................................44
Taxing ...........................................................44
Termination Date ...........................................................35
Transaction Documents........................................................38
Transferred Employees........................................................25
vii
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as
of June 24, 1997, by and among Cumulus Broadcasting, Inc. ("Broadcasting"),
Cumulus Licensing Corp. ("Licensing," and together with Broadcasting, the
"Buyers"), 62nd Street Broadcasting of Toledo, L.L.C., a Delaware limited
liability company ("Toledo"), 62nd Street Broadcasting of Toledo License,
L.L.C., a Delaware limited liability company ("Toledo License," and together
with Toledo, the "Sellers") and 62nd Street Broadcasting, L.L.C. ("62nd
Street"). The Buyers, the Sellers and 62nd Street are sometimes collectively
referred to as the "Parties". Other capitalized terms used and not otherwise
defined in this Agreement are defined in Article 21.
RECITALS
Together, the Sellers are the licensee and operator of broadcast
radio stations WKKO and WTOD, Toledo, OH, WIMX, Gibsonburg, OH, and WRQN,
Bowling Green, OH (the "Stations"). The Sellers desires to sell to the Buyers,
and the Buyers desire to purchase from the Sellers, the assets of the Stations
(other than the Excluded Assets (as defined below)), as going concerns, subject
to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1
ASSETS TO BE CONVEYED
1.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") will
take place at the offices of Kirkland & Ellis, at 153 East 53rd Street, New
York, New York, or 200 East Randolph Drive, Chicago, Illinois or at such other
place as may be agreed to by the Parties, at 10:00 a.m., local time, within ten
(10) business days after the list of conditions specified in Articles 11 and 12
hereof have been fulfilled (or waived by the Party entitled to waive such
conditions), or at such other time and date mutually agreed upon in writing by
the Parties.
1.2 Assets.
(a) At the Closing, Toledo License shall sell, assign, transfer and
convey to Licensing, and Licensing shall purchase from Toledo License, the
Station Licenses listed in Schedule 7.4, together with any additions thereto
(including renewals or modifications of the Station Licenses and applications
therefor) between the date hereof and the Closing Date.
(b) At the Closing, Toledo shall sell, assign, transfer and convey
to Broadcasting and Broadcasting shall purchase from Toledo, all of the assets,
real, personal and mixed, tangible and intangible (including the business of the
Stations as a going concern), owned or held by Toledo and used or necessary in
the conduct of the business and operation of the Stations, including all such
1
<PAGE>
property acquired by Toledo between the date hereof and the Closing Date (but
excluding the Station Licenses and the Excluded Assets specified in Section
1.3), including, but not limited to, the following:
(i) all of Toledo's rights in and to the licenses, permits and other
authorizations issued to Toledo by any governmental authority and used or
necessary in the conduct of the business and operation of the Stations
listed on Schedule 7.4 (excluding the Station Licenses), together with any
additions thereto (including renewals or modifications of such licenses,
permits and authorizations and applications therefor) between the date
hereof and the Closing Date, and all of Toledo's rights in and to the call
letters "WKKO, WTOD, WIMX and WRQN";
(ii) all of Toledo's right, title and interest in and to all real
property, including leasehold interests and easements, used or necessary
in the conduct of the business and the operation of the Stations,
including Real Property listed in Schedule 7.5, together with any
additions thereto between the date hereof and the Closing Date;
(iii) all equipment, office furniture and fixtures, office materials
and supplies, inventory, spare parts, motor vehicles and other tangible
personal property of every kind and description, owned, leased or held by
Toledo and used or necessary in the conduct of the business and operation
of the Stations, including the items listed in Schedule 7.7, together with
any replacements thereof and additions thereto, made between the date
hereof and the Closing Date;
(iv) subject to the provisions of Article 3 hereof, all of Toledo's
rights under and interest in all Contracts related to the Stations,
including the Contracts listed in Schedule 7.8 hereto, together with all
of Toledo's rights under and interest in all Contracts related to the
Stations entered into or acquired by Toledo between the date hereof and
the Closing Date in accordance with this Agreement (including Section 9.1
hereof) (collectively, the "Assumed Contracts");
(v) all of Toledo's rights under and interest in the Fritz Asset
Purchase Agreement as they relate to the Stations, including (A) Toledo's
rights under and interest in the Non-Competition Agreement, by and between
Jock Fritz, Jack Fritz, Chas D. Fritz and 62nd Street Holding, L.L.C., to
be executed pursuant to the Fritz Asset Purchase Agreement as they relate
to the Stations and (B) the Non-Competition Agreement, dated June 3, 1996,
by and between Buddy Carr, WRED, Inc. and Fritz Broadcasting, Inc. as they
relate to the Stations;
(vi) all programs and programming materials of whatever form or
nature owned by Toledo and used or intended for use on or by any Station;
2
<PAGE>
(vii) all of Toledo's rights in and to the trademarks, trade names,
service marks, franchises, copyrights, including registrations and
applications for registration of any of them, jingles, logos, slogans, and
non-governmental licenses, permits and privileges owned or held by Toledo
and used in the conduct of the business and operation of the Stations,
including those listed in Schedule 7.10, together with any additions
thereto between the date hereof and the Closing Date;
(viii) all files, records, books of account, computer programs and
software and logs relating to the operation of the Stations, including,
without limitation, programming information and studies, technical
information and engineering data, news and advertising studies and
consultants' reports, ratings reports, marketing and demographic data,
promotional materials, budgets, financial reports, and projections, sales,
operating and business plans, filings with the FCC and original executed
copies, if available, and otherwise true and correct copies of all Assumed
Contracts and, to the extent owned by Toledo, receivable records,
invoices, statements, traffic material, sales correspondence, lists of
advertisers and credit and sales reports; and
(ix) all of Toledo's rights under manufacturers' and vendors'
warranties relating to items included in the Assets (as defined below) and
all similar rights against third parties relating to items included in the
Assets to the extent contractually assignable.
The assets to be transferred to the Buyers pursuant to this Section
1.2 are hereinafter collectively referred to as the "Assets." The Assets shall
be transferred to the Buyers free and clear of all Liens (except for Permitted
Liens).
1.3 Excluded Assets. The Assets shall not include the following assets
(the "Excluded Assets"):
(a) The Sellers' books and records that pertain to the corporate
organization, existence or capitalization of the Sellers, and duplicate
copies of such records as are necessary to enable the Sellers to file tax
returns and reports;
(b) all cash, cash equivalents or similar type investments of the
Sellers, such as certificates of deposit, Treasury bills and other
marketable securities on hand and/or in banks; and
(c) all accounts receivable relating to or arising out of the
operations of the Stations prior to the Effective Time (the "Accounts
Receivable").
3
<PAGE>
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price.
(a) The total consideration to be paid by the Buyers for the Assets
(the "Purchase Price"), shall be $30,000,000 (less the Deposit as provided
for in Section 2.3 below).
(b) The Purchase Price shall be payable by the Buyers at Closing by
wire transfer of immediately available federal funds to an account at a
domestic U.S. bank or other financial institution pursuant to wire
instructions that the Sellers shall deliver to the Buyers at least two (2)
business days prior to Closing.
2.2 Allocation. At or prior to the Closing, the Buyers and the Sellers
agree to allocate the Purchase Price among the Assets in a manner mutually
agreed upon by the Sellers and the Buyers and consistent with the applicable
provisions of the Tax Code. The Buyers and the Sellers agree to file (at such
times and in such manner as required by applicable Legal Requirements) all
relevant returns and reports (including Forms 8594, Asset Acquisition
Statements, and all income and other tax returns) on the basis of such
allocation, in each case to the extent permitted by applicable Legal
Requirements.
2.3 Good Faith Escrow Deposit. Contemporaneously with the execution of
this Agreement, Broadcasting will deposit or cause to be deposited $1,500,000
into escrow (the "Deposit"). The total Deposit shall be held by an independent
escrow agent selected by Broadcasting and satisfactory to the Sellers pursuant
to an Escrow Agreement attached hereto as Exhibit A (the "Escrow Agreement").
The Deposit shall be paid to the Sellers and credited to the Purchase Price at
Closing, and interest earned thereon shall be paid to Broadcasting. If the
Closing does not occur because the Buyers (i) materially breach this Agreement
or materially default in the performance of any of their obligations hereunder
or (ii) terminate this Agreement pursuant to Section 16.1(g) and the Sellers are
not in material breach or default of this Agreement, the Deposit, with interest,
shall be paid to the Sellers as liquidated damages, as provided in Section
16.2(a). If the Closing does not occur for any other reason, including the
termination of this Agreement pursuant to Section 16.1(e), the Deposit, with
interest, shall be returned to Broadcasting.
ARTICLE 3
ASSUMPTION OF LIABILITIES
3.1 Limited Assumption of Liabilities. Subject to the conditions specified
in this Agreement, from and after the Closing Date, the Buyers will not assume
or in any way be responsible for any liabilities or obligations of the Sellers
or any other liabilities or obligations whatsoever related to the operation of
the Stations as conducted by the Sellers or the condition of the Assets at any
time prior to the Closing Date, except as specifically provided below. From and
after the Closing Date, the Buyers will assume and agree to pay, defend,
discharge and perform as
4
<PAGE>
and when due only all liabilities and obligations pursuant to all Assumed
Contracts, so long as such liabilities and obligations have been incurred in the
ordinary course of business consistent with past business and payment practices
(excluding (i) any contracts for indebtedness and (ii) any liability or
obligation relating to or arising out of such Assumed Contracts as a result of
(A) any breach of such contracts or leases occurring on or prior to the Closing
Date, (B) any violation of law, breach of warranty, tort or infringement
occurring on or prior to the Closing Date, or (C) with respect to the foregoing
items (A) and (B), any related charge, complaint, action, suit, proceeding,
hearing, investigation, claim or demand) (the "Assumed Liabilities").
3.2 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement and regardless of whether such liability is
disclosed herein or on any schedule hereto, the Buyers will not assume or be
liable for any liabilities or obligations of the Sellers not described in
Section 3.1 hereof. (the "Excluded Liabilities").
ARTICLE 4
REQUIRED CONSENTS
4.1 FCC Application. The assignment of the Station Licenses as
contemplated by this Agreement is subject to the prior consent and approval of
the FCC. The FCC Application will be filed by the Buyers and the Sellers with
the FCC within ten (10) days of the signing of this Agreement. The Sellers and
the Buyers shall prosecute the FCC Application with all reasonable diligence and
otherwise use their reasonable best efforts to obtain the grant of the FCC
Application as expeditiously as practicable including the filing of this
Agreement as an amendment to the prior filing; provided, however, that neither
the Sellers nor the Buyers shall have any obligation to satisfy any complainant
or the FCC by taking any steps which would have a material adverse effect upon
the Sellers or the Buyers or upon any Affiliate of the Buyers or the Sellers,
but neither the expense nor inconvenience to a Party of defending against a
complainant or an inquiry by the FCC shall be considered a material adverse
effect on such Party. If the FCC Consent imposes any condition on any Party
hereto, such Party shall use its reasonable best efforts to comply with such
condition; provided, however, that no Party shall be required to comply with any
condition that would have a material adverse effect upon it or any of its
Affiliates. The Buyers will provide the Sellers, and the Sellers will provide
the Buyers, with a copy of any pleading, order or other document served on such
Person relating to any FCC Application. Neither the Buyers nor the Sellers will,
and each of them will use its reasonable best efforts not to cause or permit any
of its officers, directors, partners or other affiliates to, take any action
which could reasonably be expected to materially and adversely affect the
likelihood of the grant of any FCC Consent. If reconsideration or judicial
review is sought with respect to the FCC Consent, the Party affected shall
vigorously oppose such efforts for reconsideration or judicial review; provided,
however, that nothing herein shall be construed to limit either Party's right to
terminate this Agreement pursuant to Article 16 hereof.
4.2 HSRA. Each Party will use reasonable best efforts to prepare and, at
such time as the Buyers designate, file with the United States Federal Trade
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "DOJ"), any materials and
5
<PAGE>
information required to be filed with or provided to the FTC or the DOJ pursuant
to the HSRA (as defined below) with respect to the transactions contemplated by
this Agreement. The Buyers will pay the filing fees associated with any such
filing. The Buyers and the Sellers each will promptly supply any additional
information which reasonably may be required or requested by the FTC or the DOJ.
The Buyers and the Sellers each will take all such actions and will file and use
reasonable best efforts to have declared effective or approved, all documents
and notifications with any governmental or regulatory bodies, as may be
necessary or may reasonably be requested under federal antitrust laws for the
consummation of the transactions contemplated by this Agreement.
4.3 Other Governmental Consents. Promptly following the execution of this
Agreement, the parties shall prepare and file with the appropriate Governmental
Entities any other requests for approval or waiver that are required from such
Governmental Entities in connection with the transactions contemplated hereby
and shall diligently and expeditiously prosecute, and shall cooperate fully with
each other in the prosecution of, such requests for approval or waiver and all
proceedings necessary to secure such approvals and waivers.
4.4 Consent-Pending Contracts. An Assumed Contract is a "Consent-Pending
Contract" at any time after the Closing when any consent relating to such
Assumed Contract has not been obtained or is not in effect. As an accommodation
in order to permit the purchase and sale of the Assets to be consummated in a
timely manner, and based upon the Parties' mutual belief that no other Party to
a Consent-Pending Contract will object to or be materially harmed by the Buyers'
enjoyment or use of the Sellers' rights or performance of the Sellers'
obligations under any Consent-Pending Contract and that each such third Party
will grant any required consent, the Closing Transactions will be consummated
notwithstanding the fact that any required consent which is not a Mandatory
Consent has not been obtained under one or more Consent-Pending Contracts. In
that event, the Buyers and the Sellers agree as follows with respect to each
Consent-Pending Contract:
(i) After the Closing and until February 28, 1998, the Sellers and
the Buyers will continue to attempt to obtain all Consents with respect to
such Contract in accordance with Section 9.5.
(ii) From and after the Closing Date, the Buyers and the Sellers
will cooperate with one another to provide the Buyers with the benefits of
each Consent-Pending Contract (and the Buyers may utilize such benefits),
and the Buyers will assume and agree to timely pay, satisfy, perform, and
discharge the Sellers' liabilities which arise under such Contract, unless
and until such Contract is a Consent-Denied Contract (as defined below).
If such Contract becomes a Consent-Denied Contract, then the Buyers may
thereafter suspend their performance of the Sellers' obligations arising
thereafter under such Contract until such time as such Consent-Pending
Contract is no longer a Consent-Denied Contract, and the Sellers will
perform or otherwise satisfy such obligations. If the Buyers are denied
the benefits of any Consent-Pending Contract while it is a Consent-Pending
Contract, then the Sellers will be responsible for the obligations of the
Sellers pursuant to such Contract to the extent that they relate to the
period during which it is a Consent-Pending Contract or a Consent-Denied
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Contract; provided that to the extent that the Buyers actually receive or
received the benefit of any Consent-Pending Contract or Consent-Denied
Contract while it is or was a Consent-Pending Contract or a Consent-Denied
Contract, the Buyers will be responsible for the performance of the
Sellers' obligations arising thereunder to the extent they relate to the
benefit received by the Buyers while such Consent-Pending Contract or
Consent-Denied Contract is or was a Consent-Pending Contract or a
Consent-Denied Contract.
(iii) A Consent-Pending Contract becomes a "Consent-Denied Contract"
if, prior to February 28, 1998, (i) such Contract terminates according to
its terms by reason of a breach of such Contract which occurred prior to
the Closing or (ii) any Party to such Contract other than the Sellers or
the Buyers expressly terminates the Buyers' enjoyment of the rights and
benefits pursuant to such Contract on the ground that such Party's consent
to the assignment of the Sellers' rights under such Contract to the Buyers
pursuant to this Agreement has not been obtained, or if such
Consent-Pending Contract remains a Consent-Pending Contract on February
28, 1998 Any such Consent-Pending Contract will remain a Consent-Denied
Contract unless and until each consent which is required to be obtained in
order to permit the assignment of the Sellers' rights under such Contract
pursuant to this Agreement has been obtained; provided that no
Consent-Denied Contract will cease to be a Consent-Denied Contract after
February 28, 1998.
In addition, at the Buyers' request, the Sellers will cooperate with the Buyers
to the extent reasonably necessary to enforce all rights under each
Consent-Pending Contract.
ARTICLE 5
PRORATIONS; ACCOUNTS RECEIVABLE
5.1 Proration of Income and Expenses. All income and expenses arising from
the conduct of the business and operation of the Stations shall be prorated
between the Buyers and the Sellers as of the Effective Time in accordance with
GAAP. Such prorations shall be based upon the principle that the Sellers shall
be entitled to all income earned and shall be responsible for all liabilities
and obligations incurred or accruing in connection with the operation of the
Stations until the Effective Time, and the Buyers shall be entitled to all
income earned and be responsible for such liabilities and obligations incurred
by the Buyers thereafter. Such prorations shall include, without limitation, all
ad valorem, real estate and other property Taxes (but excluding taxes arising by
reason of the transfer of the Assets as contemplated hereby, which shall be paid
as set forth in Article 14 of this agreement), business and license fees, music
and other license fees (including any retroactive adjustments thereof, which
amounts, if any, shall be paid by the Sellers), wages and salaries of employees
(including accruals up to the Closing Date for bonuses, commissions, sick leave,
vacation and severance pay and related payroll Taxes), utility expenses,
liabilities and obligations under all Assumed Contracts (other than Trade
Agreements), rents and similar prepaid and deferred items and all other expenses
attributable to the ownership and operation of the Stations. Trade Agreements
shall be prorated only to the extent provided in Section 5.2 of this Agreement.
To the extent not
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known, real estate Taxes shall be apportioned on the basis of Taxes assessed for
the preceding year, with a reapportionment as soon as the new tax rate and
valuation can be ascertained.
5.2 Trade Agreements. Liabilities and obligations under Trade Agreements
shall be prorated in favor of the Buyers to the extent that the total liability
of the Stations for air time under such agreements as of the Effective Time
exceeds by ten percent (10%) the total value of (as of the date of each Trade
Agreement) of the property to be received by the Buyers under such agreements
after the Effective Time. The liability of the Stations for unperformed time
under a Trade Agreement as of the Effective Time shall be valued according to
the Station's prevailing rate as of the date of such Trade Agreement. The Buyers
shall not be obligated to make any proration in favor of the Sellers with
respect to Trade Agreements, notwithstanding that the fair market value of
property to be received by the Buyers exceeds the liability for unperformed
time. The Sellers covenant that the net liability of the Stations under Trade
Agreements as of the Effective Time shall not exceed $35,000.
5.3 Payment of Proration Items. Within five (5) days prior to the Closing
Date, the Sellers shall deliver to the Buyers their reasonable good faith
estimate of a schedule of their prorations, including all estimated accrued
liabilities (which shall set forth in reasonable detail the basis for those
determinations) (the "Estimated Proration Schedule") based upon the proration as
described in Section 5.1 above. The Purchase Price payable at Closing will be
adjusted by the amount of the prorations allocable to the Sellers or the Buyers
as set forth on the Estimated Proration Schedule.
5.4 Further Adjustments. Within 60 days after the Closing Date, the Buyers
shall prepare and deliver to the Sellers an itemized list (the "Adjustment
List") of their determination of the prorations as described in Section 5.1.
Such list shall show the net amount of the increase or decrease, as applicable,
to the Purchase Price (the "Adjustment Amount"). The Adjustment List shall be
conclusive and binding upon the Sellers unless the Sellers provide the Buyers
with written notice of objection (the "Notice of Disagreement") within thirty
(30) days after the Sellers' receipt of the Adjustment List, which notice shall
state the adjustments proposed by the Sellers (the "the Sellers' Adjustment
Amount"). The Buyers shall have fifteen (15) days from receipt of a Notice of
Disagreement to accept or reject the Sellers' Adjustment Amount. If the Buyers
reject the Sellers' Adjustment Amount, and the amount in dispute exceeds five
thousand dollars ($5,000), the dispute shall be submitted within ten (10) days
to an independent "Big Six" public accounting firm mutually agreed upon by the
Buyers and the Sellers (the "Referee") for resolution, such resolution to be
made within thirty (30) days after submission to the Referee and to be final,
conclusive and binding on the Sellers and the Buyers. The Buyers and the Sellers
agree to share equally the cost and expenses of the Referee, but each Party
shall bear its own legal and other expenses, if any. If the amount in dispute is
equal to or less than five thousand dollars ($5,000), such amount shall be
divided equally between the Buyers and the Sellers. Payment by the Buyers or the
Sellers, as the case may be, of the Adjustment Amount determined pursuant to
this Section 5.3 shall be due fifteen (15) days after the last to occur of (i)
the Sellers' acceptance of the Adjustment List or failure to give the Buyers a
timely Notice of Disagreement; (ii) the Buyers' acceptance of the Sellers'
Adjustment Amount or
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failure to reject the Sellers' Adjustment Amount within fifteen (15) days of
receipt of a Notice of Disagreement; (iii) the Sellers' rejection of the
Adjustment Amount in the event the amount in dispute equals or is less than five
thousand dollars ($5,000); and (iv) notice to the Sellers and the Buyers of the
resolution of the disputed amount by the Referee in the event that the amount in
dispute exceeds five thousand dollars ($5,000). Any payment required by the
Buyers to the Sellers under this Section 5.4 shall be paid by wire transfer of
immediately available federal funds to the account of the Sellers with a
financial institution in the United States as designated by the Sellers in the
Sellers' Notice of Disagreement (or by separate notice in the event that the
Sellers do not send a Notice of Disagreement). Any payment required by the
Sellers to the Buyers under this Section 5.4 may be deducted, at the Buyers'
option, from the amount due to the Sellers pursuant to Section 5.5 below.
5.5 Collection of Accounts Receivable. At the Closing, the Sellers will
deliver to the Buyers a Schedule of Accounts Receivable (as defined below).
Subject to the terms and conditions of this Section 5.5, the Buyers agree to
collect the Accounts Receivable for the benefit of the Sellers in the manner
regularly pursued by the Buyers with respect to the collection of their own
accounts receivable and in the ordinary course of business and the Buyers shall
have no liability to the Sellers for uncollected Accounts Receivable. Prior to
the Closing, the Sellers shall collect the Accounts Receivable, and (i) from the
Closing Date through the one hundred twenty (120) day period following the Fritz
Effective Time (the "Fritz Collection Period") the Buyers shall collect the cash
proceeds from the Fritz Accounts Receivable (the "Fritz Collections") and (ii)
from the Closing Date through the one hundred twenty (120) day period following
the Effective Time (the "62nd Street Collection Period", and together with the
Fritz Collection Period, the "Collection Periods"), the Buyers shall collect the
cash proceeds from the 62nd Street Accounts Receivable (the "62nd Street
Collections", and together with the Fritz Collections, the "Collections").
Within fifteen (15) days after the end of each broadcast month during each
Collection Period, the Buyers shall deliver to the Sellers (i) a statement or
report (the "Monthly Collection Report") showing all Collections during such
broadcast month, (ii) a check or draft in an amount equal to the aggregate
amount of the Collections during such broadcast month (less the amount, if any,
deducted pursuant to Section 5.4 above), and (iii) all records of uncollected
Accounts Receivable. Within fifteen (15) days after the end of each Collection
Period, the Buyers shall deliver to the Sellers (i) a final statement or report
(with respect to each Collection Period, the "Final Collection Report") showing
all Fritz Collections or 62nd Street Collections, as the case may be, during
each Collection Period, (ii) a check or draft in an amount equal to the
aggregate amount of Fritz Collections or 62nd Street Collections, as the case
may be, (less the amount, if any, deducted pursuant to Section 5.4 above) less
any of the Fritz Collections or 62nd Street Collections, as the case may be,
which had been previously remitted to the Sellers, and (iii) all records of
uncollected Fritz Accounts Receivable or 62nd Street Accounts Receivable, as the
case may be. The Buyers or the Sellers will promptly deliver to the other a true
copy of any notice of a dispute as to the validity or enforceability of an
Account Receivable received from an account debtor. The Buyers shall not agree
to any settlement, discount or reduction of any Account Receivable without the
prior written consent of the Sellers, which consent shall not be unreasonably
withheld or delayed. The Buyers shall not assign, pledge or grant a security
interest in any of the Accounts Receivable to any third party or claim a
security
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interest or right in and to any of the Accounts Receivable, and, except as set
forth in Section 5.4 above, payment of the Collections shall not be subject to
set-off. The Buyers' collection obligation under this Section 5.5 shall not
include any obligation to bring suit, engage a collection agent or take any
other legal action for the collection of any Account Receivable. Notwithstanding
any provision of this Agreement, in no event shall the Buyers have any liability
or obligation to pay to the Sellers any amount in excess of the total amount of
the Collections. For the purposes of this Section, "Fritz Accounts Receivable"
shall mean all accounts receivable relating to or arising out of the operations
of the Stations prior to the Fritz Effective Time, "62nd Street Accounts
Receivable" shall mean all accounts receivable relating to or arising out of the
operations of the Stations from the Fritz Effective Time until the Effective
Time and "Accounts Receivable" shall mean the Fritz Accounts Receivable and 62nd
Street Accounts Receivable collectively.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
The Buyers represents and warrants to the Sellers as follows:
6.1 Organization and Standing. The Buyers are corporations which are
validly existing and in good standing (or has comparable active status) under
the laws of the State of Nevada and are qualified to do business in every
jurisdiction in which the nature of their businesses or their ownership of
property requires them to be so qualified.
6.2 Authorization and Binding Obligation. The Buyers have all necessary
corporate power and authority to enter into and perform under this Agreement and
the other Transaction Documents to which each Buyer is a Party and to consummate
the transactions contemplated hereby and thereby, and the Buyers' execution,
delivery and performance of this Agreement and the other Transaction Documents
to which each Buyer is a Party have been duly and validly authorized by all
necessary corporate action on their part. Each of this Agreement and the other
Transaction Documents to which each Buyer is a Party has been duly executed and
delivered by the Buyers and constitutes their valid and binding obligation,
enforceable against each Buyer in accordance with its respective terms, except
as limited by laws affecting creditors' rights generally or the application of
equitable principles.
6.3 FCC Qualifications. Except as set forth in Schedule 6.3, to the
Buyers' knowledge, there are no facts which, under the Communications Act of
1934, as amended, or the existing rules and regulations of the FCC, would
disqualify Licensing as assignee of the Station Licenses.
6.4 Absence of Conflicting Agreements or Required Consents. Except as set
forth in Article 4 with respect to FCC and other governmental consents or as
disclosed on Schedule 6.4, neither the execution, delivery and performance of
this Agreement or any other Transaction Document by the Buyers nor the
consummation of the transactions contemplated hereby or thereby: (a) does or
will require the consent of any third Party; (b) does or will violate any
provisions of the Buyers' organizational documents; (c) does or will violate any
applicable law, judgment, order,
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injunction, decree, rule, regulation or ruling of any Governmental Entity to
which either Buyer is a Party or by which either Buyer is bound; and (d) does or
will, either alone or with the giving of notice or the passage of time, or both,
conflict with, constitute grounds for termination of or result in a breach of
the terms, conditions or provisions of, or constitute a default under any
indentures, mortgage, lease, loan agreement or other agreement, instrument,
Contract, license or permit to which either Buyer is now subject.
6.5 Absence of Litigation. Except as set forth in Schedule 6.5, there is
no claim, litigation, proceeding or investigation pending or, to the best of the
Buyers' knowledge, threatened against either Buyer which seeks to enjoin or
prohibit, or which otherwise questions the validity of, any action taken or to
be taken in connection with this Agreement or any Transaction Document to which
either Buyer is a Party.
6.6 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of the
Buyers.
6.7 Disclosure. With respect to each Buyer, neither this Agreement, nor
any of the schedules or exhibits hereto, contain any untrue statement of a
material fact or, when considered as a whole, omit a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they were made, not misleading.
6.8 Closing Date. All of the representations and warranties contained in
this Article 6 and elsewhere in this Agreement and all information delivered in
any schedule, attachment or exhibit hereto or in any writing delivered to the
Sellers are true and correct on the date of this Agreement and will be true and
correct on the Closing Date, except to the extent that the Buyers have advised
the Sellers otherwise in writing at least one (1) day prior to the Closing Date.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND 62ND STREET
The Sellers and 62nd Street, as the case may be, represent and
warrant to the Buyers, effective as of the consummation of the transactions
contemplated by the Fritz Asset Purchase Agreement, as follows:
7.1 Organization and Standing. The Sellers and 62nd Street are
limited liability companies duly formed, validly existing and in good standing
under the laws of the State of Delaware, and are both qualified to do business
in every jurisdiction in which the nature of their respective business or their
ownership of property requires each of them to be qualified. The Sellers have
all necessary power and authority to own, lease and operate the Stations and the
Assets and to carry on the business of each Station as such business is now
being conducted and is proposed to be conducted by the Sellers between the date
hereof and the Closing Date.
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7.2 Authorization and Binding Obligation. The Sellers and 62nd Street have
all necessary power and authority to enter into and perform their obligations
under this Agreement and the other Transaction Documents to which either the
Sellers or 62nd Street is a party and to consummate the transactions
contemplated hereby and thereby, and the Sellers' and 62nd Street's execution,
delivery and performance of each of this Agreement and the other Transaction
Documents to which either the Sellers or 62nd Street is a party and the
transactions contemplated hereby and thereby has been duly and validly
authorized by all necessary action on each of their part. Each of this Agreement
and the other Transaction Documents to which the Sellers or 62nd Street is a
party has been duly executed and delivered by the Sellers and/or 62nd Street, as
the case may be, and constitutes their valid and binding obligation, enforceable
against the Sellers and/or 62nd Street, as the case may be, in accordance with
its respective terms, except as limited by laws affecting the enforcement of
creditors' rights generally or the application of equitable principles.
7.3 Absence of Conflicting Agreements or Required Consents. Except as set
forth in Article 4 with respect to FCC and other governmental consents and
except as set forth on Schedule 7.3, the execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Sellers are a
party and the consummation of the transactions contemplated hereby and thereby
by the Sellers (a) does not and will not require the consent of any third party
(except with respect to Contracts as disclosed in Schedule 7.8); (b) does not
and will not violate any provisions of the Sellers' organizational documents;
(c) does not and will not violate any applicable law, judgment, order,
injunction, decree, rule, regulation or ruling of any Governmental Entity to
which the Sellers are a party or by which they or the Assets are bound; (d) does
not and will not, either alone or with the giving of notice or the passage of
time, or both, conflict with, constitute grounds for termination of or result in
a breach of the terms, conditions or provisions of, or constitute a default
under any Contract, agreement, instrument, license or permit to which either the
Sellers or the Assets are now subject; and (e) does not and will not result in
the creation of any Lien on any of the Assets.
7.4 FCC Authorizations.
(a) Schedule 7.4 contains a true and complete list of the Station
Licenses, including their expiration dates, and there are no other licenses,
permits or other authorizations from Governmental Entities or regulatory
authorities required for the lawful conduct of the business and operation of any
Station in the manner and to the full extent that such Station is now conducted.
The Sellers have delivered to the Buyers true and complete copies of the Station
Licenses, including any and all amendments and other modifications thereto. The
Station Licenses and other licenses, permits and authorizations listed in
Schedule 7.4 were validly issued and are validly held by the Sellers, are in
full force and effect and are unimpaired by any act or omission of the Sellers,
their shareholders, officers, directors, employees or agents, and except as
disclosed in Schedule 7.4, none of the foregoing is subject to any restriction
or condition which would limit in any respect the full operation of the Stations
as now operated. The Sellers have no reason to believe that the FCC will not
renew the Station Licenses in the ordinary course.
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(b) Except as disclosed in Schedule 7.4 and except for the FCC
Applications, there are no applications, complaints or proceedings pending or,
to the Sellers' Knowledge, threatened before the FCC relating to the business or
operation of any Station or that may result in the revocation, modification,
non-renewal or suspension of any of the Station Licenses, the denial of any
pending application or the imposition of any fines, forfeitures, or other
administrative actions by the FCC with respect to any Station or such Station's
operation other than proceedings affecting the broadcasting industry generally.
Except as disclosed in Schedule 7.4, the Sellers are not subject to any
outstanding judgment or order of the FCC relating to any Station. Each Station
is being operated in accordance with the terms and conditions of the Station
Licenses which are applicable to such Station, and all rules, regulations and
policies of the FCC. All ownership reports, employment reports and other reports
and documents required to be filed by the Sellers with the FCC have been timely
filed; such items as are required to be placed in each Station's local public
files have been placed in such files; all proofs of performance and measurements
that are required to be made by the Sellers with respect to each Station's
transmission facilities have been completed and filed at the applicable Station;
and all information contained in the foregoing documents is true, complete and
correct.
(c) To the Sellers' Knowledge, there are no facts which, under the
Communications Act of 1934, as amended, or the existing rules and regulations of
the FCC, would disqualify Toledo License as the assignor of any of the Station
Licenses.
7.5 Title to and Condition of Real Property.
(a) Schedule 7.5(a) contains descriptions of all of the fee simple
interests in real property owned by the Sellers (the "Owned Real Property").
With respect to each parcel of Owned Real Property: (i) as of Closing, such
parcel is free and clear of all Liens (other than any Permitted Lien) and the
Sellers have good and marketable fee simple title thereto; (ii) except as set
forth in Schedule 7.5(b), there are no leases, subleases, licenses, concessions,
or other agreements, written or oral, granting to any Person the right of use or
occupancy of any portion of such parcel; and (iii) there are no outstanding
options or rights of first refusal to purchase such parcel or any portion
thereof or interest therein. The Real Property listed in Schedule 7.5(a) and
Schedule 7.5(b) includes all such properties necessary to conduct the business
and operation of the Stations as now conducted.
(b) The leases and subleases described on Schedule 7.5(b) constitute
all of the leases to which the Sellers are a party (the "Leases"). Each Lease is
in full force and effect and the Sellers hold a valid and existing leasehold or
subleasehold interest thereunder in the real property (including any tower
space) which is subject thereto (collectively, the "Leased Real Property" and,
together with the Owned Real Property, the "Real Property"). The Real Property
constitutes all of the interests in real property held or used by the Sellers
and the Stations. The Sellers have delivered to the Buyers complete and accurate
copies of each of the Leases (excluding any leases relating to the Corporate
Headquarters), in each case including all modifications and amendments thereto.
With respect to each Lease: (i) such Lease is legal, valid, binding, enforceable
and in full force and effect; (ii) subject to obtaining any consent described on
Schedule 7.3, the consummation of the Closing
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Transactions will not cause a breach or default under such Lease or otherwise
cause such Lease to cease to be legal, valid, binding, enforceable and in full
force and effect on substantially the same terms as are presently in effect;
(iii) the Sellers are not in breach or default under, and no event has occurred
which, with notice or lapse of time, would constitute such a breach or default
of the Sellers or permit termination, modification or acceleration of, such
Lease; (iv) to the Sellers' Knowledge, no other Party to such Lease is in breach
or default under, and no event has occurred which, with notice or lapse of time,
would constitute such a breach or default or permit termination, modification or
acceleration of, such Lease; (v) the Sellers have not (and, to the Sellers'
Knowledge, no other party to such Lease has) repudiated any provision thereof;
(vi) there are no disputes, oral agreements, or forbearances in effect as to
such Lease; (vii) such Lease has not been modified in any respect, except to the
extent that such modifications are disclosed by the documents delivered to the
Buyers; and (viii) the Sellers have not assigned, transferred, conveyed,
mortgaged, deeded in trust or caused any Lien (other than any Permitted Lien) to
exist with respect to any interest of the Sellers in such Lease.
(c) The Real Property used by the Sellers in the operation of the
Stations conforms in all material respects to all lease restrictions,
restrictive covenants, building codes, and federal, state and local laws,
regulations and ordinances, and the Real Property is zoned for the various
purposes for which it is currently being used. The Sellers have no knowledge of
any pending, threatened or contemplated action to take by eminent domain or
otherwise to condemn any part of the Real Property. The transmitting towers, guy
anchors, transmitter buildings and related improvements used by the Sellers in
the operation of the Stations are located entirely on the Real Property.
7.6 Condition and Operation of Improvements. To the Sellers' Knowledge, as
to each parcel of Owned Real Property and as to each parcel of Leased Real
Property: (i) all components of all buildings, structures and other improvements
included upon or within such Owned Real Property or Leased Real Property (the
"Improvements"), including the roofs and structural elements thereof and the
heating, ventilation, air conditioning, air pollution emission capture and
abatement, plumbing, electrical, mechanical, sewer, waste water and paving and
parking equipment systems and facilities included therein, are in reasonably
adequate condition to operate such facilities as currently used, occupied or
operated, and there are no facts or conditions affecting any of the Improvements
which would, individually or in the aggregate, interfere in any significant
respect with the use, occupancy or operation thereof as currently used or
proposed by the Sellers to be used, occupied or operated; (ii) all Improvements
are in good working condition and repair, are covered by standard insurance
policies, and comply with the rules and regulations of the FCC and all other
applicable federal, state and local statutes, ordinances, rules and regulations,
(iii) there are no structural deficiencies in any buildings located upon any
Owned Real Property or Leased Real Property; and (iv) no Improvement or portion
thereof is dependent for its access, operation or utility on any land, building
or other improvement not included in any Owned Real Property or Leased Real
Property.
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7.7 Title to and Condition of Personal Property. Schedule 7.7 contains a
list of the principal items (and a summary description of the other items) of
tangible personal property owned, leased or held by the Sellers and used in the
conduct of the business and operation of the Stations ("Personal Property").
Except as described in Schedule 7.7, the Sellers have good and marketable title
or valid leasehold interest in all Personal Property (and to all other tangible
personal property to be transferred to the Buyers hereunder) free and clear of
all Liens (other than any Permitted Lien). Except as described in Schedule 7.7,
all of the items of tangible personal property and facilities included in the
Assets are in good operating condition and repair, covered by standard insurance
policies, have been properly maintained in accordance with industry standards,
are performing satisfactorily and in accordance with standards of good
engineering practice and are available for immediate use in the conduct of the
business and operation of the Stations. All such tangible personal property and
facilities are in compliance in all material respects with the rules and
regulations of the FCC and with all other applicable federal, state and local
statutes, ordinances, rules and regulations. The Personal Property listed in
Schedule 7.7 includes all such properties necessary to conduct the business and
operation of each Station as such Station's business is now conducted.
7.8 Contracts.
(a) Except for the Transaction Documents and any Contract described
on Schedule 7.8, the Sellers are not a party to or bound by, and neither the
Sellers nor any Station is subject to, any of the following Contracts, whether
written or oral:
(i) collective bargaining agreement or contract with any labor union
or any bonus, pension, profit sharing, retirement or any other form of
deferred compensation plan or any hospitalization insurance or similar
plan or practice;
(ii) contract for the employment or engagement of any individual
employee or other Person (including as an independent contractor or on a
consulting basis) other than at the will of the Sellers, or any agreement
to provide severance benefits upon any termination of employment or other
engagement;
(iii) agreement, indenture or other Contract placing a Lien (other
than any Permitted Lien) on any Asset;
(iv) agreement with respect to the lending or investing of funds by
the Sellers;
(v) network affiliation, license or royalty agreement;
(vi) Time Sales Contract;
(vii) guaranty of any obligation of any other Person, other than
endorsements made for collection made in the ordinary course of business;
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(viii) sales representation agreement;
(ix) agreement with any rating service or intellectual property
licensing organization;
(x) lease or agreement under which it is lessee of, or holds or
operates, any personal property owned by any other party calling for
payments in excess of $10,000 annually or entered into outside of the
ordinary course of business;
(xi) lease or agreement under which it is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by it;
(xii) agreement, contract or understanding pursuant to which the
Sellers subcontract work to third parties;
(xiii) any Trade Agreement; or
(xiv) other agreement material to the business or operation of the
Stations, whether or not entered into in the ordinary course of business.
(b) The Sellers have delivered to the Buyers true and complete
copies of all written Contracts and other items which are described or are
required to be described on Schedule 7.8, or true and complete memoranda
describing all oral Contracts, in each case, including all amendments and other
modifications thereto, and all liabilities and obligations under such Contracts
can be ascertained from such copies or memoranda. Except as disclosed in
Schedule 7.8, all Contracts are in full force and effect and are valid, binding
and enforceable by the Sellers in accordance with their respective terms, except
as limited by laws affecting creditors' rights or equitable principles
generally. The Sellers have not granted or been granted any waiver or
forbearance with respect to any of the Contracts. The Sellers have performed all
obligations required to be performed by them in connection with the items which
are described or required to be described on Schedule 7.8 and are not in receipt
of any claim of default under any such item. To the Sellers' Knowledge, no other
contracting party is in default under any of the Contracts. Except as set forth
in Schedule 7.3, the Sellers have full legal power and authority to assign their
rights under the Contracts to the Buyers in accordance with this Agreement on
terms and conditions no less favorable than those in effect on the date hereof,
and such assignment will not require the consent of any third party or affect
the validity, enforceability or continuity of any of the Contracts. The
Contracts listed on Schedule 7.8 include all those necessary to conduct the
business and operation of each Station as such business is now conducted.
7.9 Employee Benefits.
(a) Schedule 7.9(a) contains a true and complete list of all
persons employed at each Station, each such person's job title or the capacity
in which employed and a description of all
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compensation including bonus arrangements and employee benefit plans or
arrangements applicable to each such employee. The Sellers are not a Party to
any agreement, written or oral, with salaried or non-salaried employees except
as described on Schedule 7.9(a). Except as described on Schedule 7.9(a), the
Sellers have no knowledge that any employee identified on Schedule 7.9(a)
currently plans to terminate employment, whether by reason of the transactions
contemplated by this Agreement or otherwise.
(b) The Sellers are not a party to any collective bargaining
agreement covering any of their employees at the Stations. The Sellers are not a
party to any contract with any labor organization, nor have the Sellers agreed
to recognize any union or other collective bargaining unit, nor has any union or
other collective bargaining unit been certified as representing any of the
Sellers' employees at the Stations. The Sellers have no knowledge of any
organizational effort currently being made or threatened by or on behalf of any
labor union with respect to any employees of the Sellers at the Stations. There
are no unfair labor practice charges pending against the Sellers; there are no
pending or, to the Sellers' Knowledge, threatened strikes or arbitration
proceedings involving labor matters affecting the Sellers; and, except as
disclosed on Schedule 7.9(b), the Sellers have not experienced any strikes, work
stoppage or other significant labor difficulties of any nature at the Stations.
(c) Except as set forth in Schedule 7.9(c), the Sellers are not a
party to or bound by any employee benefit plan within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not such plan is otherwise exempt from the provisions of
ERISA, and no employee or spouse of an employee is entitled to any benefits that
would be payable pursuant to any such plan. Except pursuant to a plan or
agreement listed on Schedule 7.9(c), the Sellers have no fixed or contingent
liability or obligation to any person now or formerly employed at the Stations,
including, without limitation, pension or thrift plans, individual or
supplemental pension or accrued compensation arrangements, contributions to
hospitalization or other health or life insurance programs, incentive plans,
bonus arrangements and vacation, sick leave, disability and termination
arrangements or policies, including workers' compensation policies. The Sellers
have administered any plan listed on Schedule 7.9(c) in accordance with the
terms of such plan and provisions of ERISA and if applicable, the Internal
Revenue Code. The Buyers shall not assume or hereby become obligated to pay any
debt, obligation or liability arising from the Sellers' employee benefit plans,
or any other employment arrangement, except as specifically provided in Section
3.1, and coverage under such plans and arrangements shall remain the
responsibility of the Sellers.
(d) The Sellers have complied with all laws relating to employment,
including, without limitation, laws relating to safety, health, equal employment
opportunity, wages, hours, collective bargaining, unemployment insurance,
workers' compensation, pension, welfare and benefit plans (including ERISA) and
the payment and withholding of income, social security, unemployment, disability
and other taxes. To the Sellers' Knowledge, there is no dispute between the
Sellers and any of their past or present employees (nor any job applicant)
related to
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discrimination, compensation, severance pay, vacation or pension benefits,
except as disclosed in Schedule 7.9(d).
7.10 Intellectual Property. Schedule 7.10 lists all copyrights,
trademarks, trade names, service marks, licenses, patents, permits, jingles,
privileges, and other similar intangible property rights and interests
(exclusive of those required to be listed in other Schedules hereto) applied
for, issued to or owned by the Sellers, or under which the Sellers are licensed
or franchised, and used or useful in the conduct of the business and operation
of the Stations ("Intellectual Property"), all of which rights and interests are
issued to or owned by the Sellers, or if licensed or franchised to the Sellers,
are valid and uncontested. The Sellers have delivered to the Buyers copies of
all documents, if any, establishing such rights, licenses or other authority.
There is no pending or, to the Sellers' Knowledge, threatened proceeding or
litigation affecting or with respect to the Intellectual Property. The Sellers
have received no notice and has no knowledge of any infringement or unlawful use
of such property. The properties listed in Schedule 7.10 include all such
properties necessary to conduct the business and operation of the Stations as
now conducted.
7.11 Litigation. The Sellers are not subject to any judgment, award,
order, writ, injunction, arbitration decision or decree. Except as disclosed on
Schedule 7.11, there is no claim, litigation, proceeding or investigation
pending or, to the Sellers' Knowledge, threatened against the Sellers or the
Stations in any federal, state or local court, or before any administrative
agency, arbitrator or other tribunal authorized to resolve disputes. Except as
disclosed on Schedule 7.11, there is no claim, litigation, proceeding or
investigation pending or, to the Sellers' Knowledge, threatened against the
Sellers or the Stations, which might have a material adverse effect upon the
business assets or condition (financial or otherwise) of the Sellers or the
Stations or which seek to enjoin or prohibit, or otherwise questions the
validity of, any action taken or to be taken in connection with this Agreement.
7.12 Compliance With Laws. Each of the Sellers and its employees have
complied and is in compliance in all material respects with all laws,
regulations and governmental orders applicable to the conduct of the business
and operation of the Stations (including the Sellers' broadcasting, production,
promotion, marketing and sales activities) or any Assets, and the Sellers'
present use of the Assets does not violate any such laws, regulations or orders.
The Sellers have not received any notice asserting any noncompliance with any
applicable statute, rule, or regulation, in connection with the business or
operation of any Stations. The Sellers are not now subject (nor have the Sellers
been subject during the previous five years) to any investigation, penalty
assessment, or audit (in each case of which the Sellers have been made or became
aware) by any Governmental Entity or to any other allegation that the Sellers
(including any agent, representative or broker acting on behalf of the Sellers)
violated the regulations of any such Governmental Entity or made a material
false statement or omission to any Governmental Entity.
7.13 Interests in Clients, Suppliers, Etc. Except as disclosed in Schedule
7.13, neither the Sellers nor any of their members, partners, officers, or
Affiliates or members, partners, shareholders, officers or directors thereof,
possesses, directly or indirectly, any financial interest in,
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or as a member, partner, director, officer or employee of, any partnership,
corporation, firm, limited liability company, association or business
organization which is a client, supplier, customer, lessor, lessee or competitor
of the Stations or has a banking relationship involving the Stations. Ownership
of securities of a company whose securities are registered under the Securities
Exchange Act of 1934 not in excess of five percent (5%) of any class of such
securities shall not be deemed to be a financial interest for purposes of this
Section 7.13. All Real Property, Personal Property, Contracts and Intellectual
Property used or necessary in the business or operation of the Stations are
owned, leased or held by the Sellers, and no Affiliate of the Sellers owns or
leases property or is a Party to any lease or agreement affecting or relating to
the operation of the Stations other than as disclosed in Section 7.13.
7.14 Financial Statements. The Sellers have supplied the Buyers with
copies of the audited balance sheets of Fritz Broadcasting, Inc. ("Fritz") and
the related statements of income and cash flows for Fritz's fiscal years ending
December in each of 1995 and 1996 which have been prepared in accordance with
GAAP (the "Audited Financials"), and the unaudited balance sheet of the Stations
as of the most recently completed broadcast month prior to the execution of this
Agreement and the related operating statements for the fiscal period then ended
(the "Latest Balance Sheet" and together with the "Audited Financials", the
"Financial Statements"). The Financial Statements accurately reflect and present
fairly the financial position and the results of operations of the Stations as
of the dates and/or the periods indicated. The Stations' last twelve months
broadcast cash flow as of Closing shall not be more than 10% lower than the
Stations' last twelve months broadcast cash flow as of the Latest Balance Sheet.
Except for the transactions contemplated herein, the Sellers have operated the
Stations in the ordinary and normal course of business since December 31, 1996.
Except for (a) liabilities as and to the extent reflected or reserved against in
the Financial Statements, and (b) liabilities incurred since the date of the
Latest Balance Sheet in the ordinary and normal course of business, the Sellers
have no material liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise.
7.15 Insurance. Schedule 7.15 lists all insurance policies held by the
Sellers relating to their business, properties and employees, together with the
policy limit, the type of coverage, the location of the property covered, annual
premium, premium payment dates and expiration date of each of the policies.
Copies of all such insurance policies have been furnished to the Buyers. All
such insurance policies are in full force and effect.
7.16 Taxes. The Sellers have duly, timely and in the required manner filed
all federal, state, local and foreign income, franchise, sales, use, property,
excise, payroll and other tax returns and forms required to be filed, and has
paid in full or discharged all taxes, assessments, excises, interest, penalties,
deficiencies and losses required to be paid. No event has occurred which could
impose on the Buyers any liability for any taxes, penalties or interest due or
to become due from the Sellers from any taxing authority.
7.17 Bankruptcy. No insolvency proceedings of any character, including
without limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors,
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voluntary or involuntary, affecting the Sellers, any Station or any of the
Assets, are pending or threatened, and the Sellers have not made any assignment
for the benefit of creditors or taken any action in contemplation of or which
would constitute the basis for the institution of such insolvency proceedings.
7.18 Subsidiaries; Investments. The Assets do not include any shares of
capital stock or any other security, interest or investment in, or loan to
(other than extensions of trade credit in the ordinary course of business), any
other Person or any right which is exercisable or exchangeable for or
convertible into any capital stock or other security, interest or investment in
any other Person.
7.19 Environmental Matters. Except as set forth on Schedule 7.19, to the
Sellers' Knowledge, (a) No Hazardous Substance (i) is or has been used, treated,
stored, disposed of, released, spilled, generated, manufactured, transported or
otherwise handled on or from the Real Property, (ii) has been spilled, released
or disposed of on property adjacent to the Real Property, or (iii) has otherwise
come to be located on or under the Real Property, in any case in a manner that
has given rise or would give rise to liability under Environmental Laws in all
material respects, (b) the Real Property and all operations on the Real Property
have complied with and are in compliance with all Environmental Laws in all
material respects, and (c) the Sellers have obtained all environmental, health
and safety permits necessary for the operation of the Stations, and all such
permits are in full force and effect, and the Sellers have complied with and are
in compliance with the terms and conditions of all such permits. No outstanding
liens have been placed on the Real Property under any Environmental Laws. The
Sellers have not received any notice, and are not aware, of any administrative
or judicial investigations, proceedings or actions with respect to alleged or
proven liability under or violations of Environmental Laws involving the
Sellers, or any tenants or sub-tenants of the Sellers, or otherwise involving
the Real Property or the operations on the Real Property. The Sellers, any
tenants or sub-tenants of the Sellers, and the Real Property are in compliance
with all federal and state statutes and regulations relating to Asbestos, and no
Asbestos Containing Material is present in any of the improvements on the Real
Property or is otherwise located on the Real Property. There are no underground
storage tanks, whether in use or closed, on or under the Real Property, and no
PCB is present on the Real Property. No PCB is used in the Personal Property.
The Sellers have not incurred any liability under CERCLA or any other
Environmental Law.
7.20 UCC Financing Statements. All of the Assets are and have been located
in the State of Ohio since the Assets were acquired by the Sellers. All
financing statements filed by any Party with respect to the Assets are listed in
Schedule 7.20.
7.21 Disclosure. Neither this Agreement, nor any of the schedules or
exhibits hereto, contains any untrue statement of a material fact or, when
considered as a whole, omits a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading.
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7.22 Brokerage. Other than fees owing to Richard A. Foreman Associates,
Inc. which fees will be paid by the Sellers, there are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Sellers.
7.23 HSRA Requirements. 62nd Street is not controlled by any other
entities as "control" is defined in the HSRA except for 62nd Street Holding,
L.L.C. and Bain/62nd Street, L.L.C. Neither 62nd Street Holding, L.L.C. or
Bain/62nd Street, L.L.C. have annual net sales or total assets of one hundred
million dollars ($100,000,000) or more for purposes of reportability under the
HSRA.
7.24 Fritz Asset Purchase Agreement. The Sellers have no Knowledge of a
material breach of any representation or covenant related to the Stations made
by Fritz Broadcasting, Inc. in the Fritz Asset Purchase Agreement.
7.25 Closing Date. All of the representations and warranties contained in
this Article 7 and elsewhere in this Agreement and all information delivered to
the Buyers in any schedule, attachment or exhibit hereto are true and correct as
of the consummation of the transactions contemplated by the Fritz Asset Purchase
Agreement and will be true and correct on the Closing Date, except to the extent
that the Sellers have advised the Buyers otherwise in writing at least one (1)
day prior to the Closing.
ARTICLE 8
COVENANTS OF THE BUYERS
8.1 Notification. The Buyers shall notify the Sellers of any litigation,
arbitration or administrative proceeding pending or, to its knowledge,
threatened against either Buyer which challenges the transactions contemplated
hereby, including any challenges to the FCC Application, and shall use
reasonable efforts to remove any such impediment to the transactions
contemplated by this Agreement.
8.2 No Inconsistent Action. The Buyers shall not take any action
inconsistent with its obligations under this Agreement or that would hinder or
delay the consummation of the transactions contemplated by this Agreement.
ARTICLE 9
COVENANTS OF THE SELLERS
9.1 Interim Operation. Between the date of this Agreement and the Closing
Date, except as expressly permitted by this Agreement or with the prior written
consent of the Buyers:
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(a) the Sellers shall conduct the business and operations of the
Stations solely in the ordinary and normal course of business consistent with
past practice, with the intent of preserving the ongoing operations and assets
of the Stations;
(b) the Sellers shall not sell, assign, lease or otherwise transfer
or dispose of any of the Assets, except for assets consumed or disposed of in
the ordinary course of business, where no longer used or useful in the business
or operation of the Stations, in which event the same shall be replaced with
assets of equal or greater value and utility and the Stations' inventories of
spare parts and expendable supplies shall be maintained at levels consistent
with past practices;
(c) the Sellers shall not create, assume or permit to exist any
claim, liability, or Lien upon the Assets, except for those in existence on the
date of this Agreement, all of which will be removed on or prior to the Closing
Date unless they are to be assumed by the Buyers in accordance with Section 3.1
of this Agreement;
(d) the Sellers shall operate the Stations in accordance with the
FCC's rules and regulations, the Station Licenses and all other applicable laws,
regulations, rules and orders, and shall not cause or permit by any act, or
failure to act, any of the Station Licenses to expire, be surrendered, adversely
modified, or otherwise terminated, or fail to prosecute with due diligence any
pending application to the FCC;
(e) the Sellers shall not waive any material right under any Assumed
Contract;
(f) the Sellers shall not, without the Buyers' consent, enter into
or renew (i) any Assumed Contract that involves payment by or to the Sellers of
Five Thousand Dollars ($5,000) or more, other than a Time Sales Agreement, (ii)
any Assumed Contract for a term extending beyond the Closing Date, other than a
Time Sales Agreement or (iii) enter any Trade Agreements without the Buyers'
prior written consent;
(g) the Sellers shall timely make all payments required to be paid
under any Assumed Contract consistent with past practices and otherwise pay all
liabilities and satisfy all obligations when such liabilities and obligations
consistent with past practices;
(h) the Sellers shall not increase or agree to increase the
compensation, bonuses or other benefits for employees of the Stations, except as
may be required under Assumed Contracts disclosed in Schedule 7.8 or consistent
with past employee compensation and promotion practices, and shall pay all
commissions due with respect to accounts receivable in accordance with past
practices;
(i) the Sellers shall, in accordance with the Stations' personnel
practices and policies, use its best efforts to maintain the employment at the
Stations and to renew the existing employment contracts, if any, of the
employees listed on Schedule 7.9, and neither the Sellers nor any Affiliate of
the Sellers shall solicit, directly or indirectly, through any agent or
otherwise, the
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employment of, or hire, any of the employees listed on Schedule 7.9; provided,
however, that notwithstanding the foregoing, the Sellers may solicit or hire any
Excluded Employees listed on Schedule 10.5;
(j) the Sellers shall use their best efforts to preserve the
operations, organization and reputation of the Stations intact, to preserve the
goodwill and business of the Stations' advertisers, suppliers, and others having
business relations with the Stations, and suppliers, and others having business
relations with the Stations, and to continue to conduct financial operations of
the Stations, including their credit and collection policies, with no less
effort, as in the prior conduct of the business of the Stations;
(k) the Sellers shall remove, cure, correct and repair prior to the
Closing any material deficiencies in the Assets and any violations under
applicable statutes, rules, regulations, engineering standards or building, fire
or zoning laws or regulations, which are inconsistent with the Sellers'
representations, warranties and covenants contained in this Agreement;
(l) the Sellers shall maintain monthly cash advertising and
promotional expenditures for the Stations at levels that are consistent with
past practices;
(m) the Sellers shall make capital improvements reasonably required
to continue the operations of the Stations consistent with past practices;
(n) the Sellers shall maintain insurance policies on the Stations
and the Assets comparable to those policies listed on Schedule 7.15; and
(o) the Sellers shall maintain its books and records in accordance
with GAAP and the methods used to prepare the Financial Statements and shall
furnish the Buyers, within fifteen (15) days of the close of each broadcast
month, a profit and loss statement in detail by line for such month.
9.2 Access to Station. Upon reasonable prior notice from the Buyers to the
Sellers, between the date of this Agreement and the Closing Date, the Sellers
shall give the Buyers and the Buyers' counsel, accountants, financing parties,
engineers and other representatives and each of their respective agents,
reasonable access during normal business hours to all of the Sellers'
properties, records, employees, sales representatives, current and former
independent accountants of the Sellers, in each case relating to the Stations,
and shall furnish the Buyers with all information related to the Stations that
the Buyers reasonably request. The Buyers' access under this Section 9.2 shall
be exercised in such a manner as to not interfere unreasonably with the business
of the Stations.
9.3 Exclusivity. Between the date of this Agreement and the Closing,
neither the Sellers nor any Affiliate of the Sellers shall directly or
indirectly (a) solicit, initiate or encourage submission of any proposal or
offer from any Person (including any of them) relating to any (i) liquidation,
dissolution or recapitalization of, (ii) merger or consolidation with or into,
(iii) acquisition or
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purchase of any material asset (or any material portion of the assets) of, or
any equity interest in, or (iv) similar transaction or business combination
involving, the Sellers or the Stations, or (b) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or otherwise cooperate in any way, or assist or participate in, facilitate
or encourage, any effort or attempt by any person to do or seek any of the
foregoing. The Sellers shall promptly notify the Buyers in writing if any such
offer or proposal is made to the Sellers after the date of this Agreement and
shall advise the Buyers of the identity of the person making such offer or
proposal and of the content of such offer or proposal.
9.4 Notification
(a) The Sellers shall notify the Buyers of any litigation,
arbitration or administrative proceeding pending or, to their Knowledge,
threatened against the Sellers or the Stations which challenges the transactions
contemplated hereby, including any challenges to the FCC Application, and shall
use its best efforts to take such steps as may be necessary to remove any such
impediment to the transactions contemplated by this Agreement.
(b) Between the date of this Agreement and the Closing Date, the
Sellers shall notify the Buyers if the regular broadcast transmission of any
Station from their main broadcasting antenna at full authorized effective
radiated power is interrupted or impaired for a period of more than three (3)
consecutive hours or for an aggregate of six (6) hours in any continuous two (2)
day period or twelve (12) hours in any single thirty (30) day period.
(c) Between the date of this Agreement and the Closing, the Sellers
shall keep the Buyers reasonably informed of all material operational matters
and business developments with respect to each Station.
9.5 Third-Party Consents. The Sellers shall use commercially reasonable
efforts to obtain at their own expense the consent of any third parties
necessary for (i) the assignment to the Buyers of any Assumed Contract and (ii)
all other consents required to consummate the transactions contemplated under
this Agreement.
9.6 Estoppel Certificates; Consent and Waiver. The Sellers shall use
commercially reasonable efforts to obtain estoppel certificates and consents and
waivers from any landlord with respect to the Real Property or other lessor of
any Asset. Each estoppel certificate shall identify with specificity the lease,
and any amendments or modifications thereto, and the amount of the monthly
payments due thereunder, and shall contain the landlord's or lessor's
certification for the benefit of the Buyers that the lease is in full force and
effect, that there are no uncured defaults with respect to such lease and that
the Sellers have been and are in full compliance with all of the Sellers'
obligations thereunder. Each consent and waiver shall be in form and substance
satisfactory to the Buyers' lenders.
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9.7 Closing Delivery. On the Closing Date, the Sellers shall transfer,
convey, assign and deliver to the Buyers the Assets as provided in Article 1 of
this Agreement.
9.8 Payment of Indebtedness; Financing Statements. The Sellers shall
secure the release of all Liens on the Assets that secure the payment of any
indebtedness and shall deliver to the Buyers at the Closing releases or
terminations under the Uniform Commercial Code and any other applicable federal,
state or local statutes or regulations of any financing or similar statements
filed against any Assets in (a) the jurisdictions in which the Assets are and
have been located since such Assets were acquired by the Sellers, and (b) any
other location specified or required by applicable federal, state or local
statues or regulations.
9.9 No Inconsistent Action. The Sellers shall not taken any action which
is inconsistent with its obligations under this Agreement or that would hinder
or delay the consummation of the transactions contemplated by this Agreement.
ARTICLE 10
JOINT COVENANTS
10.1 Conditions. If any event should occur between the date hereof and the
Closing, either within or without the control of any Party hereto, which would
prevent fulfillment of the conditions upon the obligations of any Party to
consummate the transactions contemplated by this Agreement, the parties shall
use their reasonable efforts to cure the event as expeditiously as possible.
10.2 Best Efforts. Between the date of this Agreement and the Closing,
each Party shall use its best efforts to cause the fulfillment at the earliest
practicable date of all of the conditions to the obligations of the other Party
to consummate the sale and purchase under this Agreement.
10.3 Control of Stations. Between the date of this Agreement and the
Closing, the Buyers shall not, directly or indirectly, control, supervise or
direct the operations of the Stations. Such operations shall be the sole
responsibility of Fritz prior to the Fritz Effective Time and of the Sellers
prior to Closing and, subject to the provisions of Article 9, shall be in their
complete discretion.
10.4 Confidentiality. The Buyers and the Sellers shall each keep
confidential all information obtained by them with respect to the other in
connection with this Agreement, and if the transactions contemplated hereby are
not consummated for any reason, each shall return to the other without retaining
a copy thereof, any schedules, documents or other written information, including
all financial information, obtained from the other in connection with this
Agreement and the transactions contemplated hereby, except where such
information is known or available through other lawful sources or where such
Party is advised by counsel that its disclosure is required in accordance with
applicable law.
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10.5 Continued Employment of Stations Employees.
(a) On the Closing Date, all active employees of the Sellers
identified on Schedule 7.8, other than the employees identified on Schedule 10.5
(the "Excluded Employees"), shall become employees of Broadcasting ("Transferred
Employees"). The terms and conditions of Broadcasting's employment of the
Transferred Employee shall be at will employment with such benefits as
Broadcasting deems appropriate; provided, however, that Broadcasting shall have
no obligation (except as required by law) to provide immediate medical insurance
coverage for preexisting conditions and shall be entitled to terminate any
Transferred Employee after the Closing; and provided, further, that Broadcasting
shall comply with the terms of any Assumed Contract relating to any Transferred
Employee listed on Schedule 7.8 and assumed by the Buyers pursuant to Section
3.1.
(b) Except to the extent required by law, Broadcasting shall not be
required to employ any employee who, on the Closing Date, shall be suffering
from any temporary or permanent disability of a nature which prevents such
employee even with reasonable accommodation from fully performing the essential
functions of his or her employment duties, and such employee shall not be deemed
to be a Transferred Employee hereunder. On the Closing Date, the Sellers shall
provide Broadcasting with a list of any employees identified on Schedule 7.9(b)
known by the Sellers to be so disabled at such time.
(c) Except as otherwise expressly set forth herein, the Sellers
shall be solely responsible for all salaries and other compensation which will
or may become payable to any Transferred Employee in respect of any period of
employment by the Sellers prior to the Effective Time, and Broadcasting shall be
solely responsible for any salaries and other compensation which will or may
become payable to any Transferred Employee in respect of any period on and after
the Effective Time.
(d) For purposes of determining the amount of any entitlement of any
Transferred Employee under Broadcasting's vacation policy, Broadcasting will
take into account and credit such Transferred Employee's length of service with
the Sellers as well as with Broadcasting, and Broadcasting will also assume
responsibility for the accrued but unused vacation of all Transferred Employees.
As part of the proration process described in Section 5.1, the Sellers shall
make a payment to the Buyers equal to the value of the accrued, but unused
vacation entitlements of all Transferred Employees. Broadcasting shall not
assume any obligations under the Sellers' existing sick leave or severance
policies, except for such obligations set forth in written Assumed Contracts.
(e) No provisions of this Agreement shall create any third party
beneficiary rights of any employee or former employee (including any beneficiary
or dependent thereof of the Sellers in respect of continued employment (or
resumed employment) with the Sellers or with Broadcasting.
(f) The Sellers shall cooperate with Broadcasting in all reasonable
respects in connection with Broadcasting's employment of the Transferred
Employees. Without limiting the
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generality of the foregoing, for a period commencing on the date of this
Agreement and ending five (5) years following the Closing Date, neither the
Sellers nor any of its Affiliates shall take any action to induce any
Transferred Employee to enter into or to continue in the employment of the
Sellers or its Affiliates in a position other than as an employee of the
Stations.
(g) With respect to the 401(k) plan maintained by the Sellers ("the
Sellers' 401(k) Plan"), all Transferred Employees shall be fully vested in their
account balances as of the Closing Date and the Sellers shall contribute on
behalf of each Transferred Employee the matching and other contributions, if
any, attributable to the 1997 plan year (based on the Transferred Employees'
compensation earned and contributions made prior to the Closing Date). Within a
reasonable time following the Closing Date, the Sellers shall cause the account
balances of the Transferred Employees under the Sellers' 401(k) Plan to be
distributed to the Transferred Employees in accordance with the terms of such
plan and Section 401(k)(10) of the Code. For a reasonable period following the
Closing Date, the Sellers shall continue to administer loans under the Sellers'
401(k) Plan with respect to accounts not transferred to Broadcasting in a direct
rollover to a plan, if any, maintained by Broadcasting (the "Buyers' Plan") and,
to the extent a Transferred Employee elects a direct rollover to the Buyers'
Plan, the Sellers shall cause any outstanding loans held in the Transferred
Employee's account to be transferred to the Buyers' Plan.
ARTICLE 11
CONDITIONS PRECEDENT TO THE BUYERS' OBLIGATION TO CLOSE
The obligations of the Buyers hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
11.1 The Sellers' Ownership of Stations. The Sellers will have consummated
the transactions contemplated by the Fritz Asset Purchase Agreement without any
material amendments or waivers thereto.
11.2 Representations, Warranties and Covenants.
(a) All representations and warranties of the Sellers made in this
Agreement shall be true and complete in all material respects on and as of the
Closing Date as if made on and as of that date and as though the Closing Date
were substituted for the date of this Agreement (without taking into account any
disclosures made by the Sellers to the Buyers pursuant to Section 7.21 hereof).
(b) All of the terms, covenants and conditions to be complied with
and performed by the Sellers on or prior to Closing Date shall have been
complied with or performed.
11.3 Governmental Consents. The FCC Consent shall have been granted and,
unless waived by the Buyers' lender or the Buyers, the FCC Consent shall have
become a Final Order, all other conditions of Section 4.2 shall have been
satisfied and any other governmental consents
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(including without limitation any required HSRA consents) required to consummate
the transactions hereunder shall have been obtained.
11.4 Governmental Authorizations. Licensing or Broadcasting, as the case
may be, shall be the lawful holder of the Station Licenses listed in Schedule
7.4 and all other licenses, permits and other authorizations used or necessary
in the conduct of the business and operation of the Stations, and there shall
not have been any modification of any of such licenses, permits and other
authorizations where it is probable that such modification would have a material
adverse effect on any Station or the conduct of such Station's business and
operation. No proceeding shall be pending which seeks or the effect of which
reasonably could be to revoke, cancel, fail to renew, suspend or modify in a
material adverse way any of the Station Licenses or any other licenses, permits
or other authorizations relating to any Station.
11.5 Mandatory Third Party Consents. The Sellers shall have obtained and
shall have delivered to the Buyers all Mandatory Consents, without any condition
adverse to the Buyers.
11.6 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, and no order, decree or judgement of any
court, agency or other governmental authority shall have been rendered against,
any Party hereto that the Buyers in good faith, based upon a written opinion of
counsel, believe would render them unlawful, as of the Closing Date, to effect
the transactions contemplated by this Agreement in accordance with its terms.
11.7 Deliveries. The Sellers shall have made or stand willing to make all
the deliveries required under Section 13.1.
11.8 No Material Adverse Change. The Stations' last twelve months
broadcast cash flow as of Closing shall not be more than 10% lower than the
Stations' last twelve months broadcast cash flow as of the Latest Balance Sheet.
11.9 Financing. The Buyers shall have obtained financing necessary for the
completion of the transactions contemplated hereby on terms consistent with
those contained in a commitment letter which will be attached hereto as Exhibit
B (the "Commitment Letter") within two weeks from the date this Agreement is
executed and which such financing will be reasonably satisfactory to the
Sellers.
ARTICLE 12
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
The obligations of the Sellers hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
12.1 The Sellers' Ownership of Stations. The Sellers will have consummated
the transactions contemplated by the Fritz Asset Purchase Agreement.
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12.2 Representations, Warranties and Covenants.
(a) All representations and warranties made by the Buyers in this
Agreement shall be true and complete in all material respects on and as of the
Closing Date as if made on and as of that date and as though the Closing Date
were substituted for the date of this Agreement (without taking into account any
disclosures made by the Buyers to the Sellers pursuant to Section 6.8 hereof).
(b) All the terms, covenants and conditions to be complied with and
performed by the Buyers under this Agreement on or prior to the Closing Date
shall have been complied with or performed,
12.3 Governmental Consents. The FCC Consent shall have been granted and,
unless waived by the Sellers' lender or the Sellers, the FCC Consent shall have
become a Final Order, all other conditions of Section 4.2 shall have been
satisfied and any other governmental consents (including without limitation any
required HSRA consents) required to consummate the transactions hereunder shall
have been obtained.
12.4 Adverse Proceedings. No suit, action, claim or governmental
proceeding shall be pending against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered against
any Party hereto that the Sellers in good faith, based upon a written opinion of
counsel, believe would render it unlawful, as of the Closing Date, to effect the
transactions contemplated by this Agreement in accordance with its terms.
12.5 Deliveries. The Buyers shall have made or stand willing to make all
the deliveries required under Section 13.2.
ARTICLE 13
DOCUMENTS TO BE DELIVERED AT THE CLOSING
13.1 Documents to be Delivered by the Sellers. At the Closing, the Sellers
shall deliver to the Buyers the following (the "the Buyers' Closing
Transactions"):
(a) a certificate of an officer of each Seller, dated the Closing
Date, in form and substance reasonably satisfactory to the Buyers, certifying as
to the fulfillment of the conditions set forth in Sections 11.1 through 11.8
hereof;
(b) opinions of the Sellers' counsel, dated the Closing Date,
reasonably acceptable to the Buyers and their counsel;
(c) the Transaction Documents to which each Seller is a party;
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(d) instruments of conveyance and transfer, in form and substance
reasonably satisfactory to counsel to the Buyers, effecting the sale, transfer,
assignment and conveyance of the Assets to the Buyers, including, but not
limited to, the following:
(i) assignments of the Station Licenses;
(ii) bills of sale for all Personal Property;
(iii) warranty deeds for all Owned Real Property;
(iv) assignments of the Assumed Contracts; and
(v) assignments of all intangible personal property
including all books, records, logs and similar assets;
(e) resolutions of the Sellers, authorizing the execution, delivery
and performance of this Agreement, certified by the Sellers;
(f) the Mandatory Consents; and
(g) such other documents as may reasonably be requested by the
Buyers' counsel.
13.2 Documents to be Delivered by the Buyers. At the Closing, the Buyers
shall deliver to the Sellers the following (the "the Sellers' Closing
Transactions" and together with the Buyers' Closing Transactions, the "Closing
Transactions"):
(a) a certificate of an officer of each Buyer, dated the Closing
Date; in form and substance reasonably satisfactory to the Sellers, certifying
to the fulfillment of the conditions specified in Section 12.1 through 12.4
hereof,
(b) immediately available wire-transferred federal funds as provided
in Section 2.1;
(c) the Transaction Documents to which each Buyer is a party;
(d) instruments, in form and substance reasonably satisfactory to
the Sellers and their counsel, pursuant to which the Buyers assume obligations,
liabilities and commitments as provided in Article 3;
(e) opinions of the Buyers' counsel, dated the Closing Date,
reasonably acceptable to the Sellers and their counsel; and
(f) such other documents as may reasonably be requested by the
Sellers' counsel.
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ARTICLE 14
TRANSFER TAXES; FEES AND EXPENSES
14.1 Transfer Taxes and Similar Charges. Except as set forth in Sections
14.2 and 14.3 hereof, all costs of transferring the Assets in accordance with
this Agreement, including recordation, transfer and documentary taxes and fees,
and any excise, sales or use taxes, shall be borne by the Sellers.
14.2 Governmental Filing or Grant Fees. Any filing or grant fees imposed
by any governmental authority, the consent of which is required for the
transactions contemplated hereby, including all filing fees incurred pursuant to
Article 4 (other than with respect to the HSRA, which fees will be paid by the
Buyers) shall be borne equally by the Buyers and the Sellers.
14.3 Expenses. Each Party hereto shall be solely responsible for and shall
pay all costs and expenses incurred by it in connection with the negotiation,
preparation and performance of and compliance with the terms of this Agreement;
provided that, the cost of any FCC Application shall be borne equally by the
Buyers and the Sellers.
ARTICLE 15
INDEMNIFICATION
15.1 Indemnification by the Sellers and 62nd Street. Notwithstanding the
Closing, the Sellers and 62nd Street (for purposes of this Article 15 the
Sellers and 62nd Street are referred to collectively as the "the Seller
Indemnitors") hereby agree to indemnify, defend and hold harmless against and
with respect to, and shall reimburse the Buyers for:
(a) Any and all losses, direct or indirect, liabilities, or damages
resulting from any untrue representation, breach of warranty, or nonfulfillment
of any covenant or obligation by the Sellers or 62nd Street contained herein or
in any certificate, document or instrument delivered to the Buyers hereunder;
(b) Any and all obligations of the Sellers not assumed by the Buyers
pursuant to the terms of this Agreement;
(c) Any and all losses, liabilities or damages to third parties
resulting from the operation or ownership of the Stations prior to the Effective
Time, including but not limited to any and all liabilities arising under the
Station Licenses or the Contracts which relate to events occurring prior to the
Effective Time;
(d) Any and all losses, liabilities or damages resulting from (i)
litigation listed on Schedule 7.11 and (ii) the matters set forth on Schedule
7.19;
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(e) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity, subject to the notice and opportunity to remedy
requirements of Section 15.3 hereof; and
(f) Interest at the Prime Rate on any reimbursable expense or loss
incurred by the Sellers from the date of payment, in the case of a reimbursable
expense, and from the date of occurrence, in the case of any other losses, until
the date of reimbursement by the Seller Indemnitors.
15.2 Indemnification by the Buyers. Notwithstanding the Closing, the
Buyers hereby agree to indemnify and hold the Seller Indemnitors harmless
against and with respect to, and shall reimburse to the Seller Indemnitors for:
(a) Any and all losses, direct or indirect, liabilities, or damages
resulting from any untrue representation, breach of warranty, or nonfulfillment
or any covenant or obligation by the Buyers contained herein or in any
certificate, document or instrument delivered to the Sellers or 62nd Street
hereunder;
(b) Any and all losses, liabilities or damages to third parties
resulting from the operation or ownership of the Stations by the Buyers on and
after the Effective Time, including, but not limited to any and all liabilities
arising under the Station Licenses or the Assumed Contracts which relate to
events occurring after the Effective Time;
(c) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity, subject to the notice and opportunity to remedy
requirements of Section 15.3 hereof; and
(d) Interest at the Prime Rate on any reimbursable expense or loss
incurred by the Sellers from the date of payment, in the case of a reimbursable
expense, and from the date of occurrence, in the case of any other losses, until
the date of reimbursement by the Buyers.
15.3 Procedure for Indemnification. The procedure for indemnification
shall be as follows:
(a) The Party seeking indemnification under this Article 15 (the
"Claimant") shall give notice to the Party from whom indemnification is sought
(the "Indemnitor") of any claim, whether solely between the parties or brought
by a third party, specifying (i) the factual basis for the claim, and (ii) the
amount of the claim. If the claim relates to an action, suit or proceeding filed
by a third party against Claimant, notice shall be given by Claimant within
fifteen (15) business days after written notice of the action, suit, or
proceeding was given to Claimant. In all other
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circumstances, notice shall be given by Claimant within thirty (30) business
days after Claimant becomes, or should have become, aware of the facts giving
rise to the claim. Notwithstanding the foregoing, Claimant's failure to give
Indemnitor timely notice shall not preclude Claimant from seeking
indemnification from Indemnitor except to the extent that Claimant's failure has
materially prejudiced Indemnitor's ability to defend the claim or litigation.
(b) With respect to claims between the parties, following receipt of
notice from the Claimant of a claim, the Indemnitor shall have thirty (30)
business days to make any investigation of the claim that the Indemnitor deems
necessary or desirable. For the purposes of this investigation, the Claimant
agrees to make available to the Indemnitor and/or its authorized representatives
the information relied upon by the Claimant to substantiate the claim. If the
Claimant and the Indemnitor cannot agree as to the validity and amount of the
claim within the 30- day period (or any mutually agreed upon extension thereof),
the Claimant may seek appropriate legal remedy.
(c) With respect to any claim by a third party which involves only
the payment of money damages by such third party and which does not concern any
FCC Consent, as to which the Claimant is entitled to indemnification hereunder,
the Indemnitor shall have the right at its own expense to participate in or
assume control of the defense of the claim, and the Claimant shall cooperate
fully with the Indemnitor, subject to reimbursement for actual out-of-pocket
expenses incurred by the Claimant as the result of a request by the Indemnitor.
Claimant shall have the right to participate in the defense of the claim as its
own expense. Prior to the Indemnitor assuming control of the defense of any
claim, the Indemnitor must furnish the Claimant with evidence which in the
Claimant's reasonable judgment, establishes that the Indemnitor is and will be
able to satisfy such liability. If the Indemnitor does not elect to assume
control or otherwise participate in the defense of any third party claim,
Claimant may, but shall have no obligation to, defend or settle such claim or
litigation in such manner as it deems appropriate, and in any event Indemnitor
shall be bound by the results obtained by the Claimant with respect to the claim
(by default or otherwise) and shall promptly reimburse Claimant for the amount
of all expenses (including the amount of any judgment rendered), legal or
otherwise, incurred in connection with such claim or litigation. The Indemnitor
shall be subrogated to all rights of the Claimant against any third party with
respect to any claim for which indemnity was paid.
15.4 Limitations. Neither the Sellers nor the Buyers shall have any
obligation to the other Parties for any matter described in Section 15.1 or
Section 15.2, as the case may be, except upon compliance by the other Party with
the provisions of this Article 15, particularly Article 15.3. Neither Party
shall be required to indemnify the other Parties under this Article 15 for any
breach of any representation or warranty contained in this Agreement unless (a)
written notice of a claim under this Article 15 was received by the Party within
the pertinent survival period specified in Article 17 of this Agreement, and (b)
unless the aggregate amount of all claims against the Party for breaches of its
representations and warranties exceeds Fifty Thousand Dollars ($50,000), in
which case such Party's responsibility to indemnify shall extend to all claims,
including the $50,000 "basket" amount. The foregoing $50,000 "basket" amount
shall not be applicable to any claims
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made by third parties against which the Buyers or the Sellers are indemnified
pursuant to Section 15.1 or Section 15.2 hereof. In computing the "basket"
amount, no individual claim of less than $5,000 shall be included therein.
Notwithstanding anything to the contrary herein, the Seller Indemnitors shall
not be liable for any amounts in excess of (i) the Purchase Price less (ii)
amounts paid by the Seller Indemnitors to Buyer to cover such losses (the
"Cap").
15.5 Arbitration Procedure.
(a) The Buyers and the Seller Indemnitors agree that the arbitration
procedure set forth below shall be the sole and exclusive method for resolving
and remedying claims for money damages arising out of the provisions of Sections
15.1 and 15.2 (the "Disputes"). Nothing in this Section 15.5 shall prohibit a
party hereto from instituting litigation to enforce any Final Determination (as
defined below) or availing itself of the other remedies set forth in Section 18
below. The parties hereby agree and acknowledge that, except as otherwise
provided in this Section 15.5, the arbitration procedures and any Final
Determination hereunder shall be governed by, and shall be enforced pursuant to,
Title 9 of the United States Code, as it may be amended or recodified from time
to time, and the current Commercial Arbitration Rules of the American
Arbitration Association.
(b) In the event that any party asserts that there exists a Dispute,
such party shall deliver a written notice to each other party involved therein
specifying the nature of the asserted Dispute and requesting a meeting to
attempt to resolve the same. If no such resolution is reached within ten
business days after such delivery of such notice, the party delivering such
notice of Dispute (the "Disputing Person") may, within 45 business days after
delivery of such notice, commence arbitration hereunder by delivering to each
other party involved therein a notice of arbitration (a "Notice of Arbitration")
and by filing a copy of such Notice of Arbitration with the American Arbitration
Association. Such Notice of Arbitration shall specify the matters as to which
arbitration is sought, the nature of any Dispute, the claims of each party to
the arbitration and shall specify the amount and nature of any damages, if any,
sought to be recovered as a result of any alleged claim, and any other matters
required by the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time to be included herein, if any.
(c) The Buyers and the Seller Indemnitors each shall select an
independent arbitrator expert in the subject matter of the Dispute (the
arbitrators so selected shall be referred to herein as "the Buyers' Arbitrator"
and "the Sellers' Arbitrator", respectively). In the event that either party
fails to select an independent arbitrator as set forth herein within 20 days
from delivery of a Notice of Arbitration, then the matter shall be resolved by
the arbitrator selected by the other party. The Buyers' Arbitrator and the
Sellers' Arbitrator shall select a third independent arbitrator expert in the
subject matter of the dispute, and the three arbitrators so selected shall
resolve the matter according to the procedures set forth in this Section 15.5.
If the Buyers' Arbitrator and the Sellers' Arbitrator are unable to agree on a
third arbitrator within 20 days after their selection, the Buyers' Arbitrator
and the Sellers' Arbitrator shall each prepare a list of three independent
arbitrators. The Buyers' Arbitrator and the Sellers' Arbitrator shall each have
the opportunity to designate as
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objectionable and eliminate one arbitrator from the other arbitrator's list
within 7 days after submission thereof, and the third arbitrator shall then be
selected by lot from the arbitrators remaining on the lists submitted by the
Buyers' Arbitrator and the Sellers' Arbitrator.
(d) The arbitrator(s) selected pursuant to paragraph (c) will
determine the allocation of the costs and expenses of arbitration based upon the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party. For example, if the
Sellers submit a claim for $1,000 and if the Buyers contest only $500 of the
amount claimed by the Sellers, and if the arbitrator(s) ultimately resolves the
dispute by awarding the Sellers $300 of the $500 contested, then the costs and
expenses of arbitration will be allocated 60% (i.e. 300 / 500) to the Buyers and
40% (i.e. 200 / 500) to the Sellers.
(e) The arbitration shall be conducted under the Commercial
Arbitration Rules of the American Arbitration Association as in effect from time
to time, except as otherwise set forth herein or as modified by the agreement of
all of the parties to this Agreement. The arbitrator(s) shall so conduct the
arbitration that a final result, determination, finding, judgment and/or award
(the "Final Determination") is made or rendered as soon as practicable, but in
no event later than 90 business days after the delivery of the Notice of
Arbitration nor later than 10 days following completion of the arbitration. The
Final Determination must be agreed upon and signed by the sole arbitrator or by
at least two of the three arbitrators (as the case may be). The Final
Determination shall be final and binding on all parties and there shall be no
appeal from or examination of the Final Determination, except for fraud,
perjury, evident partiality or misconduct by an arbitrator prejudicing the
rights of any party and to correct manifest clerical errors.
(f) The Buyers and the Seller Indemnitors may enforce any Final
Determination in any state or federal court having jurisdiction over the
dispute. For the purpose of any action or proceeding instituted with respect to
any Final Determination, each party hereto hereby irrevocably submits to the
jurisdiction of such courts, irrevocably consents to the service of process by
registered mail or personal service and hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may have or hereafter
have as to personal jurisdiction, the laying of the venue of any such action or
proceeding brought in any such court and any claim that any such action or
proceeding brought in such court has been brought in an inconvenient forum.
(g) If any party shall fail to pay the amount of any damages, if
any, assessed against it within 10 days of the delivery to such party of such
Final Determination, the unpaid amount shall bear interest from the date of such
delivery at the Prime Rate. Interest on any such unpaid amount shall be
compounded semi-annually, computed on the basis of a 360-day year consisting of
twelve 30-day months and shall be payable on demand. In addition, such party
shall promptly reimburse the other party for any and all costs or expenses of
any nature or kind whatsoever (including but not limited to all attorneys' fees)
incurred in seeking to collect such damages or to enforce any Final
Determination.
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ARTICLE 16
TERMINATION RIGHTS
16.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written agreement of the Buyers and the Sellers;
(b) by either the Buyers or the Sellers if there has been a material
misrepresentation or breach on the part of the other Parties in the
representations and warranties set forth in this Agreement, or if events have
occurred which have made it impossible to satisfy a condition precedent to the
terminating Party's obligations to consummate the transactions contemplated
hereby, unless such terminating Party's willful breach of this Agreement has
caused the condition to be unsatisfied;
(c) by the Sellers, by written notice to the Buyers, on any date
determined for the Closing in accordance with Section 1.1 if each condition set
forth in Section 11 and Section 12 has been satisfied (or will be satisfied by
the delivery of documents by the parties at the Closing) or waived in writing on
such date and the Buyers have nonetheless refused to consummate the Closing
Transactions;
(d) by the Buyers, by written notice to the Sellers, on any date
determined for the Closing in accordance with Section 1.1 if each condition set
forth in Section 11 and Section 12 has been satisfied (or will be satisfied by
the delivery of documents by the parties at the Closing) or waived in writing on
such date and the Sellers have nonetheless refused to consummate the Closing
Transactions;
(e) by the Sellers, if the Fritz Purchase Agreement terminates
according to its terms;
(f) by the Buyers, if the broadcast transmission of any Station from
its main or authorized auxiliary broadcasting antenna at not less than 90% of
the full authorized power is interrupted or impaired for a period of more than
twenty-four (24) consecutive hours or for an aggregate of thirty-six (36) hours
in any seven (7) day period; and
(g) by the Buyers, if the Buyers fail to obtain adequate financing
to consummate the transactions contemplated hereby on terms consistent with the
Commitment Letter.
Unless the Closing has occurred, this Agreement will terminate without any
action by any Person at 5:00 P.M., Toledo, Ohio time, on the Termination Date.
The "Termination Date" will be the earlier of (i) the date upon which the denial
of any FCC Consent becomes a Final Order and (ii) February 28, 1998.
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Notwithstanding the foregoing, (1) the Buyers may not rely on the failure of any
condition precedent set forth in Section 11 to be satisfied if such failure was
caused by the Buyers' failure to act in good faith or a breach of or failure to
perform any of its representations, warranties, covenants or other obligations
in accordance with the terms of this Agreement and (2) the Sellers may not rely
on the failure of any condition precedent set forth in Section 12 to be
satisfied if such failure was caused by the Sellers' failure to act in good
faith or a breach of or failure to perform any of their representations,
warranties, covenants or other obligations in accordance with the terms of this
Agreement.
16.2 Effect of Termination. If this Agreement is terminated as provided in
Section 16.1, then this Agreement will forthwith become void and there will be
no liability on the part of any Party to any other Party or any other Person in
respect thereof; provided that
(a) if this Agreement is terminated by the Sellers due to (i) the
Buyers' failure to close (if all of the conditions precedent to the Buyers'
obligation to consummate the transactions contemplated by this Agreement have
been satisfied), (ii) a material breach by either Buyer of its representations,
warranties or covenants under this Agreement or (iii) failure by the Buyers to
obtain adequate financing to consummate the transactions hereunder pursuant to
Section 16.1(g), then, if the Sellers are not in default or breach of this
Agreement, the Deposit, with interest, shall be paid to the Sellers as
liquidated damages, it being agreed that the Deposit shall constitute full
payment for any and all damages suffered by the Sellers by reason thereof and
that the Sellers shall have no rights to or claims for damages from the Buyers
or the Buyers' affiliates other than the rights to the Deposit as set forth in
this Agreement. The Buyers and the Sellers agree in advance that the Sellers'
actual damages would be difficult to ascertain and that the amount of the
liquidated damages paid to the Sellers is a fair and equitable amount to
reimburse the Sellers for damages sustained from termination of this Agreement
for any of the above-stated reasons. Notwithstanding the foregoing, if this
Agreement terminates or fails to close for any other reason (if all of the
conditions precedent to the Buyers' obligation to consummate the transactions
contemplated by this Agreement have been satisfied) other than this Section
16.2, the Deposit, plus all interest accrued thereon, shall be returned to
Broadcasting;
(b) the obligations of the parties described in Sections 10.4, 14.3
and 20.7 will survive any such termination; and
(c) no such termination of this Agreement will relieve the Sellers
from liability for any misrepresentation or breach of any representation,
warranty, covenant or agreement set forth in this Agreement prior to such
termination.
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ARTICLE 17
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations, warranties, covenants, indemnities and agreements
contained in this Agreement or in any certificate, document or instrument
delivered pursuant to this Agreement are and will be deemed and construed to be
continuing representations, warranties, covenants, indemnities and agreements
and shall survive the Closing for a period of eighteen (18) months from the
closing of the transactions contemplated by the Fritz Asset Purchase Agreement,
except for (a) agreements under Section 10.4 of this Agreement, which shall
survive the Closing indefinitely, (b) indemnification obligations resulting from
third party claims, which shall survive the Closing for a period of one (1)
month after the last day of the longest applicable statutory limitation period
applicable to such claim and (c) indemnification obligations resulting from any
liability which is not an Assumed Liability, which shall survive the Closing
indefinitely. No claim may be brought under this Agreement or any other
certificate, document or instrument delivered pursuant to this Agreement unless
written notice describing in reasonable detail the nature and basis of such
claim is given on or prior to the last day of the applicable survival period. In
the event such a notice is given, the right to indemnification with respect
thereto shall survive the applicable survival period until such claim is finally
resolved and any obligations thereto are fully satisfied. Any investigation by
or on behalf of any Party hereto shall not constitute a waiver as to enforcement
of any representation, warranty, covenant or agreement contained herein. Any
indemnification payments paid under Section 15 will be considered an adjustment
to the Purchase Price.
ARTICLE 18
REMEDIES UPON DEFAULT
Each of the Buyers and the Sellers recognize that, in the event the other
defaults in the performance of its obligations under this Agreement, monetary
damages alone will not be adequate. Except as provided in Section 15.5 hereof
regarding the requirements of using the arbitration procedure set forth therein
for resolving and remedying claims for money damages arising out of the
provisions of Sections 15.1 and 15.2, each Party shall therefore be entitled in
such event, in addition to bringing suit at law or equity for money or other
damages (including costs and expenses incurred by it in the preparation and
negotiation of this Agreement and in contemplation of the Closing hereunder), to
obtain specific performance of the terms of this Agreement from the other. In
any action to enforce the provisions of this Agreement, each Party shall waive
the defense that there is an adequate remedy at law or equity and agree that the
other Party shall have the right to obtain specific performance of the terms of
this Agreement without being required to prove actual damages post bond or
furnish other security. In addition, the prevailing Party shall be entitled to
obtain from the other court costs and reasonable attorneys' fees incurred by it
in enforcing its rights hereunder, plus interest at the Prime Rate on the amount
of any judgment obtained against such Party from the date of default until the
date of payment of the judgment. As a condition to seeking a specific
performance, the Buyers shall not be required to have tendered the Purchase
Price specified in Section 2.1 of this Agreement, but shall be ready, willing
and able to do so. In addition the parties shall have all of their rights under
the Escrow Agreement.
38
<PAGE>
ARTICLE 19
RISK OF LOSS
The risk of loss or damage to the Assets prior to the Effective Time shall
be upon the Sellers. The Sellers shall repair, replace and restore any damaged
or lost Asset to its prior condition as soon as possible and in no event later
than the Effective Time. If the Sellers are unable or fail to restore or replace
a lost or damaged Asset prior to the Closing and the cost of such restoration or
replacement would exceed $10,000 the Buyers may elect (a) to terminate this
Agreement pursuant to Article 17 hereof, (b) to consummate the transactions
contemplated by this Agreement on the Closing Date, in which event the Sellers
shall assign to the Buyers at Closing the Sellers' rights under any Asset's
damage, destruction or loss, or (c) delay the Closing Date until a date within
or replacement of such Asset. If the Sellers are unable or fail to restore or
replace any lost or damaged Asset prior to the Closing Date and the cost of such
restoration or replacement would be $10,000 or less, the Sellers shall reimburse
the Buyers for the cost of restoration or replacement of such asset. If the
delay in the Closing Date under this Article 19 would cause the Closing to fall
at any time after the period permitted by the FCC Consent, the Sellers and the
Buyers shall file an appropriate request with the FCC for an extension of time
within which to complete the Closing.
ARTICLE 20
OTHER PROVISIONS
20.1 Benefit and Assignment. This Agreement shall be binding and shall
inure to the benefit of the parties hereto and their respective successors and
assigns. Neither the Buyers nor the Sellers may assign this Agreement without
the prior written consent of the other Party hereto except that each of the
Buyers, the Sellers and 62nd Street may assign their rights (but not their
obligations) under this Agreement to an Affiliate of the Buyers, the Sellers or
62nd Street, as the case may be, and to their financing sources.
20.2 Entire Agreement. This Agreement and the Escrow Agreement (the
"Transaction Documents") and the exhibits and schedules hereto and thereto
embody the entire agreement and understanding of the parties hereto and
supersede any and all prior agreements, arrangements and understandings relating
to the matters provided for herein. No amendment, waiver of compliance with any
provision or condition hereof, or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the Party
against whom enforcement of any waiver, amendment, change, extension or
discharge is sought.
20.3 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
20.4 Computation of Time. If after making computations of time provided
for in this Agreement, a time for action or notice falls on Saturday, Sunday or
a Federal holiday, then such time shall be extended to the next business day.
39
<PAGE>
20.5 Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by and construed in
accordance with the internal laws of the State of Michigan, without giving
effect to any choice of law or conflict of law provision (whether of the State
of Michigan or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Michigan.
20.6 Press Releases and Announcements. Except for any public disclosure
which either Party in good faith believes is required by applicable law (in
which case, if practicable, the disclosing Party will give the other Party an
opportunity to review and comment upon such disclosure before it is made):
(a) prior to the Closing, no press releases related to this
Agreement or any Closing Transaction or other announcements generally to
the employees, customers or other Persons having business relationships
with the Sellers (it being understood that the Buyers will have the right
to contact such Persons in connection with its investigation of the
business of the Sellers and the Stations as provided in Section 9.2(b) and
as the Sellers may otherwise consent (which consent the Sellers will not
unreasonably withhold)) will be issued or made without the mutual approval
of the Sellers and the Buyers;
(b) after the Closing, the Sellers will not make any press release
or other public announcement of or with respect to the Stations, this
Agreement or any Closing Transaction without the Buyers' consent (which
consent the Buyers will not unreasonably withhold); and
(c) after the Closing, the Buyers will not make any press release or
other public announcement of or with respect to this Agreement or any
Closing Transaction without the Sellers' consent (which consent the
Sellers will not unreasonably withhold).
20.7 Parties in Interest. Nothing in this Agreement, express or implied,
is intended to confer on any Person other than the Parties and their respective
successors and assigns any rights or remedies under or by virtue of this
Agreement.
20.8 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing, addressed to
the following addresses, or to such other address as any Party may request in
writing.
If to the Sellers: 62nd Street Broadcasting of Toledo, L.L.C.
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attn: Robert C. Gay
Adam Kirsch
Kristin Mugford
40
<PAGE>
and
62nd Street Broadcasting, L.L.C.
941 Abbot Road
East Lansing, MI 48823
Attn: R. Charles McLravy
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: James L. Learner
If to the Buyers: Cumulus Broadcasting, Inc.
c/o Cumulus Media, L.L.C.
330 East Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Richard Weening
with a copy to:
Baker & Daniels
1st Bank Building
205 West Jefferson, Suite 250
South Bend, IN 46601
Attn: Peter Trybula
Any such notice, demand or request shall be deemed to have been duly delivered
and received (i) on the date of personal delivery, or (ii) on the date of
receipt, if mailed by registered or certified mail, postage prepaid and return
receipt requested, or (iii) on the date of a signed receipt, if sent by an
overnight delivery service, but only if sent in the same manner to all persons
entitled to receive notice or a copy.
20.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
20.10 Further Assurances. The Sellers shall at any time and from time to
time after the Closing execute and deliver to the Buyers such further
conveyances, assignments and other written assurances as the Buyers may
reasonably request in order to vest and confirm in the Buyers (or their
assignees) the title and rights to and in all of the Assets to be and intended
to be transferred, assigned and conveyed hereunder.
20.11 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision
41
<PAGE>
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provisions or the
remaining provisions of this Agreement.
20.12 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent.
In the event an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties, and no
presumption or burden of proof will arise favoring or disfavoring any Person by
virtue of the authorship of any of the provisions of this Agreement.
ARTICLE 21
DEFINITIONS
Unless otherwise stated in this Agreement, the following terms when used
herein shall have the meanings assigned to them below (such meanings to be
equally applicable to both the singular and plural forms of the terms defined).
"Affiliate" shall mean any person or entity that is controlling,
controlled by or under common control with the named person or entity.
"Asbestos" shall mean any and all varieties of materials included in the
definition of "asbestos" under any federal or state law or regulation relating
to the protection of human health or the environment.
"Asbestos-Containing Material" shall mean any material containing more
than one (1) percent Asbestos by weight.
"Business Day" whether or not capitalized, shall mean every day of the
week excluding Saturdays, Sundays and Federal holidays.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
"Closing Date" shall mean the date on which the Closing is completed.
"Communications Act" shall mean the Communications Act of 1934, as
amended, as in effect from time to time.
"Contracts" shall mean any oral or written agreement, instrument,
document, lease, employee benefit or welfare plan or other business or
commercial arrangement, Times Sales Agreement or Trade Agreement (in each case,
including any extension, renewal, amendment or other modification thereof) to
which the Sellers are a Party or by which they are bound or to which they are
subject or which pertains to the business or properties of the Sellers or the
Stations.
42
<PAGE>
"Effective Time" shall mean 12:01 a.m., Toledo, Ohio time, on the Closing
Date.
"Environmental Laws" shall mean all applicable local, state and federal
statutes and regulations, all common law, and all other provisions having the
force and effect of law relating to pollution, or the protection of human health
or the environment, including the FCC's regulations concerning radio frequency
radiation.
"FCC" shall mean the Federal Communications Commission.
"FCC Application" shall mean the application or applications that the
Sellers and the Buyers must file with the FCC requesting its consent to the
assignment of the Station Licenses.
"FCC Consent" shall mean the action by the FCC granting the FCC
Application.
"FCC Regulations" shall mean all regulations and policies promulgated by
the FCC, under the Communications Act or otherwise, as in effect from time to
time.
"Final Approval Date" shall mean the date on which the FCC Consent is
effective and has become a Final Order.
"Final Order" shall mean action by the FCC (i) which has not been vacated,
reversed, stayed, set aside, annulled or suspended (whether under Section 402 or
405 of the Communications Act or otherwise), (ii) with respect to which no
timely appeal, request for stay or petition for rehearing, reconsideration or
review by any Party or by the FCC on its own motion, is pending, and (iii) as to
which the time for filing any such appeal, request, petition, or similar
document or for the reconsideration or review by the FCC on its own motion under
the Communications Act of 1934, as amended, and the rules and regulations of the
Commission, has expired.
"Fritz Asset Purchase Agreement" means that certain Asset Purchase
Agreement, dated April 14, 1997, between 62nd Street Holding, L.L.C. and Fritz
Broadcasting, Inc.
"Fritz Effective Time" shall have the meaning assigned to such term in the
Fritz Asset Purchase Agreement.
"FTC" shall mean Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
"Governmental Entity" shall mean any government, agency, governmental
department, commission, board, bureau, court, arbitration panel or
instrumentality of the United States of America or any state or other political
subdivision thereof (whether now or hereafter constituted and/or existing) and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
43
<PAGE>
"Hazardous Substance" shall mean all hazardous or toxic waste or material
which, because of its quantity, concentration or physical, chemical or
infectious characteristic, may cause or pose a present or potential hazard to
human health or the environment when improperly used, treated, stored, disposed
of, generated, manufactured, transported or otherwise handled. "Hazardous
Substance" shall include, but is not limited to petroleum, and any and all
hazardous or toxic substances, materials or wastes as defined or listed under
the Resource Conservation and Recovery Act, the Toxic Substances Control Act,
CERCLA or any comparable state statute, or any regulation promulgated under any
such federal or state statute.
"HSRA" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations adopted thereunder.
"Knowledge" means actual knowledge without independent investigation.
"Lease" shall mean those leases and subleases set forth on Schedule 7.5(b)
as in effect on the Closing Date.
"Legal Requirements" shall mean any of the Communications Act, the FCC
Regulations, and all other federal, state, foreign and local laws, statutes,
codes, rules, regulations, ordinances, judgments, orders, decrees and the like
of any Governmental Entity, including common law.
"Liens" shall mean any mortgage, pledge, hypothecation, lien (statutory or
otherwise), preference, priority, security agreement, easement, covenant,
restriction or other encumbrance of any kind or nature whatsoever (including any
conditional sale of 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).
"Mandatory Consent" shall mean (a) each FCC Consent and (b) each consent
listed on Schedule 7.3 and identified with an asterisk.
"PCB" shall mean polychlorinated biphenyl.
"Permitted Liens" shall mean (i) Liens for Taxes, assessments or
government charges or levies not yet delinquent, (ii) statutory and contractual
Liens granted by the Sellers to any landlord, lessor or licensor for amounts not
yet due and payable, and (iii) Liens reflected in the Financial Statements.
"Person" shall mean an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or any Governmental Entity.
44
<PAGE>
"Prime Rate" shall mean a per annum rate equal to the "prime rate" as
published in the Money Rates column of the Eastern Edition of The Wall Street
Journal (or the average of such rates if more than one Rate is indicated).
"Station Licenses" shall mean the licenses, permits and other
authorizations, including any temporary waiver or special temporary
authorization, issued by the FCC to the Sellers in connection with the conduct
of the business and operation of the Station.
"Stations" shall mean radio broadcast Stations WKKO and WTOD, Toledo, OH,
WIMX, Gibsonburg, OH and WRQN, Bowling Green, OH.
"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" (as that term is
defined in Section 1504(a) of the Tax Code) (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" shall mean the Internal Revenue Code of 1986, as amended
(including, where applicable, the Internal Revenue Code of 1954, as amended).
"Times Sales Agreements" shall mean all orders, agreements and other
Contracts existing on the date of this Agreement, or entered into in the
ordinary course of business of the Stations, or as otherwise permitted by this
Agreement, between the date of this Agreement and the Closing Date, for the sale
of advertising time (including Trade Agreements) on the Stations.
"Trade Agreements" mean all trade, barter or similar arrangements for the
sale of advertising time other than for cash on the Stations.
* * * *
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed as of the date first written above.
THE BUYERS:
CUMULUS BROADCASTING, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CUMULUS LICENSING CORP.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE SELLERS:
62ND STREET BROADCASTING OF TOLEDO, L.L.C.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
62ND STREET BROADCASTING OF TOLEDO LICENSE,
L.L.C.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
EXHIBIT A
ESCROW AGREEMENT
<PAGE>
EXHIBIT B
COMMITMENT LETTER
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("AGREEMENT") is made as of the 20th day of
November, 1996, by and among IQ RADIO, INC. ("SELLER") and TAYLOR COUNTY
BROADCASTING, INC. ("PURCHASER").
RECITALS:
A. SELLER is the owner of a business located in Abilene, Texas, which
operates a radio station under call letters KHXS-FM under a license granted to
SELLER by the Federal Communication Commission ("FCC").
B. Under the terms and subject to the conditions of this Agreement, SELLER
desires to sell to PURCHASER and PURCHASER desires to purchase from SELLER
substantially all the assets of said business.
C. SELLER desires to assign and transfer to PURCHASER and PURCHASER agrees
to accept the assignment of the FCC license as to such radio station, as well as
certain Lease Agreements as more fully described herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1 - Purchase and Sale of Assets.
1.1 Upon the terms and subject to the conditions of this Agreement, SELLER
will sell to PURCHASER and PURCHASER will purchase from SELLER substantially all
the assets of the business, more particularly described in Exhibit "A" attached
hereto and made a part hereof for all purposes.
1.2 SELLER shall assign to PURCHASER (after obtaining approval from the
FCC) the license for the operation of such radio station and all rights
incidental thereto. In addition, SELLER shall assign to PURCHASER all leases or
contracts as may be accepted by
<PAGE>
PURCHASER after review by PURCHASER.
1.3 The consideration for this sale and assignment shall be as follows:
(a) The full and complete price "The Purchase Price" for all the
assets of KHXS-FM will be THREE HUNDRED THIRTY-FIVE THOUSAND
AND NO/100 ($335,000.00) DOLLARS and shall be paid as follows:
1. TWENTY-FIVE THOUSAND AND NO/100 ($25,000.00) DOLLARS
shall be paid in cash to SELLER at the time of the
closing of the Purchase Agreement.
2. The sum of TWO THOUSAND AND NO/100 ($2,000.00) DOLLARS
shall be derived out of the monthly amount of FIVE
THOUSAND AND NO/100 ($5,000.00) DOLLARS, paid pursuant
to the provisions of the time Brokerage Agreement and
shall accumulate until the closing date. On the closing
date, the total amount of this accumulation shall also
be applied against the Purchase Price as set forth in
section 1.3 (a) (3) below.
3. On the closing date, a promissory note shall be executed
and delivered to SELLER in the original principal
balance of a sum derived from the difference between 1,3
(a) (1) and (2) above and the gross figure of
$335,000.00. It is estimated that the principal balance
will be approximately TWO HUNDRED EIGHTY-SIX THOUSAND
AND NO/100 ($286,000.00) DOLLARS, if the Time Brokerage
Agreement is in place for a full twelve (12) months. Any
period of months, either more or less than twelve, would
necessitate an adjustment to this note
2
<PAGE>
balance. This note shall be payable over a ten (10) year
term, bearing an interest rate of nine (9%) percent per
annum, commencing with the first full month following
the transfer of license by the FCC. The indebtedness
evidenced by this note shall be secured by a purchase
money security interest in the assets made the subject
of this Agreement. All such liens and security
agreements shall be perfected in accordance with
applicable Texas law.
(b) In addition to the Purchase Price set forth above,
PURCHASER agrees to assume the unpaid balance of the
loan made by Phoenix Leasing Incorporated to SELLER
payable in monthly installments of ONE THOUSAND THREE
HUNDRED SEVEN AND NO/100 ($1,307.00) DOLLARS, with a
total loan value of approximately SIXTY-FIVE THOUSAND
AND NO/100 ($65,000.00) DOLLARS.
1.4 The CLOSING of this Agreement shall take place in the office of
PURCHASER in Abilene, Texas, or at such other place as may be reasonably
designated by PURCHASER. The date and time of closing shall be within fifteen
(15) business days following the approval by the FCC of the assignment of the
license for the station. All parties agree to exercise due diligence in
obtaining such approval. Time is of the essence.
Section 2 - Representations and Warranties of Seller.
SELLERS, jointly and severally, hereby represent and warrant to PURCHASER
as follows:
2.1 SELLER owns all the property described in Exhibit "A" and is the
holder in good standing of the license issued by the Federal Communication
Commission pertaining to the radio station KHXS-FM. SELLER'S title is free and
clear of all liens and encumbrances other than those
3
<PAGE>
liens specifically assumed by PURCHASER in conjunction with the Phoenix Leasing
Incorporated indebtedness. The execution, delivery and performance of this
Agreement by SELLER will not result in any violation of nor will it conflict
with or result in any violation of the terms of, or constitute a default under,
any provision of state or federal law or any agreement, mortgage, lien, credit
document, or other contracts to which SELLER or any of its property is bound.
2.2 All business records and financial information furnished by SELLER to
PURCHASER have been compiled in accordance with generally accepted accounting
procedures and contain no material misrepresentation or untruth nor is any item,
liability or obligation omitted from such records. SELLER will not incur any
liability or obligation except in the ordinary course of business until date of
closing and all liabilities will be paid by SELLER in due course in accordance
with their terms between now and date of CLOSING. No liabilities other than
those expressly assumed by PURCHASER in subparagraph 1.3(a) and (b) shall be the
responsibility or liability of PURCHASER.
2.3 SELLER shall not default in the performance of any of its obligations
under any of the credit facilities, leases or licenses held by SELLER from date
of this Agreement through CLOSING and any defaults or non-compliance now in
existence will be cured within fifteen (15) days following date of this
Agreement so that SELLER is restored to full compliance under any obligation,
license or contract.
2.4 SELLER has not and will not enter into any written agreement or
obligation other than in the ordinary course of business and has not and will
not enter into any contract or agreement providing for prepayment beyond the
term of thirty (30) days for any services to be performed by SELLER. SELLER
shall not enter into any contractual obligation or commitment that will commit
or bind SELLER beyond the term of thirty (30) days pending closing of this
Agreement.
4
<PAGE>
2.5 SELLER is not engaged in any litigation either as a plaintiff or as a
defendant nor does SELLER anticipate participation either as a plaintiff or as a
defendant in litigation and is unaware of any claims now pending against SELLER.
2.6 Copies of all leases are attached as Exhibit "B" and all leases are
current and no event of default has occurred under such leases.
Section 3 - Representations of Purchaser.
PURCHASER hereby represents and warrants to SELLER as follows:
3.1 PURCHASER is yet to be formed Texas corporation which has reserved the
name Taylor County Broadcasting, Inc. and intends to be incorporated under that
name and to do business under that name.
3.2 At the time of the execution of the Contract and the closing of the
Contract, the PURCHASER will have been incorporated and the Board of Directors
of PURCHASER will have duly adopted a Resolution authorizing the PURCHASER to
enter into this transaction and to execute all the documents and evidences of
obligation as required under the terms of this Agreement.
3.3 Execution of this Agreement by PURCHASER shall not violate any terms
or conditions of any obligation of PURCHASER and, upon the execution of this
Agreement by PURCHASER, this Agreement shall be binding upon PURCHASER and shall
be enforceable under the applicable laws of the State of Texas.
Section 4 - Conditions to Closing of Purchase.
PURCHASER'S obligation to purchase the assets made the subject of this
Agreement are conditioned upon the following items:
4.1 All representations and warranties of SELLER shall be true and correct
in all material respects when made and shall be true and correct in all material
respects as of the
5
<PAGE>
CLOSING.
4.2 A Bill of Sale in a form and manner acceptable to PURCHASER shall be
delivered to PURCHASER at CLOSING transferring all the property made the subject
of this Agreement to PURCHASER free and clear of all liens and encumbrances
except for the lien specifically assumed under the terms of this Agreement.
4.3 No closing shall take place under this Agreement until approval of the
assignment of license has been obtained from the FCC. If, for any reason, such
assignment of license is denied, PURCHASER and SELLER shall have the option to
terminate this Agreement. Failure to obtain approval within one (1) year after
approval is sought shall permit PURCHASER and SELLER to terminate this
Agreement.
Section 5 - Special Provisions.
5.1 SELLER agrees to indemnify and hold PURCHASER harmless from any and
all claims, actions or causes of action asserted against PURCHASER which arose,
in whole or in part, before date of CLOSING which in any way relate to the
assets being purchased or the business as operated by SELLER. In addition,
SELLER agrees to indemnify and hold PURCHASER harmless from any and all claims,
actions or causes of action or loss arising out of or having to do with the
breach, violation or default in conjunction with any representation, warranty or
covenant of SELLER as contained in this Agreement.
5.2 PURCHASER agrees to indemnify and hold SELLER harmless from any and
all claims, actions, or causes of action asserted against SELLER which arose
subsequent to the date of closing which in any way relate to the assets being
purchased or the business as operated by PURCHASER. In addition, PURCHASER
agrees to indemnify and hold SELLER harmless from any and all claims, actions,
or causes of actions or losses arising out of or having to do with the
6
<PAGE>
breach, violation or default in conjunction with any representation, warranty or
covenant of PURCHASER as contained in this Agreement.
5.3 SELLER agrees to be responsible for and have paid current through date
of CLOSING all liabilities and obligations of SELLER, including, but not limited
to, the monthly obligation to Phoenix Leasing.
Section 6 - Miscellaneous.
6.1 Taxes and leases shall be prorated through date of CLOSING, as well as
the obligation under any contract or note specifically assumed by PURCHASER.
6.2 PURCHASER shall have the right to reject and not assume any of the
leases described in Exhibit "B" upon giving fifteen (15) days written notice to
SELLER prior to CLOSING. As to those contracts and leases specifically assumed
by PURCHASER, PURCHASER agrees to indemnify and hold SELLER harmless from any
and all claims, actions or causes of action arising out of such leases and
contracts that were assumed by PURCHASER from and after date of CLOSING.
6.3 All representations, warranties and agreements under this Agreement
shall survive from and after date of CLOSING.
6.4 This Agreement shall be binding upon the parties hereto, their heirs,
successors and assigns.
6.5 This Agreement with the Exhibits attached constitutes the entire
agreement between the parties and may not be amended or modified in writing or
orally except by instrument in writing duly executed by all parties hereto.
Section 7 - Closing.
7.1 This Agreement shall close within fifteen (15) business days following
receipt of
7
<PAGE>
notice of the approval by the FCC of the assignment of license(s) relating to
the radio station hereinabove referenced.
7.2 At closing, SELLER shall deliver to PURCHASER the following:
(a) SELLER shall deliver an assignment of all leases, licenses,
and contracts.
(b) SELLER shall deliver a Bill of Sale transferring all of the
physical assets of KHXS-FM.
7.3 At closing, PURCHASER shall deliver to SELLER the following:
(a) PURCHASER shall deliver to SELLER the cash consideration and
the note and security agreement referred to in 1.3(a) and
execute all instruments of assumption and other documents to
evidence the transfer of responsibility to PURCHASER.
DATED:
----------------
IQ RADIO, INC.
By:
---------------------------
President
- SELLER -
TAYLOR COUNTY BROADCASTING, INC.
By:
---------------------------
GLEN A. HINE, President
-PURCHASER-
8
<PAGE>
LOCAL MARKETING AGREEMENT
This Local Marketing Agreement (the "Agreement") is made as of February
15, 1998, effective for all purposes on the Effective Date (as defined below),
between Cumulus Broadcasting, Inc. ("Programmer"), Pacific Broadcasting of
Beaumont, Inc., a Texas corporation ("Pacific"), Beaumont Skywave Inc., an
Indiana corporation ("BSI") (Pacific and BSI to be referred to collectively as
"Licensee").
Recitals
A. Licensee holds the license to operate radio broadcast station KTCX(FM)
(the "Station") pursuant to authorizations issued by the Federal Communications
Commission (the "FCC").
B. Licensee and Programmer have contemporaneously entered into an Asset
Purchase Agreement (the "Purchase Agreement") which will provide for the
acquisition by Programmer of substantially all of the assets used in connection
with the operation of the Station, on the terms and subject to the conditions
set forth therein.
C. Pending the closing of the Purchase Agreement, Programmer desires to
purchase from Licensee and Licensee desires to sell to Programmer certain
airtime on the Station, all in accordance with the Communications Act of 1934,
as amended, and the rules, regulations, and policies of the FCC (the "FCC
Requirements").
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations, warranties and agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement agree as
follows:
1. Effective Date and Term.
1.1 Effective Date. This Agreement shall become effective for all purposes
on February 15, 1998.
1.2 Term. The term of this Agreement (the "Term") shall begin on the
Effective Date and shall continue until December 31, 1998, unless earlier
terminated in accordance with the provisions set forth in this Agreement.
2. Purchase of Airtime. Programmer hereby purchases from Licensee all
airtime on the Station during the Term, other than airtime between 7:00 a.m.,
local time and 8:00 a.m., local time on Sundays, on the terms specified herein
(such purchased airtime period is referred to herein as the "Broadcasting
Period"). During the Broadcasting Period, Licensee shall broadcast on the
Station programming supplied by Programmer (collectively, the "Program" or
"Programs").
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Programmer will ensure that the Programs meet technical and quality standards
equal to those of programming broadcast by commercial radio stations generally
in the United States. If Licensee in the reasonable exercise of its discretion
finds that any Program(s) does not meet these standards, then it shall advise
Programmer in writing of the specific technical deficiencies. If such technical
deficiencies have not been corrected within ten (10) days after receipt of
notice, then Licensee shall have no obligation to broadcast such Program(s)
until such time as the technical deficiencies are corrected. Programmer shall
not substantially alter the format of the Station during the Term.
3. Licensee's Broadcasting Obligations. In consideration for the payments
made and to be made by Programmer hereunder, Licensee shall make available to
Programmer, beginning on the Effective Date, all of the Station's airtime during
the Broadcasting Period and shall cause to be broadcast on the Station the
Programs pursuant to Section 2 hereof. Throughout the Term, unless otherwise
mutually agreed by the parties, Licensee shall maintain the operating power of
the Station at its maximum licensed level and shall operate and maintain in good
working condition the Station's transmission facilities and broadcasting
equipment. Throughout the Term, Licensee shall also, with respect to the
Station:
(a) employ a General Manager who will report to Licensee and direct
the performance of Licensee's obligations hereunder and who shall have no
employment, consulting, or other material relationship to Programmer;
(b) employ at least one full time employee to assist the General
Manager in performing Licensee's obligations hereunder, including
maintaining the Station's transmission facilities, and who shall have no
employment, consulting or other material relationship with Programmer;
(c) retain ultimate control over the personnel, finances,
programming and operation of the Station;
(d) maintain a main studio consistent with the FCC Requirements at
which the General Manager and the other full time employee(s) of the
Station will be available during normal business hours;
(e) comply with the FCC Requirements with respect to the
ascertainment of community problems, needs and interests; broadcast
programming responsive thereto; and timely prepare and place in the
Station's public inspection files appropriate documentation thereof;
(f) comply with all other FCC Requirements which may be applicable
to the operation of the Station.
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4. Consideration. In consideration of the airtime made available to
Programmer pursuant to this Agreement, Programmer shall pay Licensee as set
forth in Appendix A attached hereto.
5. Operation, Ownership and Control of the Stations.
5.1 Control Vested in Licensee. Notwithstanding anything to the contrary
in this Agreement, as long as Licensee remains the FCC licensee of the Stations,
Licensee will have full authority, power and control over the operation of the
Station and over all persons employed by it. Licensee will bear the
responsibility for the Station's compliance with, and shall cause the Station to
comply with, all applicable laws, including the FCC Requirements. Nothing
contained herein shall prevent or hinder Licensee from: (a) rejecting or
refusing Programs that Licensee believes in good faith to be unsuitable or
contrary to the public interest; (b) substituting programs which Licensee
believes in good faith to be of greater local or national importance or which
are designed to address the problems, needs and interests of the local
community: (c) preempting any Program in the event of a local, territorial or
national emergency; (d) refusing to broadcast any Program that does not meet the
FCC Requirements; or (e) deleting any commercial announcements that do not
comply with the FCC Requirements or the requirements of the Federal Trade
Commission, or any state, local or federal law.
5.2 Notice of Complaints. Programmer will immediately serve Licensee with
notice and a copy of any letters of complaint that Programmer receives
concerning any Program for Licensee's review and inclusion in its public
inspection files. Licensee will immediately serve Programmer with notice and a
copy of any letters of complaint that it receives concerning any Program.
5.3 Programmer Access to the Station's Studios. During the Term, Licensee
shall make available to Programmer for no additional consideration the areas in
the Station's studios as may be reasonably necessary or appropriate for
Programmer to exercise its rights and perform its obligations under this
Agreement. Programmer shall, to the extent commercially feasible, use Licensee's
current studios and other facilities to exercise its rights and perform its
obligations under this Agreement.
5.4 Employees. Programmer shall employ and be responsible for the
salaries, taxes, insurance, and related costs for all personnel used in the
production of the programs supplied to the Station hereunder, and all other
costs incurred by Programmer for the production of such programs. Licensee shall
pay all compensation owed to its employees up to and including the Effective
Date. Programmer may, after the Effective Date, employ those of Licensee's
employees as Programmer may elect on terms and conditions determined by
Programmer in Programmer's sole discretion, other than those employees employed
by Licensee in the operation of the Station after the Effective Date, who shall
remain in Licensee's sole employ and control. Upon termination of this
Agreement, Licensee shall be free to re-employ Programmer's employees on such
terms and conditions as may be determined by Licensee.
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5.5 Mutual Cooperation. Programmer and Licensee agree to cooperate
reasonably with each other as necessary to fulfill their rights and obligations
hereunder.
6. Program Rights and Music Licenses. During the Term, Licensee shall make
available to Programmer for its use, on the dates and at the times specified by
Programmer, all of Licensee's rights to programs under any program rights
agreements of the Stations (together with the music licenses described below,
the "Program Rights Agreements"). Licensee shall use its best efforts to secure
all consents, if any, from third parties that are necessary to permit Programmer
to use the programs under Program Rights Agreements. Licensee shall maintain all
necessary performing rights licenses to musical compositions included in any
Program, subject to reimbursement by Programmer for the cost thereof under
Section 4 and Appendix A of this Agreement.
7. Programs to Serve the Public Interest. Licensee acknowledges that it is
familiar with the type of programming Programmer intends to provide and has
determined that the broadcast of such programming on the Station would serve the
public interest and is otherwise suitable. Programmer shall cooperate with
Licensee to ensure that the Programs include material that is responsive to
community problems, needs, and interests.
8. Programming Standards. Programmer shall use its best efforts to ensure
that the Programs conform to all FCC Requirements applicable to broadcast radio
stations.
9. Expenses, Revenues and Accounts Receivable.
9.1 Expenses. The Station's cash expenses arising or relating to the
period before the Effective Date shall be the responsibility of Licensee, and
Programmer shall not be obligated to reimburse Licensee for any expenses
allocable to such period. During the Term, Programmer will reimburse Licensee
for its expenses incurred in accordance with Section 4 hereof. Programmer shall
be solely responsible for all expenses attributable to the origination and/or
delivery of the Programs by Programmer to Licensee.
9.2 Cash Accounts Receivable, Advertising and Programming Revenues.
As of the Effective Date, the Licensee will turn over to the Programmer,
for collection only, the accounts receivable of the Station owing to the
Licensee as of the close of business on the day before the Effective Date. A
schedule of such accounts receivable will be delivered by the Licensee to the
Programmer on the Effective Date or as soon thereafter as possible. The
Programmer agrees to use commercially reasonable efforts in the ordinary course
of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Effective Date, and will remit all payments received such accounts
during this 120-day period within ten (10) days of the close of each thirty-day
period, together with an accounting of all payments received within such period.
The Programmer shall have the sole right to collect such accounts receivable
during such one hundred twenty (120) day period. In the event
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the Programmer receive monies during the 120-day period following the Effective
Date from an advertiser who, after the Effective Date, is advertising on the
Station, and that advertiser was included among the accounts receivable as of
the Effective Date, the Programmer shall apply said monies to the oldest
outstanding balance due on the particular account, except in the case of a
"disputed" account receivable. For purposes of this Section 6(b), a "disputed"
account receivable means one which the account debtor refuses to pay because he
asserts that the money is not owed or the amount is incorrect. In the case of
such a disputed account, the Programmer shall immediately return the account to
the Licensee prior to expiration of the 120-day period following the Effective
Date. If the Programmer returns a disputed account to the Licensee, the
Programmer shall have no further responsibility for its collection and may
accept payment from the account debtor for advertising carried on the Station
after the Effective Date. At the end of the 120-day period following the
Effective Date, the Programmer will turn back to the Licensee all of the
accounts receivable of the Station as of the Effective Date owing to the
Licensee which have not yet been collected, and the Programmer will thereafter
have no further responsibility with respect to the collection of such
receivables. During the 120-day period following the Effective Date, the
Programmer shall afford the Licensee reasonable access to the accounts
receivable "aging list." The Licensee acknowledges and agrees that the
Programmer is acting as collection agent hereunder for the sole benefit of the
Licensee and that Programmer has accepted such responsibility for the
accommodation of the Licensee. The Programmer shall not have any duty to inquire
as to the form, manner of execution or validity of any item, document,
instrument or notice deposited, received or delivered in connection with such
collection efforts, nor shall the Programmer have any duty to inquire as to the
identity, authority or rights of the persons who executed the same. The Licensee
shall indemnify Programmer and hold it harmless from and against any judgments,
expenses (including attorney's fees) costs or liabilities which the Programmer
may incur or sustain as a result of or by reason of such collection efforts,
except in the event of Programmer's gross negligence or willful misconduct.
Programmer's obligation to collect and remit Accounts Receivable hereunder shall
continue, at the option of Licensee, in the event of termination of this
Agreement pursuant to Section 11.5 hereof.
9.3 Political Time. Licensee shall, with respect to the Station, oversee
and take ultimate responsibility with respect to the provision of equal
opportunities, lowest unit charge, and reasonable access to political
candidates, and compliance with the political broadcasting provisions of the FCC
Requirements. Programmer shall cooperate with Licensee in complying with such
provisions, and shall supply promptly to Licensee such information reasonably
requested by Licensee for such purposes. Licensee, in consultation with
Programmer, will develop a statement which discloses its political broadcasting
rates and policies to political candidates, and Programmer will follow those
respective policies in the sale of political programming an advertising for the
Station. Programmer shall provide any rebates due to political advertisers and
release advertising availabilities to Licensee during the Broadcasting Period
sufficient to permit Licensee to comply with political broadcasting provisions
of the FCC Requirements. Revenues received by Licensee as a result of any such
release of advertising time shall be for the account of Programmer.
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10. Call Letters and Frequency. During the Term, Licensee (i) shall retain
all rights (except as provided in the following sentence) to the Station's call
letters and trade names, (ii) shall not change the call letters, and (iii) shall
not seek FCC consent to a modification of facilities which would specify a
frequency change or have a material adverse effect upon the presently authorized
coverage of the Station. Programmer shall include in the Programs for the
Station an announcement in a form reasonably satisfactory to the Licensee in
accordance with the FCC Requirements to identify such Station, as well as any
other announcements required by the FCC Requirements.
11. Events of Default and Termination.
11.1 Programmer's Events of Default. The occurrence and continuation of
any of the following will be deemed an Event of Default by Programmer under this
Agreement:
(a) Programmer fails to make LMA Payments;
(b) Programmer fails to observe or perform any other material
covenant, condition or agreement contained in this Agreement; or
(c) Programmer breaches or violates any material representation or
warranty made by it under this Agreement.
11.2 Licensee's Events of Default. The occurrence and continuation of any
of the following will be deemed an Event of Default by Licensee under this
Agreement:
(a) Licensee fails to observe or perform any material covenant,
condition or agreement contained in this Agreement; or
(b) Licensee breaches or violates any material representation or
warranty made by it under this Agreement.
11.3 Cure Period. The defaulting party shall have thirty (30) days from
the date on which Programmer has provided Licensee or Licensee has provided
Programmer, as the case may be, with written notice specifying the Event(s) of
Default to cure any such Event(s) of Default. If the Event of Default cannot be
cured by the defaulting party within such time period but commercially
reasonably efforts are being made to effect a cure or otherwise secure or
protect the interests of the non-defaulting party (in which case, if successful,
the Event of Default shall be deemed cured), then the defaulting party shall
have an additional period not to exceed thirty (30) days to effect a cure or a
deemed cure; provided, however, that such additional thirty-day period shall not
be available in the case of a default under Section 11.1(a) above.
11.4 Termination for Uncured Event of Default. If an Event of Default by
Programmer has not been cured or deemed cured within the period set forth in
Section 11.3 above, then Licensee may terminate this Agreement, effective
immediately upon written notice to Programmer, and pursue
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all remedies available at law or in equity for breach of this Agreement. If an
Event of Default by Licensee has not been cured or deemed cured within the
periods set forth in Section 11.3 above, then Programmer may terminate this
Agreement, effective immediately upon written notice to Licensee, and pursue all
remedies available at law or in equity for breach of this Agreement.
11.5 Termination Upon Failure or Consummation of the Purchase Agreement.
Notwithstanding any other provision hereof, this Agreement may be terminated by
Licensee or Programmer upon thirty (30) days' prior written notice at any time
following termination of the Purchase Agreement in accordance with the terms
thereof. This Agreement shall terminate immediately upon the Closing Date (as
defined in the Purchase Agreement).
11.6 Termination by Licensee To Satisfy the FCC Requirements. If Licensee
is required by the FCC to terminate this Agreement by an FCC order which has
become a Final Order as that term is defined in the Purchase Agreement),
Licensee shall, or, if the FCC orders that this Agreement be terminated before
its order becomes a Final Order and this Agreement cannot be revised to comply
with applicable FCC Requirements as contemplated by Section 20 hereof, Licensee
may, upon at least sixty (60) days' written notice to Programmer (or such
shorter period as may be required by the FCC) terminate this Agreement.
11.7 Termination by Programmer. Programmer may unilaterally terminate this
Agreement during the term upon one hundred twenty (120) days' written notice to
Licensee.
12. Certain Representations, Warranties and Covenants.
12.1 Mutual Representations Concerning This Agreement. Licensee represents
and warrants as follows: (a) Pacific and BSI are corporations duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions, (b) Licensee has the power and authority to enter into and
perform this Agreement; and (c) the execution, delivery and performance of this
Agreement by Licensee does not conflict with any other agreement to which
Licensee is a party.
Programmer represents and warrants as follows: (a) Programmer is a
corporation duly organized, validly existing and in good standing under the laws
of Nevada; (b) Programmer has the requisite corporate power and authority to
enter into and perform this Agreement; (c) the execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate action of Programmer; and (d) the execution, delivery and performance
of this Agreement by Programmer does not conflict with any other agreement to
which Programmer is a party.
12.2 Program Rights and Barter Agreements. Licensee represents and
warrants that (i) it is current in all payment obligations and is not otherwise
in default under the Program Rights Agreements and (ii) there are no Barter
Agreements as defined in the Asset Purchase Agreement which extend beyond the
Effective Date and which exceed in the aggregate Five Thousand Dollars ($5,000).
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12.3 Compliance with FCC Requirements. Programmer represents, warrants and
covenants that its execution and performance of this Agreement is, and will
remain, in compliance with the FCC Requirements, including without limitation,
47 C.F.R. ss. 73.3555.
13. Modification and Waiver; Remedies Cumulative. No modification or
waiver of any provision of this Agreement will be effective unless in writing
and signed by all parties. No failure or delay on the part of Programmer or
Licensee in exercising any right or power under this Agreement will operate as a
waiver of such right or power, nor will any single or partial exercise of any
such rights or power or the exercise of any other right or power operate as a
waiver. Except as otherwise provided in this Agreement, the rights and remedies
provided in this Agreement are cumulative and are not exclusive of any rights or
remedies which a party may otherwise have.
14. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns.
Notwithstanding the foregoing, no party may assign its rights or obligations
under this Agreement without the prior written consent of the other party;
provided, however, that Programmer may assign and delegate its rights and
obligations under this Agreement to a party that controls, or is controlled by,
or is under common control with, Programmer, and who is qualified under any
applicable FCC Requirement, upon notice to, but without the prior written
consent of Licensee.
15. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Texas without regard to any conflicts-of-law rules
that might apply the laws of another jurisdiction or jurisdictions.
16. Notices. Notices required to be provided by this Agreement shall be
given in the manner provided and to the persons specified in the Purchase
Agreement.
17. Entire Agreement. This Agreement, along with the Asset Purchase
Agreement and Ancilly Agreements thereto, embodies the entire understanding
among the parties with respect to the subject matter hereof, and supersedes any
prior or contemporaneous written or oral agreement between the parties regarding
such subject matter.
18. Relationship of Parties. Programmer and Licensee are not, and shall
not be deemed to be, agents, partners, or representatives of each other.
19. Force Majeure. The failure of a party hereto to comply with its
obligations under this Agreement due to acts of God, strikes or threats thereof
or force majeure or due to causes beyond such party's control will not
constitute an Event of Default under Section 11 of this Agreement and no party
will be liable to the others therefore. Programmer and Licensee each agree to
exercise its commercially reasonable efforts to remedy any such conditions
affecting its own facilities as soon as practicable.
20. Subject to Laws; Invalidity. The obligations of the parties under this
Agreement are
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subject to the FCC Requirements and all other applicable laws. The parties
acknowledge that this Agreement is intended to comply with FCC Requirements.
However, in the event that the FCC determines that the continued performance of
this Agreement is in violation of the FCC Requirements, each party will use its
commercially reasonable efforts to comply with the FCC Requirements or will in
good faith contest or seek to reverse any such action or agree on the terms of a
revision to this Agreement, in each case, on a time schedule sufficient to meet
the FCC Requirements and so long as the fundamental nature of the business
arrangement between the parties evidenced by this Agreement is maintained. If
any provision of this Agreement is otherwise held to be illegal, invalid, or
unenforceable under present or future laws, then such provision shall be fully
severable, this Agreement shall be construed and enforced as if such provision
had never comprised a part thereof, and the remaining provisions shall remain in
full force and effect, in each case so long as the fundamental nature of the
business arrangement between programmer and Licensee has been maintained.
21. Reciprocal Indemnity.
21.1 Indemnification by Programmer.Programmer shall indemnify, defend, and
hold harmless Licensee from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement (except as
may result from a breach of the warranty in Section 6 hereof by Licensee),
libel, slander, defamation or invasion of privacy, arising out of: (a)
Programmer's broadcasts of the Programs; (b) any misrepresentation or breach of
any warranty of Programmer; or (c) any breach of any covenant, agreement, or
obligation of Programmer. If Programmer is required to indemnify Licensee as a
result of programs broadcast hereunder which are supplied by a third party
pursuant to a contract with Licensee, it is agreed that Programmer shall be
subrogated to any rights which Licensee may have against such third party,
including the right to indemnification by such third party.
21.2 Indemnification by Licensee. Licensee shall indemnify, defend, and
hold harmless Programmer from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement (except as
may result from a breach of the warranty in Section 6 hereof by Licensee),
libel, slander, defamation or invasion of privacy, arising out of: (a)
Licensee's broadcast of programs on its own behalf, other than Programs; (b) any
misrepresentation or breach of any warranty of Licensee; or (c) any breach of
any covenant, agreement, or obligation of Licensee. If Licensee is required to
indemnify Programmer as a result of programs broadcast hereunder which are
supplied by a third party pursuant to a contract with Programmer, it is agreed
that Licensee shall be subrogated to any rights which Programmer may have
against such third party, including the right to indemnification by such third
party.
22. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the
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construction hereof.
24. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
24. Survival. All representations, warranties, covenants and agreements
made by any party in this Agreement or pursuant hereto shall survive execution
and delivery of this Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective duly authorized officers as of the date first written above.
PROGRAMMER: CUMULUS BROADCASTING, INC.
By:_____________________________
Richard Weening
Chairman
LICENSEE: PACIFIC BROADCASTING OF BEAUMONT, INC.
By:_____________________________
Printed Name:___________________
Title:__________________________
BEAUMONT SKYWAVE, INC.
By:_____________________________
Printed Name:___________________
Title:__________________________
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement, during the Term, during the Term, Programmer shall reimburse
Licensee on a monthly basis, in advance, the Station Expenses (defined below)
for the upcoming month for which Licensee has submitted to Programmer a written
estimate of expenses and subsequent documentation of expenses. The term "Station
Expenses" as used herein means the reasonable and prudent expense actually
incurred by Licensee in operating the Stations in compliance with the terms of
this Agreement (including without limitation Sections 3 and 6) and consistent
with past practice (except for changes resulting from the transactions
contemplated by this Agreement), including without limitation, those expenses
set forth on Attachment 1 hereto.
In addition, Programmer shall pay Licensee a monthly LMA fee, equal to
Fifty Thousand Dollars ($50,000) per month, of which Thirty Thousand Dollars
($30,000) per month (or a pro rated amount for a period less than one month)
shall be applied as a credit to the Purchase Price, as defined in the Asset
Purchase Agreement.
Station Expenses shall include:
Employees
_______, General Manager $
_______
Payroll Taxes
Health Insurance
Life Insurance
Engineering:
Utilities $
Maintenance and Repairs
Music License Fees:
Ascap, BMI, Sesac
Property Insurance
Station Rent
Tower Rent _________
Total Expenses $
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LOCAL MARKETING AGREEMENT
This Local Marketing Agreement (the "Agreement") is made as of December
31, 1997, effective for all purposes on the Effective Date (as defined below),
between Cumulus Broadcasting, Inc. ("Programmer"), Sovereign Communications
Corporation ("Sovereign"), and Madison Radio Group Inc. ("Madison").
Recitals
A. Sovereign holds the license to operate radio broadcast station KZRK-FM
and KZRK-AM (the "Station") pursuant to authorizations issued by the Federal
Communications Commission (the "FCC").
B. Sovereign and Programmer have contemporaneously entered into an Asset
Purchase Agreement (the "Purchase Agreement") which will provide for the
acquisition by Programmer of substantially all of the assets used in connection
with the operation of the Station, on the terms and subject to the conditions
set forth therein.
C. Pending execution of the Purchase Agreement and closing thereunder,
Programmer desires to purchase from Sovereign and Sovereign desires to sell to
Programmer certain airtime on the Stations, all in accordance with the
Communications Act of 1934, as amended, and the rules, regulations, and policies
of the FCC (the "FCC Requirements").
D. Madison currently holds the operating assets for the Station other than
the FCC License, although the parties anticipate that Sovereign will hold these
assets at the time of the Closing of the Purchase Agreement. Madison is made a
party to this Agreement because it holds some assets to which the Agreement
refers. Madison and Sovereign shall be referred to collectively as the
"Licensee" for purposes of this agreement, with the reference being to Madison
or Sovereign as the context may require.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations, warranties and agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement agree as
follows:
1. Effective Date and Term.
1.1 Effective Date. This Agreement shall become effective for all purposes
on January 1, 1998.
1.2 Term. The term of this Agreement (the "Term") shall begin on the
Effective Date and shall continue until December 31, 1998, unless earlier
terminated in accordance with the provisions set forth in this Agreement.
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2. Purchase of Airtime. Programmer hereby purchases from Licensee all
airtime on the Station during the Term, other than airtime between 7:00 a.m.,
local time and 8:00 a.m., local time on Saturdays, on the terms specified herein
(such purchased airtime period is referred to herein as the "Broadcasting
Period"). During the Broadcasting Period, Licensee shall broadcast on the
Station programming supplied by Programmer (collectively, the "Program" or
"Programs"). Programmer will ensure that the Programs meet technical and quality
standards equal to those of programming broadcast by commercial radio stations
generally in the United States. If Licensee in the reasonable exercise of its
discretion finds that any Program(s) does not meet these standards, then it
shall advise Programmer in writing of the specific technical deficiencies. If
such technical deficiencies have not been corrected within ten (10) days after
receipt of notice, then Licensee shall have no obligation to broadcast such
Program(s) until such time as the technical deficiencies are corrected.
Programmer shall not substantially alter the format of the Station during the
Term.
3. Licensee's Broadcasting Obligations. In consideration for the payments
made and to be made by Programmer hereunder, Licensee shall make available to
Programmer, beginning on the Effective Date, all of the Station's airtime during
the Broadcasting Period and shall cause to be broadcast on the Station the
Programs pursuant to Section 2 hereof. Throughout the Term, unless otherwise
mutually agreed by the parties, Licensee shall maintain the operating power of
the Station at its maximum licensed level and shall operate and maintain in good
working condition the Station's transmission facilities and broadcasting
equipment. Throughout the Term, Licensee shall also, with respect to the
Station:
(a) employ a General Manager (Lisa Guest) who will report to
Licensee and direct the performance of Licensee's obligations hereunder
and who shall have no employment, consulting, or other material
relationship to Programmer;
(b) employ at least one full time employee to assist the General
Manager in performing Licensee's obligations hereunder, including
maintaining the Station's transmission facilities, and who shall have no
employment, consulting or other material relationship with Programmer;
(c) retain ultimate control over the personnel, finances,
programming and operation of the Station;
(d) maintain a main studio consistent with the FCC Requirements at
which the General Manager and the other full time employee(s) of the
Station will be available during normal business hours;
(e) comply with the FCC Requirements with respect to the
ascertainment of community problems, needs and interests; broadcast
programming responsive thereto; and timely prepare and place in the
Station's public inspection files appropriate documentation thereof;
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(f) comply with all other FCC Requirements which may be applicable
to the operation of the Station.
4. Consideration. In consideration of the airtime made available to
Programmer pursuant to this Agreement, Programmer shall pay Licensee as set
forth in Appendix A attached hereto.
5. Operation, Ownership and Control of the Stations.
5.1 Control Vested in Licensee. Notwithstanding anything to the contrary
in this Agreement, as long as Licensee remains the FCC licensee of the Stations,
Licensee will have full authority, power and control over the operation of the
Station and over all persons employed by it. Licensee will bear the
responsibility for the Station's compliance with, and shall cause the Station to
comply with, all applicable laws, including the FCC Requirements. Nothing
contained herein shall prevent or hinder Licensee from: (a) rejecting or
refusing Programs that Licensee believes in good faith to be unsuitable or
contrary to the public interest; (b) substituting programs which Licensee
believes in good faith to be of greater local or national importance or which
are designed to address the problems, needs and interests of the local
community: (c) preempting any Program in the event of a local, territorial or
national emergency; (d) refusing to broadcast any Program that does not meet the
FCC Requirements; or (e) deleting any commercial announcements that do not
comply with the FCC Requirements or the requirements of the Federal Trade
Commission, or any state, local or federal law.
5.2 Notice of Complaints. Programmer will immediately serve Licensee with
notice and a copy of any letters of complaint that Programmer receives
concerning any Program for Licensee's review and inclusion in its public
inspection files. Licensee will immediately serve Programmer with notice and a
copy of any letters of complaint that it receives concerning any Program.
5.3 Programmer Access to the Station's Studios. During the Term, Licensee
shall make available to Programmer for no additional consideration the areas in
the Station's studios as may be reasonably necessary or appropriate for
Programmer to exercise its rights and perform its obligations under this
Agreement. Programmer shall, to the extent commercially feasible, use Licensee's
current studios and other facilities to exercise its rights and perform its
obligations under this Agreement.
5.4 Employees. Programmer shall employ and be responsible for the
salaries, taxes, insurance, and related costs for all personnel used in the
production of the programs supplied to the Station hereunder, and all other
costs incurred by Programmer for the production of such programs. Licensee shall
pay all compensation owed to its employees up to and including the Effective
Date. Programmer may, after the Effective Date, employ those of Licensee's
employees as Programmer may elect on terms and conditions determined by
Programmer in Programmer's sole discretion, other than those employees employed
by Licensee in the operation of the Station after the Effective Date, who shall
remain in Licensee's sole employ and control. Upon termination of this
Agreement, Licensee shall be free to re-employ Programmer's employees on such
terms and conditions as may
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be determined by Licensee.
5.5 Mutual Cooperation. Programmer and Licensee agree to cooperate
reasonably with each other as necessary to fulfill their rights and obligations
hereunder.
6. Program Rights and Music Licenses. During the Term, Licensee shall make
available to Programmer for its use, on the dates and at the times specified by
Programmer, all of Licensee's rights to programs under any program rights
agreements of the Stations (together with the music licenses described below,
the "Program Rights Agreements"). Licensee shall use its best efforts to secure
all consents, if any, from third parties that are necessary to permit Programmer
to use the programs under Program Rights Agreements. Licensee shall maintain all
necessary performing rights licenses to musical compositions included in any
Program, subject to reimbursement by Programmer for the cost thereof under
Section 4 and Appendix A of this Agreement.
7. Programs to Serve the Public Interest. Licensee acknowledges that it is
familiar with the type of programming Programmer intends to provide and has
determined that the broadcast of such programming on the Station would serve the
public interest and is otherwise suitable. Programmer shall cooperate with
Licensee to ensure that the Programs include material that is responsive to
community problems, needs, and interests.
8. Programming Standards. Programmer shall use its best efforts to ensure
that the Programs conform to all FCC Requirements applicable to broadcast radio
stations.
9. Expenses, Revenues and Accounts Receivable.
9.1 Expenses. The Station's cash expenses arising or relating to the
period before the Effective Date shall be the responsibility of Licensee, and
Programmer shall not be obligated to reimburse Licensee for any expenses
allocable to such period. During the Term, Programmer will reimburse Licensee
for its expenses incurred in accordance with Section 4 hereof. Programmer shall
be solely responsible for all expenses attributable to the origination and/or
delivery of the Programs by Programmer to Licensee.
9.2 Cash Accounts Receivable, Advertising and Programming Revenues.
(a) Promptly after the Effective Date, Licensee shall furnish to
Programmer a list of the Accounts Receivable (not more than 60 days past due at
the Effective Date) that arose out of the operations of the Stations as of the
close of business on the day preceding the Effective Date but are due and
payable thereafter. For a period of 120 days after the Effective Date,
Programmer, as Licensee's agent, shall, without compensation, collect the
accounts receivable for Licensee. Licensee shall be responsible for collection
of Accounts Receivable which are more than 60 days past due as of the Effective
Date. At the end of the 120-day period, Programmer shall remit to Licensee the
amount collected by Programmer during that month with respect to the Accounts
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Receivable and Programmer shall provide Licensee with a report setting for the
Accounts Receivable collected by Programmer that month. Programmer shall furnish
Licensee with such records and other information as Licensee may reasonably
require to verify the amounts collected by Programmer with respect to the
Accounts Receivable. Upon five days' prior written notice from Licensee,
Programmer shall terminate all collection efforts on behalf of Licensee with
respect to the Accounts Receivable specified in the notice and those Accounts
Receivable shall no longer be considered Accounts Receivable for purposes of
this section 9.2. Programmer shall set all commercial advertising during the
Broadcasting Period for its own account and shall be entitled to collect all
Accounts Receivable arising thereunder. At the end of the 120-day collection
period, the Programmer will turn back to the Licensee all of the accounts
receivable of the Station as of the Closing Date owing to the Licensee which
have not yet been collected. The Programmer will thereafter have no further
responsibility with respect to the collection of such receivables, which shall
remain the exclusive property of the Licensee from that point, and Licensee
shall be free to take all commercially reasonable measures to collect such
receivables.
(b) For the purpose of determining amounts collected by Programmer with
respect to the Accounts Receivable, (i) in the absence of a bona fide dispute
between an account debtor and Licensee, all payments by an account debtor shall
first be applied to Accounts Receivable due from the account debtor, and (ii)
any amount received by Programmer which is from an account debtor to Licensee
who claims to have a bona fide dispute with Licensee shall be deemed to have
been received with respect to the accounts receivable due Programmer to the
extent of such dispute.
(c) Programmer shall not be required to retain a collection agency, bring
any suit, or take any other action out of the ordinary course of business to
collect any of the Accounts Receivable. Programmer shall not compromise, settle
or adjust the amount of any of the Accounts Receivable without the written
consent of Licensee.
(d) Programmer's obligation to collect and remit Accounts Receivable
hereunder shall continue, at the option of Licensee, in the event of termination
of this Agreement pursuant to Section 11.5 hereof.
9.3 Political Time. Licensee shall, with respect to the Station, oversee
and take ultimate responsibility with respect to the provision of equal
opportunities, lowest unit charge, and reasonable access to political
candidates, and compliance with the political broadcasting provisions of the FCC
Requirements. Programmer shall cooperate with Licensee in complying with such
provisions, and shall supply promptly to Licensee such information reasonably
requested by Licensee for such purposes. Licensee, in consultation with
Programmer, will develop a statement which discloses its political broadcasting
rates and policies to political candidates, and Programmer will follow those
respective policies in the sale of political programming an advertising for the
Station. Programmer shall provide any rebates due to political advertisers and
release advertising availabilities to Licensee during the Broadcasting Period
sufficient to permit Licensee to comply with political broadcasting
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provisions of the FCC Requirements. Revenues received by Licensee as a result of
any such release of advertising time shall be for the account of Programmer.
10. Call Letters and Frequency. During the Term, Licensee (i) shall retain
all rights (except as provided in the following sentence) to the Station's call
letters and trade names, (ii) shall not change the call letters, and (iii) shall
not seek FCC consent to a modification of facilities which would specify a
frequency change or have a material adverse effect upon the presently authorized
coverage of the Station. Programmer shall include in the Programs for the
Station an announcement in a form reasonably satisfactory to the Licensee in
accordance with the FCC Requirements to identify such Station, as well as any
other announcements required by the FCC Requirements.
11. Events of Default and Termination.
11.1 Programmer's Events of Default. The occurrence and continuation of
any of the following will be deemed an Event of Default by Programmer under this
Agreement:
(a) Programmer fails to make LMA Payments;
(b) Programmer fails to observe or perform any other material
covenant, condition or agreement contained in this Agreement; or
(c) Programmer breaches or violates any material representation or
warranty made by it under this Agreement.
11.2 Licensee's Events of Default. The occurrence and continuation of any
of the following will be deemed an Event of Default by Licensee under this
Agreement:
(a) Licensee fails to observe or perform any material covenant,
condition or agreement contained in this Agreement; or
(b) Licensee breaches or violates any material representation or
warranty made by it under this Agreement.
11.3 Cure Period. The defaulting party shall have thirty (30) days from
the date on which Programmer has provided Licensee or Licensee has provided
Programmer, as the case may be, with written notice specifying the Event(s) of
Default to curer any such Event(s) of Default. If the Event of Default cannot be
cured by the defaulting party within such time period but commercially
reasonably efforts are being made to effect a cure or otherwise secure or
protect the interests of the non-defaulting party (in which case, if successful,
the Event of Default shall be deemed cured), then the defaulting party shall
have an additional period not to exceed thirty (30) days to effect a cure or a
deemed cure; provided, however, that such additional thirty-day period shall not
be available in the case of a default under Section 11.1(a) above.
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11.4 Termination for Uncured Event of Default. If an Event of Default by
Programmer has not been cured or deemed cured within the period set forth in
Section 11.3 above, then Licensee may terminate this Agreement, effective
immediately upon written notice to Programmer, and pursue all remedies available
at law or in equity for breach of this Agreement. If an Event of Default by
Licensee has not been cured or deemed cured within the periods set forth in
Section 11.3 above, then Programmer may terminate this Agreement, effective
immediately upon written notice to Licensee, and pursue all remedies available
at law or in equity for breach of this Agreement.
11.5 Termination Upon Failure or Consummation of the Purchase Agreement.
Notwithstanding any other provision hereof, this Agreement may be terminated by
Licensee or Programmer upon thirty (30) days' prior written notice at any time
following termination of the Purchase Agreement in accordance with the terms
thereof. This Agreement shall terminate immediately upon the Closing Date (as
defined in the Purchase Agreement).
11.6 Termination by Licensee To Satisfy the FCC Requirements. If Licensee
is required by the FCC to terminate this Agreement by an FCC order which has
become a Final Order as that term is defined in the Purchase Agreement),
Licensee shall, or, if the FCC orders that this Agreement be terminated before
its order becomes a Final Order and this Agreement cannot be revised to comply
with applicable FCC Requirements as contemplated by Section 20 hereof, Licensee
may, upon at least sixty (60) days' written notice to Programmer (or such
shorter period as may be required by the FCC) terminate this Agreement.
11.7 Termination by Programmer. Programmer may unilaterally terminate this
Agreement during the term upon one hundred twenty (120) days' written notice to
Licensee.
12. Certain Representations, Warranties and Covenants.
12.1 Mutual Representations Concerning This Agreement. Licensee represents
and warrants as follows: (a) Licensee is a corporation incorporated under the
laws of Texas, (b) Licensee has the power and authority to enter into and
perform this Agreement; and (c) the execution, delivery and performance of this
Agreement by Licensee does not conflict with any other agreement to which
Licensee is a party.
Programmer represents and warrants as follows: (a) Programmer is a
corporation duly organized, validly existing and in good standing under the laws
of Nevada; (b) Programmer has the requisite corporate power and authority to
enter into and perform this Agreement; (c) the execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate action of Programmer; and (d) the execution, delivery and performance
of this Agreement by Programmer does not conflict with any other agreement to
which Programmer is a party.
12.2 Program Rights and Barter Agreements. Licensee represents and
warrants that (i) it is current in all payment obligations and is not otherwise
in default under the Program Rights Agreements and (ii) there are no Barter
Agreements as defined in the Asset Purchase Agreement
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which extend beyond the Effective Date and which exceed in the aggregate Five
Thousand Dollars ($5,000).
12.3 Compliance with FCC Requirements. Programmer represents, warrants and
covenants that its execution and performance of this Agreement is, and will
remain, in compliance with the FCC Requirements, including without limitation,
47 C.F.R. ss. 73.3555.
13. Modification and Waiver; Remedies Cumulative. No modification or
waiver of any provision of this Agreement will be effective unless in writing
and signed by all parties. No failure or delay on the part of Programmer or
Licensee in exercising any right or power under this Agreement will operate as a
waiver of such right or power, nor will any single or partial exercise of any
such rights or power or the exercise of any other right or power operate as a
waiver. Except as otherwise provided in this Agreement, the rights and remedies
provided in this Agreement are cumulative and are not exclusive of any rights or
remedies which a party may otherwise have.
14. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns.
Notwithstanding the foregoing, no party may assign its rights or obligations
under this Agreement without the prior written consent of the other party;
provided, however, that Programmer may assign and delegate its rights and
obligations under this Agreement to a party that controls, or is controlled by,
or is under common control with, Programmer, and who is qualified under any
applicable FCC Requirement, upon notice to, but without the prior written
consent of Licensee.
15. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of Texas without regard to any conflicts-of-law rules
that might apply the laws of another jurisdiction or jurisdictions.
16. Notices. Notices required to be provided by this Agreement shall be
given in the manner provided and to the persons specified in the Purchase
Agreement.
17. Entire Agreement. This Agreement embodies the entire understanding
among the parties with respect to the subject matter hereof, and supersedes any
prior or contemporaneous written or oral agreement between the parties regarding
such subject matter.
18. Relationship of Parties. Programmer and Licensee are not, and shall
not be deemed to be, agents, partners, or representatives of each other.
19. Force Majeure. The failure of a party hereto to comply with its
obligations under this Agreement due to acts of God, strikes or threats thereof
or force majeure or due to causes beyond such party's control will not
constitute an Event of Default under Section 11 of this Agreement and no party
will be liable to the others therefore. Programmer and Licensee each agree to
exercise its commercially reasonable efforts to remedy any such conditions
affecting its own facilities as soon as practicable.
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20. Subject to Laws; Invalidity. The obligations of the parties under this
Agreement are subject to the FCC Requirements and all other applicable laws. The
parties acknowledge that this Agreement is intended to comply with FCC
Requirements. However, in the event that the FCC determines that the continued
performance of this Agreement is in violation of the FCC Requirements, each
party will use its commercially reasonable efforts to comply with the FCC
Requirements or will in good faith contest or seek to reverse any such action or
agree on the terms of a revision to this Agreement, in each case, on a time
schedule sufficient to meet the FCC Requirements and so long as the fundamental
nature of the business arrangement between the parties evidenced by this
Agreement is maintained. If any provision of this Agreement is otherwise held to
be illegal, invalid, or unenforceable under present or future laws, then such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such provision had never comprised a part thereof, and the
remaining provisions shall remain in full force and effect, in each case so long
as the fundamental nature of the business arrangement between programmer and
Licensee has been maintained.
21. Reciprocal Indemnity.
21.1 Indemnification by Programmer.Programmer shall indemnify, defend, and
hold harmless Licensee from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement (except as
may result from a breach of the warranty in Section 6 hereof by Licensee),
libel, slander, defamation or invasion of privacy, arising out of: (a)
Programmer's broadcasts of the Programs; (b) any misrepresentation or breach of
any warranty of Programmer; or (c) any breach of any covenant, agreement, or
obligation of Programmer. If Programmer is required to indemnify Licensee as a
result of programs broadcast hereunder which are supplied by a third party
pursuant to a contract with Licensee, it is agreed that Programmer shall be
subrogated to any rights which Licensee may have against such third party,
including the right to indemnification by such third party.
21.2 Indemnification by Licensee. Licensee shall indemnify, defend, and
hold harmless Licensee from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement (except as
may result from a breach of the warranty in Section 6 hereof by Licensee),
libel, slander, defamation or invasion of privacy, arising out of: (a)
Licensee's broadcast of programs on its own behalf, other than Programs; (b) any
misrepresentation or breach of any warranty of Licensee; or (c) any breach of
any covenant, agreement, or obligation of Licensee. If Programmer is required to
indemnify Licensee as a result of programs broadcast hereunder which are
supplied by a third party pursuant to a contract with Licensee, it is agreed
that Programmer shall be subrogated to any rights which Licensee may have
against such third party, including the right to indemnification by such third
party.
22. Covenant Not to Compete. For a period of three (3) years from the
Effective Date,
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Licensee will not engage directly or indirectly in any business that the
Licensee conducts as of the Closing Date in the Amarillo, Texas Area of
Demographic Influence.
23. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
24. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
25. Survival. All representations, warranties, covenants and agreements
made by any party in this Agreement or pursuant hereto shall survive execution
and delivery of this Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective duly authorized officers as of the date first written above.
PROGRAMMER: CUMULUS BROADCASTING, INC.
By:_____________________________
Richard Weening
Chairman
LICENSEE: SOVEREIGN COMMUNICATIONS CORPORATION
By:_____________________________
Printed Name:___________________
Title:__________________________
LICENSEE: MADISON RADIO GROUP INC.
By:_____________________________
Printed Name:___________________
Title:__________________________
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement, during the Term, during the Term, Programmer shall reimburse
Licensee on a monthly basis, in arrears, the Station Expenses (defined below)
for the prior month for which Licensee has submitted to Programmer a written
reimbursement request supported by appropriate documentation of expenses. The
term "Station Expenses" as used herein means the reasonable and prudent expense
actually incurred by Licensee in operating the Stations in compliance with the
terms of this Agreement (including without limitation Sections 3 and 6) and
consistent with past practice (except for changes resulting from the
transactions contemplated by this Agreement), including without limitation,
those expenses set forth on Attachment 1 hereto.
In addition, Programmer shall pay Licensee a monthly LMA fee, equal to the
greater of (1) One Thousand Dollars ($1,000), or (2) fifty (50) percent of the
broadcast cash flow, defined as the total revenues of the Station, less barter,
commissions and expenses, plus amortization and depreciation.
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Exhibit 10.59
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of March 23, 1998, by and
between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing), and Esprit
Communications Corporation, a Texas corporation (the "Seller"). Broadcasting and
Licensing are referred to collectively herein as the "Buyers." The Buyers and
the Seller are referred to individually as the "Party" or collectively as the
"Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
station KFQX-FM, licensed to Merkel, Texas (the "Station") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. BASIC TRANSACTION.
A. PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, the Seller agrees to sell, transfer, convey and
deliver to (i) Licensing, and Licensing agrees to purchase from the Seller, all
of the FCC Licenses listed in Section 2(1) of the disclosure schedule
("Disclosure Schedule"); and (ii) Broadcasting, and Broadcasting agrees to
purchase from the Seller, all of the Acquired Assets other than the FCC
Licenses. Both such sales shall take place at the Closing for the consideration
specified below in this Section 1.
B. ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Seller agrees to pay
and discharge all Liabilities and obligations of the Seller other than the
Assumed Liabilities.
C. PURCHASE PRICE. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the purchase price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
(the "Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
D. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a mutually agreed location,
commencing at 9:00 a.m. local time within ten (10) business days after the FCC
approval of the Assignment Application becomes a Final Order,
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by which date all other conditions to the obligations of the Parties to
consummate the transactions contemplated hereby will have been satisfied, or
such other date as the Parties may mutually determine (the "Closing Date").
E. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), and bills of sale in
form acceptable to the Buyers, (B) such affidavits, transfer tax returns,
memorandums of lease, and other additional documents as may be required by the
terms of the title insurance commitments described in Section 4(o) hereof, as
necessary to furnish title insurance as required by such section or provide
public notice of existence of the Leases, and (C) such other instruments of
sale, transfer, conveyance, and assignment as the Buyers and their counsel
reasonably may request; (iv) the Buyers will execute, acknowledge (if
appropriate), and deliver to the Seller (A) an assumption in the form attached
hereto as Exhibit B and (B) such other instruments of assumption as the Seller
and its counsel reasonably may request; and (v) the Buyers will deliver to the
Seller the consideration specified in Section 1(c) above.
F. POSTCLOSING AGREEMENT. On the Closing Date, the Seller shall
execute, and shall cause each of its shareholders to execute, a Postclosing
Agreement with the Buyers including covenants not to compete with the Buyers in
the markets served by the Station and agreements to indemnify the Buyers in the
form of Exhibit C attached hereto. A portion of the Purchase Price equal to
Fifty Thousand Dollars ($50,000) shall be paid to the Seller by the Buyers on
the Closing Date as consideration for the agreements set forth in the
Postclosing Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to the Buyers that the statements
contained in this SECTION 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
A. ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The Seller has the power and authority to own or lease its properties and to
carry on all business activities now conducted by it. The sole shareholder of
the Seller is Gary Call.
B. AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority to execute and deliver this Agreement and all agreements and
instruments to be executed and delivered by Seller pursuant to this Agreement
(collectively, the "Ancillary Agreements") and to perform its obligations
hereunder and thereunder. Without limiting the generality of the foregoing, the
Board of Directors of the Seller has duly authorized the execution, delivery,
and performance of this Agreement and the Ancillary Agreements by the Seller.
This Agreement and the Ancillary
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Agreements constitute the valid and legally binding obligation of the Seller,
enforceable in accordance with their respective terms and conditions.
C. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the charter or bylaws of the Seller; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other agreement, arrangement to which the Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
D. TITLE TO ACQUIRED ASSETS. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Seller has good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
E. FINANCIAL STATEMENTS. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1994, and December 31,
1995 for the Seller; and (ii) unaudited balance sheets and statements of income,
as of and for each month during 1996 and each month to date in 1997 for the
Seller. The Financial Statements have been prepared in conformity with the
Seller's normal accounting policies, practices and procedures applied on a
consistent basis, throughout the periods covered thereby, are correct and
complete, fairly present the financial condition of the Seller and the results
of operation of Seller at the dates and for the periods indicated, and are
consistent with the books and records of the Seller (which books and records are
correct and complete). The Financial Statements accurately state the revenues
of the Station for the period indicated therein and include an accurate breakout
of cash and trade revenues.
F. EVENTS SUBSEQUENT TO JANUARY 1, 1997. Since January 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule, there has not
been any material adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations, or future prospects of the Seller
with respect to the operation of the Station. Without limiting the generality
of the foregoing and with respect to the operation of the Station since January
1, 1997:
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i. other than this Agreement, the Seller has not entered
into any agreement, contract, lease, sublease, license, or sublicense (or
series of related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
ii. the Seller has not delayed or postponed (beyond its
normal practice in the Ordinary Course of Business) the payment of accounts
payable and other Liabilities;
iii. the Seller has not altered its credit and collection
policies or its accounting policies;
iv. the Seller has not entered into or terminated any
employment arrangement, employment contract, consulting contract or
severance agreement or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
v. there have been no changes and, to Seller's knowledge,
any threatened changes in employment terms for any of its directors,
officers, and employees;
vi. there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Seller;
vii. with the exception of the change in format from country
to CHR in 1997, the Seller has not materially altered the programming,
format or call letters of the Station, or its promotional and marketing
activities;
viii. the Seller has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Station in compliance
therewith and with all FCC rules and regulations;
ix. the Seller has not terminated or received notice of
termination for any syndicated programming; and
x. the Seller has not committed to any of the foregoing.
G. TAX MATTERS. The Seller has timely and properly filed all Tax
Returns that it was required to file with respect to the Seller's operations.
All such Tax Returns were correct and complete and properly reflect the tax
liability of the Seller. No Tax deficiencies have been proposed or assessed
against the Seller. All Taxes owed by the Seller with respect to its operations
(whether or not shown on any Tax Return) have been paid. The Seller has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. No claim has ever been made by any authority in any
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
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H. TANGIBLE ASSETS. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Station. The Seller owns or leases all tangible assets necessary for the conduct
of the operation and business of the Station as presently conducted and as
presently proposed to be conducted and all leased assets are specifically
identified as such in Section 2(h) of the Disclosure Schedule.
I. REAL PROPERTY. Section 2(i) of the Disclosure Schedule lists and
describes briefly all real property leased to the Seller (including, without
limitation, complete legal descriptions for all of the Real Estate). The Seller
has delivered to the Buyers correct and complete copies of the Leases. With
respect to the Real Estate:
i. the Leases are and, following the Closing will continue
to be, legal, valid, binding, enforceable, and in full force and effect;
ii. no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default thereunder or
permit termination, modification, or acceleration thereunder;
iii. there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
iv. to the Seller's Knowledge, none of the properties subject
to the Leases is subject to any lease (other than Leases), option to
purchase or rights of first refusal;
v. except for Permitted Real Estate Encumbrances, there are
no (i) actual or, to the Seller's Knowledge, proposed special assessments
with respect to any of the Real Estate; (ii) pending or, to the Seller's
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the buildings
or improvements located on the Real Estate; (iv) any pending or, to the
Seller's Knowledge, threatened changed in any zoning laws or ordinances
which may materially adversely affect any of the Real Estate or Seller's
use thereof;
vi. the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or its
rights thereunder;
vii. to the Seller's Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; and
viii. to the Seller's Knowledge, the owner of each leased
facility has good and marketable title to the underlying parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for Permitted Real Estate
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Encumbrances and Seller's leasehold interest in each Lease has priority
over any other interest except for the fee interest therein and Permitted
Real Estate Encumbrances.
J. CONTRACTS. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not entered into in the Ordinary Course of Business. The
Seller has delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(j) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed which constitutes an
Assumed Contract: (A) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect; (B) the written arrangement will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(j) of the Disclosure Schedule under the terms
of this Section 2(j). Except for the Assumed Contracts (and the Advertising
Contracts described in Section 2(s) below), the Buyers shall not have any
Liability or obligations for or in respect of any of the contracts set forth in
Section 2(j) of the Disclosure Schedule or any other contracts or agreements of
the Seller.
K. COMMISSION LICENSES AND COMPLIANCE WITH COMMISSION REQUIREMENTS.
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies, including,
without limitation, the FCC Licenses, used or useful in the operation of
the Station as they are now being operated are (A) in full force and
effect, (B) unimpaired by any acts or omissions of the Seller or the
Seller's employees or agents, (C) free and clear of any restrictions which
might limit the full operation of the Station, and (D) detailed in Section
2(k) of the Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and consents
referenced in the preceding sentence, Section 2(k) of the Disclosure
Schedule also sets forth, without limitation, the date of the last renewal,
the expiration date thereof, and any conditions or contingencies related
thereto. Except as set forth in Section 2(k) of the Disclosure Schedule, no
condition exists or event has occurred that permits, or after notice or
lapse of time, or both, would permit, the revocation or termination of any
such license, permit, consent, franchise, or authorization (other than
pursuant to their express expiration date) or the imposition of any
material restriction or limitation upon the operation of the Station as now
conducted. Except as set forth in Section 2(k) of the Disclosure Schedule,
the Seller is not aware of any reason why the FCC licenses might not be
renewed in the ordinary course or revoked.
ii. The Station is in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Station's transmission facilities is restricted in accordance
with the policies of the FCC.
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iii. Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Seller's Knowledge, the Seller is not the subject of any
FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Station, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(k) of the Disclosure Schedule.
iv. The Seller has filed with the FCC and all other
governmental authorities having jurisdiction over the Station all material
reports, applications, documents, instruments, and other information
required to be filed, and will continue to make such filings through the
Closing Date.
v. The Seller is not aware of any information concerning the
Station that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary for
the consummation of the transactions contemplated hereunder or the Buyer's
operation and/or ownership of the Station. Seller is not aware of any
pending FCC applications which, if approved, would allow for the operation
of a new radio station with a signal reaching the signal area of the
Station and, in addition, Seller is not aware of any plans or proposals by
any existing radio Station with a signal reaching the signal area of the
Station to alter or change their format to a format similar to that of the
Station.
L. INTELLECTUAL PROPERTY. The Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use the by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, or notice
alleging any such interference, infringement, misappropriation, or violation.
To the Knowledge of the Seller, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Seller.
M. INSURANCE. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Seller's insurance coverage. With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
and enforceable and in full force and effect; (B) the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect on identical
terms through the Closing Date.
N. LITIGATION. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any
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charge, complaint, action, suit, proceeding, hearing, or investigation of or in
any court or quasijudicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 2(n) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Station taken as a whole.
The Seller has no Knowledge of any Basis for any such charge, complaint, action,
suit, proceeding, hearing, or investigation against the Seller.
O. EMPLOYEES. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Station of each employee. To
the Knowledge of the Seller, no key employee or group of employees has any plans
to terminate employment with the Seller. The Seller is not a party to or bound
by any collective bargaining or similar agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to the employees of the Seller. The Seller has no Knowledge of any
Basis for any claim by past or current employees of the Seller or applicants for
employment that the Seller or its management has discriminated based on each
individuals race, sex, national origin, religion, ethnicity, handicap or any
other protected characteristic under applicable law.
P. EMPLOYEE BENEFITS. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Seller does not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Seller. There are no pending or, to the Knowledge of the Seller, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
Q. ENVIRONMENT, HEALTH, AND SAFETY.
i. With respect to the operation of the Station and the Real
Estate, the Seller is, and at all times in the past has been, in compliance
in all material respects with all Environmental Laws and all laws
(including rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof) concerning employee health and
safety, and the Seller has no Liability (and to Seller's Knowledge there is
no Basis related to the past or present operations of the Seller or its
predecessors for any present or future Liability) under any Environmental
Law. The Seller has no Liability (and to Seller's Knowledge there is no
Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand against the Seller
giving rise to any
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Liability) under the Occupational Safety and Health Act, as amended, or any
other law (or rule or regulation thereunder) of any federal, state, local,
or foreign government (or agency thereof) concerning employee health and
safety, or for any illness of or personal injury to any employee.
ii. The Seller has obtained and at all times has been in
compliance in all material respects with all of the terms and conditions of
all permits, licenses, and other authorizations which are required under,
and has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental Laws or law of any
federal, state, or local or foreign government relating to worker health
and safety.
iii. All properties and equipment used in the Station and the
Acquired Assets have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances. No pollutant, contaminant, or chemical,
industrial, hazardous, or toxic material or waste ever has been buried,
stored, spilled, leaked, discharged, emitted, or released on any of the
Real Estate. No above ground or underground storage tanks have ever been
located at, on or under the Real Estate. The Seller has delivered to the
Buyers a complete copy of all environmental claims, reports, studies,
compliance actions or the like of the Seller or which are available to the
Seller with respect to any of the Real Estate or any of the Acquired
Assets.
R. LEGAL COMPLIANCE. The Seller has complied in all material
respects with all laws (including rules and regulations thereunder) of federal,
state, local and foreign governments (and all agencies thereof. The Seller has
filed in a timely manner all reports, documents, and other materials it was
required to file (and the information contained therein was correct and complete
in all material respects) under all applicable laws.
S. ADVERTISING CONTRACTS. Section 2(s) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Station
(the "Advertising Contracts") in excess of $1000, and the amount to be paid to
the Seller therefor. The Seller has no reason to believe and has not received a
notice or indication of the intention of any of the advertisers or third parties
to material contracts of the Seller to cease doing business or to reduce in any
material respect the business transacted with the Seller or to terminate or
modify any agreements with the Seller (whether as a result of consummation of
the transactions contemplated hereby or otherwise). The Buyer shall assume all
Advertising Contracts identified in the Disclosure Schedule with respect to the
period from and after the Closing Date, regardless of whether such Advertising
Contracts are greater or less than $1000.
T. BROKERS' FEES. The Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
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U. UNDISCLOSED COMMITMENTS OR LIABILITIES. There are no material
commitments, liabilities or obligations relating to the Station, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Seller of the liabilities of third parties, for which specific
and adequate provisions have not been made on the Financial Statements except
those incurred in or as a result of the Ordinary Course of Business since
January 1, 1997.
V. DISCLOSURE. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
Buyers represent and warrant to the Seller that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
A. ORGANIZATION OF THE BUYERS. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
B. AUTHORIZATION OF TRANSACTION. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
C. NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement or the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby and thereby (including the assignments and
assumptions referred to in Section 1(e) above), will (i) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge, or
other restriction of any government, governmental agency, or court to which the
Buyers are subject or any provision of their articles of organization or other
charter documents, or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1 (e) above).
D. BROKERS' FEES. Other than the fee payable to Norman Fischer &
Associates, which shall be the exclusive responsibility of the Buyers, the
Buyers have no Liability or obligation
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to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Seller could
become liable or obligated.
E. FCC QUALIFICATION. Buyer is aware of no fact that would, under
the Communications Act of 1934, and the rules and regulations thereunder,
disqualify Buyer from being the assignee of the Stations, and Buyer shall
certify in the Assignment Application that it is financially, legally, and
otherwise qualified to be an FCC licensee.
4. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
A. GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
B. ASSIGNMENT APPLICATIONS. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Station from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon the Station or
impose significant costs on such party). If the FCC imposes any condition on
either party to the Assignment Application, such party shall use commercially
reasonable efforts to comply with such condition, provided, that neither party
shall be required hereunder to comply with any condition that would have a
material adverse effect upon the Station or any Affiliate. The Seller and the
Buyers shall jointly oppose any requests for reconsideration or judicial review
of FCC approval of the Assignment Application and shall jointly request from the
FCC extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
C. EMPLOYMENT OFFERS. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at their option, extend offers of
employment to all or any of the Seller's employees effective on the Closing
Date. From and after the execution of this Agreement, the Seller shall use its
best efforts to assist Buyers in retaining those employees of the Station which
the Buyers wish to hire in connection with the operation of the Station by the
Buyers subsequent to the Closing, and
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the Seller will not take any action to preclude or discourage any of the
Seller's employees from accepting any offer of employment extended by the
Buyers.
D. NOTICES AND CONSENTS. The Seller will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request. Each of the Parties will take any action that may be
necessary, proper, or advisable in connection with any notices to, filings with,
and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
E. ADVERTISING OBLIGATIONS. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Station for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
F. OPERATING STATEMENTS. The Seller shall deliver to the Buyers,
for the Buyers' informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Station within ten (10) days
after each such statement is prepared by or for the Seller.
G. CONTRACTS. The Seller will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(k) of the Disclosure Schedule in any material respect. The Seller will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Five Thousand Dollars
($5,000).
H. OPERATION OF STATION. The Seller will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. The Seller shall operate the Station in compliance with the
FCC Licenses and the rules and regulations of the FCC, and the FCC Licenses
shall at all times remain in full force and effect. The Seller shall file with
the FCC all material reports, applications, documents, instruments and other
information required to be filed in connection with the operation of the
Station.
I. CREDIT AND RECEIVABLES. The Seller will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Station and with respect to collecting accounts receivable
arising from such extension of credit.
J. PRESERVATION OF STATION AND THE ACQUIRED ASSETS. The Seller will
keep its Station and the Acquired Assets and properties substantially intact,
including its present operations, physical facilities, working conditions,
relationships with lessors, licensors, advertisers, suppliers, customers, and
employees, all of the Confidential Information, call letters and trade secrets
of the Station, and the FCC Licenses.
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K. FULL ACCESS AND CONSULTATION. The Seller will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Station, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Seller. The Seller will consult with the
Buyers' management with a view to informing Buyers' management as to the
operations, management and business of the Station. Without limiting the
foregoing, Seller acknowledges and agrees that it will provide the Buyers and
their representatives with such access to the properties, books, records,
documents and operations of the Seller as contemplated herein in a manner which
will permit the Buyers to fully complete their due diligence review within the
thirty (30) day period reference in Section 5(a) (ix), below.
L. NOTICE OF DEVELOPMENTS. The Seller will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Station or the Acquired Assets or the ability of the Seller
to perform hereunder.
M. EXCLUSIVITY. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the Seller,
or (ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyers immediately if any person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
N. TITLE INSURANCE, SURVEYS AND ENVIRONMENTAL ASSESSMENTS. The
Buyers will obtain (i) with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request,
and (ii) a current survey of each parcel of Real Estate certified to the Buyers
and its lender, prepared by a licensed surveyor and conforming to current ALTA
Minimum Detail Requirements for Land Title Surveys, disclosing the location of
all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys') which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing. The Buyers and
the Seller will each pay one-half (l/2) of the costs of these title policies and
Surveys.
O. CONTROL OF STATION. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Between the date of this Agreement and
the Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control,
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supervise, or direct, the operation of the Station, and such operation shall be
the sole responsibility of and in the control of the Seller.
P. RISK OF LOSS. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing; provided,
however, that Seller shall not be responsible for any loss, damage, or
destruction caused by Buyer during the term of the Local Marketing Agreement.
In the event of any loss, damage, or destruction not caused by Buyer, the Seller
will promptly notify the Buyers of all particulars thereof, stating the cause
thereof (if known) and the extent to which the cost of restoration, replacement
and repair of the Acquired Assets lost, damaged or destroyed will be reimbursed
under any insurance policy with respect thereto. The Seller will, at Seller's
expense, repair or replace such Acquired Assets to their former condition as
soon as possible after loss, damage or destruction thereof and shall use its
best efforts to restore as promptly as possible transmissions as authorized in
the FCC Licenses. The Closing Date shall be extended (with FCC consent, if
necessary) for up to sixty (60) days to permit such repair or replacement. If
repair or replacement cannot be accomplished within sixty (60) days of the date
of the Seller's notice to the Buyers and the Buyers determine that the Seller's
failure to repair or replace would have a material adverse effect on the
operation of the Station:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
iii. the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to the Buyers
of all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers of any proceeds under any such
insurance policies, previously received by the Seller with respect thereto
plus an amount equal to the amount of any deductible or self-insurance
maintained by Seller on such Acquired Assets. In the event the Closing
Date is postponed pursuant to this SECTION 4(P), the parties hereto will
cooperate to extend the time during which this Agreement must be closed as
specified in the consent of the FCC.
5. CONDITIONS TO OBLIGATION TO CLOSE.
A. CONDITIONS TO OBLIGATION OF THE BUYERS. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
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ii. the Seller shall have performed and complied with all of
its covenants hereunder in all respects through the Closing;
iii. the Seller shall have procured all of the third party
consents specified in Section 4(d) above and all of the title insurance
commitments (and endorsements) and Surveys described in Section 4(o) above
shall have been procured;
iv. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasijudicial
or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the parties if such transactions are consummated, (B) cause any
of the transactions contemplated by this Agreement to be rescinded
following consummation, or (C) affect adversely the right of the Buyers to
own, operate, or control the Acquired Assets (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
v. the Seller shall have delivered to the Buyers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Sections 5(a)(i) through (iv) is satisfied in all respects;
vi. the Assignment Application shall have been approved by a
Final Order of the FCC and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
vii. the relevant parties shall have entered into the
Postclosing Agreement;
viii. the Buyers shall have received from counsel to the Seller
an opinion with respect to the matters set forth in Exhibit D attached
hereto, addressed to the Buyers and its lender and dated as of the Closing
Date;
ix. the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) in accordance
with an allocation schedule to be delivered at closing; and
x. all actions to be taken by the Seller in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Buyers.
B. CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
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i. the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
iii. no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
iv. the Buyers shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
v. each of the Assignment Applications shall have been
approved by a Final Order of the FCC and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
vi. the relevant parties shall have entered into the
Postclosing Agreement; and
vii. the Seller shall have received from counsel to the Buyers
an opinion with respect to the matters set forth in Exhibit E-1 attached
hereto, addressed to the Seller and dated as of the Closing Date;
viii. all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Seller.
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing:
A. GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further
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action (including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all the sole cost and
expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Section 7 below).
B. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Station, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
C. ADJUSTMENTS. Operation of the Station and the income and
expenses attributable thereto up through the close of business on the day before
the Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Buyers as of the Closing
Date in accordance with the foregoing principle. In addition, all commissions
payable with respect to the accounts receivable of the Seller (whether due
before or after Closing) shall be solely for the account and responsibility of
the Seller. Contractual arrangements that do not reflect an equal rate of
compensation to a Station over the term of the agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by an
independent accounting firm mutually acceptable to both parties and the fees and
expenses of such accounting firm shall be paid one-half (1/2) by the Seller and
one-half (1/2) by the Buyer.
D. COLLECTION OF ACCOUNTS RECEIVABLE. At the Closing, the Seller
will turn over to the Buyers, for collection only, the accounts receivable of
the Station owing to the Seller as of the close of business on the day before
the Closing Date. A schedule of such accounts receivable will be delivered by
the Seller to the Buyers on the Closing Date or as soon thereafter as possible.
The Buyers agree to use commercially reasonable efforts in the ordinary course
of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Closing Date, and will remit all payments received on such
accounts during this 120-day period on the one hundred twentieth (120th) day
together with an accounting of all payments received within such period. The
Buyers shall have the sole right to collect such accounts receivable during such
one hundred twenty (120) day period. In the event the
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Buyers receive monies during the 120-day period following the Closing Date from
an advertiser who, after the Closing Date, is advertising on the Station, and
that advertiser was included among the accounts receivable as of the Closing
Date, the Buyers shall apply said monies to the oldest outstanding balance due
on the particular account, except in the case of a "disputed" account
receivable. For purposes of this Section 6(d), a "disputed" account receivable
means one which the account debtor refuses to pay because he asserts that the
money is not owed or the amount is incorrect. In the case of such a disputed
account, the Buyers shall immediately return the account to the Seller prior to
expiration of the 120-day period following the Closing Date. If the Buyers
return a disputed account to the Seller, the Buyers shall have no further
responsibility for its collection and may accept payment from the account debtor
for advertising carried on the Station after the Closing Date. At the end of the
120-day period following the Closing Date, the Buyers will turn back to the
Seller all of the accounts receivable of the Station as of the Closing Date
owing to the Seller which have not yet been collected, and the Buyers will
thereafter have no further responsibility with respect to the collection of such
receivables. During the 120-day period following the Closing Date, the Buyers
shall afford the Seller reasonable access to the accounts receivable "aging
list." The Seller acknowledges and agrees that the Buyers are acting as
collection agent hereunder for the sole benefit of the Seller and that Buyers
have accepted such responsibility for the accommodation of the Seller. The
Buyers shall not have any duty to inquire as to the form, manner of execution or
validity of any item, document, instrument or notice deposited, received or
delivered in connection with such collection efforts, nor shall the Buyers have
any duty to inquire as to the identity, authority or rights of the persons who
executed the same. The Seller shall indemnify Buyers and hold them harmless from
and against any judgments, expenses (including attorney's fees) costs or
liabilities which the Buyers may incur or sustain as a result of or by reason of
such collection efforts.
E. CONSENTS. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
A. Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in SECTIONS 2(A), 2(B), 2(C), AND 2(D) hereof
or relating to the Seller's title to the Acquired Assets) shall survive the
Closing and continue in full force and effect for a period until 90 days after
the applicable statute of limitations has expired with respect to any claim by
the Buyers based on a claim or action by a third party and for a period of three
(3) years following Closing with respect to any
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claim by the Buyers not based on a claim or action by a third party. All of the
other representations and warranties (including the representations and
warranties Seller contained in SECTIONS 2(A), 2(B), 2(C), AND 2(D) hereof or
relating to the Seller's title to the Acquired Assets) and all covenants of the
Buyers and the Seller contained in this Agreement shall survive the Closing and
continue in full force and effect forever thereafter.
B. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in SECTION 7(E) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement or
in any Ancillary Agreement executed and/or delivered by the Seller (so long
as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant
of the Seller contained herein or in any Ancillary Agreement;
iii. any Liability of the Seller which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
C. Indemnification Provisions for the Benefit of the Seller. Except
as described below in SECTION 7(E) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
D. Specific Performance. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in SECTION 10(O) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in SECTION
7(E) with respect to
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the remedy of liquidated damages upon a breach of a warranty or covenant of this
Agreement prior to the Closing, money damages would not be an adequate remedy
for Buyers for a breach of any provision of this Agreement.
E. Liquidated Damages. The Buyers and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(C), the Seller
shall be entitled to receive from the defaulting Party for such default the sum
of One Hundred Seventy Thousand Dollars ($170,000) as liquidated damages without
the need for proof of damages, subject only to successfully proving in a court
of competent jurisdiction that the Buyers materially breached this Agreement and
that the transactions contemplated thereby have not occurred. The Seller shall
proceed against the Earnest Money Deposit as partial satisfaction of liquidated
damages owed by the Buyers, and such liquidated damages shall be Seller's sole
remedy for a failure of the transactions contemplated hereby to occur as a
result of a material breach of the terms of this Agreement by the Buyers.
F. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this SECTION 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; PROVIDED, HOWEVER, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
G. LIMITATION OF LIABILITY. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from
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and after the Closing Date except to the extent that the Adverse Consequences
suffered by the Identified Party, in the aggregate from all indemnifiable events
shall exceed Ten Thousand Dollars ($10,000) and indemnification shall be made by
the indemnifying party only to the extent of such excess over Ten Thousand
Dollars ($10,000); provided however that the foregoing limitation shall not be
applicable to: (i) the obligations of the Buyer to pay and discharge any
Liability of the Seller to third parties from and after the Closing Date assumed
by the Buyer under the terms of this Agreement; (ii) the obligation of the
Seller to pay and discharge any Liability to third parties not assumed by the
Buyer under the terms of this Agreement, or (iii) the Seller's obligation to
deliver clear title to the Acquired Assets.
8. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title, and interest in and to all of the
assets of the Seller, other than Retained Assets that are used or useful in the
operation of the Station, wherever located, including but not limited to all of
its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles) and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those Barter Agreements and Advertising Contracts (whether or not greater than
$1000) identified on the Disclosure Schedule) now existing or entered into in
the Ordinary Course of Business for the sale of advertising time on the Station;
(e) Assumed Contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the Station, jingles,
logos, slogans, and business goodwill of the Station; (g) claims, deposits,
prepayments, refunds, causes of action, chooses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment; (h) Licenses and similar rights obtained from governments and
governmental agencies; and (i) FCC logs and records and all other books,
records, ledgers, logs, files, documents, correspondence, advertiser lists, all
other lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, program production materials,
studies, reports, and other printed or written materials; and (j) goodwill of
the Station.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"ADVERTISING CONTRACTS" has the meaning set forth in Section 2(s), above.
"AFFILIATE" means with reference to any person or entity, another person or
entity controlled by, under the control of or under common control with that
person or entity.
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"ASSIGNMENT APPLICATION" has the meaning set forth in Section 4(b) above.
"ASSUMED CONTRACTS" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(k) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"ASSUMED LIABILITIES" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contracts either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"BUYERS" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in SECTION 1(D) above.
"CLOSING DATE" has the meaning set forth in SECTION 1(D) above.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of the Seller.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 1 above.
"EARNEST MONEY DEPOSIT" has the meaning set forth in Section 1(c) above.
"EARNEST MONEY ESCROW AGREEMENT" has the meaning set forth in Section 1(c)
above.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
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"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means Norman Fischer & Associates.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC LICENSES" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Station.
"FINAL ORDER" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 2(E) above.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 7(D) above.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 7(D) above.
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"INTELLECTUAL PROPERTY" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LEASES" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites, as described in SECTION 2(I) of
the Disclosure Schedule.
"LIABILITY" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LICENSES" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Station and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"MULTI-EMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
"PERMITTED REAL ESTATE ENCUMBRANCES" shall have the meaning set forth in
Section 2(i), above.
"POST-CLOSING AGREEMENT" means the Post-Closing Agreement with Seller's
owners in the form attached hereto as EXHIBIT C.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"PURCHASE PRICE" has the meaning set forth in SECTION 1(C) above.
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<PAGE>
"REAL ESTATE" means the real estate, building, fixtures and improvements
which are the subject of the Leases.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
"RETAINED ASSETS" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller; and (iv) Cash.
"RETAINED LIABILITIES" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Station prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"SELLER" has the meaning set forth in the preface above.
"STATION" means the radio broadcast station having the call letters
KFQX-FM, licensed by the FCC to operate in Merkel, Texas.
"SUBSIDIARY," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"SURVEYS" has the meaning set forth in SECTION 4(O) above.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental
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<PAGE>
(including taxes under Code Sec. 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. TERMINATION.
(A) TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach of any representation, warranty, or covenant contained
in this Agreement; provided, however, that if such breach is capable of
being cured, such breach also remains uncured for twenty (20) days after
notice of breach is received by the Seller from the Buyers;
iii. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in breach of any representation, warranty, or covenant contained
in this Agreement; provided, however that if such breach is capable being
cured, such breach remains uncured for twenty (20) days after notice of
breach is received by the Buyers from the Seller;
iv. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under SECTION
5(A) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained in
this Agreement);
v. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under SECTION
5(B) hereof (unless the failure results primarily from the Seller itself
breaching any representation, warranty, or covenant contained in this
Agreement);
vi. the Buyer may terminate this Agreement on or before the
30th day after the date hereof in the event it has not satisfactorily
completed its due diligence review of the Stations; or
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<PAGE>
vii. the Buyers or the Seller may terminate this Agreement if
any Assignment Application is denied by Final Order.
(B) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. MISCELLANEOUS.
A. PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
B. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
C. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
D. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, PROVIDED that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Seller the Purchase Price therefor or to any
successor to the Buyers in the event of any sale, merger or consolidation of the
Buyers, and (ii) Buyers may assign their indemnification claims and their rights
under the warranties and representations of the Sellers to the financial
institution(s) providing financing to the Buyers in connection with this
transaction.
E. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
F. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
G. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when
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<PAGE>
hand delivered, when delivered via prepaid express or courier delivery service,
when sent by facsimile transmission actually received by the receiving equipment
or three (3) days after deposited in the United States mail, certified mail,
postage prepaid, return receipt requested, in each case addressed to the
intended recipient as set forth below:
IF TO THE SELLER:
Mr. R.G. Call
Esprit Communications Corporation
510 S. Congress Avenue, Suite 310
Austin, Texas 78704-1716
Phone: (512) 457-1334
Fax: (512) 457-1335
Copy to:
Luvaas, Cobb, Richards & Fraser, P.C.
777 High Street, Suite 300
Eugene, Oregon 97401-2787
Attn: J. Dominic Monahan, Esquire
Phone: (541) 484-9292
Fax: (541) 343-1206
(which copy shall not constitute notice to Seller)
IF TO THE BUYERS:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Phone: (414) 283-4500
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Phone: (312) 867-0091
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<PAGE>
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
H. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Texas.
I. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
J. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
K. EXPENSES. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(o) with respect to title commitments and Surveys. The Seller
will pay all of Seller's income taxes.
L. CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have
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<PAGE>
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
M. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
N. SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Abilene, Texas in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
------------------------------
(printed)
Title:
---------------------------
CUMULUS LICENSING CORPORATION
By:
------------------------------
(printed)
Title:
---------------------------
ESPRIT COMMUNICATIONS CORPORATION
By:
------------------------------
(printed)
Title:
---------------------------
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<PAGE>
SCHEDULE A
PURCHASE PRICE. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the amount of One Million Seven Hundred Thousand
Dollars ($1,700,000.00), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Eighty-Five Thousand Dollars ($85,000.00) (the
"EARNEST MONEY DEPOSIT") in the form of an irrevocable letter of credit from
Lehman Commercial Paper Inc.; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of One Million Seven Hundred Thousand Dollars ($1,700,000.00), with
adjustments as provided specifically in this Agreement.
The Earnest Money Deposit referenced in this SCHEDULE A shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as EXHIBIT A (the "EARNEST MONEY ESCROW AGREEMENT"), and shall
be disbursed to Seller or returned to Buyer as provided in the Earnest Money
Escrow Agreement.
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<PAGE>
Exhibit 10.60
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("AGREEMENT") is made as of the 20th day of
November, 1996, by and among IQ RADIO, INC. ("SELLER") and TAYLOR COUNTY
BROADCASTING, INC. ("PURCHASER").
RECITALS:
A. SELLER is the owner of a business located in Abilene, Texas, which
operates a radio station under call letters KHXS-FM under a license granted to
SELLER by the Federal Communication Commission ("FCC").
B. Under the terms and subject to the conditions of this Agreement,
SELLER desires to sell to PURCHASER and PURCHASER desires to purchase from
SELLER substantially all the assets of said business.
C. SELLER desires to assign and transfer to PURCHASER and PURCHASER
agrees to accept the assignment of the FCC license as to such radio station, as
well as certain Lease Agreements as more fully described herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1 - PURCHASE AND SALE OF ASSETS.
1.1 Upon the terms and subject to the conditions of this Agreement,
SELLER will sell to PURCHASER and PURCHASER will purchase from SELLER
substantially all the assets of the business, more particularly described in
Exhibit "A" attached hereto and made a part hereof for all purposes.
1.2 SELLER shall assign to PURCHASER (after obtaining approval from the
FCC) the license for the operation of such radio station and all rights
incidental thereto. In addition, SELLER shall assign to PURCHASER all leases
or contracts as may be accepted by
<PAGE>
PURCHASER after review by PURCHASER.
1.3 The consideration for this sale and assignment shall be as follows:
(a) The full and complete price "The Purchase Price" for all the
assets of KHXS-FM will be THREE HUNDRED THIRTY-FIVE THOUSAND AND
NO/100 ($335,000.00) DOLLARS and shall be paid as follows:
1. TWENTY-FIVE THOUSAND AND NO/100 ($25,000.00) DOLLARS shall
be paid in cash to SELLER at the time of the closing of the
Purchase Agreement.
2. The sum of TWO THOUSAND AND NO/100 ($2,000.00) DOLLARS shall
be derived out of the monthly amount of FIVE THOUSAND AND
NO/100 ($5,000.00) DOLLARS, paid pursuant to the provisions
of the time Brokerage Agreement and shall accumulate until
the closing date. On the closing date, the total amount of
this accumulation shall also be applied against the Purchase
Price as set forth in section 1.3 (a) (3) below.
3. On the closing date, a promissory note shall be executed and
delivered to SELLER in the original principal balance of a
sum derived from the difference between 1,3 (a) (1) and (2)
above and the gross figure of $335,000.00. It is estimated
that the principal balance will be approximately TWO HUNDRED
EIGHTY-SIX THOUSAND AND NO/100 ($286,000.00) DOLLARS, if the
Time Brokerage Agreement is in place for a full twelve (12)
months. Any period of months, either more or less than
twelve, would necessitate an adjustment to this note
2
<PAGE>
balance. This note shall be payable over a ten (10) year
term, bearing an interest rate of nine (9%) percent per
annum, commencing with the first full month following the
transfer of license by the FCC. The indebtedness evidenced
by this note shall be secured by a purchase money security
interest in the assets made the subject of this Agreement.
All such liens and security agreements shall be perfected in
accordance with applicable Texas law.
(b) In addition to the Purchase Price set forth above, PURCHASER
agrees to assume the unpaid balance of the loan made by Phoenix
Leasing Incorporated to SELLER payable in monthly installments
of ONE THOUSAND THREE HUNDRED SEVEN AND NO/100 ($1,307.00)
DOLLARS, with a total loan value of approximately SIXTY-FIVE
THOUSAND AND NO/100 ($65,000.00) DOLLARS.
1.4 The CLOSING of this Agreement shall take place in the office of
PURCHASER in Abilene, Texas, or at such other place as may be reasonably
designated by PURCHASER. The date and time of closing shall be within fifteen
(15) business days following the approval by the FCC of the assignment of the
license for the station. All parties agree to exercise due diligence in
obtaining such approval. Time is of the essence.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF SELLER.
SELLERS, jointly and severally, hereby represent and warrant to PURCHASER
as follows:
2.1 SELLER owns all the property described in Exhibit "A" and is the
holder in good standing of the license issued by the Federal Communication
Commission pertaining to the radio station KHXS-FM. SELLER'S title is free and
clear of all liens and encumbrances other than those
3
<PAGE>
liens specifically assumed by PURCHASER in conjunction with the Phoenix Leasing
Incorporated indebtedness. The execution, delivery and performance of this
Agreement by SELLER will not result in any violation of nor will it conflict
with or result in any violation of the terms of, or constitute a default under,
any provision of state or federal law or any agreement, mortgage, lien, credit
document, or other contracts to which SELLER or any of its property is bound.
2.2 All business records and financial information furnished by SELLER to
PURCHASER have been compiled in accordance with generally accepted accounting
procedures and contain no material misrepresentation or untruth nor is any item,
liability or obligation omitted from such records. SELLER will not incur any
liability or obligation except in the ordinary course of business until date of
closing and all liabilities will be paid by SELLER in due course in accordance
with their terms between now and date of CLOSING. No liabilities other than
those expressly assumed by PURCHASER in subparagraph 1.3(a) and (b) shall be the
responsibility or liability of PURCHASER.
2.3 SELLER shall not default in the performance of any of its obligations
under any of the credit facilities, leases or licenses held by SELLER from date
of this Agreement through CLOSING and any defaults or non-compliance now in
existence will be cured within fifteen (15) days following date of this
Agreement so that SELLER is restored to full compliance under any obligation,
license or contract.
2.4 SELLER has not and will not enter into any written agreement or
obligation other than in the ordinary course of business and has not and will
not enter into any contract or agreement providing for prepayment beyond the
term of thirty (30) days for any services to be performed by SELLER. SELLER
shall not enter into any contractual obligation or commitment that will commit
or bind SELLER beyond the term of thirty (30) days pending closing of this
Agreement.
4
<PAGE>
2.5 SELLER is not engaged in any litigation either as a plaintiff or as a
defendant nor does SELLER anticipate participation either as a plaintiff or as a
defendant in litigation and is unaware of any claims now pending against SELLER.
2.6 Copies of all leases are attached as Exhibit "B" and all leases are
current and no event of default has occurred under such leases.
SECTION 3 - REPRESENTATIONS OF PURCHASER.
PURCHASER hereby represents and warrants to SELLER as follows:
3.1 PURCHASER is yet to be formed Texas corporation which has reserved
the name Taylor County Broadcasting, Inc. and intends to be incorporated under
that name and to do business under that name.
3.2 At the time of the execution of the Contract and the closing of the
Contract, the PURCHASER will have been incorporated and the Board of Directors
of PURCHASER will have duly adopted a Resolution authorizing the PURCHASER to
enter into this transaction and to execute all the documents and evidences of
obligation as required under the terms of this Agreement.
3.3 Execution of this Agreement by PURCHASER shall not violate any terms
or conditions of any obligation of PURCHASER and, upon the execution of this
Agreement by PURCHASER, this Agreement shall be binding upon PURCHASER and shall
be enforceable under the applicable laws of the State of Texas.
SECTION 4 - CONDITIONS TO CLOSING OF PURCHASE.
PURCHASER'S obligation to purchase the assets made the subject of this
Agreement are conditioned upon the following items:
4.1 All representations and warranties of SELLER shall be true and
correct in all material respects when made and shall be true and correct in all
material respects as of the
5
<PAGE>
CLOSING.
4.2 A Bill of Sale in a form and manner acceptable to PURCHASER shall be
delivered to PURCHASER at CLOSING transferring all the property made the subject
of this Agreement to PURCHASER free and clear of all liens and encumbrances
except for the lien specifically assumed under the terms of this Agreement.
4.3 No closing shall take place under this Agreement until approval of
the assignment of license has been obtained from the FCC. If, for any reason,
such assignment of license is denied, PURCHASER and SELLER shall have the option
to terminate this Agreement. Failure to obtain approval within one (1) year
after approval is sought shall permit PURCHASER and SELLER to terminate this
Agreement.
SECTION 5 - SPECIAL PROVISIONS.
5.1 SELLER agrees to indemnify and hold PURCHASER harmless from any and
all claims, actions or causes of action asserted against PURCHASER which arose,
in whole or in part, before date of CLOSING which in any way relate to the
assets being purchased or the business as operated by SELLER. In addition,
SELLER agrees to indemnify and hold PURCHASER harmless from any and all claims,
actions or causes of action or loss arising out of or having to do with the
breach, violation or default in conjunction with any representation, warranty or
covenant of SELLER as contained in this Agreement.
5.2 PURCHASER agrees to indemnify and hold SELLER harmless from any and
all claims, actions, or causes of action asserted against SELLER which arose
subsequent to the date of closing which in any way relate to the assets being
purchased or the business as operated by PURCHASER. In addition, PURCHASER
agrees to indemnify and hold SELLER harmless from any and all claims, actions,
or causes of actions or losses arising out of or having to do with the
6
<PAGE>
breach, violation or default in conjunction with any representation, warranty or
covenant of PURCHASER as contained in this Agreement.
5.3 SELLER agrees to be responsible for and have paid current through
date of CLOSING all liabilities and obligations of SELLER, including, but not
limited to, the monthly obligation to Phoenix Leasing.
SECTION 6 - MISCELLANEOUS.
6.1 Taxes and leases shall be prorated through date of CLOSING, as well
as the obligation under any contract or note specifically assumed by PURCHASER.
6.2 PURCHASER shall have the right to reject and not assume any of the
leases described in Exhibit "B" upon giving fifteen (15) days written notice to
SELLER prior to CLOSING. As to those contracts and leases specifically assumed
by PURCHASER, PURCHASER agrees to indemnify and hold SELLER harmless from any
and all claims, actions or causes of action arising out of such leases and
contracts that were assumed by PURCHASER from and after date of CLOSING.
6.3 All representations, warranties and agreements under this Agreement
shall survive from and after date of CLOSING.
6.4 This Agreement shall be binding upon the parties hereto, their heirs,
successors and assigns.
6.5 This Agreement with the Exhibits attached constitutes the entire
agreement between the parties and may not be amended or modified in writing or
orally except by instrument in writing duly executed by all parties hereto.
SECTION 7 - CLOSING.
7.1 This Agreement shall close within fifteen (15) business days
following receipt of
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<PAGE>
notice of the approval by the FCC of the assignment of license(s) relating to
the radio station hereinabove referenced.
7.2 At closing, SELLER shall deliver to PURCHASER the following:
(a) SELLER shall deliver an assignment of all leases, licenses, and
contracts.
(b) SELLER shall deliver a Bill of Sale transferring all of the
physical assets of KHXS-FM.
7.3 At closing, PURCHASER shall deliver to SELLER the following:
(a) PURCHASER shall deliver to SELLER the cash consideration and the
note and security agreement referred to in 1.3(a) and execute
all instruments of assumption and other documents to evidence
the transfer of responsibility to PURCHASER.
DATED:
--------------------
IQ RADIO, INC.
BY:
-----------------------------------
PRESIDENT
- SELLER -
TAYLOR COUNTY BROADCASTING, INC.
BY:
-----------------------------------
GLEN A. HINE, President
-PURCHASER-
8
<PAGE>
Exhibit 10.61
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Agreement") is made as of this
20th day of January, 1998 by and among Taylor County Broadcasting, Inc., a Texas
corporation ("Assignor"), Cumulus Licensing Corp., a Nevada corporation
("Licensing") and Cumulus Broadcasting, Inc., a Nevada corporation
("Broadcasting" and together with Licensing, the "Assignee").
This Agreement is intended to effectuate Sections 2(v)(vi) and 5(a)(viii)
of the October 29, 1997 Asset Purchase Agreement (the "Purchase Agreement")
among Assignee, Big Country Broadcasting, Inc. ("Big Country") and Tye
Broadcasting, Inc. ("Tye"), pursuant to which Assignor's Purchase Option (as
defined in the Purchase Agreement) relative to Station KHXS-FM, Abilene, Texas
is to be assigned from Assignor, which is commonly owned with Big Country and
Tye, to Assignee. Assignor, pursuant to its Time Brokerage Agreement of
December 6, 1996 with IQ Radio, Inc. ("Licensee"), has exercised its Purchase
Option and entered into a Purchase Agreement (the "IQ Purchase Agreement") with
Licensee on November 20, 1997.
NOW, THEREFORE, in consideration of the above premises, the mutual promises
herein made and those made by Assignee, Big Country and Tye in the Purchase
Agreement, the parties hereto agree as follows:
1. Assignor hereby assigns to Assignee all of its rights under the IQ
Purchase Agreement.
2. Assignee agrees to be bound by the terms and provisions of the IQ
Purchase Agreement and, as Assignee, to perform all of the duties and
obligations, including the payment of the Purchase Price, as required of
"Purchaser" in the IQ Purchase Agreement, and hereafter holds Assignor harmless
with respect to any obligations whatsoever under the IQ Purchase Agreement
<PAGE>
other than for any breach by Assignor of the IQ Purchase Agreement prior to the
date hereof.
3. Licensee acknowledges that at the Closing under the IQ Purchase
Agreement the Federal Communications Commission authorizations for Station
KHXS-FM shall be assigned to Licensing, and the other assets to be assigned
pursuant to the IQ Purchase Agreement shall be assigned to Broadcasting.
4. In lieu of the representations contained in Sections 3.1 and 3.2 of
the IQ Purchase Agreement, Assignee hereby represents to Licensee that
Broadcasting and Licensing are corporations, duly organized and in good standing
under the laws of the State of Nevada, and that Assignee's execution and
delivery of this Agreement, and the performance of its obligations under the IQ
Purchase Agreement, have been duly authorized by all necessary action on the
part of Broadcasting and Licensing.
5. The representations of "Purchaser" included in Section 3.3 of the IQ
Purchase Agreement are hereby certified to by Assignee as being true as to it.
6. The parties agree that the penultimate sentence of Section 1.3(a)3 of
the IQ Purchase Agreement shall be amended to add the words "to the extent
permitted by law and by the regulations of the FCC" at the end of such sentence.
7. The parties agree that the first sentence of Section 6.2 of the IQ
Purchase Agreement is amended to add the words "and contracts" immediately after
the word "leases" therein.
8. The parties agree that Exhibits A and B to the IQ Purchase Agreement
shall be the Exhibits A and B attached hereto.
<PAGE>
2
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
TAYLOR COUNTY BROADCASTING, INC.
By:
------------------------------
Virginia Ann Hine
Vice President
CUMULUS BROADCASTING, INC.
By:
------------------------------
Richard Weening
Chairman
CUMULUS LICENSING CORP.
By:
------------------------------
Richard Weening
Chairman
IQ Radio, Inc. hereby consents to the assignment of the IQ Purchase
Agreement as provided for above, agrees to perform all of its duties and
obligations under the IQ Purchase Agreement as so assigned and agrees to the
amendments to the IQ Purchase Agreement set forth herein.
IQ RADIO, INC.
Date: 1-20-97 By:
------------- ------------------------------
President
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
TAYLOR COUNTY BROADCASTING, INC.
By:
------------------------------
Virginia Ann Hine
Vice President
CUMULUS BROADCASTING, INC.
By:
------------------------------
Richard Weening
Chairman
CUMULUS LICENSING CORP.
By:
------------------------------
Richard Weening
Chairman
IQ Radio, Inc. hereby consents to the assignment of the IQ Purchase
Agreement as provided for above, agrees to perform all of its duties and
obligations under the IQ Purchase Agreement as so assigned and agrees to the
amendments to the IQ Purchase Agreement set forth herein.
IQ RADIO, INC.
Date: By:
----------- ------------------------------
President
<PAGE>
EXHIBIT A
LICENSEE does not own any equipment. LICENSEE owns the FCC licence and all
equipment is leased.
<PAGE>
EXHIBIT B
Contracts for LICENSEE are listed below:
1. KRIG Equipment Lease
2. Rush Limbaugh Contract
3. Imus In the Morning Contract
4. LMA Contract amount of payment for Larry Hickerson
5. KACU Tower Rental for KHXS
6. CNN Barter Agreement
<PAGE>
Exhibit 10.62
ASSET PURCHASE AGREEMENT
This Agreement ("AGREEMENT") is entered into as of January 2, 1997, by and
between Cumulus Broadcasting, Inc., a Nevada corporation ("BROADCASTING"),
Cumulus Licensing Corporation, a Nevada corporation ("LICENSING"), and Westwind
Broadcasting Inc. (the "SELLER"). Broadcasting and Licensing (collectively
herein the "BUYERS"). The Buyers and the Seller are referred to collectively
herein as the ("PARTIES"). Capitalized terms used in this Agreement are defined
in SECTION 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
stations KPUR-FM, licensed to Canyon, Texas, and KPUR-AM, licensed to Amarillo
(the "STATIONS") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. BASIC TRANSACTION.
(A) PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, Licensing agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to Licensing, all of
the FCC Licenses listed in SECTION 2(L) of the Disclosure Schedule. In
addition, Broadcasting agrees to purchase from the Seller, and the Seller agrees
to sell, transfer, convey, and deliver to Broadcasting, all of the Acquired
Assets other than the FCC Licenses. Both such sales shall take place at the
Closing for the consideration specified below in this SECTION 1.
(B) ASSUMPTION OF LIABILITIES. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities at the Closing. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
the Seller not included within the definition of Assumed Liabilities and the
Seller agrees to pay and discharge all Liabilities and obligations of the Seller
other than the Assumed Liabilities.
(C) PURCHASE PRICE. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the amount of Eight Hundred Twenty
Thousand Dollars ($820,000.00) (the "PURCHASE PRICE"). The Purchase Price shall
be payable as follows:
(i) on the date of this Agreement, the Buyers will deliver to the
Escrow Agent an irrevocable letter of credit issued by NationsBank of Texas,
N.A. for the benefit of the Escrow Agent in the amount of Sixty-One Thousand
Five Hundred Dollars ($61,500.00) (the "EARNEST MONEY DEPOSIT"); and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Eight Hundred Twenty Thousand Dollars ($820,000.00), with adjustments
as specifically provided in this Agreement.
ASSET PURCHASE AGREEMENT
TONYA/ADAMS/CUMULUS PAGE 1 OF 37
<PAGE>
The Earnest Money Deposit referenced in this Section 1(c) shall be held in
escrow by the Escrow Agent pursuant to an escrow agreement in the form attached
hereto as Exhibit A (the "EARNEST MONEY ESCROW AGREEMENT"). If this Agreement
is terminated without Closing of the transaction contemplated herein, the
Earnest Money Deposit shall be paid to the Seller or returned to the Buyers as
provided in the Earnest money Escrow Agreement.
(D) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of SANDERS, BAKER &
JESKO, P.C., attorneys in Amarillo, Texas, commencing at 9:00 a.m. local time on
the date set by the Buyers and Seller not earlier than the fifth business day or
later than the tenth business day after the FCC approval of the Assignment
Application becomes a Final Order, by which date all other conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
will have been satisfied or such other date as the Parties may mutually
determine (the "CLOSING DATE").
(E) DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will deliver
to the Buyers the various certificates, instruments, and documents referred to
in SECTION 5(A) below; (ii) the Buyers will deliver to the Seller the various
certificates, instruments, and documents referred to in SECTION 5(B) below;
(iii) the Seller will execute, acknowledge (if appropriate), and deliver to the
Buyers (A) assignments (including Lease and other Assumed Contract assignments
and Intellectual Property transfer documents), bills of sale and warranty deeds
in the forms attached hereto as EXHIBITS "B-1" THROUGH "B-2", (B) such
affidavits, transfer tax returns, memorandums of lease, and other documents as
may be required by the terms of the title insurance commitments described in
SECTION 4(O) hereof, as necessary to furnish title insurance as required by such
section or as may be necessary to convey title to the Real Estate to the Buyers
in the condition required herein or provided public notice of existence of the
Leases, and (C) such other instruments of sale, transfer, conveyance, and
assignment as the Buyers and their counsel reasonably may request; (iv) the
Buyers will execute, acknowledge (if appropriate), and deliver to the Seller (A)
an assumption in the form attached hereto as EXHIBIT "C" and (B) such other
instruments of assumption as the Seller and its counsel reasonably may request;
and (v) the Buyers will deliver to the Seller the consideration specified in
SECTION L(C) above.
(F) POSTCLOSING AGREEMENT. On the Closing Date, the Seller shall execute,
and shall cause shareholder Keith Adams to execute, a Postclosing Agreement with
the Buyer containing a covenant not to compete with the Buyer in the markets
served by the Stations. A portion of the Purchase Price equal to Thirty
Thousand Dollars ($30,000.00) shall be paid to the Seller by the Buyers on the
Closing Date as consideration for the covenant not to compete set forth in the
Postclosing Agreement.
(G) ALLOCATION. The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial accounting and tax purposes)in accordance with the allocation schedule
attached hereto as EXHIBIT "E".
(H) LOCAL MARKETING AGREEMENT. Concurrent with the execution of this
Agreement, the Seller and Buyer shall execute the Local Marketing Agreement (the
"LMA AGREEMENT"),which includes the terms and conditions pursuant to which the
Operating Company will purchase the airtime on the
ASSET PURCHASE AGREEMENT
TONYA/ADAMS/CUMULUS PAGE 2 OF 37
<PAGE>
Stations. The accounts receivable of the Stations in existence as of the date
of this Agreement shall be collected pursuant to the terms and conditions of the
LMA Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Buyers that the statements contained in this SECTION 2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this SECTION 2):
(A) ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The Seller has the power and authority to own or lease its properties and to
carry on all business activities now conducted by it. The shareholder of the
Seller is Keith Adams.
(B) AUTHORIZATION OF TRANSACTION. The Seller has full power and authority
(including full
partnership power and authority) to execute and deliver this Agreement and all
agreements and instruments to be executed and delivered by such Party pursuant
to this Agreement (collectively, the "ANCILLARY AGREEMENTS") and to perform its
obligations hereunder and thereunder. Without limiting the generality of the
foregoing, the Board of Directors of the Seller has duly authorized the
execution, delivery, and performance of this Agreement and the Ancillary
Agreements by the Seller. This Agreement and the Ancillary Agreements
constitute the valid and legally binding obligation of the Seller, enforceable
in accordance with their respective terms and conditions.
(C) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in SECTION 1(E) above), to the knowledge and belief of Seller,will
in any material way, (i) violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge, or other of any government,
governmental agency, or court to which the Seller is subject or any provision of
the charter or bylaws of the Seller; or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice or third party consent under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other agreement,
arrangement to which the Seller is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Other than with respect to the Assignment
Application described in SECTION 4(O) to the knowledge of Seller, the Seller
does not need to give any notice to, make any filing with, or obtain any
Licenses, consent, or approval of any court or government or govenunental agency
in order for the Parties to enter into this agreement or the Ancillary
Agreements or to consummate the transactions contemplated by this Agreement or
the Ancillary Agreements (including the assignments and assumptions referred to
in SECTION 1(E) above).
(D) TITLE TO ACQUIRED ASSETS. Other than the Security Interests set forth
on SECTION 2(D) of the Disclosure Schedule (which shall be released at or before
the Closing) the Seller has good and
ASSET PURCHASE AGREEMENT
TONYA/ADAMS/CUMULUS PAGE 3 OF 37
<PAGE>
marketable title to all of the Acquired Assets, free and clear of any Security
Interest or restriction on transfer.
(E) FINANCIAL STATEMENTS. Included in SECTION 2(E) of the Disclosure
Schedule are the following financial statements (collectively the "FINANCIAL
STATEMENTS"): (i) unaudited balance sheets and statements of income, and cash
fiow as of and for the fiscal years ended December 31, 1993, December 31, 1994,
December 31, 1995 and December 31, 1996, for the Seller; and (ii) unaudited
balance sheets and statements of income, as of and for each month during 1996
and each month ending October 31 in 1997 for the Seller. The Financial
Statements are correct and complete, fairly represent the financial condition
of the Seller on such dates and the results of operations for the periods
designated therein, and are consistent with the books and records of the Seller
(F) EVENTS SUBSEQUENT TO SEPTEMBER 1, 1997. Since September 1, 1997,
except as set forth in SECTION 2(F) of the Disclosure Schedule, there has not
been any adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations. Without limiting the generality
of the foregoing and with respect to the operation of the Stations since that
date:
(i) the Seller has not sold, leased, transferred, or assigned any
of its material assets, tangible or intangible;
(ii) other than this Agreement, the Seller has not entered into any
agreement, contract, lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
outside the Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled
any agreement, contract lease, sublease, license, or sublicense (or series of
related agreements, contracts, leases, subleases, licenses, and sublicenses)
involving more than $5,000 to which the Seller is a party or by which it or any
of its assets are bound;
(iv) no Security Interest has been imposed upon any of Seller's
assets, tangible or intangible;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions);
(vii) the Seller has not created, incurred, assumed, or guaranteed
any indebtedness (including capitalized lease obligations) outside the Ordinary
Course of Business;
ASSET PURCHASE AGREEMENT
TONYA/ADAMS/CUMULUS PAGE 4 OF 37
<PAGE>
(viii) the Seller has not delayed or postponed (beyond its normal
practice in the Ordinary
Course of Business) the payment of accounts payable and other Liabilities;
(ix) the Seller has not canceled, compromised, waived, or released
any right or claim (or
series of related rights and claims) outside the Ordinary Course of Business;
(x) the Seller has not granted any license or sublicense of any
rights under or with respect
to any Intellectual Property;
(xi) the Seller has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to any of its property or any action
adversely affecting the FCC Licenses;
(xii) the Seller has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees giving rise to
any claim or right on its part against the person
or on the part of the person against it;
(xiii) the Seller has not entered into any employment contract,
consulting contract or severance agreement or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement;
(xiv) the Seller has not granted any increase (outside routine
salary and wage increases in the Ordinary Course of Business) in the rate of
compensation, commissions, bonus or other remuneration payable, or granted any
severance or termination pay to, any of its directors, officers, and employees;
(xv) the Seller has not adopted any (A) bonus, (B) profit-sharing,
(C) incentive compensation, (D) pension, (E) retirement, (F) medical,
hospitalization, life, or other insurance, (G)
severance, or (H) other plan, contract, or commitment for any of its directors,
officers, employees, or modified or terminated any existing such plan, contract,
or commitment;
(xvi) the Seller has not made any other change in employment terms
for any of its directors, officers, and employees;
(xvii) the Seller has not made or pledged to make any charitable or
other capital contribution;
(xviii) there has not been any other occurrence, event, incident,
action, failure to act, or
transaction outside the Ordinary Course of Business involving the Seller;
(xix) the Seller has not altered its credit and collection policies
or its accounting policies;
(xx) the Seller has not materially altered the programming, format
or call letters of the
ASSET PURCHASE AGREEMENT
TONYA/ADAMS/CUMULUS PAGE 5 OF 37
<PAGE>
Stations, or its promotional and marketing activities;
(xxi) the Seller has not applied to the FCC for any modification of
the FCC Licenses or
failed to take any action necessary to preserve the FCC Licenses and has
operated the Stations compliance therewith and with all FCC rules and
regulations; or
(xxii) the Seller has not committed to any of the foregoing.
(G) TAX MATTERS. The Seller has timely and properly filed all Tax Returns
that they were required to file with respect to the Seller's operations. All
such Tax Returns were correct and complete in all respects and properly reflect
the tax liability of the Seller. The Seller has not requested any extension of
time within which to file returns in respect of any Taxes with respect to the
Seller's operations. No Tax deficiencies have been proposed or assessed against
the Seller. There are no pending, or to the Seller's knowledge, threatened
audits, investigations, or claims for or relating to any liability in respect of
Taxes with respect to the Seller's operations. All Taxes due and owed by the
Seller with respect to its operations (whether or not shown on any Tax Return)
have been paid. The Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. No claim has ever been
made by any authority in any jurisdiction where the Seller does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the assets of the Seller that arose in
connection with any failure (or alleged failure) to pay any Tax.
(H) TANGIBLE ASSETS. SECTION 2(H) of the Disclosure Schedule sets forth a
listing of all transmitter and station equipment; vehicles and other tangible
personal property used in conducting the operation and business of the Stations.
The Seller owns or leases all tangible assets as are specifically identified as
such in SECTION 2(H) of the Disclosure Schedule. Any leased personal property
included within the tangible personal property is in the condition required of
such property by the terms of the lease applicable thereto during the term of
the lease and upon the expiration thereof. All of the equipment utilized in the
operation of the Stations to the best knowledge and belief of Seller, is in
compliance with all FCC and FAA requirements.
(i) INSPECTION. Buyer by execution hereof acknowledges and
represents Buyer has conducted Buyer's own inspection of the tangible assets and
accepts same "AS IS."
(ii) NO WARRANTIES. SELLER HEREBY MAKES NO REPRESENTATIONS AND
WARRANTIES TO BUYER. ALL PERSONAL PROPERTY IS SOLD TO BUYER "AS IS" AND "WITH
ALL FAULTS"; NO WARRANTIES OF ANY KIND ARE IMPLIED IN THIS TRANSACTION.
(I) REAL PROPERTY. SECTION 2(I) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Seller has delivered to the Buyer correct complete copies of the
Leases. With respect to the Real Estate:
ASSET PURCHASE AGREEMENT
TONYA/ADAMS/CUMULUS PAGE 6 OF 37
<PAGE>
(i) the Seller has good and marketable title to all of the Owned
Real Estate and said Real Estate will at Closing be free and clear of all liens,
charges, mortgages, security interests, easements, restrictions or other
encumbrances of any nature whatsoever except real estate taxes for the year of
Closing and recorded utility easements.
(ii) to the best knowledge and belief of Seller, the Leases are
and, following the Closing will continue to be, legal, valid, binding,
enforceable, and in full force and effect;
(iii) no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with notice
or lapse of time, would constitute a breach or default thereunder or permit
termination, modification, or acceleration thereunder;
(iv) there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
(v) none of the Owned Real Estate and to the Seller's Knowledge,
none of the properties
subject to the Leases is subject to any lease (other than Leases), option to
purchase or rights of first refusal;
(vi) except for Permitted Real Estate Encumbrances, there are to
the best knowledge and belief of Seller, no (i) actual or, proposed special
assessments with respect to any of the Real Estate; (ii) pending or threatened
condemnation proceedings with respect to any of the Real Estate; (iii) pending
or threatened litigation or administrative actions with respect to any of the
Real Estate; (iv) mechanic's or materialmens' liens with respect to the Owned
Real Estate; (v) structural or mechanical defects in any of the buildings or
improvements located in the Real Estate; (vi) planned or commenced improvements
which will result in an assessment or otherwise affect the Real Estate; (vii)
governmental agency or court orders requiring the repair, alteration or
correction of any existing condition with respect to the Real Estate or any
portion thereof, or (viii) any pending or threatened changed in any zoning laws
or ordinances which may affect any of the Real Estate or Seller's use thereof;
(vii) all buildings and improvements on the Real estate, to the
knowledge of Seller, are in good operating condition and repair, normal wear and
tear excepted;
(viii) the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the Leases or its rights
thereunder;
(ix) to the Seller's Knowledge, all facilities on the Real Estate
have received all approvals, of governmental authorities (including licenses,
permits, and zoning approvals) required in connection with the operation thereof
and have been operated and maintained in accordance with applicable laws, rules,
and regulations;
(x) all facilities on the Real Estate are supplied with utilities
and other services necessary
ASSET PURCHASE AGREEMENT
TONYA/ADAMS/CUMULUS PAGE 7 OF 37
<PAGE>
for the operation of said facilities; and
(xi) to the Seller's Knowledge, the owner of each leased facility
has good and marketable title to the underlying parcel of real property, free
and clear of any Security Interest, easement, covenant, or other restriction,
except for Permitted Real Estate Encumbrances and Seller's leasehold interest in
each Lease has priority over any other interest except for the fee interest
therein and Permitted Real Estate Encumbrances;
(J) INTELLECTUAL PROPERTY. To the best knowledge and belief of Seller, the
Seller owns or has the right to use pursuant to license, sublicense, agreement,
or permission all Intellectual Property necessary for or currently used in the
operation of the business of the Seller as presently conducted and as presently
proposed to be conducted. Each item of Intellectual Property owned or used by
the Seller immediately prior to the Closing hereunder will be owned or available
for use by the Buyer on identical terms and conditions immediately subsequent to
the Closing hereunder. The Seller, to Seller's knowledge and belief, has taken
all necessary or action to protect each item of Intellectual Property that it
owns or uses. With respect to such Intellectual Property:
(i) To the best of Seller's knowledge and belief, the Seller has
not interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and the Seller
has never received any charge, complaint, claim, or notice alleging any such
interference, infringement, misappropriation, or violation. To the Knowledge of
the Seller, no third party has interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Intellectual Property rights of the
Seller.
(ii) SECTION 2(K) of the Disclosure Schedule also identifies each
item of Intellectual Property that any third party owns and that the Seller uses
pursuant to license, sublicense, agreement, or permission including, but not
limited to the call letters of the Stations. The Seller has supplied the
Buyer with correct and complete copies of all such licenses, sublicenses,
agreements, permissions (as amended to date). With respect to each such item of
used Intellectual Property:
(A) the license, sublicense, agreement, or permission covering
the item is, and following the Closing will continue to be on
identical terms, legal, valid, binding, enforceable, and in full force
and effect;
(B) no party to the license, sublicense, agreement, or
permission is in breach or default (or has repudiated any provision
thereof), and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(C) with respect to each sublicense, the representations and
warranties set forth in subsections (A) and (B) above are true and
correct with respect to the underlying license;
(D) the underlying item of Intellectual Property is not
subject to any outstanding
ASSET PURCHASE AGREEMENT
TONYA/ADAMS/CUMULUS PAGE 8 OF 37
<PAGE>
judgment, order, decree, stipulation, injunction, or charge;
(E) no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand is pending, or, to the Knowledge of
the Seller, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
(F) the Seller has not agreed to indemnify any person or
entity for or against any interference, infringement,
misappropriation, or other conflict with respect to the item of
Intellectual Property; and
(G) the Seller has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(K) CONTRACTS. SECTION 2(K) of the Disclosure Schedule lists the following
contracts, agreements, and other written arrangements (other than with
advertisers for the sale of air time which are listed in SECTION 2(S) of the
Disclosure Schedule) to which the Seller is a party:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $ 1,000 per year;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products, or other personal
property or for the furnishings or receipt of services which either calls for
performance over a period of more than one year or involves more than the sum of
$ 1,000;
(iii) any written arrangement concerning a partnership or joint
venture;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed (or
may create, incur, assume, or guarantee) indebtedness (including capitalized
lease obligations) involving more than $ 1,000 or under which it has imposed (or
may impose) a Security Interest on any of its assets, tangible or intangible;
(v) any written arrangement concerning confidentiality or
noncompetition;
(vi) any written arrangement with any of its employees in the
nature of a collective bargaining agreement, consulting agreement, compensation
agreement, employment agreement, commission agreement, or severance agreement;
(vii) any written arrangement under which the consequences of a
default or termination could have an adverse effect on the assets, liabilities,
business, condition, operations, results of operations, or future prospects of
the Seller or the Stations;
ASSET PURCHASE AGREEMENT
TONYA/ADAMS/CUMULUS PAGE 9 OF 37
<PAGE>
(viii) any written arrangement concerning a guaranty by the Seller
and any other party; or
(ix) any other written arrangement (or group of related written
arrangements) either involving more than $5,000 or not entered into in the
Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement listed in SECTION 2(K) of the Disclosure Schedule (as
amended to date). With respect to written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect; (B) the written arrangement
will continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in SECTION 2(K) of the Disclosure Schedule under the terms
of this SECTION 2(K). Except for the Assumed
Contracts, the Buyer shall not have any Liability or obligations for or in
respect of any of the contracts set forth in SECTION 2(K) of the Disclosure
Schedule or any other contracts or agreements of the Seller.
(L) COMMISSION LICENSES AND COMPLIANCE WITH COMMISSION REQUIREMENTS.
(i) To the knowledge and belief of Seller, all licenses, permits,
authorizations, franchises, certificates of compliance, and consents of
governmental bodies, including, without limitation, the FCC Licenses, used or
useful in the operation of the Stations as they are now being operated are, in
all material respects, (A) in full force and effect, (B) unimpaired by any acts
or omissions of the Seller or the Seller's employees or agents (C) free and
clear of any restrictions which might limit the full operation of the Stations,
and (D) detailed in SECTION 2(L) of the Disclosure Schedule. With respect to
the licenses, permits, authorizations, franchises, certificates of compliance
and consents referenced in the preceding sentence, SECTION 2(L) of the
Disclosure Schedule also sets forth, without limitation, the date of the last
renewal, the expiration date thereof, and any conditions or contingencies
related thereto. Except as set forth in SECTION 2(L) of the Disclosure
Schedule, to the knowledge and belief of Seller, no condition exists or event
has occurred that permits, or after notice or lapse of time, or both, would
permit, the revocation or termination of any such license, permit, consent,
franchise, or authorization (other than pursuant to their express expiration
date) or the imposition of any material restriction or limitation upon the
operation of the Stations as now conducted. Except as set forth in SECTION 2(L)
of the Disclosure Schedule, the Seller is not aware of any reason why the FCC
licenses might not be renewed in the ordinary course or revoked.
(ii) To the knowledge and belief of Seller, the Stations are each
in compliance in all material respects with the FCC's policy on exposure to
radio frequency radiationand renewal of any FCC License would constitute a major
environmental action under the FCC's rules or policies. Access to the Stations'
transmission facilities is restricted in accordance with the policies of the
FCC.
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(iii) Except as set forth in SECTION 2(L) of the Disclosure
Schedule, to the Seller's knowledge and belief, the Seller is not the subject of
any FCC or other governmental investigation or notice of violation or order, or
any material complaint, objection, petition to deny, or opposition issued by or
filed with the FCC or any other governmental authority in connection with the
operation of or authorization for the Stations, and there are no proceedings
(other than rule making proceedings of general applicability) before the FCC or
any other governmental authority that could adversely affect any of the FCC
Licenses or the authorizations listed in SECTION 2(L) of the Disclosure
Schedule.
(iv) The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
(v) The Seller is not aware of any information concerning the
Stations that could cause
the FCC or any other regulatory authority not to issue to the Buyer all
regulatory certificates and approvals necessary for the consummation of the
transactions contemplated hereunder or the Buyer's operation and/or ownership of
the Stations. Seller is not aware of any pending FCC applications which, if
approved, would allow for the operation of a new radio Stations with a signal
reaching the signal area of the Stations and, in addition, Seller is not aware
of any plans or proposals by existing radio Stations with a signal reaching the
signal area of the Stations to alter or change their format to a format similar
to that of the Stations.
(M) INSURANCE. SECTION 2(M) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Seller is a party, a named insured,
or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) to the knowledge and belief of
Seller, the policy is legal, valid, binding, and enforceable and in full force
and effect; (B) to the knowledge and belief of
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Seller, the policy will continue to be legal, valid, binding, and enforceable
and in full force and effect on identical terms through the Closing Date.
(N) LITIGATION. SECTION 2(N) of the Disclosure Schedule sets forth each
instance in which the Seller: (i) is subject to any unsatisfied judgment, order,
decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the charges,
complaints, actions, suits, proceedings, hearings, and investigations set forth
in SECTION 2(N) of the Disclosure Schedule could result in any adverse change in
the assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no reason to believe that any such charge, complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened against
the Seller.
(O) EMPLOYEES. SECTION 2(O) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee of
the Seller. SECTION 2(O) of the Disclosure Schedule also sets forth a list of
all employee handbooks and/or manuals relating to the employees of Seller, true
and correct copies of which have been delivered to the Buyer. To the Knowledge
of the Seller, no key employee or group of employees has any plans to terminate
employment with the Seller. The Seller is not a party to or bound by any
understanding (whether written or oral), agreement or contract with any union,
labor organization, employee group or other entity or individual which affects
the employment of employees of the Seller including, but not limited to any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. The
Seller has no Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Seller. The Seller has not been in a strike, slow down or other work
stoppage during the five (5) year period immediately preceding the date hereof
and, to the Seller's Knowledge, there are no strikes, slow downs or work
stoppages threatened against the Seller. To the Seller's Knowledge, it has not
committed any unfair labor practice. To the Knowledge and belief of Seller,
there is no basis for any claim by any past or present employee of the Seller
that such employee was subject to wrongful discharge or any employment
discrimination by the Seller or its management arising out of or relating to the
employee's race, sex, age, religion, national origin, ethnicity, handicap or any
other protected characteristic under applicable law. To the Knowledge and
belief of Seller, no proceedings are pending before any court, governmental
agency or instrumentality or arbitrator relating to labor matters, and there is
no pending investigation by any governmental agency or, to the Knowledge of the
Seller, threatened claim by any such agency or other person relating to labor or
employment matters.
(P) EMPLOYEE BENEFITS. SECTION 2(P) of the Disclosure Schedule lists all
Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects
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with the applicable requirements of ERISA and the Code. The Seller does not
have any commitment to create any additional Employee Benefit Plan or modify or
change any existing Employee Benefit Plan that would affect any employee or
terminated employee of the Seller. There are no pending or, to the Knowledge of
the Seller, threatened claims under, by or on behalf of any of the Employee
Benefit Plans, by any employee or beneficiary covered by any such Employee
Benefit Plan, or otherwise involving any such Employee Benefit Plan (other than
routine claims for benefits), nor have there been any Reportable Events or
Prohibited Transactions with respect to any Employee Benefit Plan.
(Q) ENVIRONMENT, HEALTH, AND SAFETY.
(i) With respect to the operation of the Stations and the Real
Estate, to the best Knowledge and belief of Seller, the Seller is, and at all
times in the past has been, in compliance in all material respects with all
Environmental Laws and all laws (including rules and regulations thereunder) of
federal, state, and local governments (and all agencies thereof) concerning
employee health and safety, and to the Knowledge and belief of Seller, no
charge, complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has ever been filed or commenced or, to the Seller's
Knowledge, is threatened, against the Seller alleging any failure to comply with
any such Environmental Law or laws concerning employee health and safety.
(ii) With respect to the operation of the Stations and the Real
Estate, the Seller, to Seller's best Knowledge and belief, has no Liability (and
to Seller's Knowledge there is no Basis related to the present operations of
the Seller for any present charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Seller giving rise to any
Liability) under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the
Federal Water Pollution Control Act of 1972, the Clean Air Act of 1970,
the Safe Drinking Water Act of 1974, the Toxic Substances Control Act of 1976,
the Refuse Act of 1899, or the Emergency Planning and Community Right-to-Know
Act of 1986 (each as amended), or any other law of any federal, state, local, or
foreign government or agency thereof (including rules, regulations, codes,
plans, judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, or pollution or protection of
the environment, including, without limitation, laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes ("ENVIRONMENTAL LAWS");
(iii) To the best Knowledge and belief of Seller, the Seller has no
Liability (and to Seller's Knowledge there is no Basis for any present charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or demand
against the Seller giving rise to any Liability) under the Occupational Safety
and Health Act, as amended, or any other law (or rule or regulation thereunder)
of any federal, state, local, or foreign government (or agency thereof)
concerning employee health and safety, or for any illness of or personal injury
to any employee.
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(iv) SECTION 2(Q) of the Disclosure Schedule contains a copy of all
environmental claims, reports, studies, compliance actions or the like of the
Seller or which are available to the Seller with respect to any of the Real
Estate or any of the Acquired Assets.
(R) LEGAL COMPLIANCE.
(i) To the best Knowledge and belief of Seller, the Seller has
complied in all material respects with all laws (including rules and regulations
thereunder) of federal, state, local and foreign governments (and all agencies
thereof, and no charge, complaint, action, suit, proceeding, hearing, to the
best Knowledge and belief of Seller, investigation, or claim, demand, or notice
has been filed or commenced or, to the Seller's Knowledge, is threatened,
against the Seller alleging any failure to comply with any such law or
regulation, including those relating to the employment of labor, employee civil
rights, and equal employment opportunities and relating to antitrust matters.
(ii) To the best Knowledge and belief of Seller, the Seller has
filed in a timely manner all reports, documents, and other materials it was
required to file (and the information contained therein was correct and complete
in all material respects) under all applicable laws (including rules and
regulations thereunder) of federal state, local and foreign governments (and all
agencies thereof). To the Seller's Knowledge, it has possession of all records
and documents it was required to retain under all applicable laws (including
rules and regulations thereunder).
(S) ADVERTISING CONTRACTS. SECTION 2(S) of the Disclosure Schedule lists
all arrangements for the sale of air time or advertising on the Stations in
excess of $ 1 000, and the amount to be paid to the Seller therefor. The Seller
has no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Seller to cease doing business or to reduce in any material respect the
business transacted with the Seller or to terminate or modify any agreements
with the Seller (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
(T) BROKERS' FEES. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(U) UNDISCLOSED COMMITMENTS OR LIABILITIES. There are no commitments,
liabilities or obligations relating to any of the Stations, whether accrued,
absolute, contingent or otherwise including, without limitation, guaranties by
the Seller of the liabilities of third parties, for which specific and adequate
provisions have not been made on the Financial Statements except those incurred
in or as a result of the Ordinary Course of Business since September 1, 1997
(none of which Ordinary Course of Business obligations have had or will have a
material adverse effect on any Stations).
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER. Buyers represent and
warrant to the Seller that the statements contained in this SECTION 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
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Date were substituted for the date of this Agreement throughout this SECTION 3),
except as set forth in the Disclosure Schedule. The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this SECTION 3.
(A) ORGANIZATION OF THE BUYERS. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
(B) AUTHORIZATION OF TRANSACTION. Buyers have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
their obligations hereunder and thereunder. This Agreement and the Ancillary
Agreements constitute the valid and legally binding obligation of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
(C) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in SECTION 1(E) above), will to best of Buyers' knowledge, in any
material way, (i) violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which the Buyers are subject or any provision
of their articles of organization or other charter documents, or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest or
other arrangement to which the Buyers are a party or by which they are bound or
to which any of their assets is subject. Other than the Assignment Application
described in SECTION 4(B), the Buyers do not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any court
or government or governmental agency in order for the Parties to consummate the
actions contemplated by this Agreement or the Ancillary Agreements (including
the assignments and assumptions referred to in SECTION 1(E) above).
(D) BROKERS' FEES. Other than the fee payable to Norman Fischer &
Associates, which shall be the exclusive responsibility of the Buyers; the
Buyers have no Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which the Seller could become liable or obligated.
4. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(A) GENERAL. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in SECTION 5 below).
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(B) ASSIGNMENT APPLICATIONS. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Seller to Licensing (the
"ASSIGNMENT APPLICATION"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use the commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have material adverse effect upon the Stations or
upon any Affiliate or impose significant costs on such party). If the FCC
imposes any condition on either party to the Assignment Application, such party
shall use commercially reasonable efforts to comply with such condition,
provided, that neither party shall be required hereunder to comply with any
condition that would have a material adverse effect upon the Stations or any
Affiliate. The Seller and the Buyers shall jointly oppose any requests for
reconsideration or judicial review of FCC approval of the Assignment Application
and shall jointly request from the FCC extension of the effective period of FCC
approval of the Assignment Application if the Closing shall not have occurred
prior to the expiration of the original effective period of the FCC Consent.
Nothing in this SECTION 4(B) shall be construed to limit either party's right to
terminate this Agreement pursuant to SECTION 9 of this Agreement.
(C) EMPLOYMENT OFFERS. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. Not earlier than one (1) week prior to the Closing,
the Buyers may, at their option, extend offers of employment to all or any of
the Seller's employees effective on the Closing Date. From and after the
execution of this Agreement, the Seller shall use its best efforts to assist
Buyers in retaining those employees of the Stations which the Buyers wish to
hire in connection with the operation of the Stations by the Buyers subsequent
to the Closing, and the Seller will not take any action to preclude or
discourage any of the Seller's employees from accepting any offer of employment
extended by the Buyers.
(D) NOTICES AND CONSENTS. The Seller will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request in connection with the matters pertaining to the Seller
disclosed or required to be disclosed in the Disclosure Schedule (including,
without limitation, consents to assignment of the Leases and other Assumed
Contracts). Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
(E) OPERATION OF BUSINESS. The Seller will not engage in any practice,
take any action, embark on any course of inaction, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality of the
foregoing, the Seller will not engage in any practice, take any action, embark
on any course of inaction, or enter into any transaction of the sort described
in SECTION 2(F) above.
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(F) ADVERTISING OBLIGATIONS. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Stations for goods or services ("BARTER AGREEMENTS") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Ten Thousand Dollars ($10,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
(G) CONTRACTS. The Seller will not without the prior written consent of
the Buyers amend, change, or modify any of the contracts listed on SECTION 2(K)
of the Disclosure Schedule in any material respect. The Seller will not without
prior written consent of the Buyers enter into any new contracts respecting the
Stations or their properties, except (i) contracts for the sale of time on the
Stations for cash, goods or services which are entered into in the Ordinary
Course of Business and comply with SECTIONS 4(F) AND 4(J) hereof, (ii) contracts
entered into in the Ordinary Course of Business which are calculable on not more
than thirty-one (31) days' notice without penalty or premium, and (iii)
contracts entered into in the Ordinary Course of Business each of which does not
involve more than Five Thousand Dollars ($5,000) or all of which do not involve
more than Ten Thousand Dollars ($ 10,000) in the aggregate.
(H) OPERATION OF STATIONS. The Seller shall operate the Stations in
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
(I) CREDIT AND RECEIVABLES. The Seller will follow its usual and customary
policies with respect to extending credit for sales of air time and advertising
on the Stations and with respect to collecting accounts receivable arising from
such extension of credit.
(J) PRESERVATION OF BUSINESS. The Seller will keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensors,
advertisers, suppliers, customers, and employees, all of the Confidential
Information which means any information concerning the businesses and affairs of
the Seller, call letters and trade secrets of the Stations, and the FCC
Licenses.
(K) FULL ACCESS AND CONSULTATION. Prior to closing of this transaction as
defined herein, the Seller will permit representatives of the Buyers to have
full access at all reasonable times, and in a Manner so as not to interfere with
the normal business operations of the Stations, to all premises, properties,
books, records, contracts, Tax records, and documents of or pertaining to the
Seller for the purpose of permitting the Buyer to, among other things: (a)
conduct its due diligence review, (b) review financial statements of the Seller,
(c) verify the accuracy of representations and warranties of the Seller
contained in this Agreement, and (d) prepare for the consummation of the
transactions contemplated by this Agreement. The Seller will consult with the
Buyers' management with a view to informing Buyer's management as to the
operations, management and business of the Stations.
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(L) NOTICE OF DEVELOPMENTS. The Seller, when such facts become known to
Seller, will give prompt written notice to the Buyers of any material
development, which in Seller's opinion may affect the assets, Liabilities,
business, financial condition, operations, results of operations. Each Party
will give prompt written notice to the other of any material development
affecting the ability of the Parties to consummate the transactions contemplated
by this Agreement. No disclosure by any Party pursuant to this SECTION 4(M),
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(M) EXCLUSIVITY. The Seller will not (i) solicit, initiate, or encourage
the submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving the Seller; or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Seller will
notify the Buyers immediately if any person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(N) TITLE INSURANCE, SURVEYS AND ENVIRONMENTAL ASSESSMENTS.
(i) TITLE POLICY. Seller shall furnish to Buyer at Seller's
expense an Owner's Policy of Title Insurance (the Title Policy) issued by a
Title Company duly licensed and authorized to do business in the State of Texas,
(the "Title Company") reasonably satisfactory to Buyer in the amount of the fair
market value of the land and improvements conveyed and dated at or after
closing.
(A) TAX PRORATION. Current taxes shall be prorated through
the Closing Date. If ad valorem taxes for the year in which the sale
is closed are not available on the Closing Date, proration of taxes
shall be made on the basis of taxes assessed in the previous year
unless substantial improvements have been made.
(B) TITLE APPROVAL.
(1) PRELIMINARY TITLE REPORT. Seller, will cause the
Title Company to furnish Buyer a Commitment to issue
Title Insurance (the "Title Report") accompanied by
copies of all recorded documents relating to easements,
rights-of-way, etc., affecting the Property and deliver
the report to Buyer's counsel.
(C) TITLE POLICY. The Title Policy delivered by Seller to
Buyer hereunder shall guarantee Buyer's title to be as good and
indefeasible subject only to:
(1) any discrepancies, conflicts or shortages in area
or boundary lines, or any encroachments, or any
overlapping of improvements
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(2) taxes for the current and subsequent years and
subsequent assessments for prior years due to a change
in land usage or ownership
(3) rights of parties in possession
(4) liens created as security for the sale
consideration
(5) exceptions, reservations, conditions or
restrictions set out described in this contract and
(6) any other reservations or exceptions permitted by
the terms of this contract or acceptable to Buyer.
(D) Seller shall furnish tax statements showing no delinquent
taxes; a General Warranty Deed conveying title subject only to liens
securing payment of debt created or assumed as part of the
consideration, taxes for the current year; and exceptions or
reservations set forth in the Title Report referenced above. In case
of dispute as to the form of the Deed, the form prepared by the State
Bar of Texas shall be used.
(ii) PROPERTY SURVEY. A current plat or survey of the property may
be obtained at Buyer's cost and expense showing the location of the Property
with respect to the original survey lines and showing the boundaries and visible
conditions along the boundaries, perimeter fences, easements, highways, rights
of way, roadways, on or adjacent to the property and contain a computation of
area, and has been prepared by a mutually acceptable Registered Public Surveyor
licensed by the State of Texas. This survey has been be staked on the ground,
and the plat shall shows the location of all improvements and contains a
surveyor's certification that there are no encroachments on the property and
sets forth the total number of net and gross acres comprising the property,
together with a metes and bounds description thereof.
(iii) OBJECTIONS TO TITLE AND SURVEY. Buyer shall have a period of
fifteen (15) days from the date Buyer receives the last of the title commitment
and survey referred to herein within which to notify Seller of any objections to
the title commitment and survey. Seller shall have a period of thirty (30) days
from the date Buyer notifies Seller of such objections to use Seller's best
efforts to cure such objections. In the event the objections are not cured
within the time period provided herein despite Seller's exercise of its best
efforts, then Buyer may elect, within fifteen (15) days of the expiration of
Seller's cure period, to either: (a) terminate this agreement; or (b) proceed to
close this transaction notwithstanding Seller's inability to cure said
objections.
(iv) ENVIRONMENTAL ASSESSMENT. Prior to closing Buyer, at its
option and at its cost, may arrange for an environmental assessment to be
conducted on the Property by a qualified environmental consultant. The
assessment shall be conducted according to the following minimum standards:
(A) Phase I of the assessment shall include:
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(1) A review of available documents;
(2) Interviews with people aware of operations that
have been conducted on the Property; and,
(3) A physical inspection of the Property.
(B) If the results of Phase I are inconclusive to show the
presence or absence of any hazardous substances on the Property, Buyer
shall have the option of terminating this Contract and his earnest
money shall be refunded to him or, at his option, Buyer may proceed
with a Phase II assessment of the Property. In the event that Phase
II of the assessment is done, it shall include:
(1) A more detailed review of the Property; and
(2) Specialized physical sampling as necessarily
indicated from the results of Phase I.
(C) If the results of the Phase II assessment are
inconclusive to show the presence or absence of any hazardous
substances on the Property, Buyer shall have the option of terminating
this Contract and his earnest money shall be refunded to him or, at
his option, Buyer may proceed with a Phase III assessment of the
Property. The nature of the inquiries to be made in the Phase III
assessment, if any, shall be determined by the Buyer and the
environmental consultant retained to conduct the assessment following
the Buyer's analysis of a report on the Phase II assessment.
(D) The cost of the environmental assessment shall be paid by
Buyer. If the environmental assessment conducted pursuant hereto
indicates that remedial action is necessary to bring the Property into
compliance with any and all local, state and federal ordinances, laws
or regulations, Seller shall be responsible for undertaking all
remedial action recommended by the environmental consultant, the Texas
Natural Resource Conservation Commission, the Environmental Protection
Agency, or any other local, state or federal governmental agency
requiring any remedial action. If, however, the projected cost of
such remedial action exceeds Ten Thousand and No/100 Dollars
($10,000.00), then Seller shall have the option to terminate this
Contract.
Notwithstanding anything to the contrary herein, in the event Buyer fails to
obtain a Phase I Environmental Assessment within sixty (60) days after the
delivery of this contract, such right to have an assessment shall be waived by
Buyers, and Buyers shall be required to proceed with the purchase of the
Property.
(v) COST APPORTIONMENT. Not withstanding anything to the contrary
herein contained, the Seller will pay one-half (1/2) up to a total of $2,500.00
of the cost to Buyer of the title policy, Survey and environmental assessments.
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(O) CONTROL OF STATIONS. The transactions contemplated by this Agreement
shall not be consummated until after the FCC has given its consent and approval
to the Assignment Application. Between the date of this Agreement and the
Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
(P) RISK OF LOSS. The risk of loss, damage, or destruction to any of the
Acquired Assets shall remain with the Seller until the Closing. In the event of
any such loss, damage, or destruction the Seller will promptly notify the Buyer
of all particulars thereof, stating the cause thereof (if known) and the extent
to which the cost of restoration, replacement and repair of the Acquired Assets
lost, damaged or destroyed will be reimbursed under any insurance policy with
respect thereto. The Seller will, at Seller's expense, repair or replace such
Acquired Assets to their former condition as soon as possible after loss, damage
or destruction thereof and shall use its best efforts to restore as promptly as
possible transmissions as authorized in the FCC Licenses. The Closing Date
shall be extended (with FCC consent, if necessary) for up to sixty (60) days to
permit such repair or replacement. If repair or replacement cannot be
accomplished within sixty (60) days of the date of the Seller's notice to the
Buyers, and the Buyers determine that the Seller's failure to repair or replace,
alone or in the aggregate with any other then existing factors, would have a
material adverse effect on the operation of the Stations:
(a) the Buyers may elect to terminate this Agreement; or
(b) the Buyers may postpone the Closing Date until such time as the
property has been repaired, replaced or restored in a manner and to an extent
reasonably satisfactory to the Buyers, unless the same cannot be reasonably
effected within ninety (90) days of the date of the Seller's notice to the
Buyers, in which case either party may terminate this Agreement; or
(c) the Buyers may choose to accept the Acquired Assets in their
"then" condition, together with the Seller's assignment to the Buyers of all
rights under any insurance claims covering the loss, damage or destruction and
payment over to the Buyers of any proceeds under any such insurance policies,
previously received by the Seller with respect thereto.
In the event the Closing Date is postponed pursuant to this SECTION 4(G.), the
parties hereto will cooperate to extend the time during which this Agreement
must be closed as specified in the consent of the FCC.
5. CONDITIONS TO OBLIGATION TO CLOSE.
(A) CONDITIONS TO OBLIGATION OF THE BUYERS. The obligation of the Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
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(i) the representations and warranties set forth in SECTION 2
above shall be true and correct in all respects at and as of the Closing Date as
though made on and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all respects through the Closing;
(iii) the third party consents specified in SECTION 4(D) above,
including but not limited to those relating to transmitter and studio leases,
and all of the title insurance commitments (and endorsements), Surveys and
environmental site assessments described in SECTION 4(O) above have been
obtained;
(iv) no action, suit, investigation, inquiry or other proceeding
shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
wherein an unfavorable judgment, order, decree, stipulation, injunction, or
charge would (A) prevent consummation of any of the transactions contemplated by
this Agreement or impose damages or penalties upon any of the parties if such
transactions are consummated, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or (C) affect adversely
the right of the Buyer to own, operate, or control the Acquired Assets (and no
such judgment, order, decree, stipulation, injunction, or charge shall be in
effect);
(v) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in SECTIONS 5(A)(I) THROUGH
(IV) is satisfied in all respects and the statements contained in such
certificate shall be deemed a warranty of the Seller which shall survive the
Closing;
(vi) each of the Assignment Applications shall have been approved
by a Final Order of the FCC and the Buyer shall have received all governmental
approvals required to transfer all other authorizations, consents, and approvals
of governments and governmental agencies set forth in the Disclosure Schedule;
(vii) the relevant parties shall have entered into the Postclosing
Agreement; and
(viii) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Buyers may elect to (i) terminate this Agreement without
liability to the Seller, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Buyers elect to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Seller
(including, without limitation, any breach arising as a result of the failure of
the Seller to execute and/or deliver any item described in this SECTION 5(A),
the Buyers may seek appropriate remedies for any and all damages, costs and
expenses incurred
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by the Buyers by reason of such breach including, without limitation,
indemnification pursuant to SECTION 7, below.
(B) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the Seller to
consummate the actions to be performed by it in connection with the Closing is
subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in SECTION 3
above shall be true and correct in all respects at and as of the Closing Date as
though made on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of their
covenants hereunder
in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other proceeding
shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
injunction, or charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or impose damages or penalties upon any of the
Parties if such transactions are consummated, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such judgment, order, decree, stipulation, injunction, or
charge shall be in effect);
(iv) the Buyers shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in SECTION 5(B)(I)-(III) is
satisfied in all respects and the statements contained in such certificate shall
be deemed a warranty of the Buyers which shall survive the Closing;
(v) each of the Assignment Applications shall have been approved
by a Final Order of
the FCC and the Buyers shall have received all governmental approvals required
to transfer all other authorizations, consents, and approvals of government and
governmental agencies set forth in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the Postclosing
Agreement; and
(vii) all actions to be taken by the Buyers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied, the Seller may elect to (i) terminate this Agreement without
liability to the Buyers, or (ii) consummate the transactions contemplated herein
despite such failure. Regardless of whether the Seller elects to terminate this
Agreement or consummate the transactions described herein, if such failure shall
be as a result of a breach of any provision of this Agreement by the Buyers
(including, without limitation, any breach arising as a result of the failure of
the Buyers to execute and/or deliver any item described in this SECTION
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5(A), the Seller may seek appropriate remedies for any and all damages, costs
and expenses incurred by the Seller by reason of such breach including, without
limitation, indemnification pursuant to SECTION 7, below.
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the Closing:
(A) GENERAL. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under SECTION 7 below).
(B) LITIGATION SUPPORT. In the event and for so long as any Party actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under SECTION 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
(C) ADJUSTMENTS. Except to the extent otherwise provided in the Local
Marketing Agreement executed this same date by Seller and Buyers, the following
adjustments shall be made:
(i) operation of the Stations and the income and expenses
attributable thereto up through the close of business on the day before the
Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers;
(ii) such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Buyers as of the Closing
Date in accordance with the foregoing principle;
(iii) in addition, all commissions payable with respect to the
accounts receivable of the Seller (whether due before or after Closing) shall be
solely for the account and responsibility of the Seller.
(iv) contractual arrangements that do not reflect an equal rate of
compensation to a Stations over the term of the agreement shall be equitably
adjusted as of the Closing Date.
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(v) the prorations and adjustments hereunder shall be made and
paid insofar as feasible on the Closing Date, with a final settlement sixty (60)
days after the Closing Date.
(vi) in the event of any disputes between the Parties as to such
adjustments, the amounts not in dispute shall nonetheless be paid at such time
and such disputes shall be determined by an independent accounting firm mutually
acceptable to both parties and the fees and expenses of such accounting firm
shall be paid one-half (1/2) by the Seller and one-half (1/2) by the Buyer.
(D) COLLECTION OF ACCOUNTS RECEIVABLE. At the Closing, the Seller will
turn over to the Buyers, for collection only, the accounts receivable of the
Stations owing to the Seller as of the close of business on the Closing Date. A
schedule of such accounts receivable will be delivered by the Seller to the
Buyers on the Closing Date or as soon thereafter as possible. The Buyers agree
to use commercially reasonable efforts in the ordinary course of business (but
without responsibility to institute legal or collection proceedings) to collect
such accounts receivable during the 120-day period following the Closing Date,
and will remit all payments received on such accounts during each calendar month
during this 120-day period on the one hundred twentieth (120th) day together
with an accounting of all payments received within such period. The Buyers shall
have the sole right to collect such accounts receivable during such one hundred
twenty (120) day period. In the event the Buyers receive monies during the
120-day period following the Closing Date from an advertiser who, after the
Closing Date, is advertising over any of the Stations, and that advertiser was
included among the accounts receivable as of the Closing Date, the Buyer shall
apply said monies to the oldest outstanding balance due on the particular
account, except in the case of a "disputed" account receivable. For purposes of
this SECTION 6(D), a "disputed" account receivable means one which the account
debtor refuses to pay because he asserts that the money is not owed or the
amount is incorrect. In the case of such a disputed account, the Buyers shall
immediately return the account to the Seller prior to expiration of the 120-day
period following the Closing Date. If the Buyers return a disputed account to
the Seller, the Buyers shall have no further responsibility for its collection
and may accept payment from the account debtor for advertising carried on any of
the Stations after the Closing Date. At the end of the 120-day period following
the Closing Date, the Buyers will turn back to the Seller all of the accounts
receivable of the Stations as of the Closing Date owing to the Seller which have
not yet been collected, and the Buyers will thereafter have no further
responsibility with respect to the collection of such receivables. During the
120-day period following the Closing Date, the Buyers shall afford the Seller
reasonable access to the accounts receivable "aging list." The Seller
acknowledges and agrees that the Buyers are acting as its collection agent
hereunder for the sole benefit of the Seller and that Buyers have accepted such
responsibility for the accommodation of the Seller. The Buyer shall not have
any duty to inquire as to the form, manner of execution or validity of any item,
document, instrument or notice deposited, received or delivered in connection
with such collection efforts, nor shall the Buyers have any duty to inquire as
to the identity, authority or rights of the persons who executed the same. The
Seller shall indemnify Buyers and hold them harmless from and against any
judgments, expenses (including attorney's fees) costs or liabilities which the
Buyers may incur or sustain as a result of or by reason of such collection
efforts.
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(F) CONSENTS. In the event any of the Assumed Contracts are not assignable
or any consent to such assignment is not obtained on or prior to the Closing
Date, and the Buyers elect to consummate the transactions contemplated herein
despite such failure or inability to obtain such consent, the Seller shall
continue to use commercially reasonable efforts to obtain any such assignment or
consent after the Closing Date. Until such time as such assignment or approval
has been obtained, the Seller will cooperate with Buyers in any lawful and
economically feasible. arrangement to provide that the Buyer shall receive the
Seller's interest in the benefits under any such Assumed Contract, including
performance by the Seller as agent, if economically feasible.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(A) SURVIVAL. All of the representations and warranties of the Seller
contained in this Agreement shall survive the Closing and continue in full
force and effect for a period of eighteen (18) months from the Closing Date with
respect to any claim by the Buyers based on a claim or action by a third party
and for a period of one (1) year following Closing with respect to any claim by
the Buyers not based on a claim or action by a third party. All covenants of
the Buyers and the Seller contained in this Agreement shall survive the Closing
but remain in full force and effect for eighteen (18) months from Closing.
(B) INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE BUYERS. Except as
described below in SECTION 7(E) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
(so long as the Seller makes a written claim for indemnification within the
applicable survival period) from and against the entirety of any Adverse
Consequences the Buyers may suffer resulting from, arising out of, relating to,
in the nature of, or caused by:
(i) any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement or in
any Ancillary Agreement executed and/or delivered by the Seller (so long as the
Buyers make a written claim for indemnification within the applicable survival
period);
(ii) any breach or nonfulfillment of any agreement or covenant of
the Seller contained herein or in any Ancillary Agreement;
(iii) any Liability of the Seller which is not an Assumed Liability;
and/or
(iv) any Liability of the Buyers arising by operation of law.
The Seller's liability shall be limited to $82,000.00 under this SECTION 7(B).
(C) INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE SELLER. Except as
described below in SECTION 7(E) with respect to a breach of a warranty or
covenant prior to the Closing Date, Buyer agrees to indemnify the Seller from
and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any
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Ancillary Agreement executed and/or delivered by the Buyers (so long as the
Seller makes a written claim for indemnification within the applicable survival
period) or (ii) any breach or nonfulfillment of any agreement or covenant of the
Buyers contained herein or in any Ancillary Agreement, or (iii) any Assumed
Liability.
Buyers' liability under this SECTION 7(C) shall be limited to $82,000.00.
(D) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in a court of the
United States or the State of Texas sitting in Amarillo, Texas (subject to the
provisions set forth in SECTION 10(O) below), in addition to any other remedy to
which it may be entitled, at law or in equity. Each of the Parties acknowledges
and agrees that not withstanding the provision in SECTION 7(E) with respect to
the remedy of liquidated damages upon a breach of a warranty or covenant of this
Agreement prior to the Closing, money damages would not be an adequate remedy
for a breach of any provision of this Agreement.
(E) LIQUIDATED DAMAGES. The Buyer and the Seller acknowledge that in the
event that the transactions contemplated by this Agreement are not closed
because of a default by either Party, the Adverse Consequences as a result of
such default may be difficult, if not impossible, to ascertain. Accordingly, in
lieu of indemnification pursuant to SECTION 7(B) OR 7(C), the non-defaulting
Party shall be entitled to receive from the defaulting Party for such default
the sum of Eighty-Two Thousand Dollars ($82,000.00) as liquidated damages
without the need for proof of damages, subject only to successfully proving in a
court of competent jurisdiction that the other Party has materially breached
this Agreement and that the transactions contemplated thereby have not occurred;
provided however, that the Seller and Buyers shall retain the option to receive,
pursuant to SECTION 7(D), and in lieu of receiving the liquidated damages
provided in this SECTION 7(G), the remedy of specific performance with respect
to a breach of this Agreement prior to the Closing. The Buyers and the Seller
agree to pay said sum of liquidated damages within ten (10) days of the date
that the non-defaulting party obtains such a judgment, and agree that in the
event this Agreement is terminated by the Seller prior to the Closing Date as a
result of a breach or default by the Buyers under this Agreement, the Seller
shall proceed against the Earnest Money as satisfaction of liquidated damages
owed by Buyers.
(F) MATTERS INVOLVING THIRD PARTIES. If any third party shall notify any
Party (the "INDEMNIFIED PARTY") with respect to any matter which may give rise
to a claim for indemnification against any other Party (the "INDEMNIFYING
PARTY") under this SECTION 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the
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matter with counsel of its choice; (ii) the Indemnified Party may retain
separate co-counsel at its sole cost and expense; (iii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Indemnifying Party (not
to be withheld unreasonably), and (iv) the Indemnifying Party will not consent
to the entry of any judgment with respect to the matter, or enter into any
settlement which does not include a provision whereby the plaintiff or claimant
in the matter releases the Indemnified Party from all Liability with respect
thereto, without the written consent of the Indemnified Party (not to be
withheld unreasonably). In the event the Indemnifying Party does not notify the
Indemnified Party within 15 days after the Indemnified Party has given notice of
the matter that the Indemnifying Party is assuming the defense thereof, however,
and/or in the event the Indemnifying Party shall fail to defend such claim
actively and in good faith, then the Indemnified Party may defend against, or
enter into any settlement with respect to, the matter in any manner it
reasonably may deem appropriate.
8. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title, and interest in and to all of the
assets of the Seller, other than Retained Assets that are used or useful in the
operation of the Stations, wherever located, including but not limited to all of
its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles, and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublimeness granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those Barter Agreements and Advertising Contracts identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Stations; (e) Assumed Contracts, indentures,
Security Interests, guaranties, other similar arrangements, and rights
thereunder; (f) call letters of the Stations, jingles, logos, slogans, and
business goodwill of the Stations; (g) claims, deposits, prepayments, refunds,
causes of action, causes in action, rights of recovery (including rights under
policies of insurance), rights of set off, and rights of recoupment; (h)
Licenses and similar rights obtained from government and governmental agencies;
and (i) FCC logs and records and all other books, records. ledgers, logs, files,
documents, correspondence, advertiser lists, all other lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, program production materials, studies,
reports, and other printed or written materials; and o) goodwill of the
Stations.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
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"ADVERTISING CONTRACTS" has the meaning set forth in SECTION 2(S), above.
"AFFILIATE" means with reference to any person or entity, another person or
entity controlled by, under the control of or under common control with that
person or entity.
"ASSIGNMENT APPLICATION" has the meaning set forth in SECTION 4(B) above.
"ASSUMED CONTRACTS" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts listed on EXHIBIT "G" attached hereto.
"ASSUMED LIABILITIES" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"BUYERS" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in SECTION L(D) above.
"CLOSING DATE" has the meaning set forth in SECTION L(D) above.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means information concerning customer lists,
advertising rates, employee salaries and like matters.
"DISCLOSURE SCHEDULE" has the meaning set forth in SECTION 2 above.
"EARNEST MONEY DEPOSIT" has the meaning set forth in Section l(c) above.
"EARNEST MONEY ESCROW AGREEMENT" has the meaning set forth in SECTION L(C)
above.
"EMPLOYEE BENEFIT PLAN" means any (a) non-qualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
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"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
"ENVIRONMENTAL LAWS" has the meaning set forth in SECTION 2(Q), above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means Norman Fischer & Associates.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC LICENSES" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"FINAL ORDER" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 2(E) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 7(D) above.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 7(D) above.
"INTELLECTUAL PROPERTY" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patent able or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans, proposals,
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<PAGE>
technical data, copyright able works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information), (g) other proprietary rights, and (h) copies
and tangible embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LEASES" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites in as described in SECTION 2(I) of
the Disclosure Schedule.
"LIABILITY" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LICENSES" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3 (3 7).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OWNED REAL ESTATE" means the real property owned by the Seller in as
described in SECTION 2(I) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"PARTY" has the meaning set forth in the preface above.
"PERMITTED REAL ESTATE ENCUMBRANCES" shall have the meaning set forth in
SECTION 2(I), above.
"POST-CLOSING AGREEMENT" means the Post-Closing Agreement with Seller's
owners in the form attached hereto as EXHIBIT "D".
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"PURCHASE PRICE" has the meaning set forth in SECTION L(C) above.
"REAL ESTATE" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
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<PAGE>
"RETAINED ASSETS" I means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller; and (iv) Cash.
"RETAINED LIABILITIES" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
SECTION 4(I) relating to Surveys, title commitments and environmental audits and
SECTION 4(B) with regard to the Assignment Application; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"SELLER" has the meaning set forth in the preface above.
"STATIONS" means the radio broadcast Stations having the call letters
KPUR-FM, licensed by the FCC to operate in Canyon, Texas, and KPUR-AM, licensed
by the FCC to operate in Amarillo, Texas.
"SUBSIDIARY," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"SURVEYS" has the meaning set forth in SECTION 4(O) above.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
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<PAGE>
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. TERMINATION
(A) TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the Seller is
in breach of any representation, warranty, or covenant contained in this
Agreement; provided, however, that if such breach is capable of being cured,
such breach also remains uncured for twenty (20) days after notice of breach is
received by the Seller from the Buyers;
(iii) the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the Buyers
are in breach of any representation, warranty, or covenant contained in this
Agreement; provided, however that if such breach is capable being cured,
such breach remains uncured for twenty (20) days after notice of breach is
received by the Buyers from the Seller;
(iv) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall not
have occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under SECTION 5(A) hereof
(unless the failure results primarily from the Buyers themselves breaching any
representation, warranty, or covenant contained in this Agreement);
(v) the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall not
have occurred on or before the 270th day following the date of this Agreement by
reason of the failure of any condition precedent under SECTION 5(B) hereof
(unless the failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this Agreement); or
(vi) the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(B) EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to SECTION 9(A) above, all obligations of the Parties hereunder shall terminate
without any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
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<PAGE>
10. MISCELLANEOUS
(A) SURVIVAL. All of the representations, warranties, and covenants of the
Parties contained in this Agreement shall survive the Closing hereunder as and
to the extent provided in SECTION 7(A) hereof and the Post-Closing Agreement
with respect to Seller's owners.
(B) PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
(C) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(D) ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
(E) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, provided that (i) the Buyers may assign all of its right,
title and interest in, to and under this Agreement to one or more Affiliates,
who shall then, subject to the terms and conditions of this Agreement, have the
right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay
to the Seller the Purchase Price therefor or to any successor to the Buyers in
the event of any sale, merger or consolidation of the Buyers.
(F) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(G) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(H) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
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<PAGE>
IF TO THE SELLER:
Keith Adams
Box 8886
Horseshoe Bay, TX 78657
Copy to:
Robert R. Sanders
P.O. Box 2667
Amarillo, TX 79105-2667
(which copy shall not constitute notice to Seller)
IF TO THE BUYERS:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
(I) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
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<PAGE>
(J) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(K) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(L) EXPENSES. The Buyers and the Seller, will each bear their own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby, other than as set forth
in SECTION 4(B) with regard to the Assignment Applications and as set forth in
SECTION 4(O) with respect to Surveys, title commitments and environmental
audits.
(M) CONSTRUCTION. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(N) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(O) SERVICE OF PROCESS. Any Party may make service on the other Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in SECTION 10(H)
above. Nothing in this SECTION 10(O) however, shall affect the right of any
Party to serve legal process in any other manner permitted by law.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
---------------------------
(printed)
---------------------------
Title:
------------------------
CUMULUS LICENSING CORPORATION
By:
---------------------------
(printed)
---------------------------
Title:
------------------------
WESTWIND BROADCASTING, INC.
By:
---------------------------
(printed)
---------------------------
Title: President
------------------------
PAGE 37 OF 37
<PAGE>
Exhibit 10.63
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of March 16, 1998, by and
between Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"),
Cumulus Licensing Corporation, a Nevada corporation ("Licensing), and P and T
Broadcasting, Inc. a [Georgia] corporation (the "Seller"). Broadcasting and
Licensing are referred to collectively herein as the "Buyers." The Buyers and
the Seller are referred to individually as the "Party" or collectively as the
"Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
stations WLOV-FM and WLOV-AM, licensed to Washington, Georgia (the "Stations")
in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. BASIC TRANSACTION.
a. PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, the Seller agrees to sell, transfer, convey and
deliver to (i) Licensing, and Licensing agrees to purchase from the Seller, all
of the FCC Licenses listed in Section 2(k) of the disclosure schedule
("Disclosure Schedule"); and (ii) Broadcasting, and Broadcasting agrees to
purchase from the Seller, all of the Acquired Assets other than the FCC
Licenses. Both such sales shall take place at the Closing for the consideration
specified below in this Section 1.
b. ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Seller agrees to pay
and discharge all Liabilities and obligations of the Seller other than the
Assumed Liabilities.
c. PURCHASE PRICE. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the purchase price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
(the "Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
d. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Stations in
Washington, Georgia, or at another mutually agreed location, commencing at 9:00
a.m. local time promptly after the FCC approval of the Assignment Application
becomes a Final Order, by which date all other conditions to the obligations of
the Parties to consummate the transactions contemplated hereby will have been
satisfied, or such other date as the Parties may mutually determine (the
"Closing Date").
<PAGE>
e. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds in form acceptable to the Buyers, (B) such affidavits, transfer
tax returns, memorandums of lease, and other additional documents as may be
required by the terms of the title insurance commitments described in Section
4(o) hereof, as necessary to furnish title insurance as required by such section
or as may be necessary to convey title to the Real Estate to the Buyers in the
condition required herein or provide public notice of existence of the Leases,
and (C) such other instruments of sale, transfer, conveyance, and assignment as
the Buyers and their counsel reasonably may request; (iv) the Buyers will
execute, acknowledge (if appropriate), and deliver to the Seller (A) an
assumption in the form attached hereto as Exhibit B and (B) such other
instruments of assumption as the Seller and its counsel reasonably may request;
and (v) the Buyers will deliver to the Seller the consideration specified in
Section 1(c) above.
f. POSTCLOSING AGREEMENT. On the Closing Date, the Seller shall
execute, and shall cause each of its shareholders to execute, a Postclosing
Agreement with the Buyers including covenants not to compete with the Buyers in
the markets served by the Stations and agreements to indemnify the Buyers in the
form of Exhibit C attached hereto. A portion of the Purchase Price equal to
Fifty Thousand Dollars ($50,000) shall be paid to the Seller by the Buyers on
the Closing Date as consideration for the agreements set forth in the
Postclosing Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to the Buyers that the statements
contained in this SECTION 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
a. ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The Seller has the power and authority to own or lease its properties and to
carry on all business activities now conducted by it. The shareholder of the
Seller is Dennis Peter Helmreich.
b. AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority (including full partnership power and authority) to execute and
deliver this Agreement and all agreements and instruments to be executed and
delivered by Seller pursuant to this Agreement (collectively, the "Ancillary
Agreements") and to perform its obligations hereunder and thereunder. Without
limiting the generality of the foregoing, the Board of Directors of the Seller
has duly authorized the execution, delivery, and performance of this Agreement
and the Ancillary Agreements by the Seller. This Agreement and the Ancillary
Agreements constitute the valid and legally binding obligation of the Seller,
enforceable in accordance with their respective terms and conditions.
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<PAGE>
c. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the charter or bylaws of the Seller; or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other agreement, arrangement to which the Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
d. TITLE TO ACQUIRED ASSETS. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Seller has good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
e. FINANCIAL STATEMENTS. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1994, and December 31,
1995 for the Seller; and (ii) unaudited balance sheets and statements of income,
as of and for each month during 1996 and each month to date in 1997 for the
Seller. The Financial Statements have been prepared in conformity with the
Seller's normal accounting policies, practices and procedures applied on a
consistent basis, throughout the periods covered thereby, are correct and
complete, fairly present the financial condition of the Seller and the results
of operation of Seller at the dates and for the periods indicated, and are
consistent with the books and records of the Seller (which books and records are
correct and complete). The Financial Statements accurately state the revenues
of the Stations for the period indicated therein and include an accurate
breakout of cash and trade revenues.
f. EVENTS SUBSEQUENT TO JANUARY 1, 1997. Since January 1, 1997,
except as set forth in Section 2(f) of the Disclosure Schedule, there has not
been any material adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations, or future prospects of the Seller
with respect to the operation of the Stations. Without limiting the generality
of the foregoing and with respect to the operation of the Stations since January
1, 1997:
(i) other than this Agreement, the Seller has not entered into
any agreement, contract, lease, sublease, license, or sublicense (or series
of related
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<PAGE>
agreements, contracts, leases, subleases, licenses, and sublicenses)
outside the Ordinary Course of Business;
(ii) the Seller has not delayed or postponed (beyond its normal
practice in the Ordinary Course of Business) the payment of accounts
payable and other Liabilities;
(iii) the Seller has not altered its credit and collection
policies or its accounting policies;
(iv) the Seller has not entered into or terminated any
employment arrangement, employment contract, consulting contract or
severance agreement or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(v) there have been no changes and, to Seller's knowledge, any
threatened changes in employment terms for any of its directors, officers,
and employees;
(vi) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Seller;
(vii) the Seller has not materially altered the programming,
format or call letters of the Stations, or its promotional and marketing
activities;
(viii) the Seller has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in compliance
therewith and with all FCC rules and regulations;
(ix) the Seller has not terminated or received notice of
termination for any syndicated programming; and
(x) the Seller has not committed to any of the foregoing.
g. TAX MATTERS. The Seller has timely and properly filed all Tax
Returns that it was required to file with respect to the Seller's operations.
All such Tax Returns were correct and complete and properly reflect the tax
liability of the Seller. No Tax deficiencies have been proposed or assessed
against the Seller. All Taxes owed by the Seller with respect to its operations
(whether or not shown on any Tax Return) have been paid. The Seller has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. No claim has ever been made by any authority in any
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
h. TANGIBLE ASSETS. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and stations equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Stations. The Seller owns or leases all tangible assets necessary for the
conduct of the operation and business of the Stations as presently
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<PAGE>
conducted and as presently proposed to be conducted and all leased assets are
specifically identified as such in Section 2(h) of the Disclosure Schedule.
i. REAL PROPERTY. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate). The Seller has delivered to the Buyers correct and complete copies of
the Leases. With respect to the Real Estate:
(i) the Seller has good and marketable title to all of the Owned
Real Estate free and clear of all liens, charges, mortgages, security
interests, easements, restrictions or other encumbrances of any nature
whatsoever except real estate taxes for the year of Closing and municipal
and zoning ordinances and recorded utility easements which do not impair
the current use, occupancy or value or the marketability of title of the
property and which are disclosed in Section 2(i) of the Disclosure Schedule
(collectively, the "Permitted Real Estate Encumbrances");
(ii) the Leases are and, following the Closing will continue to
be, legal, valid, binding, enforceable, and in full force and effect;
(iii) no party to any Lease is in breach or default (or has
repudiated any provision thereof), and no event has occurred which, with
notice or lapse of time, would constitute a breach or default thereunder or
permit termination, modification, or acceleration thereunder;
(iv) there are no disputes, oral agreements, or forbearance
programs in effect as to any Lease;
(v) none of the Owned Real Estate and to the Seller's Knowledge,
none of the properties subject to the Leases is subject to any lease (other
than Leases), option to purchase or rights of first refusal;
(vi) except for Permitted Real Estate Encumbrances, there are no
(i) actual or, to the Seller's Knowledge, proposed special assessments with
respect to any of the Real Estate; (ii) pending or, to the Seller's
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the buildings
or improvements located on the Real Estate; (iv) any pending or, to the
Seller's Knowledge, threatened changed in any zoning laws or ordinances
which may materially adversely affect any of the Real Estate or Seller's
use thereof;
(vii) the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or its
rights thereunder;
(viii) to the Seller's Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; and
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(ix) to the Seller's Knowledge, the owner of each leased
facility has good and marketable title to the underlying parcel of real
property, free and clear of any Security Interest, easement, covenant, or
other restriction, except for Permitted Real Estate Encumbrances and
Seller's leasehold interest in each Lease has priority over any other
interest except for the fee interest therein and Permitted Real Estate
Encumbrances.
j. CONTRACTS. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not entered into in the Ordinary Course of Business. The
Seller has delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(j) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed which constitutes an
Assumed Contract: (A) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect; (B) the written arrangement will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. The Seller is not a party to any verbal contract,
agreement, or other arrangement which, if reduced to written form, would be
required to be listed in Section 2(j) of the Disclosure Schedule under the terms
of this Section 2(j). Except for the Assumed Contracts, the Buyers shall not
have any Liability or obligations for or in respect of any of the contracts set
forth in Section 2(j) of the Disclosure Schedule or any other contracts or
agreements of the Seller.
k. COMMISSION LICENSES AND COMPLIANCE WITH COMMISSION REQUIREMENTS.
(i) All licenses, permits, authorizations, franchises, certificates
of compliance, and consents of governmental bodies, including, without
limitation, the FCC Licenses, used or useful in the operation of the
Stations as they are now being operated are (A) in full force and effect,
(B) unimpaired by any acts or omissions of the Seller or the Seller's
employees or agents, (C) free and clear of any restrictions which might
limit the full operation of the Stations, and (D) detailed in Section 2(k)
of the Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and consents
referenced in the preceding sentence, Section 2(k) of the Disclosure
Schedule also sets forth, without limitation, the date of the last renewal,
the expiration date thereof, and any conditions or contingencies related
thereto. Except as set forth in Section 2(k) of the Disclosure Schedule, no
condition exists or event has occurred that permits, or after notice or
lapse of time, or both, would permit, the revocation or termination of any
such license, permit, consent, franchise, or authorization (other than
pursuant to their express expiration date) or the imposition of any
material restriction or limitation upon the operation of the Stations as
now conducted. Except as set forth in Section 2(k) of the Disclosure
Schedule, the Seller is not aware of any reason why the FCC licenses might
not be renewed in the ordinary course or revoked.
(ii) The Stations are in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major
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environmental action under the FCC's rules or policies. Access to the
Station's transmission facilities is restricted in accordance with the
policies of the FCC.
(iii) Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Seller's Knowledge, the Seller is not the subject of any
FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(k) of the Disclosure Schedule.
(iv) The Seller has filed with the FCC and all other
governmental authorities having jurisdiction over the Stations all material
reports, applications, documents, instruments, and other information
required to be filed, and will continue to make such filings through the
Closing Date.
(v) The Seller is not aware of any information concerning the
Stations that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary for
the consummation of the transactions contemplated hereunder or the Buyer's
operation and/or ownership of the Stations. Seller is not aware of any
pending FCC applications which, if approved, would allow for the operation
of a new radio station with a signal reaching the signal area of the
Stations and, in addition, Seller is not aware of any plans or proposals by
any existing radio Station with a signal reaching the signal area of the
Stations to alter or change their format to a format similar to that of the
Stations.
l. INTELLECTUAL PROPERTY. The Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use the by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, or notice
alleging any such interference, infringement, misappropriation, or violation.
To the Knowledge of the Seller, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Seller.
m. INSURANCE. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Seller's insurance coverage. With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
and enforceable and in full force and effect; (B) the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect on identical
terms through the Closing Date.
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n. LITIGATION. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(n) of the Disclosure Schedule could result in any adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller or the Stations taken as a whole.
The Seller has no Knowledge of any Basis for any such charge, complaint, action,
suit, proceeding, hearing, or investigation against the Seller.
o. EMPLOYEES. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee. To
the Knowledge of the Seller, no key employee or group of employees has any plans
to terminate employment with the Seller. The Seller is not a party to or bound
by any collective bargaining or similar agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to the employees of the Seller. The Seller has no Knowledge of any
Basis for any claim by past or current employees of the Seller or applicants for
employment that the Seller or its management has discriminated based on each
individuals race, sex, national origin, religion, ethnicity, handicap or any
other protected characteristic under applicable law.
p. EMPLOYEE BENEFITS. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Seller does not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Seller. There are no pending or, to the Knowledge of the Seller, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
q. ENVIRONMENT, HEALTH, AND SAFETY.
(i) With respect to the operation of the Stations and the Real
Estate, the Seller is, and at all times in the past has been, in compliance
in all material respects with all Environmental Laws and all laws
(including rules and regulations thereunder) of federal, state, and local
governments (and all agencies thereof) concerning employee health and
safety, and the Seller has no Liability (and to Seller's Knowledge there is
no Basis related to the past or present operations of the Seller or its
predecessors for any
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present or future Liability) under any Environmental Law. The Seller has
no Liability (and to Seller's Knowledge there is no Basis for any present
or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Seller giving rise to any
Liability) under the Occupational Safety and Health Act, as amended, or any
other law (or rule or regulation thereunder) of any federal, state, local,
or foreign government (or agency thereof) concerning employee health and
safety, or for any illness of or personal injury to any employee.
(ii) The Seller has obtained and at all times has been in
compliance in all material respects with all of the terms and conditions of
all permits, licenses, and other authorizations which are required under,
and has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental Laws or law of any
federal, state, or local or foreign government relating to worker health
and safety.
(iii) All properties and equipment used in the Stations and the
Acquired Assets have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances. No pollutant, contaminant, or chemical,
industrial, hazardous, or toxic material or waste ever has been buried,
stored, spilled, leaked, discharged, emitted, or released on any of the
Real Estate. No above ground or underground storage tanks have ever been
located at, on or under the Real Estate. The Seller has delivered to the
Buyers a complete copy of all environmental claims, reports, studies,
compliance actions or the like of the Seller or which are available to the
Seller with respect to any of the Real Estate or any of the Acquired
Assets.
r. LEGAL COMPLIANCE. The Seller has complied in all material
respects with all laws (including rules and regulations thereunder) of federal,
state, local and foreign governments (and all agencies thereof. The Seller has
filed in a timely manner all reports, documents, and other materials it was
required to file (and the information contained therein was correct and complete
in all material respects) under all applicable laws.
s. ADVERTISING CONTRACTS. Section 2(s) of the Disclosure Schedule
lists all arrangements for the sale of air time or advertising on the Stations
in excess of $1000, and the amount to be paid to the Seller therefor. The Seller
has no reason to believe and has not received a notice or indication of the
intention of any of the advertisers or third parties to material contracts of
the Seller to cease doing business or to reduce in any material respect the
business transacted with the Seller or to terminate or modify any agreements
with the Seller (whether as a result of consummation of the transactions
contemplated hereby or otherwise).
t. BROKERS' FEES. The Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
u. UNDISCLOSED COMMITMENTS OR LIABILITIES. There are no material
commitments, liabilities or obligations relating to the Stations, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Seller of the liabilities of
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third parties, for which specific and adequate provisions have not been made on
the Financial Statements except those incurred in or as a result of the Ordinary
Course of Business since January 1, 1997.
v. DISCLOSURE. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
Buyers represent and warrant to the Seller that the statements contained in
this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date except as set forth in the
Disclosure Schedule.
a. ORGANIZATION OF THE BUYERS. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
b. AUTHORIZATION OF TRANSACTION. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
c. NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement or the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby and thereby (including the assignments and
assumptions referred to in Section 1(e) above), will (i) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge, or
other restriction of any government, governmental agency, or court to which the
Buyers are subject or any provision of their articles of organization or other
charter documents, or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than the Assignment Application described in Section 4(b), the Buyers do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any court or government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement or the Ancillary Agreements (including the assignments and
assumptions referred to in Section 1 (e) above).
d. BROKERS' FEES. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated. The fee payable to McCoy Broadcast Brokerage, Inc. shall
be the exclusive responsibility of Buyers.
4. PRE-CLOSING COVENANTS.
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The Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing:
a. GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
b. ASSIGNMENT APPLICATIONS. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be paid by Buyers. Each party shall pay its own
attorneys' fees. The Seller and the Buyers shall thereafter prosecute the
Assignment Application with all reasonable diligence and otherwise use
commercially reasonable efforts to obtain the grant of the Assignment
Application as expeditiously as practicable (but neither the Seller nor the
Buyers shall have any obligation to satisfy complainants or the FCC by taking
any steps which would have a material adverse effect upon the Stations or impose
significant costs on such party). If the FCC imposes any condition on either
party to the Assignment Application, such party shall use commercially
reasonable efforts to comply with such condition, provided, that neither party
shall be required hereunder to comply with any condition that would have a
material adverse effect upon the Stations or any Affiliate. The Seller and the
Buyers shall jointly oppose any requests for reconsideration or judicial review
of FCC approval of the Assignment Application and shall jointly request from the
FCC extension of the effective period of FCC approval of the Assignment
Application if the Closing shall not have occurred prior to the expiration of
the original effective period of the FCC Consent. Nothing in this Section 4(b)
shall be construed to limit either party's right to terminate this Agreement
pursuant to Section 9 of this Agreement.
c. EMPLOYMENT OFFERS. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at their option, extend offers of
employment to all or any of the Seller's employees effective on the Closing
Date. From and after the execution of this Agreement, the Seller shall use its
best efforts to assist Buyers in retaining those employees of the Stations which
the Buyers wish to hire in connection with the operation of the Stations by the
Buyers subsequent to the Closing, and the Seller will not take any action to
preclude or discourage any of the Seller's employees from accepting any offer of
employment extended by the Buyers.
d. NOTICES AND CONSENTS. The Seller will give all notices to third
parties and shall have obtained all third party consents, that the Buyers
reasonably may request. Each of the Parties will file any notification and
report forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use its best efforts
to obtain an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary, proper or advisable.
Each of the Parties will take any additional action that may be necessary,
proper, or advisable in connection with any other notices to, filings with,
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and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
e. ADVERTISING OBLIGATIONS. The Seller shall satisfy its air time
obligations under its agreements for sale of air time and advertising on the
Stations for goods or services ("Barter Agreements") such that the outstanding
aggregate balance owing under all Barter Agreements as of the Closing Date shall
not exceed Five Thousand Dollars ($5,000.00) worth of air time without the
Buyers' consent. On the Closing Date, the Seller shall deliver to the Buyers a
schedule, certified by an officer of the Seller, reflecting the aggregate
outstanding balances under all Barter Agreements in existence as of the Closing
Date.
f. OPERATING STATEMENTS. The Seller shall deliver to the Buyers,
for the Buyers' informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Stations within ten (10) days
after each such statement is prepared by or for the Seller.
g. CONTRACTS. The Seller will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(k) of the Disclosure Schedule in any material respect. The Seller will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Five Thousand Dollars
($5,000).
h. OPERATION OF STATIONS. The Seller will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. The Seller shall operate the Stations in compliance with
the FCC Licenses and the rules and regulations of the FCC, and the FCC Licenses
shall at all times remain in full force and effect. The Seller shall file with
the FCC all material reports, applications, documents, instruments and other
information required to be filed in connection with the operation of the
Stations.
i. CREDIT AND RECEIVABLES. The Seller will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Stations and with respect to collecting accounts receivable
arising from such extension of credit.
j. PRESERVATION OF STATIONS AND THE ACQUIRED ASSETS. The Seller
will keep its Stations and the Acquired Assets and properties substantially
intact, including its present operations, physical facilities, working
conditions, relationships with lessors, licensors, advertisers, suppliers,
customers, and employees, all of the Confidential Information, call letters and
trade secrets of the Stations, and the FCC Licenses.
k. FULL ACCESS AND CONSULTATION. The Seller will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Stations, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Seller. The Seller will consult with the
Buyers' management with a view to informing Buyers' management as to the
operations, management and business of the Stations. Without limiting the
foregoing, Seller acknowledges and agrees that it will provide the Buyers and
their representatives with such access to the properties, books, records,
documents and operations of the Seller as contemplated herein in a
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manner which will permit the Buyers to fully complete their due diligence review
within the thirty (30) day period reference in Section 5(a) (ix), below.
l. NOTICE OF DEVELOPMENTS. The Seller will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Stations or the Acquired Assets or the ability of the Seller
to perform hereunder.
m. EXCLUSIVITY. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the Seller,
or (ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyers immediately if any person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
n. TITLE INSURANCE, SURVEYS AND ENVIRONMENTAL ASSESSMENTS. The
Buyers will obtain with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request,
(ii) with respect to each parcel of Owned Real Estate, an owner's policy of
title insurance by a title insurer reasonably satisfactory to the Buyers, in an
amount equal to the fair market value of such Real Estate (including all
improvements located thereon), insuring over the standard pre-printed exceptions
and insuring title to the Owned Real Estate to be vested in the Buyers as of the
Closing free and clear of all liens and encumbrances except Permitted Real
Estate Encumbrances, together with such endorsements for zoning, contiguity,
public access and extended coverage as the Buyers or its lender reasonably
request, (iii) a current survey of each parcel of Real Estate certified to the
Buyers and its lender, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys') which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iv) with
respect to each parcel of Real Estate, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Sellers which does not indicate that the Seller and the Real Estate are
not in compliance with any Environmental Law and which shall not disclose or
recommend any action with respect to any condition to be remediated or
investigated or any contamination on the site assessed. true
o. CONTROL OF STATIONS. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Between the date of this Agreement and
the Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to
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control, supervise, or direct, the operation of the Stations, and such operation
shall be the sole responsibility of and in the control of the Seller.
p. RISK OF LOSS. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing. In the event
of any such loss, damage, or destruction the Seller will promptly notify the
Buyers of all particulars thereof, stating the cause thereof (if known) and the
extent to which the cost of restoration, replacement and repair of the Acquired
Assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will, at Seller's expense, repair or replace
such Acquired Assets to their former condition as soon as possible after loss,
damage or destruction thereof and shall use its best efforts to restore as
promptly as possible transmissions as authorized in the FCC Licenses. The
Closing Date shall be extended (with FCC consent, if necessary) for up to sixty
(60) days to permit such repair or replacement. If repair or replacement cannot
be accomplished within sixty (60) days of the date of the Seller's notice to the
Buyers and the Buyers determine that the Seller's failure to repair or replace
would have a material adverse effect on the operation of the Stations:
(i) the Buyers may elect to terminate this Agreement; or
(ii) the Buyers may postpone the Closing Date until such time
as the property has been repaired, replaced or restored in a manner and to
an extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
(iii) the Buyers may choose to accept the Acquired Asset in
their "then" condition, together with the Seller's assignment to the Buyers
of all rights under any insurance claims covering the loss, damage or
destruction and payment over to the Buyers of any proceeds under any such
insurance policies, previously received by the Seller with respect thereto
plus an amount equal to the amount of any deductible or self-insurance
maintained by Seller on such Acquired Assets. In the event the Closing
Date is postponed pursuant to this SECTION 4(P), the parties hereto will
cooperate to extend the time during which this Agreement must be closed as
specified in the consent of the FCC.
5. CONDITIONS TO OBLIGATION TO CLOSE.
a. CONDITIONS TO OBLIGATION OF THE BUYERS. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 2
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of
its covenants hereunder in all respects through the Closing;
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(iii) the Seller shall have procured all of the third party
consents specified in Section 4(d) above, and all of the title insurance
commitments (and endorsements), Surveys and environmental site assessments
described in Section 4(o) above shall have been procured by Buyers to their
satisfaction;
(iv) no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasijudicial
or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the parties if such transactions are consummated, (B) cause any
of the transactions contemplated by this Agreement to be rescinded
following consummation, or (C) affect adversely the right of the Buyers to
own, operate, or control the Acquired Assets (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
(v) the Seller shall have delivered to the Buyers a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Sections 5(a)(i) through (iv) is satisfied in all respects;
(vi) each of the Assignment Applications shall have been
approved by a Final Order of the FCC all applicable waiting periods (and
any extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or been terminated and the Buyers shall have received all governmental
approvals required to transfer all other authorizations, consents, and
approvals of governments and governmental agencies set forth in the
Disclosure Schedule;
(vii) the relevant parties shall have entered into the
Postclosing Agreement;
(viii) the Buyers shall have received from counsel to the Seller
an opinion with respect to the matters set forth in Exhibit E attached
hereto, addressed to the Buyers and its lender and dated as of the Closing
Date;
(ix) the Parties shall have agreed to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) in accordance
with an allocation schedule to be delivered at closing; and
(x) all actions to be taken by the Seller in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Buyers.
b. CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
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(i) the representations and warranties set forth in Section 3
above shall be true and correct in all respects at and as of the Closing
Date as though made on and as of the Closing Date;
(ii) the Buyers shall have performed and complied with all of
their covenants hereunder in all respects through the Closing;
(iii) no action, suit, investigation, inquiry or other
proceeding shall be pending or threatened before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree, stipulation,
injunction, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or impose damages or penalties
upon any of the Parties if such transactions are consummated, or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree, stipulation,
injunction, or charge shall be in effect);
(iv) the Buyers shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above in
Section 5(b)(i)-(iii) is satisfied in all respects and the statements
contained in such certificate shall be deemed a warranty of the Buyers
which shall survive the Closing;
(v) each of the Assignment Applications shall have been
approved by a Final Order of the FCC and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
(vi) the relevant parties shall have entered into the
Postclosing Agreement; and
(vii) all actions to be taken by the Buyers in connection with
the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Seller.
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the Closing:
a. GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 7 below).
b. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing,
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investigation, claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
the Stations, each of the other Parties will reasonably cooperate with the
contesting or defending Party and its counsel in the contest or defense, make
available his or its personnel, and provide such testimony and access to its
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
c. ADJUSTMENTS. Operation of the Stations and the income and
expenses attributable thereto up through the close of business on the day before
the Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities charges,
insurance, real and personal property taxes, prepaid expenses, deposits, music
license fees, and rents and payments pertaining to the Assumed Contracts
(including any contracts for the sale of time for cash, trade or barter so
assigned) shall be prorated between the Seller and the Buyers as of the Closing
Date in accordance with the foregoing principle. In addition, all commissions
payable with respect to the accounts receivable of the Seller (whether due
before or after Closing) shall be solely for the account and responsibility of
the Seller. Contractual arrangements that do not reflect an equal rate of
compensation to a Stations over the term of the agreement shall be equitably
adjusted as of the Closing Date. The prorations and adjustments hereunder shall
be made and paid insofar as feasible on the Closing Date, with a final
settlement sixty (60) days after the Closing Date. In the event of any disputes
between the Parties as to such adjustments, the amounts not in dispute shall
nonetheless be paid at such time and such disputes shall be determined by an
independent accounting firm mutually acceptable to both parties and the fees and
expenses of such accounting firm shall be paid one-half (1/2) by the Seller and
one-half (1/2) by the Buyer.
d. COLLECTION OF ACCOUNTS RECEIVABLE. At the Closing, the Seller
will turn over to the Buyers, for collection only, the accounts receivable of
the Stations owing to the Seller as of the close of business on the day before
the Closing Date. A schedule of such accounts receivable will be delivered by
the Seller to the Buyers on the Closing Date or as soon thereafter as possible.
The Buyers agree to use commercially reasonable efforts in the ordinary course
of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Closing Date, and will remit all payments received on such
accounts during this 120-day period on the one hundred twentieth (120th) day
together with an accounting of all payments received within such period. The
Buyers shall have the sole right to collect such accounts receivable during such
one hundred twenty (120) day period. In the event the Buyers receive monies
during the 120-day period following the Closing Date from an advertiser who,
after the Closing Date, is advertising on the Stations, and that advertiser was
included among the accounts receivable as of the Closing Date, the Buyers shall
apply said monies to the oldest outstanding balance due on the particular
account, except in the case of a "disputed" account receivable. For purposes of
this Section 6(d), a "disputed" account receivable means one which the account
debtor refuses to pay because he asserts that the money is not owed or the
amount is incorrect. In the case of such a disputed account, the Buyers
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shall immediately return the account to the Seller prior to expiration of the
120-day period following the Closing Date. If the Buyers return a disputed
account to the Seller, the Buyers shall have no further responsibility for its
collection and may accept payment from the account debtor for advertising
carried on the Stations after the Closing Date. At the end of the 120-day period
following the Closing Date, the Buyers will turn back to the Seller all of the
accounts receivable of the Stations as of the Closing Date owing to the Seller
which have not yet been collected, and the Buyers will thereafter have no
further responsibility with respect to the collection of such receivables.
During the 120-day period following the Closing Date, the Buyers shall afford
the Seller reasonable access to the accounts receivable "aging list." The Seller
acknowledges and agrees that the Buyers are acting as collection agent hereunder
for the sole benefit of the Seller and that Buyers have accepted such
responsibility for the accommodation of the Seller. The Buyers shall not have
any duty to inquire as to the form, manner of execution or validity of any item,
document, instrument or notice deposited, received or delivered in connection
with such collection efforts, nor shall the Buyers have any duty to inquire as
to the identity, authority or rights of the persons who executed the same. The
Seller shall indemnify Buyers and hold them harmless from and against any
judgments, expenses (including attorney's fees) costs or liabilities which the
Buyers may incur or sustain as a result of or by reason of such collection
efforts.
e. SEVERANCE OBLIGATIONS. In the event an offer of employment is
extended by the Buyers to and accepted by an employee of the Seller pursuant to
Section 4(c) and such subsequent employment by the Buyers is terminated within
sixty (60) days from the Closing Date, the Seller shall be responsible for, and
shall pay to such accepting employee, all severance benefits (if any, pursuant
to the Seller's practices as in effect on the Closing Date) that may be due and
owing such employee by reason of his or her employment with either the Seller or
the Buyers.
f. CONSENTS. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
a. SURVIVAL. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in SECTIONS 2(A), 2(B), 2(C), AND 2(D) hereof
or relating to the Seller's title to the Acquired Assets) shall survive the
Closing and continue in full force and effect for a period until 90 days after
the applicable statute of limitations has expired with respect to any claim by
the Buyers based on a claim or action by a third party and for a period of three
(3) years following Closing with respect
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to any claim by the Buyers not based on a claim or action by a third party. All
of the other representations and warranties (including the representations and
warranties Seller contained in SECTIONS 2(A), 2(B), 2(C), AND 2(D) hereof or
relating to the Seller's title to the Acquired Assets) and all covenants of the
Buyers and the Seller contained in this Agreement shall survive the Closing and
continue in full force and effect forever thereafter.
b. INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE BUYERS. Except
as described below in SECTION 7(E) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
(i) any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement or
in any Ancillary Agreement executed and/or delivered by the Seller (so long
as the Buyers make a written claim for indemnification within the
applicable survival period);
(ii) any breach or nonfulfillment of any agreement or covenant
of the Seller contained herein or in any Ancillary Agreement;
(iii) any Liability of the Seller which is not an Assumed
Liability; and/or
(iv) any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
c. INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE SELLER. Except
as described below in SECTION 7(E) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
d. SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in SECTION 10(O) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in SECTION
7(E) with respect to the remedy of liquidated damages upon a breach of a
warranty or
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covenant of this Agreement prior to the Closing, money damages would not be an
adequate remedy for Buyers for a breach of any provision of this Agreement.
e. LIQUIDATED DAMAGES. The Buyers and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(C), the Seller
shall be entitled to receive from the defaulting Party for such default the
Earnest Money Deposit as liquidated damages without the need for proof of
damages, subject only to successfully proving in a court of competent
jurisdiction that the Buyer materially breached this Agreement and that the
transactions contemplated thereby have not occurred. The Seller shall proceed
against the Earnest Money Deposit as full satisfaction of liquidated damages
owed by the Buyers and as its sole remedy for a failure of the transactions
contemplated hereby to occur as a result of a material breach of the terms of
this Agreement by the Buyers.
f. MATTERS INVOLVING THIRD PARTIES. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this SECTION 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; PROVIDED, HOWEVER, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
8. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title, and interest in and to all of the
assets of the Seller, other than Retained Assets that are used or useful in the
operation of the Stations, wherever located, including but not limited to all of
its (a) leaseholds and other interests of any
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kind therein, improvements, fixtures, and fittings thereon (such as towers and
antennae), and easements, rights-of-way, and other appurtenances thereto); (b)
tangible personal property (such as fixed assets, computers, data processing
equipment, electrical devices, monitoring equipment, test equipment, switching,
terminal and studio equipment, transmitters, transformers, receivers, broadcast
facilities, furniture, furnishings, inventories of compact disks, records, tapes
and other supplies, vehicles) and all assignable warranties with respect
thereto; (c) Intellectual Property, goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions; (d) rights under orders and
agreements (including those Barter Agreements and Advertising Contracts
identified on the Disclosure Schedule) now existing or entered into in the
Ordinary Course of Business for the sale of advertising time on the Stations;
(e) Assumed Contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (f) call letters of the Stations, jingles,
logos, slogans, and business goodwill of the Stations; (g) claims, deposits,
prepayments, refunds, causes of action, chooses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment; (h) Licenses and similar rights obtained from governments and
governmental agencies; and (i) FCC logs and records and all other books,
records, ledgers, logs, files, documents, correspondence, advertiser lists, all
other lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, program production materials,
studies, reports, and other printed or written materials; and (j) goodwill of
the Stations.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"ADVERTISING CONTRACTS" has the meaning set forth in Section 2(s), above.
"AFFILIATE" means with reference to any person or entity, another person or
entity controlled by, under the control of or under common control with that
person or entity.
"ASSIGNMENT APPLICATION" has the meaning set forth in Section 4(b) above.
"ASSUMED CONTRACTS" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(k) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"ASSUMED LIABILITIES" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
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"BUYERS" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in SECTION 1(D) above.
"CLOSING DATE" has the meaning set forth in SECTION 1(D) above.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of the Seller.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 1 above.
"EARNEST MONEY DEPOSIT" has the meaning set forth in Section 1(c) above.
"EARNEST MONEY ESCROW AGREEMENT" has the meaning set forth in Section 1(c)
above.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means McCoy Broadcast Brokerage.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC LICENSES" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"FINAL ORDER" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 2(E) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 7(D) above.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 7(D) above.
"INTELLECTUAL PROPERTY" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
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"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LEASES" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites, as described in SECTION 2(I) of
the Disclosure Schedule.
"LIABILITY" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LICENSES" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"MULTI-EMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"OWNED REAL ESTATE" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"PARTY" has the meaning set forth in the preface above.
"PERMITTED REAL ESTATE ENCUMBRANCES" shall have the meaning set forth in
Section 2(i), above.
"POST-CLOSING AGREEMENT" means the Post-Closing Agreement with Seller's
owners in the form attached hereto as EXHIBIT C.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"PURCHASE PRICE " has the meaning set forth in SECTION 1(C) above.
"REAL ESTATE" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
"RETAINED ASSETS" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into
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on or after the date of this Agreement); (iii) accounts, notes and other
receivables of the Seller; and (iv) Cash.
"RETAINED LIABILITIES" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"SELLER" has the meaning set forth in the preface above.
"STATIONS" means the radio broadcast stations having the call letters
WLOV-FM and WLOV-AM , licensed by the FCC to operate in Washington, Georgia.
"SUBSIDIARY," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"SURVEYS" has the meaning set forth in SECTION 4(O) above.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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<PAGE>
9. TERMINATION.
a. TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach of any representation, warranty, or covenant contained
in this Agreement; provided, however, that if such breach is capable of
being cured, such breach also remains uncured for twenty (20) days after
notice of breach is received by the Seller from the Buyers;
(iii) the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in breach of any representation, warranty, or covenant contained
in this Agreement; provided, however that if such breach is capable being
cured, such breach remains uncured for twenty (20) days after notice of
breach is received by the Buyers from the Seller;
(iv) the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under SECTION
5(A) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained in
this Agreement);
(v) the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under SECTION
5(B) hereof (unless the failure results primarily from the Seller itself
breaching any representation, warranty, or covenant contained in this
Agreement);
(vi) the Buyer may terminate this Agreement on or before the
30th day after the date hereof in the event it has not satisfactorily
completed its due diligence review of the Stations; or
(vii) the Buyers or the Seller may terminate this Agreement if
any Assignment Application is denied by Final Order.
b. EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. MISCELLANEOUS.
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<PAGE>
a. PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
b. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
c. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
d. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, PROVIDED that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and to pay to the Seller the Purchase Price therefor or to any
successor to the Buyers in the event of any sale, merger or consolidation of the
Buyers, and (ii) Buyers may assign their indemnification claims and their rights
under the warranties and representations of the Sellers to the financial
institution(s) providing financing to the Buyers in connection with this
transaction.
e. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
f. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
IF TO THE SELLER:
Dennis Peter Helmreich
P and T Broadcasting, Inc.
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<PAGE>
P.O. Box 266
Lexington, GA 30648
Fax: (706) 743-3652
IF TO THE BUYERS:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
h. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Georgia.
i. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
j. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have
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<PAGE>
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
k. EXPENSES. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(o) with respect to Surveys, title commitments and
environmental audits. The Seller will pay all income taxes through the date of
Closing. The Seller and the Buyers will each pay one-half (1/2) of any transfer
or sales taxes and other recording or similar fees necessary to vest title to
each of the Acquired Assets in the Buyers.
l. CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
m. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
n. SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Lexington, Georgia in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
-------------------------------
- ----------------------------------
(Printed)
Title:
----------------------------
CUMULUS LICENSING CORPORATION
By:
-------------------------------
- ----------------------------------
(Printed)
Title:
----------------------------
P AND T BROADCASTING, INC
By:
-------------------------------
Dennis Peter Helmreich
Title:CEO
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<PAGE>
SCHEDULE A
PURCHASE PRICE. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the amount of Five Hundred Thousand Dollars ($500,000),
payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the Escrow
Agent the amount of Twenty-Five Thousand Dollars ($25,000) (the "EARNEST MONEY
DEPOSIT") in the form of an irrevocable letter of credit from NationsBank; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the amount of
Five Hundred Thousand Dollars ($500,000), with adjustments as provided
specifically in this Agreement.
The Earnest Money Deposit referenced in this SCHEDULE A shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as EXHIBIT A (the "EARNEST MONEY ESCROW AGREEMENT"), and shall
be disbursed to Seller or returned to Buyer as provided in the Earnest Money
Escrow Agreement.
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<PAGE>
Exhibit 10.64
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of March __, 1998, by and
among Cumulus Broadcasting, Inc., a Nevada corporation ("Broadcasting"), Cumulus
Licensing Corporation, a Nevada corporation ("Licensing), and Crystal Radio
Group, Inc. (the "Seller"). Broadcasting and Licensing are referred to
collectively herein as the "Buyers." The Buyers and the Seller are referred to
individually as the "Party" or collectively as the "Parties." Capitalized terms
used in this Agreement are defined in Section 8 hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
stations WKMI(AM) (licensed to Kalamazoo, Michigan), WRKR(FM) (licensed to
Portage, Michigan), and WKFR(FM) (licensed to Battle Creek, Michigan) (the
"Stations") in return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. BASIC TRANSACTION.
A. PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, on the Closing Date (as defined herein) the Seller
shall sell, transfer, convey and deliver to (i) Licensing, and Licensing shall
purchase from the Seller, all of the FCC Licenses listed in Section 2(1) of the
disclosure schedule ("Disclosure Schedule"); and (ii) Broadcasting, and
Broadcasting shall purchase from the Seller, all of the Acquired Assets other
than the FCC Licenses. Both such sales shall take place at the Closing for the
consideration specified below in this Section 1.
B. ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities or otherwise expressly assumed by Broadcasting, and the
Seller agrees to pay and discharge all Liabilities and obligations of the Seller
other than the Assumed Liabilities.
C. PURCHASE PRICE. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the purchase price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
(the "Earnest Money Deposit") in the form and manner described in Schedule A and
more particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A and entered into by the Parties on the
date hereof.
D. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a mutually agreed location,
commencing at 9:00 a.m. local time within
<PAGE>
five (5) to ten (10) business days after FCC approval of the Assignment
Application becomes a Final Order, so long as all other conditions to the
obligations of the respective Parties to consummate the transactions
contemplated hereby will have been satisfied, or such other date as the Parties
may mutually determine (the "Closing Date").
E. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale and
warranty deeds in form acceptable to the Buyers, (B) such affidavits, transfer
tax returns, memorandums of lease, and other additional documents as may be
required by the terms of the title insurance commitments described in Section
4(o) hereof, as necessary to furnish title insurance as required by such section
or as may be necessary to convey title to the Real Estate to the Buyers in the
condition required herein or provide public notice of existence of the Leases,
and (C) such other instruments of sale, transfer, conveyance, and assignment as
the Buyers and their counsel reasonably may request; (iv) the Buyers will
execute, acknowledge (if appropriate), and deliver to the Seller (A) an
assumption in the form attached hereto as Exhibit B and (B) such other
instruments of assumption as the Seller and its counsel reasonably may request;
and (v) the Buyers will deliver to the Seller the consideration specified in
Section 1(c) above.
F. NONCOMPETITION AND RETAINAGE AGREEMENTS. On the Closing Date,
the Seller shall execute, and shall cause shareholder Edward J. Sackley, III to
execute, a Noncompetition Agreement with the Buyers including covenants not to
compete with the Buyers in the markets served by the Stations in the form of
Exhibit C attached hereto. A portion of the Purchase Price equal to One Hundred
Dollars ($100) shall be paid to the Seller by the Buyers on the Closing Date as
consideration for the agreements set forth in the Noncompetition Agreement. In
addition, on the Closing Date, the Seller and Buyers shall enter into a
Retainage Agreement in the form attached as Exhibit D hereto, pursuant to which
Six Hundred Thousand Dollars ($600,000) shall be deposited by Buyers with the
Retainage Agent and disbursed at the times and under the procedures specified in
the Retainage Agreement.
G. EMPLOYMENT AGREEMENT. On the Closing Date, the Seller shall
cause Edward J. Sackley, III to enter into an Employment Agreement with the
Buyers in the form of Exhibit E attached hereto.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to the Buyers that the statements
contained in this SECTION 2 are correct and complete, except as set forth in the
Disclosure Schedule.
A. ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The Seller has the power and authority to own or lease its
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<PAGE>
properties and to carry on all business activities now conducted by it. The
shareholders of the Seller are set forth in Section 2(a) of the Disclosure
Schedule.
B. AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and all agreements and instruments to be executed and delivered
by Seller pursuant to this Agreement (collectively, the "Ancillary Agreements")
and to perform its obligations hereunder and thereunder. Without limiting the
generality of the foregoing, the Board of Directors of the Seller has duly
authorized the execution, delivery, and performance of this Agreement and the
Ancillary Agreements by the Seller. This Agreement and the Ancillary Agreements
constitute the valid and legally binding obligation of the Seller, enforceable
in accordance with their respective terms and conditions.
C. NONCONTRAVENTION. Except as set forth in Section 2(c) of the
Disclosure Schedule, neither the execution and the delivery of this Agreement or
the Ancillary Agreements, nor the consummation of the transactions contemplated
hereby and thereby (including the assignments and assumptions referred to in
Section 1(e) above), will (i) violate any statute, regulation, rule, judgment,
order, decree, stipulation, injunction, charge, or other restriction of any
government, governmental agency, or court to which the Seller is subject or any
provision of the charter or bylaws of the Seller; or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice or third party consent under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or other
agreement, arrangement to which the Seller is a party or by which it is bound or
to which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Other than with respect to the
Assignment Application described in Section 4(b) the Seller does not need to
give any notice to, make any filing with, or obtain any Licenses, consent, or
approval of any court or government or governmental agency in order for the
Parties to enter into this agreement or the Ancillary Agreements or to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements (including the assignments and assumptions referred to in Section
1(e) above).
D. TITLE TO ACQUIRED ASSETS. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) the Seller has good and marketable title to all of the
Acquired Assets, free and clear of any Security Interest or restriction on
transfer.
E. FINANCIAL STATEMENTS. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1993, December 31, 1994,
and December 31, 1995 for the Seller; and (ii) unaudited balance sheets and
statements of income, as of and for each month during 1996 and each month to
date in 1997 for the Seller. The Financial Statements have been prepared in
conformity with the Seller's normal accounting policies, practices and
procedures applied on a consistent basis, throughout the periods covered
thereby, are correct and complete in all material respects, fairly present the
financial condition of the Seller and the results of operation of Seller at the
dates and for
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<PAGE>
the periods indicated, and are consistent with the books and records of the
Seller (which books and records are correct and complete). The Financial
Statements accurately state the revenues of the Stations for the period
indicated therein and include an accurate breakout of cash and trade revenues.
F. EVENTS SUBSEQUENT TO JANUARY 1, 1997. During the period between
January 1, 1997, and the date of this Agreement, except as set forth in Section
2(f) of the Disclosure Schedule, there has not been any material adverse change
in the assets, Liabilities, business, financial condition, operations, or
results of operations of the Seller with respect to the operation of the
Stations. Without limiting the generality of the foregoing and with respect to
the operation of the Stations since January 1, 1997 until the date of this
Agreement:
i. other than this Agreement, the Seller has not entered into
any agreement, contract, lease, sublease, license, or sublicense (or series
of related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
ii. the Seller has not delayed or postponed (beyond its normal
practice in the Ordinary Course of Business) the payment of accounts
payable and other Liabilities;
iii. the Seller has not altered its credit and collection
policies or its accounting policies;
iv. the Seller has not entered into or terminated any employment
arrangement, employment contract, consulting contract or severance
agreement or collective bargaining agreement, written or oral, or modified
the terms of any existing such contract or agreement outside the Ordinary
Course of Business;
v. there have been no changes and, to Seller's knowledge, any
threatened changes in employment terms for any of its directors, officers,
and employees;
vi. there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Seller;
vii. the Seller has not materially altered the programming,
format or call letters of the Stations, or its promotional and marketing
activities outside the Ordinary Course of Business;
viii. the Seller has not applied to the FCC for any
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in compliance
therewith and with all FCC rules and regulations;
ix. the Seller has not terminated or received notice of
termination for any syndicated programming outside the Ordinary Course of
Business; and
x. the Seller has not committed to any of the foregoing.
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<PAGE>
G. TAX MATTERS. The Seller has timely and properly filed all Tax
Returns that it was required to file with respect to the Seller's operations.
All such Tax Returns were correct and complete and properly reflect the tax
liability of the Seller. No Tax deficiencies have been proposed or assessed
against the Seller. All Taxes owed by the Seller with respect to its operations
(whether or not shown on any Tax Return) have been paid. The Seller has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. No claim has ever been made by any authority in any
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
H. TANGIBLE ASSETS. Section 2(h) of the Disclosure Schedule sets
forth a listing (which, in certain cases, is done by general categories) of all
transmitter and station equipment, vehicles and other tangible personal property
owned by Seller and used in conducting the operation and business of the
Stations as of December 31, 1996, other than the tangible personal property
included in Retained Assets and identified in Schedule 8. The Seller owns or
leases all tangible assets necessary for the conduct of the operation and
business of the Stations as presently conducted. Any item of station equipment
on this list which is no longer used in the operation of the Stations was
either: (i) disposed of in the ordinary course of business because it was no
longer useful in the operation of the Stations; or (ii) replaced with another
item of equipment of substantially equivalent or greater value; or (iii) removed
from service due to malfunction or obsolescence, and although still on hand, no
longer being used in the operation of the Stations.
I. REAL PROPERTY. Section 2(i) of the Disclosure Schedule lists and
describes briefly all Owned Real Estate and real property leased to the Seller
(including, without limitation, complete legal descriptions for all of the Real
Estate) (but excluding real property included in Retained Assets and identified
in Schedule 8). The Seller has delivered to the Buyers correct and complete
copies of the Leases. With respect to the Real Estate:
i. the Seller has good and marketable title to all of the Owned
Real Estate free and clear of all liens, charges, mortgages, security
interests, easements, restrictions or other encumbrances of any nature
whatsoever except those disclosed in Section 2(i) of the Disclosure
Schedule (collectively, the "Permitted Real Estate Encumbrances");
ii. the Leases are and, as of Closing will be, legal, valid,
binding, enforceable, and in full force and effect;
iii. to Seller's Knowledge, no party to any Lease is in breach or
default (or has repudiated any provision thereof), and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default thereunder or permit termination, modification, or acceleration
thereunder;
iv. there are no disputes, oral agreements, or forbearance
programs in effect between the Seller and any landlord as to any Lease;
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<PAGE>
v. none of the Owned Real Estate and to the Seller's Knowledge,
none of the properties subject to the Leases is subject to any lease (other
than Leases), option to purchase or rights of first refusal;
vi. except for Permitted Real Estate Encumbrances and as
described in Section 2(i) of the Disclosure Schedule, there are no (i)
actual or, to the Seller's Knowledge, proposed special assessments with
respect to any of the Real Estate; (ii) pending or, to the Seller's
Knowledge, threatened condemnation proceedings with respect to any of the
Real Estate; (iii) structural or mechanical defects in any of the buildings
or improvements located on the Real Estate; (iv) any pending or, to the
Seller's Knowledge, threatened changed in any zoning laws or ordinances
which may materially adversely affect any of the Real Estate or Seller's
use thereof;
vii. the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Leases or its
rights thereunder;
viii. to the Seller's Knowledge, except as disclosed as
Section 2(i) of the Disclosure Schedule, all facilities on the Real Estate
have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; and
ix. to the Seller's Knowledge, the owner of each leased facility
has good and marketable title to the underlying parcel of real property,
free and clear of any Security Interest, easement, covenant, or other
restriction, except for Permitted Real Estate Encumbrances and Seller's
leasehold interest in each Lease has priority over any other interest
except for the fee interest therein and Permitted Real Estate Encumbrances.
J. CONTRACTS. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not entered into in the Ordinary Course of Business. The
Seller has delivered to the Buyers a correct and complete copy of each written
arrangement listed in Section 2(j) of the Disclosure Schedule (as amended to
date). With respect to each written arrangement so listed which constitutes an
Assumed Contract: (A) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect; (B) the written arrangement will
continue to be legal, valid, binding, and enforceable and in full force and
effect on identical terms following the Closing (if the arrangement has not
expired according to its terms); (C) to Seller's Knowledge, no party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination, modification, or
acceleration, under the written arrangement; and (D) no party has repudiated any
provision of the written arrangement. The Seller is not a party to any verbal
contract, agreement, or other arrangement which, if reduced to written form,
would be required to be listed in Section 2(j) of the Disclosure Schedule under
the terms of this Section 2(j). Except for the Assumed Contracts, the Buyers
shall not have any Liability or obligations for or in respect of any of the
contracts set forth in Section 2(j) of the Disclosure Schedule or any other
contracts or agreements of the Seller.
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K. COMMISSION LICENSES AND COMPLIANCE WITH COMMISSION REQUIREMENTS.
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies, including,
without limitation, the FCC Licenses, used or useful in the operation of
the Stations as they are now being operated are (A) in full force and
effect, (B) unimpaired by any acts or omissions of the Seller or the
Seller's employees or agents, (C) free and clear of any restrictions which
might limit the full operation of the Stations, and (D) detailed in Section
2(k) of the Disclosure Schedule. With respect to the licenses, permits,
authorizations, franchises, certificates of compliance and consents
referenced in the preceding sentence, Section 2(k) of the Disclosure
Schedule also sets forth, without limitation, the date of the last renewal,
the expiration date thereof, and any conditions or contingencies related
thereto. Except as set forth in Section 2(k) of the Disclosure Schedule, no
condition exists or event has occurred that permits, or after notice or
lapse of time, or both, would permit, the revocation or termination of any
such license, permit, consent, franchise, or authorization (other than
pursuant to their express expiration date) or the imposition of any
material restriction or limitation upon the operation of the Stations as
now conducted. Except as set forth in Section 2(k) of the Disclosure
Schedule, the Seller is not aware of any reason why the FCC Licenses might
not be renewed in the ordinary course or revoked.
ii. The Stations are in compliance with the FCC's policy on
exposure to radio frequency radiation. No renewal of any FCC License would
constitute a major environmental action under the FCC's rules or policies.
Access to the Stations' transmission facilities is restricted in accordance
with the policies of the FCC.
iii. Except as set forth in Section 2(k) of the Disclosure
Schedule, to the Seller's Knowledge, the Seller is not the subject of any
FCC or other governmental investigation or any notice of violation or
order, or any material complaint, objection, petition to deny, or
opposition issued by or filed with the FCC or any other governmental
authority in connection with the operation of or authorization for the
Stations, and there are no proceedings (other than rule making proceedings
of general applicability) before the FCC or any other governmental
authority that could adversely affect any of the FCC Licenses or the
authorizations listed in Section 2(k) of the Disclosure Schedule.
iv. The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
v. The Seller is not aware of any information concerning the
Stations that could cause the FCC or any other regulatory authority not to
issue to the Buyers all regulatory certificates and approvals necessary for
the consummation of the transactions contemplated hereunder or the Buyer's
operation and/or ownership of the Stations. As of the date hereof, without
having conducted any investigation, Seller is not aware of any pending FCC
applications which, if approved, would allow for the operation of a new
radio station
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with a signal reaching the signal area of the Stations and, in addition,
Seller is not aware, without having conducted any investigation, of any
plans or proposals by any existing radio stations with a signal reaching
the signal area of the Stations to alter or change their format to a format
similar to that of the Stations, provided that Station WQSN(AM), Kalamazoo,
Michigan, has a construction permit to migrate to the expanded band.
L. INTELLECTUAL PROPERTY. The Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use the by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, or notice
alleging any such interference, infringement, misappropriation, or violation.
To the Knowledge of the Seller, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Seller.
M. INSURANCE. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Seller's insurance coverage. With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
and enforceable and in full force and effect; (B) the policy will continue to be
legal, valid, binding, and enforceable and in full force and effect on identical
terms through the Closing Date.
N. LITIGATION. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth in Section
2(n) of the Disclosure Schedule will, in the opinion of Seller, result in any
material adverse change in the assets, Liabilities, business, financial
condition, operations, results of operations, or future prospects of the Seller
or the Stations taken as a whole. There is no litigation or proceeding pending
by or against, or threatened against or affecting Seller that would affect
Seller's ability fully to carry out the transactions contemplated by this
Agreement.
O. EMPLOYEES. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, titles, salary or wage rates and all other
forms of compensation paid for work at the Stations of each employee. To the
Knowledge of the Seller as of the date hereof, no key employee or group of
employees has any plans to terminate employment with the Seller. The Seller is
not a party to or bound by any collective bargaining or similar agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to the employees of the Seller. The Seller has no
Knowledge of any claim by past or current employees of the Seller or applicants
for employment that the Seller
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or its management has discriminated based on each individuals race, sex,
national origin, religion, ethnicity, handicap or any other protected
characteristic under applicable law.
P. EMPLOYEE BENEFITS. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in operation in all respects with the applicable requirements of
ERISA and the Code. The Seller does not have any commitment to create any
additional Employee Benefit Plan or modify or change any existing Employee
Benefit Plan that would affect any employee or terminated employee of the
Seller. There are no pending or, to the Knowledge of the Seller, threatened
claims under, by or on behalf of any of the Employee Benefit Plans, by any
employee or beneficiary covered by any such Employee Benefit Plan, or otherwise
involving any such Employee Benefit Plan (other than routine claims for
benefits), nor have there been any Reportable Events or Prohibited Transactions
with respect to any Employee Benefit Plan.
Q. ENVIRONMENT, HEALTH, AND SAFETY.
i. With respect to the operation of the Stations and the Real
Estate, to Seller's Knowledge the Seller is, and at all times in the past
has been, in compliance in all material respects with all Environmental
Laws and all laws (including rules and regulations thereunder) of federal,
state, and local governments (and all agencies thereof) concerning employee
health and safety, and to Seller's Knowledge the Seller has no Liability
(and to Seller's Knowledge there is no Basis related to the past or present
operations of the Seller or its predecessors for any present or future
Liability) under any Environmental Law, except as described in Section
2(q) of the Disclosure Schedule. Except as described in Section 2(q) of
the Disclosure Schedule, to Seller's Knowledge, the Seller has no Liability
(and to Seller's Knowledge there is no Basis for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation, claim,
or demand against the Seller giving rise to any Liability) under the
Occupational Safety and Health Act, as amended, or any other law (or rule
or regulation thereunder) of any federal, state, local, or foreign
government (or agency thereof) concerning employee health and safety, or
for any illness of or personal injury to any employee.
ii. To Seller's Knowledge, the Seller has obtained and at all
times has been in compliance in all material respects with all of the terms
and conditions of all permits, licenses, and other authorizations which are
required under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of any
federal, state, or local or foreign government relating to worker health
and safety.
iii. Except as described in Section 2(q) of the Disclosure
Schedule, to Seller's Knowledge all properties and equipment used in the
Stations and the Acquired Assets are, and to Seller's Knowledge have been,
free of asbestos, PCB's, methylene
<PAGE>
chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances. To Seller's Knowledge,
no pollutant, contaminant, or chemical, industrial, hazardous, or toxic
material or waste ever has been buried, stored, spilled, leaked,
discharged, emitted, or released on any of the Real Estate. To Seller's
Knowledge, no above ground or underground storage tanks have ever been
located at, on or under the Real Estate. To Seller's Knowledge, the
Seller has delivered to the Buyers a complete copy of all environmental
claims, reports, studies, compliance actions or the like of the Seller or
which are available to the Seller with respect to any of the Real Estate or
any of the Acquired Assets.
R. LEGAL COMPLIANCE. To Seller's Knowledge, the Seller has complied
in all material respects with all laws (including rules and regulations
thereunder) of federal, state, local and foreign governments (and all agencies
thereof), subject to the matters disclosed in Section 2(q) of the Disclosure
Schedule. The Seller has filed in a timely manner all reports, documents, and
other materials it was required to file (and the information contained therein
was correct and complete in all material respects) under all applicable laws.
S. ADVERTISING CONTRACTS. Section 2(s) of the Disclosure Schedule
lists all arrangements in effect as of March 3, 1998 for the sale of air time or
advertising on the Stations in excess of $1000, and the amount to be paid to the
Seller therefor. The Seller has no reason to believe and has not received a
notice or indication of the intention of any of the advertisers or third parties
to material contracts of the Seller to cease doing business or to reduce in any
material respect the business transacted with the Seller or to terminate or
modify any agreements with the Seller (whether as a result of consummation of
the transactions contemplated hereby or otherwise).
T. BROKERS' FEES. The Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
U. UNDISCLOSED COMMITMENTS OR LIABILITIES. There are no material
commitments, liabilities or obligations relating to the Stations, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Seller of the liabilities of third parties, for which specific
and adequate provisions have not been made on the Financial Statements except
those incurred in or as a result of the Ordinary Course of Business since
January 1, 1997.
V. DISCLOSURE. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
Buyers each represent and warrant to the Seller that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement.
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A. ORGANIZATION OF THE BUYERS. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada.
B. AUTHORIZATION OF TRANSACTION. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions.
C. NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement or the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby and thereby (including the assignments and
assumptions referred to in Section 1(e) above), will (i) violate any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge, or
other restriction of any government, governmental agency, or court to which the
Buyers are subject or any provision of their articles of organization or other
charter documents, or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Buyers are a
party or by which they are bound or to which any of their assets is subject.
Other than with respect to the Assignment Application described in Section 4(b),
the Buyers do not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any court or government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement or the Ancillary Agreements (including the
assignments and assumptions referred to in Section 1 (e) above).
D. BROKERS' FEES. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
E. QUALIFICATIONS. Each Buyer has the requisite legal, financial
and other qualifications under the Communications Act of 1934, as amended, and
the rules, regulations and policies of the FCC, as well as under all other
applicable federal, state and local laws, rules and regulations, to acquire the
FCC Licenses from Seller. Neither Buyer is required to obtain, nor will it seek
to obtain, an exemption from or waiver of any FCC rule, regulation or policy in
order to acquire the FCC Licenses or operate the Stations. Nor will any Buyer
or any of its Affiliates seek to divest itself of any interest in or
relationship to any media in order to permit Licensing to acquire the FCC
Licenses.
F. LITIGATION. There is no litigation or proceeding pending by or
against, or threatened against or affecting either Buyer that would affect
Buyers' ability fully to carry out the transactions contemplated by this
Agreement. To Buyers' knowledge, there is no action, suit, investigation,
inquiry, or other proceeding pending or threatened before any court or
quasijudicial or administrative agency of any federal, state, local or foreign
jurisdiction wherein an unfavorable judgment, order, degree, stipulation,
injunction or charge would (i) prevent consummation of any
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of the transactions contemplated by this Agreement or impose damages or
penalties upon any of the parties if such transactions are consummated, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affect adversely the right of the Buyers to
own, operate or control the Acquired Assets.
G. MARKET ACQUISITIONS. Neither Buyers nor any of their Affiliates have
entered into a letter of intent, agreement or any other commitment or
arrangement pursuant to which such entity will acquire one or more additional
radio or television broadcast stations with respect to which the principal
community contour or Grade A contour, as applicable, of any of such broadcast
stations
would overlap the principal community contour of any of the Stations.
4. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
A. GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
B. ASSIGNMENT APPLICATIONS. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses, permits and
authorizations pertaining to the Stations from the Seller to Licensing (the
"Assignment Application"). The costs of the FCC filing fees in connection with
the Assignment Application shall be divided equally between the Parties. Each
party shall pay its own attorneys' fees. The Seller and the Buyers shall
thereafter prosecute the Assignment Application with all reasonable diligence
and otherwise use commercially reasonable efforts to obtain the grant of the
Assignment Application as expeditiously as practicable (but neither the Seller
nor the Buyers shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon the Stations or
impose significant costs on such party). If the FCC imposes any condition on
either party to the Assignment Application, such party shall use commercially
reasonable efforts to comply with such condition, provided, that neither party
shall be required hereunder to comply with any condition that would have a
material adverse effect upon such party, any of the Stations or any Affiliate.
The Seller and the Buyers shall jointly oppose any requests for reconsideration
or judicial review of FCC approval of the Assignment Application and shall
jointly request from the FCC extension of the effective period of FCC approval
of the Assignment Application if the Closing shall not have occurred prior to
the expiration of the original effective period of the FCC Consent. Nothing in
this Section 4(b) shall be construed to limit either party's right to terminate
this Agreement pursuant to Section 9 of this Agreement.
C. EMPLOYMENT OFFERS. Upon notice to the Seller, and at mutually
agreeable times, the Seller will permit the Buyers to meet with its employees
prior to the Closing Date. The Buyers may, at their option, extend offers of
employment to all or any of the Seller's employees effective on the Closing
Date. From and after the execution of this Agreement, the Seller shall use
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its reasonable efforts to assist Buyers in retaining those employees of the
Stations which the Buyers wish to hire in connection with the operation of the
Stations by the Buyers subsequent to the Closing, and the Seller will not take
any action to preclude or discourage any of the Seller's employees from
accepting any offer of employment extended by the Buyers.
D. NOTICES AND CONSENTS. The Seller will give all notices to third
parties and use reasonable effort to obtain third party consents that the Buyers
reasonably may request. Each of the Parties will file any notification and
report forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use reasonable
efforts to obtain an early termination of the applicable waiting period, and
will make any further filings pursuant thereto that may be necessary, proper or
advisable. Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
E. OPERATING STATEMENTS. If requested by Buyers, the Seller shall
deliver to the Buyers, for the Buyers' informational purposes only, monthly
unaudited statements of operating revenues and operating expenses of the
Stations within ten (10) days after each such statement is prepared by or for
the Seller.
G. CONTRACTS. The Seller will not without the prior written consent
of the Buyers (which shall not be unreasonably withheld or delayed) amend,
change, or modify any of the contracts listed on Section 2(k) of the Disclosure
Schedule in any material respect. The Seller will not without prior written
consent of the Buyers enter into any contract outside the Ordinary Course of
Business which involves more than Five Thousand Dollars ($5,000) if such
contract is to be an Assumed Contract.
H. OPERATION OF STATIONS. The Seller will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. The Seller shall operate the Stations in material
compliance with the FCC Licenses and the rules and regulations of the FCC, and
the FCC Licenses shall at all times remain in full force and effect. The Seller
shall file with the FCC all material reports, applications, documents,
instruments and other information required to be filed in connection with the
operation of the Stations.
I. CREDIT AND RECEIVABLES. The Seller will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Stations and with respect to collecting accounts receivable
arising from such extension of credit.
J. PRESERVATION OF STATIONS AND THE ACQUIRED ASSETS. The Seller
will use reasonable efforts to keep its Stations and the Acquired Assets and
properties substantially intact, including its present operations, physical
facilities, working conditions, relationships with lessors, licensors, all of
the Confidential Information, call letters and trade secrets of the Stations,
and the FCC Licenses.
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K. FULL ACCESS AND CONSULTATION. The Seller will permit
representatives of the Buyers to have full access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Stations, to all premises, properties, books, records, contracts, Tax records,
and documents of or pertaining to the Seller. The Seller will consult with the
Buyers' management with a view to informing Buyers' management as to the
operations, management and business of the Stations.
L. NOTICE OF DEVELOPMENTS. The Seller will give prompt written
notice to the Buyers of any material development affecting the Acquired Assets
or the ability of the Seller to perform hereunder.
M. EXCLUSIVITY. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) merger or consolidation, (B) acquisition or purchase of securities or
assets, or (C) similar transaction or business combination involving the Seller,
or (ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. The Seller will notify the Buyers immediately if any person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
N. TITLE INSURANCE, SURVEYS AND ENVIRONMENTAL ASSESSMENTS. The
Buyers will obtain (i) with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request,
(ii) with respect to each parcel of Owned Real Estate, an owner's policy of
title insurance by a title insurer reasonably satisfactory to the Buyers, in an
amount equal to the fair market value of such Real Estate (including all
improvements located thereon), insuring over the standard pre-printed exceptions
and insuring title to the Owned Real Estate to be vested in the Buyers as of the
Closing free and clear of all liens and encumbrances except Permitted Real
Estate Encumbrances, together with such endorsements for zoning, contiguity,
public access and extended coverage as the Buyers or its lender reasonably
request, (iii) a current survey of each parcel of Real Estate certified to the
Buyers and its lender, prepared by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Surveys') which shall not
disclose any survey defect or encroachment from or onto any of the Real Estate
which has not been cured or insured over prior to the Closing; and (iv) with
respect to each parcel of Real Estate, a current Phase I environmental site
assessment from an environmental consultant or engineer reasonably satisfactory
to the Sellers which, except as otherwise disclosed in Section 2(q) of the
Disclosure Schedule, does not indicate that the Seller and the Real Estate are
not in material compliance with any Environmental Law and which shall not
disclose or recommend any action with respect to any condition to be remediated
or investigated or any contamination on the site
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assessed. The Seller will pay the costs of the title policies and Surveys, and
the Buyers will pay the costs of the environmental assessments.
O. CONTROL OF STATIONS. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Between the date of this Agreement and
the Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
P. RISK OF LOSS. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing. In the event
of any such loss, damage, or destruction the Seller will promptly notify the
Buyers of all particulars thereof, stating the cause thereof (if known) and the
extent to which the cost of restoration, replacement and repair of the Acquired
Assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will, at Seller's expense (subject to its
collection of insurance proceeds), repair or replace such Acquired Assets to
their former condition as soon as possible after loss, damage or destruction
thereof and shall use reasonable efforts to restore as promptly as possible
transmissions as authorized in the FCC Licenses. The Closing Date shall be
extended (with FCC consent, if necessary) for up to sixty (60) days to permit
such repair or replacement. If repair or replacement cannot be accomplished
within sixty (60) days of the date of the Seller's notice to the Buyers and the
Buyers determine that the Seller's failure to repair or replace would have a
material adverse effect on the operation of the Stations:
i. the Buyers may elect to terminate this Agreement; or
ii. the Buyers may postpone the Closing Date until such time as
the property has been repaired, replaced or restored in a manner and to an
extent reasonably satisfactory to the Buyers, unless the same cannot be
reasonably effected within ninety (90) days of the date of the Seller's
notice to the Buyers, in which case either party may terminate this
Agreement; or
iii. the Buyers may choose to accept the Acquired Asset in their
"then" condition, without any adjustment to the Purchase Price, together
with the Seller's assignment to the Buyers of all rights under any
insurance claims covering the loss, damage or destruction and payment over
to the Buyers of any proceeds under any such insurance policies, previously
received by the Seller with respect thereto plus an amount equal to the
amount of any deductible or self-insurance maintained by Seller on such
Acquired Assets. In the event the Closing Date is postponed pursuant to
this SECTION 4(N), the parties hereto will cooperate to extend the time
during which this Agreement must be closed as specified in the consent of
the FCC.
Q. ASBESTOS. Seller agrees prior to Closing to remove from the premises
all asbestos-containing materials at locations that are friable, as described in
the May 4, 1995 report of Kieser
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& Associates included in Section 2(q) of the Disclosure Schedule using such
methods as may comply with applicable law.
5. CONDITIONS TO OBLIGATION TO CLOSE.
A. CONDITIONS TO OBLIGATION OF THE BUYERS. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 2
above shall be true and correct in all material respects (or with respect
to representations and warranties which include a condition of materiality,
in all respects) at and as of the Closing Date as though made on and as of
the Closing Date;
ii. the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
iii. the Seller shall have procured all of the third party
consents to consents and contracts designated by Buyers as material in
Section 2(j) of the Disclosure Schedule, and all of the title insurance
commitments (and endorsements), Surveys described in Section 4(n) above,
the asbestos-containing materials shall have been removed as provided in
Section 4(q) above, and if Buyers have obtained the environmental
assessments described in Section 4(n), except as otherwise disclosed in
Section 2(q) of the Disclosure Schedule, such assessments shall not
indicate that the Seller and the Stations are not in material compliance
with any Environmental Law and shall not disclose or recommend any action
with respect to any condition to be remediated or investigated or any
contamination on the site assessed;
iv. no action, suit, investigation, inquiry or other proceeding
shall be pending or threatened before any court or quasijudicial or
administrative agency of any federal, state, local, or foreign jurisdiction
wherein an unfavorable judgment, order, decree, stipulation, injunction, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or impose damages or penalties upon any of
the parties if such transactions are consummated, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of the Buyers to own,
operate, or control the Acquired Assets (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
v. the Seller shall have delivered to the Buyers a certificate
(without qualification as to knowledge (except with respect to (iv) above)
or materiality or otherwise) to the effect that each of the conditions
specified above in Sections 5(a)(i) through (iv) is satisfied in all
respects;
vi. each of the Assignment Applications shall have been approved
by a Final Order of the FCC all applicable waiting periods (and any
extensions thereof) under the
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Hart-Scott-Rodino Act shall have expired or been terminated and the Buyers
shall have received all governmental approvals required to transfer all
other authorizations, consents, and approvals of governments and
governmental agencies set forth in the Disclosure Schedule;
vii. the relevant parties shall have entered into the
Noncompetition Agreement, Retainage Agreement, and the Employment
Agreement;
viii. the Buyers shall have received from counsel to the
Seller an opinion with respect to the matters set forth in Exhibit E
attached hereto, addressed to the Buyers and its lender and dated as of the
Closing Date;
ix. the Parties shall have agreed to allocate the Purchase Price
(and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) in accordance
with an allocation schedule to be delivered at closing; and
x. all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Buyers.
B. CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 3
above shall be true and correct in all material respects (or if the
representation or warranty includes a condition of materiality, in all
respects) at and as of the Closing Date as though made on and as of the
Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
iii. no action, suit, investigation, inquiry or other proceeding
shall be pending or threatened before any court or quasi judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
wherein an unfavorable judgment, order, decree, stipulation, injunction, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or impose damages or penalties upon any of
the Parties if such transactions are consummated, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such judgment, order, decree, stipulation, injunction,
or charge shall be in effect);
iv. the Buyers shall have delivered to the Seller a certificate
(without qualification as to knowledge (except with respect to (iii) above)
or materiality or otherwise)
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to the effect that each of the conditions specified above in Section
5(b)(i)-(iii) is satisfied in all respects and the statements contained in
such certificate shall be deemed a warranty of the Buyers which shall
survive the Closing;
v. each of the Assignment Applications shall have been approved
by a Final Order of the FCC and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
vi. the relevant parties shall have entered into the Postclosing
Agreement and the Employment Agreement; and
vii. all actions to be taken by the Buyers in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing:
A. GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 7 below).
B. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
C. ADJUSTMENTS. Operation of the Stations and the income and
expenses attributable thereto up through the close of business on the day before
the Closing Date shall be for the account of the Seller and thereafter for the
account of the Buyers. Such items as employee salaries, vacation, sick day and
personal time accruals, and fringe benefits, power and utilities
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charges, insurance, real and personal property taxes, prepaid expenses,
deposits, music license fees, and rents and payments pertaining to the Assumed
Contracts (including any contracts for the sale of time for cash, trade or
barter so assigned) shall be prorated between the Seller and the Buyers as of
the Closing Date in accordance with the foregoing principle. In addition, all
commissions payable with respect to the accounts receivable of the Seller
(whether due before or after Closing) shall be solely for the account and
responsibility of the Seller. Contractual arrangements that do not reflect an
equal rate of compensation to a Stations over the term of the agreement shall be
equitably adjusted as of the Closing Date. The prorations and adjustments
hereunder shall be made and paid insofar as feasible on the Closing Date, with a
final settlement sixty (60) days after the Closing Date. In the event of any
disputes between the Parties as to such adjustments, the amounts not in dispute
shall nonetheless be paid at such time and such disputes shall be determined by
an independent accounting firm mutually acceptable to both parties and the fees
and expenses of such accounting firm shall be paid one-half (1/2) by the Seller
and one-half (1/2) by the Buyer. The Purchase Price shall be allocated among
the Acquired Assets as mutually agreed upon by Buyers and Seller prior to
Closing. In the event that the parties are unable to mutually agree upon the
allocation by Closing, Buyers, on the one hand, and Seller, on the other, shall
each select an independent certified public accountant within ten (10) days
after the Closing and such independent certified public accountant shall within
ten (10) days select a third independent certified public accountant who shall
make a determination of the allocation within sixty (60) days after his or her
selection. Buyers and Seller agree that the allocation determined by their
mutual agreement or otherwise by the independent certified public accountant, as
the case may be, shall be conclusive and binding on Buyers and seller for all
purposes, including without limitation, reporting and disclosure requirements of
the Internal Revenue Service (including the reporting requirements of Section
1060(b) of the Internal Revenue Code of 1986, as amended).
D. COLLECTION OF ACCOUNTS RECEIVABLE. At the Closing, the Seller
will turn over to the Buyers, for collection only, the accounts receivable of
the Stations owing to the Seller as of the close of business on the day before
the Closing Date. A schedule of such accounts receivable will be delivered by
the Seller to the Buyers on the Closing Date or as soon thereafter as possible.
The Buyers agree to use commercially reasonable efforts in the ordinary course
of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Closing Date, and will remit all payments received on such
accounts during this 120-day period on the tenth (10th) day of each month
following collection together with an accounting of all payments received within
such period. The Buyers shall have the sole right to collect such accounts
receivable during such one hundred twenty (120) day period. In the event the
Buyers receive monies during the 120-day period following the Closing Date from
an advertiser who, after the Closing Date, is advertising on the Stations, and
that advertiser was included among the accounts receivable as of the Closing
Date, the Buyers shall apply said monies to the oldest outstanding balance due
on the particular account, except in the case of a "disputed" account
receivable. For purposes of this Section 6(d), a "disputed" account receivable
means one which the account debtor refuses to pay because he asserts in writing
with a detailed explanation that the money is not owed or the amount is
incorrect. In the case of such a disputed account, the Buyers shall immediately
return the account to the Seller prior to expiration of the 120-day period
following the Closing Date. If the Buyers return a disputed account to the
Seller, the Buyers shall have no further responsibility for its collection and
may accept payment from the account debtor for
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advertising carried on the Stations after the Closing Date. At the end of the
120-day period following the Closing Date, the Buyers will turn back to the
Seller all of the accounts receivable of the Stations as of the Closing Date
owing to the Seller which have not yet been collected, and the Buyers will
thereafter have no further responsibility with respect to the collection of such
receivables. During the 120-day period following the Closing Date, the Buyers
shall afford the Seller reasonable access to the accounts receivable "aging
list." The Seller acknowledges and agrees that the Buyers are acting as
collection agent hereunder for the sole benefit of the Seller and that Buyers
have accepted such responsibility for the accommodation of the Seller. The
Buyers shall not have any duty to inquire as to the form, manner of execution or
validity of any item, document, instrument or notice deposited, received or
delivered in connection with such collection efforts, nor shall the Buyers have
any duty to inquire as to the identity, authority or rights of the persons who
executed the same. The Seller shall indemnify Buyers and hold them harmless from
and against any judgments, expenses (including attorney's fees) costs or
liabilities which the Buyers may incur or sustain as a result of or by reason of
such collection efforts, except those resulting from the gross negligence or any
omission of Buyers or their intentional misconduct.
E. CONSENTS. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
F. FUTURE MARKET ACQUISITIONS. Each of the Buyers agrees that
between the date hereof and Closing neither it nor any of its affiliates will
enter into a letter of intent, agreement or any other commitment or arrangement
pursuant to which it would acquire one or more additional radio or television
broadcast stations with respect to which the principal community contour or
Grade A contour, as applicable, of any of such broadcast stations would overlap
the principal community contour of any of the Stations.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
A. Survival. All of the representations and warranties of the Seller
contained in Section 2 of this Agreement (other than the representations and
warranties of the Seller contained in SECTIONS 2(A), 2(B), 2(C), AND 2(D) hereof
or relating to the Seller's title to the Acquired Assets) shall survive the
Closing and continue in full force and effect for a period until 90 days after
the applicable statute of limitations has expired with respect to any claim by
the Buyers based on a claim or action by a third party and for a period of
eighteen (18) months following Closing with respect to any claim by the Buyers
not based on a claim or action by a third party. All of the other
representations and warranties (including the representations and warranties
Seller contained in
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SECTIONS 2(A), 2(B), 2(C), AND 2(D) hereof or relating to the Seller's title to
the Acquired Assets) and all covenants of the Buyers and the Seller contained in
this Agreement shall survive the Closing and continue in full force and effect
forever thereafter.
B. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in SECTION 7(E) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement or
in any Ancillary Agreement executed and/or delivered by the Seller (so long
as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant of
the Seller contained herein or in any Ancillary Agreement;
iii. any Liability of the Seller which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
C. Indemnification Provisions for the Benefit of the Seller. Except
as described below in SECTION 7(E) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree, jointly and severally, to
indemnify the Seller from and against the entirety of any Adverse Consequences
the Seller may suffer resulting from, arising out of, relating to, in the nature
of, or caused by (i) any misrepresentation or breach of any of the Buyers'
representations or warranties contained in this Agreement or in any Ancillary
Agreement executed and/or delivered by the Buyers (so long as the Seller makes a
written claim for indemnification within the applicable survival period) or (ii)
any breach or nonfulfillment of any agreement or covenant of the Buyers
contained herein or in any Ancillary Agreement, or (iii) any Assumed Liability.
D. Specific Performance. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in SECTION 10(O) below), in addition to any
other remedy to which it may be entitled, at law or in equity. Each of the
Parties acknowledges and agrees that not withstanding the provision in SECTION
7(E) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior
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to the Closing, money damages would not be an adequate remedy for Buyers for a
breach of any provision of this Agreement.
E. Liquidated Damages. The Buyers and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(C), the Seller
shall be entitled to receive the Earnest Money Deposit as liquidated damages
without the need for proof of damages, subject only to successfully proving in a
court of competent jurisdiction that either Buyer materially breached this
Agreement and that the transactions contemplated thereby have not occurred. The
Seller shall proceed against the Earnest Money Deposit as full satisfaction of
liquidated damages owed by the Buyers and as its sole remedy for a failure of
the transactions contemplated hereby to occur as a result of a material breach
of the terms of this Agreement by the Buyers.
F. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this SECTION 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; PROVIDED, HOWEVER, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld unreasonably),
and (iv) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement which does not include
a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all Liability with respect thereto, without the written
consent of the Indemnified Party (not to be withheld unreasonably). In the event
the Indemnifying Party does not notify the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof, however, and/or in the event the
Indemnifying Party shall fail to defend such claim actively and in good faith,
then the Indemnified Party may defend against, or enter into any settlement with
respect to, the matter in any manner it reasonably may deem appropriate.
G. LIMITATION OF LIABILITY. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Identified Party, in
the aggregate from all indemnifiable events shall exceed Ten Thousand Dollars
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($10,000) and indemnification shall be made by the indemnifying party only to
the extent of such excess over Ten Thousand Dollars ($10,000); provided however
that the foregoing limitation shall not be applicable to: (i) the obligations of
either Buyer to pay and discharge any Assumed Liability of the Seller; (ii) the
obligation of the Seller to pay and discharge any Retained Liability; or (iii)
the Seller's obligation to deliver clear title to the Acquired Assets.
8. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title, and interest in and to all of the
assets of the Seller, other than Retained Assets, that are used or useful in the
operation of the Stations, wherever located, including but not limited to all of
its (a) Owned Real Estate; (b) leaseholds and other interests of any kind
therein, improvements, fixtures, and fittings thereon (such as towers and
antennae), and easements, rights-of-way, and other appurtenances thereto); (c)
tangible personal property (such as fixed assets, computers, data processing
equipment, electrical devices, monitoring equipment, test equipment, switching,
terminal and studio equipment, transmitters, transformers, receivers, broadcast
facilities, furniture, furnishings, inventories of compact disks, records, tapes
and other supplies, vehicles) and all assignable warranties with respect
thereto; (d) Intellectual Property, goodwill associated therewith, licenses and
sublicenses granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions; (e) rights under orders and
agreements (including those Barter Agreements and Advertising Contracts
identified on the Disclosure Schedule) now existing or entered into in the
Ordinary Course of Business for the sale of advertising time on the Stations;
(f) Assumed Contracts, indentures, Security Interests, guaranties, other similar
arrangements, and rights thereunder; (g) call letters of the Stations, jingles,
logos, slogans, and business goodwill of the Stations; (h) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of recovery
(including rights under policies of insurance), rights of set off, and rights of
recoupment; (i) Licenses and similar rights obtained from governments and
governmental agencies; and (j) FCC logs and records and all other books,
records, ledgers, logs, files, documents, correspondence, advertiser lists, all
other lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, program production materials,
studies, reports, and other printed or written materials; and (k) goodwill of
the Stations.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including all attorneys' fees and court costs.
"ADVERTISING CONTRACTS" has the meaning set forth in Section 2(s), above.
"AFFILIATE" means with reference to any person or entity, another person or
entity controlled by, under the control of or under common control with that
person or entity.
"ASSIGNMENT APPLICATION" has the meaning set forth in Section 4(b) above.
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"ASSUMED CONTRACTS" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(j) of the
Disclosure Schedule.
"ASSUMED LIABILITIES" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contract either: (i) to furnish
services, and other non-Cash benefits to another party after the Closing; or
(ii) to pay for goods, services, and other non-Cash benefits that another party
will furnish to it after the Closing. The Assumed Liabilities shall not include
any Retained Liabilities.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"BUYERS" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in SECTION 1(D) above.
"CLOSING DATE" has the meaning set forth in SECTION 1(D) above.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of the Seller.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 1 above.
"EARNEST MONEY DEPOSIT" has the meaning set forth in Section 1(c) above.
"EARNEST MONEY ESCROW AGREEMENT" has the meaning set forth in Section 1(c)
above.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
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"EMPLOYMENT AGREEMENT" has the meaning set forth in Section 1(g) above.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means Michigan National Bank, NA.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC LICENSES" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"FINAL ORDER" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay by a court, of the
FCC's action is pending or in effect, and the deadline for filing any such
appeal or request has passed.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 2(E) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
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"INDEMNIFIED PARTY" has the meaning set forth in SECTION 7(D) above.
"Indemnifying party" has the meaning set forth in SECTION 7(D) above.
"INTELLECTUAL PROPERTY" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"KNOWLEDGE" means actual knowledge of Edward J. Sackley III.
"LEASES" means those real estate leases to which Seller is a party
governing Seller's studios and FM tower sites, as described in SECTION 2(I) of
the Disclosure Schedule.
"LIABILITY" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LICENSES" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"MULTI-EMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"NONCOMPETITION AGREEMENT" means the Noncompetition Agreement with Seller's
Owner in the form attached as Exhibit C.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with Seller's past custom and practice (including with respect to
quantity and frequency).
"OWNED REAL ESTATE" means the real property owned by the Seller as
described in Section 2(i) of the Disclosure Schedule and all buildings,
fixtures, and improvements located thereon.
"PARTY" has the meaning set forth in the preface above.
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"PERMITTED REAL ESTATE ENCUMBRANCES" shall have the meaning set forth in
Section 2(i), above.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"PURCHASE PRICE " has the meaning set forth in SECTION 1(C) above.
"REAL ESTATE" means the Owned Real Estate and the real estate, building,
fixtures and improvements which are the subject of the Leases.
"RETAINAGE AGENT" means Michigan National Bank, NA.
"RETAINAGE AGREEMENT" means the Retainage Agreement among Seller, Buyers
and Retainage Agent in the form attached hereto as Exhibit D.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
"RETAINED ASSETS" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation; (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyers on
the other hand entered into on or after the date of this Agreement); (iii)
accounts, notes and other receivables of the Seller; (iv) Cash; and (v) the
assets listed in Schedule 8 hereto.
"RETAINED LIABILITIES" means any other obligations or Liabilities of the
Seller, including but not limited to: (i) any Liability relating to the
ownership or operation of the Stations prior to the Closing; (ii) any Liability
of the Seller for income, transfer, sales, use, and other Taxes arising in
connection with the consummation contemplated hereby; (iii) any Liability of the
Seller for costs and expenses incurred in connection with this Agreement or the
consummation of the transactions contemplated hereby (except as set forth in
Section 4(i) relating to Surveys, title commitments and environmental audits and
Section 4(b) with regard to the Assignment Application; or (iv) any Liability or
obligation of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement).
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due
and payable; and (b) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation.
"SELLER" has the meaning set forth in the preface above.
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"STATIONS" means the radio broadcast stations having the call letters
WKMI(AM) (licensed to Kalamazoo, Michigan); WRKR(FM) (licensed to Portage,
Michigan); and WKFR(FM) (licensed to Battle Creek, Michigan).
"SUBSIDIARY," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"SURVEYS" has the meaning set forth in SECTION 4(O) above.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in breach of any representation, warranty, or covenant contained
in this Agreement; provided, however, that if such breach is capable of
being cured, such breach also remains uncured for twenty (20) days after
notice of breach is received by the Seller from the Buyers;
iii. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in breach of any representation, warranty, or covenant contained
in this Agreement; provided, however that if such breach is capable being
cured, such breach remains uncured for twenty (20) days after notice of
breach is received by the Buyers from the Seller;
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<PAGE>
iv. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under SECTION
5(A) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained in
this Agreement);
v. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under SECTION
5(B) hereof (unless the failure results primarily from the Seller itself
breaching any representation, warranty, or covenant contained in this
Agreement);
vi. the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. MISCELLANEOUS.
A. PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
B. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
C. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
D. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, PROVIDED that (i) the Buyers may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, who shall then, be subject to the terms and conditions of this
Agreement, have the right to receive the Acquired Assets, assume the Assumed
Liabilities, and pay to the Seller the Purchase Price therefor provided that
Buyers shall not be released from their performance obligations hereunder, and
provided further
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<PAGE>
that such assignment shall not hinder or delay either the receipt of FCC
approval of the assignment of the Stations' FCC Licenses or the Closing); and
(ii) Buyers may assign their indemnification claims and their rights under the
warranties and representations of the Sellers to the financial institution(s)
providing financing to the Buyers in connection with this transaction.
E. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
F. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
G. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
IF TO THE SELLER:
Crystal Radio Group, Inc.
4154 Jennings Drive
PO Box 50911
Kalamazoo, MI 49005-0911
Attn: Edward J. Sackley III
Copy to:
Fisher, Wayland, Cooper, Leader & Zaragoza L.L.P.
2001 Pennsylvania Avenue N.W., Suite 400
Washington, D.C. 20006
Attn: Richard R. Zaragoza, Esquire
Robert C. Fisher, Esquire
Fax: (202) 296-6518
(which copy shall not constitute notice to Seller)
IF TO THE BUYERS:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
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<PAGE>
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
H. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Michigan.
I. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
J. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
K. EXPENSES. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the
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<PAGE>
Assignment Applications and as set forth in Section 4(n) with respect to
Surveys, title commitments and environmental audits. The Seller will pay its own
income taxes. The Seller and the Buyers will each pay one-half (1/2) of any
transfer or sales taxes and other recording or similar fees necessary to vest
title to each of the Acquired Assets in the Buyers.
L. CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
M. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
N. SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Kalamazoo, Michigan in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
O. CONFIDENTIAL INFORMATION. The Parties acknowledge that each has
furnished and will be furnishing the other with Confidential Information, and
they acknowledge the competitive value and confidential nature of the
Confidential Information and the damage that could result of Buyers, Seller or
the Stations if any Confidential Information is disclosed to any third party or
used or exploited by either party or others. Each party agrees that, except as
specifically permitted hereunder, it shall not disclose, or permit its
employees, agents, advisors or other persons under its control to disclose, to
any third party any of the Confidential Information; provided, however, that
either party may make such disclosure if it has received the written opinion of
outside counsel that such disclosure must be made in order to comply with a
requirement of law; provided, further, that
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<PAGE>
Buyers may disclose any of the Confidential Information to their legal,
accounting and other professional advisors and to their financial institutions
for the purpose of obtaining financing in connection with the transactions
contemplated hereunder so long as such entities shall have agreed not to
disclose any of the Confidential Information to any other party or use or
exploit any of the Confidential Information. The obligations set forth in this
Section 10(o) shall survive the termination of this Agreement or the Closing.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
------------------------------
- ---------------------------------
(Printed)
Title:
---------------------------
CUMULUS LICENSING CORPORATION
By:
------------------------------
- ---------------------------------
(Printed)
Title:
---------------------------
CRYSTAL RADIO GROUP, INC.
By:
------------------------------
- ---------------------------------
(Printed)
Title:
---------------------------
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SCHEDULE A
PURCHASE PRICE. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the amount of Fourteen Million and no/100 Dollars
($14,000,000), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Seven Hundred Thousand and no/100 Dollars
($700,000.00) (the "Earnest Money Deposit") in the form of an irrevocable letter
of credit from Lehman Commercial Paper Inc.; and
(ii) on the Closing Date, the Buyers shall deposit with the Retainage
Agent by wire transfer of immediately available funds the amount of Six Hundred
Thousand and no/100 Dollars ($600,000) (the "Retainage Amount"); and
(iii) on the Closing Date, the Buyers shall pay to the Seller by wire
transfer of immediately available funds the amount of Thirteen Million Four
Hundred Thousand and no/100 Dollars (with adjustments as authorized by this
Agreement) ($13,400,000.00).
The Earnest Money Deposit referenced in this SCHEDULE A shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as EXHIBIT A (the "EARNEST MONEY ESCROW AGREEMENT"), and shall
be disbursed to Seller or returned to Buyer as provided in the Earnest Money
Escrow Agreement. The Retainage Amount referenced in this Schedule A shall be
placed with the Retainage Agent pursuant to the Retainage Agreement in the form
attached hereto as EXHIBIT D.
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ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into as of March ___, 1998, by and
among CUMULUS BROADCASTING, INC., a Nevada corporation ("Broadcasting"), CUMULUS
LICENSING CORPORATION, a Nevada corporation ("Licensing), and OCMULGEE
BROADCASTING CO., INC., a Georgia corporation (the "Seller"). Broadcasting and
Licensing are referred to collectively herein as the "Buyers." The Buyers and
the Seller are referred to individually as the "Party" or collectively as the
"Parties." Capitalized terms used in this Agreement are defined in Section 8
hereof.
Subject to the terms and conditions of this Agreement, the Buyers hereby
agree to purchase substantially all of the assets (and assume certain of the
liabilities) of the Seller that are used or useful in the operation of radio
stations WEAS-AM and WEAS-FM, licensed to Savannah, Georgia (the "Stations") in
return for cash.
Now, therefore, in consideration of the above premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. BASIC TRANSACTION.
A. PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, the Seller agrees to sell, transfer, convey and
deliver to (i) Licensing, and Licensing agrees to purchase from the Seller, all
of the FCC Licenses listed in Section 2(1) of the disclosure schedule
("Disclosure Schedule"); and (ii) Broadcasting, and Broadcasting agrees to
purchase from the Seller, all of the Acquired Assets other than the FCC
Licenses. Both such sales shall take place at the Closing for the consideration
specified below in this Section 1.
B. ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, Broadcasting agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The Buyers will
not assume or have any responsibility, however, with respect to any other
obligation or Liability of the Seller not included within the definition of
Assumed Liabilities and assumed by Broadcasting, and the Seller agrees to pay
and discharge all Liabilities and obligations of the Seller other than the
Assumed Liabilities.
C. PURCHASE PRICE. The Buyers agree to pay to the Seller, as
consideration for the Acquired Assets, the purchase price (the "Purchase Price")
described in Schedule A to this Agreement, and agrees to make the escrow deposit
(the "Escrow Deposit") in the form and manner described in Schedule A and more
particularly in the earnest money escrow agreement ("Earnest Money Escrow
Agreement") attached hereto as Exhibit A.
D. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at a mutually agreed location,
commencing at 9:00 a.m. local time, on a mutually agreed date which shall be no
later than ten (10) business days after the FCC approval of the Assignment
Application becomes a Final Order, by which date all other conditions to the
<PAGE>
obligations of the Parties to consummate the transactions contemplated hereby
will have been satisfied, or such other date as the Parties may mutually
determine (the "Closing Date").
E. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyers the various certificates, instruments, and documents
referred to in Section 5(a) below; (ii) the Buyers will deliver to the Seller
the various certificates, instruments, and documents referred to in Section 5(b)
below; (iii) the Seller will execute, acknowledge (if appropriate), and deliver
to the Buyers (A) assignments (including Lease and other Assumed Contract
assignments and Intellectual Property transfer documents), bills of sale in form
reasonably acceptable to the Buyers, (B) such affidavits, transfer tax returns,
memorandums of lease, and other additional documents as may be required by the
terms of the title insurance commitments described in Section 4(o) hereof, as
necessary to furnish title insurance as required by such section or as may be
necessary to convey title to the Real Estate to the Buyers in the condition
required herein or provide public notice of existence of the Leases, and (C)
such other instruments of sale, transfer, conveyance, and assignment as the
Buyers and their counsel reasonably may request; (iv) the Buyers will execute,
acknowledge (if appropriate), and deliver to the Seller (A) an assumption in the
form attached hereto as Exhibit B and (B) such other instruments of assumption
as the Seller and its counsel reasonably may request; and (v) the Buyers will
deliver to the Seller the consideration specified in Section 1(c) above.
F. INDEMNIFICATION ESCROW AGREEMENT. On the Closing Date, the
Parties shall execute, and shall cause the Escrow Agent to execute, the
Indemnification Escrow Agreement substantially in the form of Exhibit C attached
hereto.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to the Buyers that the statements
contained in this SECTION 2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date, except as set
forth in the Disclosure Schedule.
A. ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Seller does not have any Subsidiaries.
The Seller has the power and authority to own or lease its properties and to
carry on all business activities now conducted by it. The shareholders of the
Seller are Edward Esserman and Leon Perlis.
B. AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority to execute and deliver this Agreement and all agreements and
instruments to be executed and delivered by Seller pursuant to this Agreement
(collectively, the "Ancillary Agreements") and to perform its obligations
hereunder and thereunder. Without limiting the generality of the foregoing, the
Board of Directors of the Seller has duly authorized the execution, delivery,
and performance of this Agreement and the Ancillary Agreements by the Seller.
This Agreement and the Ancillary Agreements constitute the valid and legally
binding obligation of the Seller, enforceable in accordance with their
respective terms and conditions, except as limited by creditors' rights or
equitable principles generally.
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<PAGE>
C. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Ancillary Agreements, nor the consummation of the transactions
contemplated hereby and thereby (including the assignments and assumptions
referred to in Section 1(e) above), will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the charter or bylaws of the Seller; or (ii)
(except for the need to obtain the consents specified in Section 2(j) of the
Disclosure Schedule) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or third party
consent under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other agreement, arrangement to which the
Seller is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). Other than with respect to the Assignment Application described in
Section 4(b) the Seller does not need to give any notice to, make any filing
with, or obtain any Licenses, consent, or approval of any court or government or
governmental agency in order for the Parties to enter into this agreement or the
Ancillary Agreements or to consummate the transactions contemplated by this
Agreement or the Ancillary Agreements (including the assignments and assumptions
referred to in Section 1(e) above).
D. TITLE TO ACQUIRED ASSETS. Other than the Security Interests set
forth on Section 2(d) of the Disclosure Schedule (which shall be released at or
before the Closing) and the Permitted Encumbrances, the Seller has good and
marketable title to all of the Acquired Assets, free and clear of any Security
Interest or restriction on transfer, other than Permitted Encumbrances.
E. FINANCIAL STATEMENTS. Included in Section 2(e) of the Disclosure
Schedule are the following financial statements (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income, and cash
flow as of and for the fiscal years ended December 31, 1995, and December 31,
1996, for the Seller; and (ii) unaudited balance sheets and statements of
income, as of and for each month during 1996 and 1997 for the Stations. The
Financial Statements prepared since August 1, 1997 have been prepared in
conformity with the Seller's normal accounting policies, practices and
procedures applied on a consistent basis, throughout the periods covered
thereby, are correct and complete, fairly present the financial condition of the
Seller and the results of operation of the Stations at the dates and for the
periods indicated, and are consistent with the books and records of the Seller
(which books and records are correct and complete). The Financial Statements
accurately state the revenues of the Stations for the period indicated therein
and include an accurate breakout of cash and trade revenues.
F. EVENTS SUBSEQUENT TO JANUARY 1, 1998. Between January 1, 1998,
and the date of this Agreement, except as set forth in Section 2(f) of the
Disclosure Schedule, there has not been any material adverse change in the
assets, Liabilities, business, financial condition, operations, results of
operations, or future prospects of the Seller with respect to the operation of
the Stations. Without limiting the generality of the foregoing and with respect
to the operation of the Stations since January 1, 1998, except as set forth in
Section 2(f) of the Disclosure Statement:
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<PAGE>
i. other than this Agreement, the Seller has not entered into
any agreement, contract, lease, sublease, license, or sublicense (or series
of related agreements, contracts, leases, subleases, licenses, and
sublicenses) outside the Ordinary Course of Business;
ii. the Seller has not delayed or postponed (beyond its normal
practice in the Ordinary Course of Business) the payment of accounts
payable and other Liabilities;
iii. the Seller has not altered its credit and collection
policies or its accounting policies;
iv. the Seller has not entered into or terminated any employment
arrangement, employment contract, consulting contract or severance
agreement or collective bargaining agreement, written or oral, or modified
the terms of any existing such contract or agreement, other than in the
Ordinary Course of Business;
v. there have been no changes and, to Seller's Knowledge, any
threatened changes in employment terms for any of its directors, officers,
and employees, other than in the Ordinary Course of Business;
vi. there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Seller;
vii. the Seller has not materially altered the programming,
format or call letters of the Stations, or its promotional and marketing
activities;
viii. the Seller has not applied to the FCC for any adverse
modification of the FCC Licenses or failed to take any action necessary to
preserve the FCC Licenses and has operated the Stations in compliance in
all material respects therewith and with all FCC rules and regulations;
ix. the Seller has not terminated or received notice of
termination for any syndicated programming; and
x. the Seller has not committed to any of the foregoing.
G. TAX MATTERS. The Seller has timely and properly filed all Tax
Returns that it was required to file with respect to the Seller's operations.
All such Tax Returns were correct and complete and properly reflect the tax
liability of the Seller. No Tax deficiencies have been proposed or assessed
against the Seller. All Taxes owed by the Seller with respect to its operations
(whether or not shown on any Tax Return) have been paid. The Seller has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party. No claim has ever been made by any authority in any
jurisdiction where the Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
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H. TANGIBLE ASSETS. Section 2(h) of the Disclosure Schedule sets
forth a listing of all transmitter and station equipment, vehicles and other
tangible personal property used in conducting the operation and business of the
Stations. The Seller owns or leases all tangible assets necessary for the
conduct of the operation and business of the Stations as presently conducted and
as presently proposed to be conducted and all leased assets are specifically
identified as such in Section 2(h) of the Disclosure Schedule.
I. REAL PROPERTY. Section 2(i) of the Disclosure Schedule lists and
describes briefly all real property leased to the Seller (including, without
limitation, complete legal descriptions for all of the Real Estate). The Seller
has delivered to the Buyers correct and complete copies of the Leases. With
respect to the Real Estate:
i. the Leases are in full force and effect;
ii. to Seller's Knowledge, no party to any Lease is in breach or
default (or has repudiated any provision thereof), and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default thereunder or permit termination, modification, or acceleration
thereunder;
iv. to Seller's Knowledge, there are no disputes, oral
agreements, or forbearance programs in effect as to any Lease;
v. to Seller's Knowledge, except as set forth in the Leases,
none of the properties subject to the Leases is subject to any lease (other
than Leases), option to purchase or rights of first refusal;
vi. to Seller's Knowledge, except for Permitted Encumbrances and
as set forth in Section 2(i) of the Disclosure Schedule, there are no (i)
structural or mechanical defects in any of the buildings or improvements
located on the Real Estate; (ii) any pending or threatened changes in any
zoning laws or ordinances which may materially adversely affect any of the
Real Estate or Seller's use thereof;
vii. Except as set forth in Section 2(i) of the Disclosure
Schedule, the Seller has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the Leases or its rights
thereunder;
viii. to the Seller's Knowledge, all facilities on the Real
Estate have received all approvals of governmental authorities (including
licenses, permits and zoning approvals) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations.
J. CONTRACTS. Section 2(j) of the Disclosure Schedule lists any
written arrangement (or group of related written arrangements) either involving
more than $5,000 or not entered into in the Ordinary Course of Business except
for Advertising Agreements (Section 2(j) of the Disclosure Schedule includes a
summary of the Barter Agreements). The Seller has delivered
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to the Buyers a correct and complete copy of each written arrangement listed in
Section 2(j) of the Disclosure Schedule (as amended to date) (other than the
Barter Agreements). With respect to each written arrangement so listed which
constitutes an Assumed Contract: (A) the written arrangement is legal, valid,
binding, enforceable, (except as limited by laws affecting creditors' rights or
equitable principles generally) and in full force and effect; (B) to Seller's
Knowledge, no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the written arrangement; and
(C) to Seller's Knowledge, no party has repudiated any provision of the written
arrangement. The Seller is not a party to any verbal contract, agreement, or
other arrangement which, if reduced to written form, would be required to be
listed in Section 2(j) of the Disclosure Schedule under the terms of this
Section 2(j). Except for the Assumed Contracts, the Buyers shall not have any
Liability or obligations for or in respect of any of the contracts set forth in
Section 2(j) of the Disclosure Schedule or any other contracts or agreements of
the Seller.
K. COMMISSION LICENSES AND COMPLIANCE WITH COMMISSION REQUIREMENTS.
i. All licenses, permits, authorizations, franchises,
certificates of compliance, and consents of governmental bodies, including,
without limitation, the FCC Licenses, used or useful in the operation of
the Stations as they are now being operated are (A) in full force and
effect, (B) unimpaired by any acts or omissions of the Seller or the
Seller's employees or agents, (C) free and clear of any restrictions which
might limit the operation of the Stations as they are currently operated,
and (D) detailed in Section 2(k) of the Disclosure Schedule. With respect
to the licenses, permits, authorizations, franchises, certificates of
compliance and consents referenced in the preceding sentence, Section 2(k)
of the Disclosure Schedule also sets forth, without limitation, the date of
the last renewal, the expiration date thereof, and any conditions or
contingencies related thereto. Except as disclosed in Section 2(k) of the
Disclosure Schedule, there are no applications, complaints or proceedings
pending or, to Seller's Knowledge, threatened before the FCC relating to
the operation of the Stations or that may result in the revocation,
materially adverse modification, non-renewal or suspension of any of the
FCC Licenses, or the imposition of any fines, forfeitures or other
administrative actions by the FCC with respect to the Stations or their
operation other than proceedings affecting the broadcasting industry
generally.
ii. The Stations are in compliance in all material respects with
the FCC's policy on exposure to radio frequency radiation. No renewal of
any FCC License would constitute a major environmental action under the
FCC's rules or policies.
iii. The Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Stations all material reports,
applications, documents, instruments, and other information required to be
filed, and will continue to make such filings through the Closing Date.
iv. The Seller is not aware of any information concerning the
Stations that could cause the FCC or any other regulatory authority not to
issue to the Buyers all
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regulatory certificates and approvals necessary for the consummation of the
transactions contemplated hereunder.
L. INTELLECTUAL PROPERTY. The Seller owns or has the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the businesses of the Seller as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Seller immediately prior to the
Closing hereunder is set forth on Section 2(l) of the Disclosure Schedule and
each item listed will be owned or available for use the by the Buyers on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Seller has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and the Seller has never received any charge, complaint, or notice
alleging any such interference, infringement, misappropriation, or violation.
To the Knowledge of the Seller, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Seller.
M. INSURANCE. Section 2(m) of the Disclosure Schedule sets forth a
complete and accurate description of all Seller's insurance coverage. With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
and enforceable and in full force and effect; (B) the policy (or substantially
similar policy) will be maintained by Seller through the Closing Date.
N. LITIGATION. Section 2(n) of the Disclosure Schedule sets forth
each instance in which the Seller: (i) is subject to any unsatisfied judgment,
order, decree, stipulation, injunction, or charge; or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in any
court or quasijudicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. The Seller has no Knowledge of
any Basis for any such charge, complaint, action, suit, proceeding, hearing, or
investigation against the Seller.
O. EMPLOYEES. Section 2(o) of the Disclosure Schedule sets forth a
listing of the names, positions, job descriptions, salary or wage rates and all
other forms of compensation paid for work at the Stations of each employee. To
the Knowledge of the Seller, no key employee or group of employees has any plans
to terminate employment with the Seller. The Seller is not a party to or bound
by any collective bargaining or similar agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to the employees of the Seller. The Seller has no Knowledge of any
Basis for any claim by past or current employees of the Seller or applicants for
employment that the Seller or its management has discriminated based on each
individuals race, sex, national origin, religion, ethnicity, handicap or any
other protected characteristic under applicable law.
P. EMPLOYEE BENEFITS. Section 2(p) of the Disclosure Schedule lists
all Employee Benefit Plans that the Seller maintains or to which the Seller
contributes or is required to contribute for the benefit of any current or
former employee of the Seller and true and correct copies of each such Employee
Benefit Plan have been delivered to the Buyers. Each Employee Benefit Plan (and
each related trust or insurance contract) complies and at all times has complied
in form and in
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operation in all respects with the applicable requirements of ERISA and the
Code. The Seller does not have any commitment to create any additional Employee
Benefit Plan or modify or change any existing Employee Benefit Plan that would
affect any employee or terminated employee of the Seller. There are no pending
or, to the Knowledge of the Seller, threatened claims under, by or on behalf of
any of the Employee Benefit Plans, by any employee or beneficiary covered by any
such Employee Benefit Plan, or otherwise involving any such Employee Benefit
Plan (other than routine claims for benefits), nor to Seller's Knowledge have
there been any Reportable Events or Prohibited Transactions with respect to any
Employee Benefit Plan.
Q. ENVIRONMENT, HEALTH, AND SAFETY. To Seller's Knowledge (except
as set forth in Section 2(q) of the Disclosure Schedule, which disclosure shall
not affect the right of Buyer to inspect the environmental conditions described
therein to its satisfaction):
i. The Real Estate and all operations on the Real Estate are in
compliance in all material respects with all Environmental Laws and all
laws (including rules and regulations thereunder) of federal, state, and
local governments (and all agencies thereof) concerning employee health and
safety, and the Seller has no Liability (and there is no Basis related to
the past or present operations of the Seller or its predecessors for any
present or future Liability) under any Environmental Law. The Seller has
no Liability (and there is no Basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim, or
demand against the Seller giving rise to any Liability) under the
Occupational Safety and Health Act, as amended, or any other law (or rule
or regulation thereunder) of any federal, state, local, or foreign
government (or agency thereof) concerning employee health and safety, or
for any illness of or personal injury to any employee.
ii. The Seller has obtained and at all times has been in
compliance in all material respects, to its Knowledge, with all of the
terms and conditions of all permits, licenses, and other authorizations
which are required for its operation of the Stations under, and has
complied in all material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws or law of any
federal, state, or local or foreign government relating to worker health
and safety.
iii. All properties and equipment used in the Stations and the
Acquired Assets have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances. No pollutant, contaminant, or chemical,
industrial, hazardous, or toxic material or waste ever has been buried,
stored, spilled, leaked, discharged, emitted, or released on any of the
Real Estate. No above ground or underground storage tanks have ever been
located at, on or under the Real Estate.
R. LEGAL COMPLIANCE. The Seller has operated the Stations in
compliance in all material respects with all laws (including rules and
regulations thereunder) of federal, state, local and foreign governments (and
all agencies thereof. The Seller has filed in a timely manner all reports,
documents, and other materials it was required to file (and the information
contained therein was correct and complete in all material respects) under all
applicable laws.
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S. ADVERTISING CONTRACTS. Section 2(s) of the Disclosure Schedule
is a summary of all arrangements for the sale of air time or advertising on the
Stations. The Seller has no reason to believe and has not received a notice or
indication of the intention of any of the advertisers or third parties to
material contracts of the Seller to cease doing business or to reduce in any
material respect the business transacted with the Seller or to terminate or
modify any agreements with the Seller (whether as a result of consummation of
the transactions contemplated hereby or otherwise).
T. BROKERS' FEES. Other than the fee payable to Media Services
Group and Media Venture Partners, which shall be the exclusive responsibility of
Seller, the Seller has no Liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the transactions contemplated by
this Agreement.
U. UNDISCLOSED COMMITMENTS OR LIABILITIES. There are no material
commitments, liabilities or obligations relating to the Stations, whether
accrued, absolute, contingent or otherwise including, without limitation,
guaranties by the Seller of the liabilities of third parties, for which specific
and adequate provisions have not been made on the Financial Statements except
those incurred in or as a result of the Ordinary Course of Business since August
1, 1997.
V. DISCLOSURE. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
Buyers represent and warrant to the Seller that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as set
forth in the Disclosure Schedule.
A. ORGANIZATION OF THE BUYERS. Broadcasting and Licensing are
corporations duly organized, validly existing, and in good standing under the
laws of Nevada. The Buyers have the power and authority to own or lease their
properties and to carry on all business activities now conducted by them.
B. AUTHORIZATION OF TRANSACTION. Buyers have full power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform their obligations hereunder and thereunder. Without limiting the
generality of the foregoing, the respective Board of Directors of each of the
Buyers has duly authorized the exectuion, delivery and performance of this
Agreement and Ancillary Agreements by the Buyers. This Agreement and the
Ancillary Agreements constitute legally binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective terms and
conditions, except as limited by creditors' rights and equitable principles
generally.
C. NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement or the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby and
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thereby (including the assignments and assumptions referred to in Section 1(e)
above), will (i) violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which the Buyers are subject or any provision
of their articles of organization or other charter documents, or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or third party consent under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest, or
other arrangement to which the Buyers are a party or by which they are bound or
to which any of their assets is subject. Other than the Assignment Application
described in Section 4(b), the Buyers do not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any court
or government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement or the Ancillary Agreements
(including the assignments and assumptions referred to in Section 1 (e) above).
D. BROKERS' FEES. The Buyers have no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
E. FCC QUALIFICATIONS. There are no facts which, under the
Communications Act of 1934, as amended, or the existing rules and regulations of
the FCC, would disqualify Licensing as Assignee of the Station Licenses or delay
athe consummation of the transactions contemplated by this Agreement. The
Buyers are financially qualified to consummate the transactions contemplated by
this Agreement and to certify to their financial qualifications on FCC Form 314,
and Buyers shall so certify. Neither Buyer has any knowledge of any fact or
circumstances relating to it or any of its affiliates that would reasonably be
expected to (a) cause the filing of any objection to the Assignment Application,
or (b) lead to a delay in the processing by the FCC of the Assignment
Application.
F. ABSENCE OF LITIGATION. Except as set forth in Section 3(f) of
the Disclosure Schedule, there is no claim, litigation, proceeding or
investigation pending or, to the knowledge of Buyers, threatened against either
Buyer which seeks to enjoin or prohibit, or which otherwise questions the
validity of, any action taken or to be taken in connection with this Agreement.
4. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
A. GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this Agreement
(including satisfying the closing conditions set forth in Section 5 below).
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B. ASSIGNMENT APPLICATIONS. Within ten (10) business days after the
execution of this Agreement, the Seller and the Buyers shall jointly file with
the FCC an application for assignment of the FCC Licenses from the Seller to
Licensing (the "Assignment Application"). The costs of the FCC filing fees in
connection with the Assignment Application shall be divided equally between the
Parties. Each party shall pay its own attorneys' fees. The Seller and the
Buyers shall thereafter prosecute the Assignment Application with all reasonable
diligence and otherwise use commercially reasonable efforts to obtain the grant
of the Assignment Application as expeditiously as practicable (but neither the
Seller nor the Buyers shall have any obligation to satisfy complainants or the
FCC by taking any steps which would have a material adverse effect upon the
Stations or impose significant costs on such party). If the FCC imposes any
condition on either party to the Assignment Application, such party shall use
commercially reasonable efforts to comply with such condition, provided, that
neither party shall be required hereunder to comply with any condition that
would have a material adverse effect upon the Stations or any Affiliate. The
Seller and the Buyers shall jointly oppose any requests for reconsideration or
judicial review of FCC approval of the Assignment Application and shall jointly
request from the FCC extension of the effective period of FCC approval of the
Assignment Application if the Closing shall not have occurred prior to the
expiration of the original effective period of the FCC Consent. Nothing in this
Section 4(b) shall be construed to limit either party's right to terminate this
Agreement pursuant to Section 9 of this Agreement.
C. CONTINUED EMPLOYMENT OF STATION EMPLOYEES. (i) On or prior to
the Closing Date, Buyers shall offer employment to all employees of the Stations
employed by Seller immediately prior to the Closing Date (employees accepting
such employment on or after theClosing Date being herein referred to as the
"Transferred Employees"). The terms and conditions of the Buyers' employement
of the Transferred Employees shall be at will employment in at least the same
positions, for at least the same direct cash compensation, with medical
insurance effective as of the Closing date and including coverage for any
pre-existing health conditions that would have been covered under Seller's
health plan in which the employee was a participant immediately prior to their
Closing Date and such other benefits as Buyers provide generally for their other
employees; provided, however, that Buyers shall comply with the terms of any
Assumed Contract relating to any Transferred Employee that is listed in Section
2(j) of the Disclosure Schedule.
(ii) Except as otherwise expressly set forth herein, Seller shall be solely
responsible for all salaries and other compensation which will or may become
payable to any Transferred Employee in respect of any period of employment by
Seller prior to the Closing Date, and Buyers shall be solely responsible for any
salaries and other compensation which will or may become payable to any
Transferred Employee in respect of any period on and after the Closing Date.
D. NOTICES AND CONSENTS. The Seller will give all notices to third
parties and shall obtain all third party consents for any Assumed Contract that
requires consent to assign and is marked with an asterisk on Section 2(j) of the
Disclosure Schedule. Each of the Parties will file any notification and report
forms and related material that it may be required to file with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the Hart-Scott-Rodino Act, will use its best efforts to obtain an
early termination of the applicable waiting period, and will make any further
filings pursuant thereto that may be necessary, proper or
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advisable. Each of the Parties will take any additional action that may be
necessary, proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents, and approvals of governments, governmental
agencies, and third parties that it may be required to give, make, or obtain.
In the event that the United States Department of Justice or the Federal Trade
Commission initiates an investigation of the transaction under the
Hart-Scott-Rodino Act, (i) Seller shall bear its out-of-pocket expenses in
connection with such investigation in an amount up to Five Thousand Dollars
($5,000); (ii) Buyer shall reimburse Seller for additional out-of-pocket
expenses in connection with such investigation in excess of Five Thousand
Dollars ($5000), but not to exceed Fifty Thousand Dollars ($50,000); and (iii)
if Buyers' or Seller's actual or estimated expenses exceed Fifty Thousand
Dollars ($50,000), Buyers or Seller may terminate this Agreement under Section 9
below.
E. ADVERTISING OBLIGATIONS. the Closing Date, the Seller shall
deliver to the Buyers a schedule, certified by an officer of the Seller,
reflecting the aggregate outstanding balances under all of its agreements for
the sale of advertising on the Stations for goods and services ("Barter
Agreements") in existence as of the Closing Date. Seller's obligations under
the Barter Agreements shall be prorated as set forth in Section 6(c).
F. OPERATING STATEMENTS. The Seller shall deliver to the Buyers,
for the Buyers' informational purposes only, monthly unaudited statements of
operating revenues and operating expenses of the Stations within twenty (20)
days after each such statement is prepared by or for the Seller.
G. CONTRACTS. The Seller will not without the prior written consent
of the Buyers amend, change, or modify any of the contracts listed on Section
2(k) of the Disclosure Schedule in any material respect. The Seller will not
without prior written consent of the Buyers enter into any contract outside the
Ordinary Course of Business which involves more than Ten Thousand Dollars
($10,000).
H. OPERATION OF STATIONS. The Seller will not, without the prior
written consent of the Buyers, engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. The Seller shall
operate the Stations in compliance in all material respects with the FCC
Licenses and the rules and regulations of the FCC, and shall use its best
efforts to ensure that the FCC Licenses at all times remain in full force and
effect. The Seller shall file with the FCC all material reports, applications,
documents, instruments and other information required to be filed in connection
with the operation of the Stations.
I. CREDIT AND RECEIVABLES. The Seller will follow its usual and
customary policies with respect to extending credit for sales of air time and
advertising on the Stations and with respect to collecting accounts receivable
arising from such extension of credit.
J. PRESERVATION OF STATIONS AND THE ACQUIRED ASSETS. The Seller
will use commercially reasonable efforts to keep its Stations and the Acquired
Assets and properties substantially intact, except for ordinary wear and tear,
including its present operations, physical facilities, working conditions,
relationships with lessors, licensors, advertisers, suppliers, customers,
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and employees, all of the Confidential Information, call letters and trade
secrets of the Stations, and the FCC Licenses.
K. ACCESS AND CONSULTATION. The Seller will permit representatives
of the Buyers to have access at all reasonable times, and in a manner so as not
to interfere with the normal business operations of the Stations, to all
premises, properties, books, records, contracts, Tax records, and documents of
or pertaining to the Stations. The Seller will consult with the Buyers'
management with a view to informing Buyers' management as to the operations,
management and business of the Stations.
L. NOTICE OF DEVELOPMENTS. The Seller will give prompt written
notice to the Buyers of any material development affecting business, operations
or prospects of the Stations or the Acquired Assets or the ability of the Seller
to perform hereunder.
M. EXCLUSIVITY. The Seller will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any acquisition or purchase of the Acquired Assets or of all of the outstanding
stock of the Seller, or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any person to do or seek
any of the foregoing. The Seller will notify the Buyers immediately if any
person makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
N. TITLE INSURANCE, SURVEYS AND ENVIRONMENTAL ASSESSMENTS. The
Buyers will obtain with respect to each parcel of Real Estate subject to the
Leases, a leasehold owner's policy issued by a title insurer reasonably
satisfactory to the Sellers, in an amount equal to the fair market value of such
Real Estate (including all improvements located thereon), insuring over the
standard pre-printed exceptions and insuring leasehold title to such Real Estate
in the Buyers as of the Closing subject only to the Permitted Real Estate
Encumbrances, together with such endorsements for zoning, contiguity, public
access and extended coverage as the Buyers or their lender reasonably request.
O. CONTROL OF STATIONS. The transactions contemplated by this
Agreement shall not be consummated until after the FCC has given its consent and
approval to the Assignment Application. Between the date of this Agreement and
the Closing Date, the Buyers and their employees or agents shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operation of the Stations, and such operation shall be the sole
responsibility of and in the control of the Seller.
P. RISK OF LOSS. The risk of loss, damage, or destruction to any of
the Acquired Assets shall remain with the Seller until the Closing. In the event
of any such loss, damage, or destruction the Seller will promptly notify the
Buyers of all particulars thereof, stating the cause thereof (if known) and the
extent to which the cost of restoration, replacement and repair of the Acquired
Assets lost, damaged or destroyed will be reimbursed under any insurance policy
with respect thereto. The Seller will, at Seller's expense, repair or replace
such Acquired Assets to their former condition as soon as possible after loss,
damage or destruction thereof and shall use its best
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efforts to restore as promptly as possible transmissions as authorized in the
FCC Licenses. If Seller is unable or fails to restore or replace a lost or
damaged Acquired Asset prior to the Closing, Buyers may elect (a) to consummate
the transactions csontemplated by this Agreement on the Closing Date, in which
event Seller shall assign to Buyers at Closing the Seller's rights under any
insurance policy or pay over to Buyers all proceeds of insurance covering such
aCquired Asset's damage, destruction or loss plus an amount equal ot the amount
of any deductible or self-insurance maintained by Seller on such Required Asset,
or (b) delay the Closing Date until a date within 15 days after Seller gives
written notice to Buyers of completion of the restoration or replacement of such
Acquired Asset, provided, however, that if the cost of any repair, restoration
or replacement that Seller fails to make prior to the Closing Date exceeds Four
Hundred Thousand Dollars ($400,000), or if the date of Seller's written notice
to Buyers does not occur within one (1) year of the date of this Agreement,
Buyers shall also have the option to terminate this Agreement. In the event the
Closing Date is postponed pursuant to this Section 4(p), the parties will
cooperate to extend the time during which this Agreement must be closed as
specified in the Consent of the FCC.
Q. CONFIDENTIALITY. Buyers and Seller shall each keep confidential all
information obtained by it with respect to the other in connection with this
Agreement, and if the transactions contemplated hereby are not consummated for
any reason, each shall return to the other, without retaining a copy thereof,
any schedules, documents or other written information, including all financial
information, obtained from the other in connection with this Agreement and the
transactions contemplated hereby, except where such information is known or
available through other lawful sources or where such party is advised by counsel
that its disclosure is required in accordance with applicable law.
5. CONDITIONS TO OBLIGATION TO CLOSE.
A. CONDITIONS TO OBLIGATION OF THE BUYERS. The obligation of Buyers
to consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 2
above shall be true and correct in all material respects at and as of the
Closing Date as though made on and as of the Closing Date;
ii. the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
iii. the Seller shall have procured all of the third party
consents specified in Section 4(d) above and all of the title insurance
commitments (and endorsements), Surveys and environmental site assessments
described in Section 4(o) above;
iv. No suit, action, claim or governmental proceeding shall be
pending or threatened against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered
against, any party hereto that Buyers in
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good faith believe would render it unlawful, as of the Closing Date, to
effect the transactions contemplated by this Agreement in accordance with
its terms.
v. the Seller shall have delivered to the Buyers a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Sections 5(a)(i)
through (iv) is satisfied in all respects;
vi. each of the Assignment Applications shall have been approved
by a Final Order of the FCC and all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
been terminated;
vii. the relevant parties shall have entered into the
Indemnification Escrow Agreement;
viii. the Buyers shall have received from counsel to the
Seller an opinion with respect to certain matters to be agreed between
Buyers and Seller, addressed to the Buyers and its lender and dated as of
the Closing Date;
ix. the Parties shall have agreed to allocate the Purchase Price
(and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) in accordance
with an allocation schedule to be delivered at closing; and
x. all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Buyers.
B. CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
i. the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of the
Closing Date as though made on and as of the Closing Date;
ii. the Buyers shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
iii. No suit, action, claim or governmental proceeding shall be
pending or threatened against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered
against, any party hereto that Seller in good faith believes would render
it unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement in accordance with its terms.
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iv. the Buyers shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in Section 5(b)(i)-(iii)
is satisfied in all respects and the statements contained in such
certificate shall be deemed a warranty of the Buyers which shall survive
the Closing;
v. each of the Assignment Applications shall have been approved
by a Final Order of the FCC and the Buyers shall have received all
governmental approvals required to transfer all other authorizations,
consents, and approvals of governments and governmental agencies set forth
in the Disclosure Schedule;
vi. the relevant parties shall have entered into the
Indemnification Escrow Agreement; and
vii. the Seller shall have received from counsel to the Buyers an
opinion with respect to matters to be mutually agreed between Seller and
Buyers, addressed to the Seller and dated as of the Closing Date;
viii. all actions to be taken by the Buyers in connection
with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Seller.
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing:
A. GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 7 below).
B. LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Stations, each of the other Parties will reasonably cooperate with
the contesting or defending Party and its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below); provided, however, that such access and
cooperation does not unreasonably disrupt the normal operations of the
cooperating party.
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C. ADJUSTMENTS. (i) The income and expenses attributable to the
operations of the Stations through the close of business on the day before the
Closing Date (the "Effective Time") shall be for the account of the Seller and
thereafter for the account of the Buyers. Such items as employee salaries,
vacation, sick day and personal time accruals, and fringe benefits, power and
utilities charges, insurance, real and personal property taxes, prepaid
expenses, deposits, music license fees, and rents and payments pertaining to the
Assumed Contracts (excluding Barter Agreement which shall be prorated as set
forth below) shall be prorated between the Seller and the Buyers as of the
Closing Date in accordance with GAAP. In addition, all commissions payable with
respect to the accounts receivable of the Seller (whether due before or after
Closing) shall be solely for the account and responsibility of the Seller.
Contractual arrangements that do not reflect an equal rate of compensation to a
Stations over the term of the agreement shall be equitably adjusted as of the
Closing Date. Liabilities and obligations under Barter Agreements shall be
prorated in favor of Buyers to the extent that the Liability (determined in
accordance with GAAP) of the Stations as of the Effective Time exceeds by
Fifteen Thousand Dollars ($15,000) the fair market value of the property and
services to be received by Buyers under such agreements and shall be prorated in
favor of Seller to the extent that the fair market value of the property to be
received by Buyers under such agreements exceeds by Fifteen Thousand Dollars
($15,000) the Liability (determined in accordance with GAAP) of the Stations for
air time under such agreements.
(ii) Three (3) business days prior to Closing, Seller shall deliver to
Buyers a preliminary list of all items to be prorated pursuant to Section 6(c)
(the "Preliminary Proration Schedule") and, to the extent feasible, such
prorations shall be credited against or added to the Purchase Price at Closing.
In the event Buyers and Seller do not reach a final agreement on such prorations
and adjustments at Closing, Seller shall deliver to Buyers a schedule of its
proposed prorations and adjustments (the "Proration Schedule") no later than
sixty (60) days after the Closing Date. The Proration Schedule shall be
conclusive and binding upon Buyers unless Buyers provide Seller with written
notice of objection (the "Notice of Disagreement") within ten (10) days after
Buyers' receipt of the Proration Schedule, which notice shall state the
prorations of expenses proposed by Buyers (the "Buyers' Proration Amount").
Seller shall have ten (10) days from receipt of a Notice of Disagreement to
accept or reject Buyers' Proration Amount. If Seller rejects Buyers' Proration
Amount, and the amount in dispute exceeds five thousand dollars ($5,000), the
dispute shall be submitted within ten (10) days to the Washington, D.C. office
of Ernst & Young (the "Referee") for resolution, such resolution to be final,
conclusive, and binding on Seller and Buyers. Buyers and Seller agree to share
equally the cost and expenses of the Referee, but each party shall bear its own
legal and other expenses, if any. If the amount in dispute is equal to or less
than five thousand dollars ($5,000), such amount shall be divided equally
between Buyers and Seller. Payment by Buyers or Seller, as the case may be, of
the proration amounts determined pursuant to this Section 6(c) shall be due
within five (5) days of the last to occur (I) Buyers' acceptance of the
Proration Schedule or failure to give Seller a timely Notice of Disagreement;
(ii) Seller's acceptance of Buyers' Proration Amount or failure to reject
Buyers's Proration Amount within ten (10) days of receipt of a Notice of
Disagreement; (iii) Seller's rejection of Buyers' Proration Amount in the event
the amount in dispute equals or is less than five thousand dollars ($5,000); and
(iv) notice to Seller and Buyers of the resolution of the disputed amount by the
Referee in the event that the amount in dispute exceeds five thousand dollars
($5,000). Any payment required by Seller to Buyers or by Buyers to Seller, as
the case may be, under this Section 6(c) shall be paid by wire transfer of
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immediatley available federal funds to the account of the payee with a financial
institution in the United States as designated by Seller in the Proration
Schedule or by Buyers in the Notice of Disagreement (or by separate notice in
the event that Buyers do not send a Notice of Disagreement). If either Buyers
or Seller fails to pay when due any amount udner this Section 6(c), interest on
such amount will accrue from the date payment was due to the date such payment
is made at a per annum rate equal to the Prime Rate plus two percent (2%), and
such interest shall be payable upon demand.
D. COLLECTION OF ACCOUNTS RECEIVABLE. At the Closing, the Seller
will turn over to the Buyers, for collection only, the accounts receivable of
the Stations owing to the Seller as of the close of business on the day before
the Closing Date. A schedule of such accounts receivable will be delivered by
the Seller to the Buyers on the Closing Date or as soon thereafter as possible.
The Buyers agree to use commercially reasonable efforts in the ordinary course
of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Closing Date (the "Collection Period"), and will remit all
payments received on such accounts within ten days of the end of each month
during the Collection Period together with an accounting of all payments
received during such month. The Buyers shall have the sole right to collect such
accounts receivable during the Collection Period. In the event the Buyers
receive monies during the Collection Period from an advertiser who, after the
Closing Date, is advertising on the Stations, and that advertiser was included
among the accounts receivable as of the Closing Date, the Buyers shall apply
said monies to the oldest outstanding balance due on the particular account,
except in the case of a "disputed" account receivable of which Buyers have
received notice. For purposes of this Section 6(d), a "disputed" account
receivable means one which the account debtor refuses to pay because he asserts
that the money is not owed or the amount is incorrect. In the case of such a
disputed account, the Buyers shall immediately return the account to the Seller
prior to expiration of the Collection Period. If the Buyers return a disputed
account to the Seller, the Buyers shall have no further responsibility for its
collection and may accept payment from the account debtor for advertising
carried on the Stations after the Closing Date. At the end of the Collection
Period, the Buyers will turn back to the Seller all of the accounts receivable
of the Stations as of the Closing Date owing to the Seller which have not yet
been collected, and the Buyers will thereafter have no further responsibility
with respect to the collection of such receivables. During the Collection
Period, the Buyers shall afford the Seller reasonable access to the accounts
receivable "aging list." The Seller acknowledges and agrees that the Buyers are
acting as collection agent hereunder for the sole benefit of the Seller and that
Buyers have accepted such responsibility for the accommodation of the Seller.
The Buyers shall not have any duty to inquire as to the form, manner of
execution or validity of any item, document, instrument or notice deposited,
received or delivered in connection with such collection efforts, nor shall the
Buyers have any duty to inquire as to the identity, authority or rights of the
persons who executed the same. The Seller shall indemnify Buyers and hold them
harmless from and against any judgments, expenses (including attorney's fees)
costs or liabilities which the Buyers may incur or sustain as a result of or by
reason of such collection efforts, unless they result from Buyers' gross
negligence or willful misconduct.
E. CONSENTS. In the event any of the Assumed Contracts are not
assignable or any consent to such assignment is not obtained on or prior to the
Closing Date, and the Buyers elect to consummate the transactions contemplated
herein despite such failure or inability to obtain such consent, the Seller
shall continue to use commercially reasonable efforts to obtain any such
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assignment or consent after the Closing Date. Until such time as such assignment
or approval has been obtained, the Seller will cooperate with Buyers in any
lawful and economically feasible arrangement to provide that the Buyers shall
receive the Seller's interest in the benefits under any such Assumed Contract,
including performance by the Seller as agent, if economically feasible;
provided, however, that the Buyers shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to the extent that
Buyers would have been responsible therefor if such consent or assignment had
been obtained.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
A. Survival. All of the representations and warranties contained in
Section 2 of this Agreement shall survive the Closing and continue in full force
and effect for a period until eighteen (18) months following the Closing Date.
B. Indemnification Provisions for the Benefit of the Buyers. Except
as described below in SECTION 7(E) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Seller agrees to indemnify the Buyers
from and against the entirety of any Adverse Consequences the Buyers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by:
i. any misrepresentation or breach of any of the Seller's
representations or warranties, and covenants contained in this Agreement or
in any Ancillary Agreement executed and/or delivered by the Seller (so long
as the Buyers make a written claim for indemnification within the
applicable survival period);
ii. any breach or nonfulfillment of any agreement or covenant of
the Seller contained herein or in any Ancillary Agreement;
iii. any Liability of the Seller which is not an Assumed
Liability; and/or
iv. any Liability of the Buyers arising by operation of law
(including under any bulk transfer law of any jurisdiction or under any
common law doctrine of defacto merger or successor liability) which is not
an Assumed Liability.
C. Indemnification Provisions for the Benefit of the Seller. Except
as described below in SECTION 7(E) with respect to a breach of a warranty or
covenant prior to the Closing Date, the Buyers agree to indemnify the Seller
from and against the entirety of any Adverse Consequences the Seller may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
any misrepresentation or breach of any of the Buyers' representations or
warranties contained in this Agreement or in any Ancillary Agreement executed
and/or delivered by the Buyers (so long as the Seller makes a written claim for
indemnification within the applicable survival period) or (ii) any breach or
nonfulfillment of any agreement or covenant of the Buyers contained herein or in
any Ancillary Agreement, or (iii) any Assumed Liability.
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D. SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the Buyers would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the Buyers
shall be entitled, in lieu of bring suit at law for money damages, to seek an
injunction or injunctions to enforce specifically this Agreement and the terms
and provisions hereof in any action instituted in any court of the United States
or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in SECTION 10(O) below). Each of the
Parties acknowledges and agrees that not withstanding the provision in SECTION
7(E) with respect to the remedy of liquidated damages upon a breach of a
warranty or covenant of this Agreement prior to the Closing, money damages would
not be an adequate remedy for Buyers for a breach of any provision of this
Agreement.
E. LIQUIDATED DAMAGES. The Buyers and the Seller acknowledge that in
the event that the transactions contemplated by this Agreement are not closed
because of a default by the Buyers, the Adverse Consequences to the Seller as a
result of such default may be difficult, if not impossible, to ascertain.
Accordingly, in lieu of indemnification pursuant to Section 7(C), the Seller
shall be entitled to receive from the Buyers for such default payment of Five
Hundred Twenty Thousand Dollars ($520,000) as liquidated damages without the
need for proof of damages, subject only to successfully proving in a court of
competent jurisdiction that the Buyers materially breached this Agreement and
that the transactions contemplated thereby have not occurred. Recovery of
liquidated damages under this Section 7(e) shall be Seller's sole remedy for a
failure of the transactions contemplated hereby to occur as a result of a
material breach of the terms of this Agreement by the Buyers.
F. MATTERS INVOLVING THIRD PARTIES. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against any other Party (the "Indemnifying
Party") under this SECTION 7, then the Indemnified Party shall notify the
Indemnifying Party thereof promptly; PROVIDED, HOWEVER, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged as a result
of such failure. In the event any Indemnifying Party notifies the Indemnified
Party within 15 days after the Indemnified Party has given notice of the matter
that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (iii) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably), and (iv) the Indemnifying Party will not consent to the entry of
any judgment with respect to the matter, or enter into any settlement which does
not include a provision whereby the plaintiff or claimant in the matter releases
the Indemnified Party from all Liability with respect thereto, without the
written consent of the Indemnified Party (not to be withheld unreasonably). In
the event the Indemnifying Party does not notify the Indemnified Party within 15
days after the Indemnified Party
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has given notice of the matter that the Indemnifying Party is assuming the
defense thereof, however, and/or in the event the Indemnifying Party shall fail
to defend such claim actively and in good faith, then the Indemnified Party may
defend against, or enter into any settlement with respect to, the matter in any
manner it reasonably may deem appropriate.
G. LIMITATION OF LIABILITY. Notwithstanding anything in this
Agreement to the contrary, after the Closing neither party shall indemnify or
otherwise be liable to the other party from and after the Closing Date except to
the extent that the Adverse Consequences suffered by the Identified Party, in
the aggregate from all indemnifiable events shall exceed Twenty-Five Thousand
Dollars ($25,000) and indemnification shall be made by the indemnifying party
only to the extent of such excess over Twenty-Five Thousand Dollars ($25,000);
provided however that the foregoing limitation shall not be applicable to: (i)
the obligations of the Buyer to pay and discharge any Liability of the Seller to
third parties from and after the Closing Date assumed by the Buyer under the
terms of this Agreement; (ii) the obligation of the Seller to pay and discharge
any Liability to third parties not assumed by the Buyer under the terms of this
Agreement, or (iii) the Seller's obligation to deliver clear title to the
Acquired Assets.
8. DEFINITIONS.
"ACQUIRED ASSETS" means all right, title, and interest in and to all of the
assets of the Seller, other than Retained Assets that are used or useful in the
operation of the Stations, wherever located, including but not limited to all of
its (a) leaseholds and other interests of any kind therein, improvements,
fixtures, and fittings thereon (such as towers and antennae), and easements,
rights-of-way, and other appurtenances thereto); (b) tangible personal property
(such as fixed assets, computers, data processing equipment, electrical devices,
monitoring equipment, test equipment, switching, terminal and studio equipment,
transmitters, transformers, receivers, broadcast facilities, furniture,
furnishings, inventories of compact disks, records, tapes and other supplies,
vehicles) and all assignable warranties with respect thereto; (c) Intellectual
Property, goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions; (d) rights under orders and agreements (including
those Barter Agreements and Advertising Contracts identified on the Disclosure
Schedule) now existing or entered into in the Ordinary Course of Business for
the sale of advertising time on the Stations; (e) Assumed Contracts, indentures,
Security Interests, guaranties, other similar arrangements, and rights
thereunder; (f) call letters of the Stations, jingles, logos, slogans, and
business goodwill of the Stations; (g) claims, deposits, prepayments, refunds,
causes of action, chooses in action, rights of recovery (including rights under
policies of insurance), rights of set off, and rights of recoupment; (h)
Licenses and similar rights obtained from governments and governmental agencies;
and (i) FCC logs and records and all other books, records, ledgers, logs, files,
documents, correspondence, advertiser lists, all other lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, program production materials, studies,
reports, and other printed or written materials; and (j) goodwill of the
Stations.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations, injunctions,
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damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including all reasonable
attorneys' fees and court costs.
"ADVERTISING CONTRACTS" has the meaning set forth in Section 2(s), above.
"AFFILIATE" means with reference to any person or entity, another person or
entity controlled by, under the control of or under common control with that
person or entity.
"ASSIGNMENT APPLICATION" has the meaning set forth in Section 4(b) above.
"ASSUMED CONTRACTS" means the Leases, the Barter Agreements, the
Advertising Contracts and those contracts identified on Section 2(k) of the
Disclosure Schedule as those to be assumed by Broadcasting.
"ASSUMED LIABILITIES" means (a) obligations of the Seller which accrue
after the Closing Date under the Assumed Contracts and(b) obligations of Seller
which accrue after the Closing Date, if any, under other contracts entered into
between the date of the Agreement and the Closing Date which Buyers agree in
writing to assume. The Assumed Liabilities shall not include any Retained
Liabilities.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"BUYERS" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements.
"CLOSING" has the meaning set forth in SECTION 1(D) above.
"CLOSING DATE" has the meaning set forth in SECTION 1(D) above.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of the Seller.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 1 above.
"EARNEST MONEY DEPOSIT" has the meaning set forth in Section 1(c) above.
"EARNEST MONEY ESCROW AGREEMENT" has the meaning set forth in Section 1(c)
above.
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"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec.
3(1).
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act
of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act
of 1976, the Refuse Act of 1899, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law of any federal,
state, local, or foreign government or agency thereof (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and safety, or
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means Media Services Group.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FCC" means the Federal Communications Commission of the United States.
"FCC LICENSES" means the licenses, permits and other authorizations,
including any temporary waiver or special temporary authorization, issued by the
FCC to the Seller in connection with the conduct of the business and operation
of the Stations.
"FINAL ORDER" means an action by the FCC as to which: (a) no request for
stay by the FCC is pending, no such stay is in effect, and any deadline for
filing a request for any such stay has passed; (b) no appeal, petition for
rehearing or reconsideration, or application for review is pending before the
FCC and the deadline for filing any such appeal, petition or application has
passed; (c) the FCC has not initiated reconsideration or review on its own
motion and the time in which such reconsideration or review is permitted has
passed; and (d) no appeal to a court, or request for stay
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by a court, of the FCC's action is pending or in effect, and the deadline for
filing any such appeal or request has passed.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 2(E) above.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 7(D) above.
"INDEMNIFICATION ESCROW AGREEMENT" has the meaning set forth in Section
1(f) above.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 7(D) above.
"INTELLECTUAL PROPERTY" means all (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, call letters, logos, trade names, and corporate names and registrations
and applications for registration thereof, (c) all programs, programming
materials, copyrights and registrations and applications for registration
thereof, (d) mask works and registrations and applications for registration
thereof, (e) computer software, data, and documentation, (f) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, market and other research information, drawings,
specifications, designs, plans proposals, technical data, copyrightable works,
financial, marketing, and business data, pricing and cost information, business
and marketing plans, and customer and supplier lists and information), (g) other
proprietary rights, and (h) copies and tangible embodiments thereof (in whatever
form or medium).
"KNOWLEDGE" means actual knowledge after reasonable investigation.
"LEASES" means those real estate leases to which Seller is a party
governing Seller's studios and AM and FM tower sites, as described in SECTION
2(I) of the Disclosure Schedule.
"LIABILITY" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LICENSES" means all FCC and other governmental licenses, franchises,
approvals, certificates, authorizations and rights of the Seller with respect to
the operations of the Stations and all applications therefor, together with any
renewals, extension or modifications thereof and additions thereto.
"MULTI-EMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
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"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
"PERMITTED ENCUMBRANCES" shall mean (a) encumbrances for Taxes, assessments
or other governmental charges or levies not yet due; (b) statutory liens of
landlords or liens of carriers, warehousemen, mechanics, material men and other
liens for amounts not yet due which liens are imposed by law and created in the
Ordinary Course of Business; (c) liens incurred or deposits made in the Oridnary
Course of Business in connection with workers' compensation, unemployment
insurance or other types of social security; (d) minor defects of title,
easements, right of way restrictions and other similar encumbrances not
materially detracting from the value of the Acquired Assets or interfering with
the ordinary conduct of business of Seller.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406 and
Code Section 4975.
"PURCHASE PRICE " has the meaning set forth in SECTION 1(C) above.
"REAL ESTATE" means the real estate, building, fixtures and improvements
which are the subject of the Leases.
"REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043.
"RETAINED ASSETS" means (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, capitalization, and
existence of the Seller as a corporation, and duplicate copies of such records
as are necessary to enable Seller to file Tax returns and reports; (ii) any of
the rights of the Seller under this Agreement (or under any side agreement
between the Seller on the one hand and the Buyers on the other hand entered into
on or after the date of this Agreement); (iii) accounts, notes and other
receivables of the Seller; and (iv) Cash.
"RETAINED LIABILITIES" means any obligations or Liabilities of the Seller
other than Assumed Liabilities, including but not limited to: (i) any Liability
relating to the ownership or operation of the Stations prior to the Closing;
(ii) any Liability of the Seller for income, transfer, sales, use, and other
Taxes arising in connection with the consummation contemplated hereby (except as
set forth in Section 10(k) with respect to transfer and sales taxes and
recording and similar fees); (iii) any Liability of the Seller for costs and
expenses incurred in connection with this Agreement or the consummation of the
transactions contemplated hereby (except as set forth in Section 4(i) relating
to Surveys, title commitments and environmental audits and Section 4(b) with
regard to the Assignment Application; or (iv) any Liability or obligation of the
Seller under this Agreement (or under any side agreement between the Seller on
the one hand and the Buyers on the other hand entered into on or after the date
of this Agreement).
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"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than Permitted Encumbrances.
"SELLER" has the meaning set forth in the preface above.
"STATIONS" means the radio broadcast stations having the call letters
WEAS(AM) and WEAS-FM, licensed by the FCC to operate in Savannah, Georgia.
"SUBSIDIARY," with respect to any person, means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which ) 50% or more of (i) the outstanding capital stock or other equity
interest having voting power to elect a majority of the Board of Directors of
such corporation or persons having a similar role as to an entity that is not a
corporation, (ii) the interest in the profits of such partnership or joint
venture, or (iii) the beneficial interest of such trust or estate are at such
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate
this Agreement as provided below:
i. the Buyers and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the
Seller is in material breach of any representation, warranty, or covenant
contained in this Agreement; provided, however,
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that if such breach is capable of being cured, such breach also remains
uncured for twenty (20) days after notice of breach is received by the
Seller from the Buyers;
iii. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing in the event the
Buyers are in material breach of any representation, warranty, or covenant
contained in this Agreement; provided, however that if such breach is
capable being cured, such breach remains uncured for twenty (20) days after
notice of breach is received by the Buyers from the Seller;
iv. the Buyers may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under SECTION
5(A) hereof (unless the failure results primarily from the Buyers
themselves breaching any representation, warranty, or covenant contained in
this Agreement);
v. the Seller may terminate this Agreement by giving written
notice to the Buyers at any time prior to the Closing if the Closing shall
not have occurred on or before the 270th day following the date of this
Agreement by reason of the failure of any condition precedent under SECTION
5(B) hereof (unless the failure results primarily from the Seller itself
breaching any representation, warranty, or covenant contained in this
Agreement);
vi. the Buyers or the Seller may terminate this Agreement if any
Assignment Application is denied by Final Order, or designated for
evidentiary hearing; and
vii the Buyers or the Seller may terminate this Agreement if the
Department of Justice or the Federal Trade Commission initiates an
investigation of the transaction under the Hart-Scott-Rodino Act, and the
actual or estimated expenses of the Buyers or Seller to comply with the
investigation exceed Fifty Thousand Dollars ($50,000), as described in
SECTION 4(D) above.
(B) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 9(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
10. MISCELLANEOUS.
A. PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing Party will advise
the other Party prior to making the disclosure).
B. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
C. ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
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D. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party, PROVIDED that (i) either party may assign all of
their right, title and interest in, to and under this Agreement to one or more
Affiliates, and (ii) Buyers may assign their indemnification claims and their
rights under the warranties and representations of the Sellers to the financial
institution(s) providing financing to the Buyers in connection with this
transaction.
E. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
F. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
G. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing and shall be considered to be given
and received in all respects when hand delivered, when delivered via prepaid
express or courier delivery service, when sent by facsimile transmission
actually received by the receiving equipment or three (3) days after deposited
in the United States mail, certified mail, postage prepaid, return receipt
requested, in each case addressed to the intended recipient as set forth below:
IF TO THE SELLER:
Ocmulgee Broadcasting Co., Inc.
2201 Bruce Drive
East Beach
St. Simon's Island, Georgia 31522
Phone: (912) 634-0370
Fax: (912) 634-8280
Attention: Edward Esserman
Copy to:
Leventhal, Senter & Lerman
2000 K Street, NW
Suite 600
Washington, DC 20006-1809
Phone: (202) 416-6762
Fax: (202) 293-7783
Attention: Sally A. Buckman, Esquire
(which copy shall not constitute notice to Seller)
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IF TO THE BUYERS:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
c/o QUAESTUS Management Corp.
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
Attn: Terrence J. Leahy
Fax: (414) 283-4505
With a copy to:
Cumulus Broadcasting, Inc.
Cumulus Licensing Corp.
875 N. Michigan Avenue
Suite 3650
Chicago, Illinois 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
H. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of Georgia.
I. AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyers and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
J. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that
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is valid and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
K. EXPENSES. The Buyers and the Seller, will each bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, other than as set
forth in Section 4(b) with regard to the Assignment Applications and as set
forth in Section 4(o) with respect to title commitments. The Seller will pay all
income taxes. The Seller and the Buyers will each pay one-half (1/2) of any
transfer or sales taxes and other recording or similar fees necessary to vest
title to each of the Acquired Assets in the Buyers.
L. CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
M. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
N. SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Savannah, Georgia, in any
action or proceeding arising out of or relating to this Agreement, agrees that
all claims in respect of the action or proceeding may be heard and determined in
any such court, and agrees not to bring any action or proceeding arising out of
or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other Party with respect thereto. Any Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(g) above. Nothing in this Section 10(n), however, shall affect the right of
any Party to serve legal process in any other manner permitted by law. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law.
O. LIKE KIND EXCHANGE. If requested by the Seller, Buyers shall
cooperate in good faith with the Seller, execute such documents and consummate
such transaction(s) as may be
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reasonably requested by the Seller to enable Seller to qualify the exchange of
the Acquired Assets for other like-kind property under the provisions of Section
1031 of the Internal Revenue Code of 1986, as amended, provided that the buyers
shall acquire the Acquired Assets subject to and with the full benefit of all of
the representations and warranties of the Seller as provided herein.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
CUMULUS BROADCASTING, INC.
By:
----------------------------
- -------------------------------
(Printed)
Title:
-------------------------
CUMULUS LICENSING CORPORATION
By:
----------------------------
- -------------------------------
(Printed)
Title:
-------------------------
OCMULGEE BROADCASTING CO., INC.
By:
----------------------------
- -------------------------------
(Printed)
Title:
-------------------------
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SCHEDULE A
PURCHASE PRICE. The Buyers agree to pay to the Seller, as consideration
for the Acquired Assets, the amount of Five Million Two Hundred Fifty Thousand
and no/100 Dollars ($5,250,000.00), payable as follows:
(i) on the date of this Agreement, the Buyers will deposit with the
Escrow Agent the amount of Two Hundred Sixty-Two Thousand Five Hundred and
no/100 Dollars ($262,500.00) (the "EARNEST MONEY DEPOSIT") in the form of an
irrevocable letter of credit from Lehman Commercial Paper, Inc.; and
(ii) on the Closing Date, the Buyers shall pay to the Seller the
amount of Five Million Two Hundred Thousand and no/100 ($5,200,000.00), with
adjustments as provided specifically in this Agreement.
The Earnest Money Deposit referenced in this SCHEDULE A shall be placed in
escrow with the Escrow Agent pursuant to an escrow agreement in the form
attached hereto as EXHIBIT A (the "EARNEST MONEY ESCROW AGREEMENT"), and shall
be disbursed to Seller or returned to Buyer as provided in the Earnest Money
Escrow Agreement.
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Exhibit 10.66
LOCAL MARKETING AGREEMENT
This Local Marketing Agreement (the "Agreement") is made as of March 16,
1998, effective for all purposes on the Effective Date (as defined below),
between CUMULUS BROADCASTING, INC. ("Programmer"), and PHOENIX BROADCAST
PARTNERS, INC., a Florida corporation ("Licensee").
RECITALS
A. Licensee holds the license to operate radio broadcast station WZAT-FM
(the "Station") pursuant to authorizations issued by the Federal Communications
Commission (the "FCC");
B. Licensee and Programmer intend shortly to enter into an Asset Purchase
Agreement (the "Purchase Agreement"), which shall provide for the acquisition
by Programmer of substantially all of the assets used in connection with the
operation of the Stations, on the terms and subject to the conditions set forth
therein.
C. Pending execution of the Purchase Agreement and closing thereunder,
Programmer desires to purchase from Licensee and Licensee desires to sell to
Programmer certain airtime on the Stations, all in accordance with the
Communications Act of 1934, as amended, and the rules, regulations, and policies
of the FCC (the "FCC Requirements").
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations, warranties and agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement agree as
follows:
1. EFFECTIVE DATE AND TERM.
1.1 EFFECTIVE DATE. This Agreement shall become effective for all
purposes on March 16, 1998.
1.2 TERM. The term of this Agreement (the "Term") shall begin on the
Effective Date and shall continue until March 30, 1999, unless earlier
terminated in accordance with the provisions set forth in this Agreement.
2. PURCHASE OF AIRTIME. Programmer hereby purchases from Licensee all
airtime on the Station during the Term, other than airtime between 7:00 a.m.,
local time and 8:00 a.m., local time on Sundays, on the terms specified herein
(such purchased airtime period is referred to herein as the "Broadcasting
Period"). During the Broadcasting Period, Licensee shall broadcast on the
Station programming supplied by Programmer (collectively, the "Program" or
"Programs"). Programmer will ensure that the Programs meet technical and
quality standards equal to those of
<PAGE>
programming broadcast by commercial radio stations generally in the United
States. If Licensee in the reasonable exercise of its discretion finds that any
Program(s) does not meet these standards, then it shall advise Programmer in
writing of the specific technical deficiencies. If such technical deficiencies
have not been corrected within ten (10) days after receipt of notice, then
Licensee shall have no obligation to broadcast such Program(s) until such time
as the technical deficiencies are corrected.
3. LICENSEE'S BROADCASTING OBLIGATIONS. In consideration for the
payments made and to be made by Programmer hereunder, Licensee shall make
available to Programmer, beginning on the Effective Date, all of the Station's
airtime during the Broadcasting Period and shall cause to be broadcast on the
Station the Programs pursuant to Section 2 hereof. Throughout the Term, unless
otherwise mutually agreed by the parties, Licensee shall maintain the operating
power of the Station at its maximum licensed level and shall operate and
maintain in good working condition the Station's transmission facilities and
broadcasting equipment. Throughout the Term, Licensee shall also, with respect
to the Station:
(a) employ a General Manager who will report to Licensee and direct
the performance of Licensee's obligations hereunder and who shall have no
employment, consulting, or other material relationship to Programmer;
(b) employ one full time employee to assist the General Manager in
performing Licensee's obligations hereunder, including maintaining the
Station's transmission facilities, and who shall have no employment,
consulting or other material relationship with Programmer;
(c) retain ultimate control over the personnel, finances, programming
and operation of the Station;
(d) maintain a main studio consistent with the FCC Requirements at
which the General Manager and the other full time employee(s) of the
Station will be available during normal business hours;
(e) comply with the FCC Requirements with respect to the
ascertainment of community problems, needs and interests; broadcast
programming responsive thereto; and timely prepare and place in the
Station's public inspection files appropriate documentation thereof;
(f) comply with all other FCC Requirements which may be applicable to
the operation of the Station.
4. CONSIDERATION. In consideration of the airtime made available to
Programmer pursuant to this Agreement, Programmer shall pay Licensee as set
forth in APPENDIX A attached hereto.
2
<PAGE>
5. OPERATION, OWNERSHIP AND CONTROL OF THE STATION.
5.1 CONTROL VESTED IN LICENSEE. Notwithstanding anything to the contrary
in this Agreement, as long as Licensee remains the FCC licensee of the Station,
Licensee will have full authority, power and control over the operation of the
Station and over all persons employed by it. Licensee will bear the
responsibility for the Station's compliance with, and shall cause the Station to
comply with, all applicable laws, including the FCC Requirements. Nothing
contained herein shall prevent or hinder Licensee from: (a) rejecting or
refusing Programs that Licensee believes in good faith to be unsuitable or
contrary to the public interest; (b) substituting programs which Licensee
believes in good faith to be of greater local or national importance or which
are designed to address the problems, needs and interests of the local
community: (c) preempting any Program in the event of a local, territorial or
national emergency; (d) refusing to broadcast any Program that does not meet the
FCC Requirements; or (e) deleting any commercial announcements that do not
comply with the FCC Requirements or the requirements of the Federal Trade
Commission, or any state, local or federal law.
5.2 NOTICE OF COMPLAINTS. Programmer will immediately serve Licensee with
notice and a copy of any letters of complaint that Programmer receives
concerning any Program for Licensee's review and inclusion in its public
inspection files. Licensee will immediately serve Programmer with notice and a
copy of any letters of complaint that it receives concerning any Program.
5.3 PROGRAMMER ACCESS TO THE STATION'S STUDIOS. During the Term, Licensee
shall make available to Programmer for no additional consideration the areas in
the Station's studios as may be reasonably necessary or appropriate for
Programmer to exercise its rights and perform its obligations under this
Agreement. Programmer shall, to the extent commercially feasible, use
Licensee's current studios and other facilities to exercise its rights and
perform its obligations under this Agreement.
5.4 EMPLOYEES. Programmer shall employ and be responsible for the
salaries, taxes, insurance, and related costs for all personnel used in the
production of the programs supplied to the Station hereunder, and all other
costs incurred by Programmer for the production of such programs. Licensee
shall pay all compensation owed to its employees up to and including the
Effective Date. Programmer may, after the Effective Date, employ those of
Licensee's employees as Programmer may elect on terms and conditions determined
by Programmer in Programmer's sole discretion, other than those employees
employed by Licensee in the operation of the Station after the Effective Date,
who shall remain in Licensee's sole employ and control. Upon termination of
this Agreement, Licensee shall be free to re-employ Programmer's employees on
such terms and conditions as may be determined by Licensee.
5.5 MUTUAL COOPERATION. Programmer and Licensee agree to cooperate
reasonably with each other as necessary to fulfill their rights and obligations
hereunder.
6. PROGRAM RIGHTS AND MUSIC LICENSES. During the Term, Licensee shall
make
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<PAGE>
available to Programmer for its use, on the dates and at the times specified by
Programmer, all of Licensee's rights to programs under any program rights
agreements of the Station (together with the music licenses described below, the
"Program Rights Agreements"). Licensee shall use its best efforts to secure all
consents, if any, from third parties that are necessary to permit Programmer to
use the programs under Program Rights Agreements. Licensee shall maintain all
necessary performing rights licenses to musical compositions included in any
Program, subject to reimbursement by Programmer for the cost thereof under
Section 4 and APPENDIX A of this Agreement.
7. PROGRAMS TO SERVE THE PUBLIC INTEREST. Licensee acknowledges that it
is familiar with the type of programming Programmer intends to provide and has
determined that the broadcast of such programming on the Station would serve the
public interest and is otherwise suitable. Programmer shall cooperate with
Licensee to ensure that the Programs include material that is responsive to
community problems, needs, and interests.
8. PROGRAMMING STANDARDS. Programmer shall use its best efforts to
ensure that the Programs conform to all FCC Requirements applicable to broadcast
radio stations.
9. EXPENSES, REVENUES AND ACCOUNTS RECEIVABLE.
9.1 EXPENSES. The Station's cash expenses arising or relating to the
period before the Effective Date shall be the responsibility of Licensee, and
Programmer shall not be obligated to reimburse Licensee for any expenses
allocable to such period. During the Term, Programmer will reimburse Licensee
for its expenses incurred in accordance with Section 4 hereof. Programmer shall
be solely responsible for all expenses attributable to the origination and/or
delivery of the Programs by Programmer to Licensee.
9.2 CASH ACCOUNTS RECEIVABLE, ADVERTISING AND PROGRAMMING REVENUES.
As of the Effective Date, the Licensee will turn over to the Programmer,
for collection only, the accounts receivable of the Station owing to the
Licensee as of the close of business on the day before the Effective Date. A
schedule of such accounts receivable will be delivered by the Licensee to the
Programmer on the Effective Date or as soon thereafter as possible. The
Programmer agrees to use commercially reasonable efforts in the ordinary course
of business (but without responsibility to institute legal or collection
proceedings) to collect such accounts receivable during the 120-day period
following the Effective Date, and will remit all payments received on such
accounts at the end of this 120-day period, together with an accounting of all
payments received within such period. The Programmer shall have the sole right
to collect such accounts receivable during such 120-day period. In the event
the Programmer receives monies during the 120-day period following the Effective
Date from an advertiser who, after the Effective Date, is advertising on the
Station, and that advertiser was included among the accounts receivable as of
the Effective Date, the Programmer shall apply said monies to the oldest
outstanding balance due on the particular account, except in the case of a
"disputed" account receivable. For purposes of this Section 9.2, a "disputed"
account
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<PAGE>
receivable means one which the account debtor refuses to pay because he asserts
that the money is not owed or the amount is incorrect. In the case of such a
disputed account, the Programmer shall immediately return the account to the
Licensee prior to expiration of the 120-day period following the Effective Date.
If the Programmer returns a disputed account to the Licensee, the Programmer
shall have no further responsibility for its collection and may accept payment
from the account debtor for advertising carried on the Station after the
Effective Date. At the end of the 120-day period following the Effective Date,
the Programmer will turn back to the Licensee all of the accounts receivable of
the Station as of the Effective Date owing to the Licensee which have not yet
been collected, and the Programmer will thereafter have no further
responsibility with respect to the collection of such receivables. During the
120-day period following the Effective Date, the Programmer shall afford the
Licensee reasonable access to the accounts receivable "aging list." The Licensee
acknowledges and agrees that the Programmer is acting as collection agent
hereunder for the sole benefit of the Licensee and that Programmer has accepted
such responsibility for the accommodation of the Licensee. The Programmer shall
not have any duty to inquire as to the form, manner of execution or validity of
any item, document, instrument or notice deposited, received or delivered in
connection with such collection efforts, nor shall the Programmer have any duty
to inquire as to the identity, authority or rights of the persons who executed
the same. The Licensee shall indemnify Programmer and hold it harmless from and
against any judgments, expenses (including attorney's fees) costs or liabilities
which the Programmer may incur or sustain as a result of or by reason of such
collection efforts, except in the event of Programmer's gross negligence or
willful misconduct. Programmer's obligation to collect and remit Accounts
Receivable hereunder shall continue, at the option of Licensee, in the event of
termination of this Agreement pursuant to Section 11.5 hereof.
9.3 POLITICAL TIME. Licensee shall, with respect to the Station, oversee
and take ultimate responsibility with respect to the provision of equal
opportunities, lowest unit charge, and reasonable access to political
candidates, and compliance with the political broadcasting provisions of the FCC
Requirements. Programmer shall cooperate with Licensee in complying with such
provisions, and shall supply promptly to Licensee such information reasonably
requested by Licensee for such purposes. Licensee, in consultation with
Programmer, will develop a statement which discloses its political broadcasting
rates and policies to political candidates, and Programmer will follow those
respective policies in the sale of political programming and advertising for the
Station. Programmer shall provide any rebates due to political advertisers and
release advertising availabilities to Licensee during the Broadcasting Period
sufficient to permit Licensee to comply with political broadcasting provisions
of the FCC Requirements. Revenues received by Licensee as a result of any such
release of advertising time shall be for the account of Programmer.
10. CALL LETTERS AND FREQUENCY. During the Term, Licensee (i) shall
retain all rights (except as provided in the following sentence) to the
Station's call letters and trade names, (ii) shall not change the call letters,
and (iii) shall not seek FCC consent to a modification of facilities which would
specify a frequency change or have a material adverse effect upon the presently
authorized coverage of the Station. Programmer shall include in the Programs
for the Station an announcement in a form reasonably satisfactory to the
Licensee in accordance with the FCC Requirements to
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identify such Station, as well as any other announcements required by the FCC
Requirements.
11. EVENTS OF DEFAULT AND TERMINATION.
11.1 PROGRAMMER'S EVENTS OF DEFAULT. The occurrence and continuation of
any of the following will be deemed an Event of Default by Programmer under this
Agreement:
(a) Programmer fails to make LMA Payments;
(b) Programmer fails to observe or perform any other material
covenant, condition or agreement contained in this Agreement; or
(c) Programmer breaches or violates any material representation or
warranty made by it under this Agreement.
11.2 LICENSEE'S EVENTS OF DEFAULT. The occurrence and continuation of any
of the following will be deemed an Event of Default by Licensee under this
Agreement:
(a) Licensee fails to observe or perform any material covenant,
condition or agreement contained in this Agreement; or
(b) Licensee breaches or violates any material representation or
warranty made by it under this Agreement.
11.3 CURE PERIOD. The defaulting party shall have thirty (30) days from
the date on which Programmer has provided Licensee or Licensee has provided
Programmer, as the case may be, with written notice specifying the Event(s) of
Default to cure any such Event(s) of Default. If the Event of Default cannot be
cured by the defaulting party within such time period but commercially
reasonably efforts are being made to effect a cure or otherwise secure or
protect the interests of the non-defaulting party (in which case, if successful,
the Event of Default shall be deemed cured), then the defaulting party shall
have an additional period not to exceed thirty (30) days to effect a cure or a
deemed cure; provided, however, that such additional thirty-day period shall not
be available in the case of a default under Section 11.1(a) above.
11.4 UNCURED EVENT OF DEFAULT. If an Event of Default by Programmer has
not been cured or deemed cured within the period set forth in Section 11.3
above, then Licensee may terminate this Agreement, effective immediately upon
written notice to Programmer, and pursue all remedies available at law or in
equity for breach of this Agreement; provided, however, that Licensee may not
terminate the Agreement for default by Programmer during the first thirty-six
(36) months of the term. If an Event of Default by Licensee has not been cured
or deemed cured within the periods set forth in Section 11.3 above, then
Programmer may terminate this Agreement, effective immediately upon written
notice to Licensee, and pursue all remedies available at law or in equity for
breach of this Agreement.
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11.5 TERMINATION UPON FAILURE OR CONSUMMATION OF THE PURCHASE AGREEMENT.
Notwithstanding any other provision hereof, this Agreement may be terminated by
Licensee or Programmer upon thirty (30) days' prior written notice at any time
following termination of the Purchase Agreement in accordance with the terms
thereof. This Agreement shall terminate immediately upon the Closing Date (as
defined in the Purchase Agreement).
11.6 TERMINATION BY LICENSEE TO SATISFY THE FCC REQUIREMENTS. If Licensee
is required by the FCC to terminate this Agreement by an FCC order which has
become a Final Order as that term is defined in the Purchase Agreement),
Licensee shall, or, if the FCC orders that this Agreement be terminated before
its order becomes a Final Order and this Agreement cannot be revised to comply
with applicable FCC Requirements as contemplated by Section 20 hereof, Licensee
may, upon at least sixty (60) days' written notice to Programmer (or such
shorter period as may be required by the FCC) terminate this Agreement.
11.7 TERMINATION BY MUTUAL CONSENT. Licensee and Programmer may terminate
this Agreement at any time, on thirty (30) days' notice, by mutual consent.
11.8 TERMINATION BY PROGRAMMER. Programmer may unilaterally terminate this
Agreement during the term upon one hundred twenty (120) days' written notice to
Licensee.
12. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS.
12.1 MUTUAL REPRESENTATIONS CONCERNING THIS AGREEMENT. Licensee represents
and warrants as follows: (a) Licensee is duly organized, validly existing and in
good standing under the laws of its jurisdiction, (b) Licensee has the power and
authority to enter into and perform this Agreement; and (c) the execution,
delivery and performance of this Agreement by Licensee does not conflict with
any other agreement to which Licensee is a party.
Programmer represents and warrants as follows: (a) Programmer is a
corporation duly organized, validly existing, in good standing under the laws of
Nevada, and qualified to do business in the state of Georgia; (b) Programmer has
the requisite corporate power and authority to enter into and perform this
Agreement; (c) the execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action of Programmer; and (d)
the execution, delivery and performance of this Agreement by Programmer does not
conflict with any other agreement to which Programmer is a party.
12.2 PROGRAM RIGHTS AND BARTER AGREEMENTS. Licensee represents and
warrants that (i) it is current in all payment obligations and is not otherwise
in default under the Program Rights Agreements and (ii) there are no Barter
Agreements as defined in the Asset Purchase Agreement which extend beyond the
Effective Date and which exceed in the aggregate Five Thousand Dollars ($5,000).
12.3 COMPLIANCE WITH FCC REQUIREMENTS. Programmer represents, warrants and
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covenants that its execution and performance of this Agreement is, and will
remain, in compliance with the FCC Requirements, including without limitation,
47 C.F.R. Section 73.3555.
13. MODIFICATION AND WAIVER; REMEDIES CUMULATIVE. No modification or
waiver of any provision of this Agreement will be effective unless in writing
and signed by all parties. No failure or delay on the part of Programmer or
Licensee in exercising any right or power under this Agreement will operate as a
waiver of such right or power, nor will any single or partial exercise of any
such rights or power or the exercise of any other right or power operate as a
waiver. Except as otherwise provided in this Agreement, the rights and remedies
provided in this Agreement are cumulative and are not exclusive of any rights or
remedies which a party may otherwise have.
14. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns, including
any successor purchase of the Station assets. Notwithstanding the foregoing, no
party may assign its rights or obligations under this Agreement without the
prior written consent of the other party; provided, however, that Programmer may
assign and delegate its rights and obligations under this Agreement to a party
that controls, or is controlled by, or is under common control with, Programmer,
and who is qualified under any applicable FCC Requirement, upon notice to, but
without the prior written consent of Licensee.
15. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of Florida without regard to any conflicts-of-law
rules that might apply to the laws of another jurisdiction or jurisdictions.
Venue for all purposes shall be in state or federal courts in the state of
Florida.
16. NOTICES. Any notice permitted, required, or contemplated hereunder
shall be in writing and shall be given personally or by prepaid registered or
certified mail, with return receipt requested or by prepaid nationally
recognized overnight courier service addressed as follows:
If to the Licensee:
Phoenix Broadcast Partners, Inc.
35048 U.S. Highway 19
Palm Harbor, FL 34684-1925
Attn: Carl Marcocci
Phone: (813) 442-4027
Fax: (813) 781-4375
If to the Programmer:
Cumulus Broadcasting, Inc.
c/o Quaestus Management Corporation
330 E. Kilbourn Avenue, Suite 250
Milwaukee, WI 53202
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Attn: Terrence J. Leahy, Esq.
Fax: (414) 283-4505
and Cumulus Broadcasting, Inc.
875 N. Michigan Avenue
Chicago, IL 60611
Attn: Richard J. Bonick
Fax: (312) 867-0098
A notice shall be deemed received upon the date of delivery if given personally,
or if given by mail or overnight courier, upon the receipt thereof. Any Party
may change the adress to which notices hereunder are to be delivered by giving
the other Party notice in the manner set forth herein. Notices required to be
provided by this Agreement shall be given in the manner provided and to the
persons specified in the Purchase Agreement.
17. ENTIRE AGREEMENT. This Agreement embodies the entire understanding
among the parties with respect to the subject matter hereof, and supersedes any
prior or contemporaneous written or oral agreement between the parties regarding
such subject matter.
18. RELATIONSHIP OF PARTIES. Programmer and Licensee are not, and shall
not be deemed to be, agents, partners, or representatives of each other.
19. FORCE MAJEURE. The failure of a party hereto to comply with its
obligations under this Agreement due to acts of God, strikes or threats thereof
or force majeure or due to causes beyond such party's control will not
constitute an Event of Default under Section 11 of this Agreement and no party
will be liable to the others therefore. Programmer and Licensee each agree to
exercise its commercially reasonable efforts to remedy any such conditions
affecting its own facilities as soon as practicable.
20. SUBJECT TO LAWS; INVALIDITY. The obligations of the parties under
this Agreement are subject to the FCC Requirements and all other applicable
laws. The parties acknowledge that this Agreement is intended to comply with
FCC Requirements. However, in the event that the FCC determines that the
continued performance of this Agreement is in violation of the FCC Requirements,
each party will use its commercially reasonable efforts to comply with the FCC
Requirements or will in good faith contest or seek to reverse any such action or
agree on the terms of a revision to this Agreement, in each case, on a time
schedule sufficient to meet the FCC Requirements and so long as the fundamental
nature of the business arrangement between the parties evidenced by this
Agreement is maintained. If any provision of this Agreement is otherwise held
to be illegal, invalid, or unenforceable under present or future laws, then such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such provision had never comprised a part thereof, and the
remaining provisions shall remain in full force and effect, in each case so long
as the fundamental nature of the business arrangement between Programmer and
Licensee has been maintained.
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21. RECIPROCAL INDEMNITY.
21.1 INDEMNIFICATION BY PROGRAMMER. Programmer shall indemnify, defend,
and hold harmless Licensee from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement (except as
may result from a breach of the warranty in Section 6 hereof by Licensee),
libel, slander, defamation or invasion of privacy, arising out of: (a)
Programmer's broadcasts of the Programs; (b) any misrepresentation or breach of
any warranty of Programmer; or (c) any breach of any covenant, agreement, or
obligation of Programmer. If Programmer is required to indemnify Licensee as a
result of programs broadcast hereunder which are supplied by a third party
pursuant to a contract with Licensee, it is agreed that Programmer shall be
subrogated to any rights which Licensee may have against such third party,
including the right to indemnification by such third party.
21.2 INDEMNIFICATION BY LICENSEE. Licensee shall indemnify, defend, and
hold harmless Programmer from and against any and all claims, losses, costs,
liabilities, damages, and expenses (including reasonable attorneys' fees and
other expenses incidental thereto) of every kind, nature and description,
including but not limited to those relating to copyright infringement (except as
may result from a breach of the warranty in Section 6 hereof by Licensee),
libel, slander, defamation or invasion of privacy, arising out of: (a)
Licensee's broadcast of programs on its own behalf, other than Programs; (b) any
misrepresentation or breach of any warranty of Licensee; or (c) any breach of
any covenant, agreement, or obligation of Licensee. If Licensee is required to
indemnify Programmer as a result of programs broadcast hereunder which are
supplied by a third party pursuant to a contract with Programmer, it is agreed
that Licensee shall be subrogated to any rights which Programmer may have
against such third party, including the right to indemnification by such third
party.
22. HEADINGS. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
23. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
24. SURVIVAL. All representations, warranties, covenants and agreements
made by any party in this Agreement or pursuant hereto shall survive execution
and delivery of this Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective duly authorized officers as of the date first written above.
PROGRAMMER: CUMULUS BROADCASTING, INC.
By:
-------------------------------
Richard Weening
Chairman
LICENSEE: PHOENIX BROADCAST PARTNERS, INC.
By:
-------------------------------
Printed Name:
---------------------
Title:
----------------------------
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APPENDIX A
LMA PAYMENTS
In consideration of the airtime made available to Programmer pursuant to
this Agreement,Programmer shall reimburse Licensee on a monthly basis, in
arrears, within five days of the end of the month, the Station Expenses (defined
below) for the previous month for which Licensee has submitted to Programmer
invoices or other reasonable documentation of expenses. The term "Station
Expenses" as used herein means the reasonable and prudent expense actually
incurred by Licensee in operating the Station in compliance with the terms of
this Agreement (including without limitation Sections 3 and 6) and consistent
with past practice (except for changes resulting from the transactions
contemplated by this Agreement), including without limitation, those expenses
set forth below:
Employees
_______, General Manager $
_______
Payroll Taxes
Health Insurance
Life Insurance
Engineering:
Utilities $
Maintenance and Repairs
Music License Fees:
Ascap, BMI, Sesac
Property Insurance
Station Rent
Tower Rent
---------------
Total Expenses $
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Exhibit 10.67
ASSET PURCHASE AGREEMENT
RADIO STATIONS WVBO-FM/WOSH-AM/WOGB-FM
This Asset Purchase Agreement, (hereafter referred to as "Agreement") made
this day of February, 1997, by and between Value Radio Corporation, a
Wisconsin corporation (hereinafter referred to as "Seller") and Cumulus Media,
L.L.C., a Delaware limited liability company (hereinafter referred to as
"Buyer").
W I T N E S S E T H:
WHEREAS, Seller is the holder of authorizations issued by the Federal
Communications Commission (the "FCC") for radio stations WVBO-FM, WOSH-AM and
WOGB-FM, licensed to Oshkosh,Wisconsin and Kaukauna, Wisconsin (hereinafter the
"Radio Stations"); and
WHEREAS, Buyer desires to purchase from Seller substantially all of the
assets used or useful in the operation of the Radio Stations, as more
particularly described below in this Agreement, upon the terms and conditions
set forth herein; and
WHEREAS, Seller desires to sell said Assets as part of a qualified
tax-deferred exchange under Internal Revenue Code Section 1031 in which this
Agreement, once executed by the parties hereto, shall be assigned to a qualified
intermediary designated by Seller (the "Qualified Intermediary") who will assume
and undertake the rights and obligations of Seller under this Agreement,
including the right to receive the purchase price from Buyer, and the obligation
to cause Seller to deliver the assets of the Radio Stations to Buyer; and
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
hereby mutually covenant and agree as follows:
ARTICLE I
TRANSFER OF ASSETS, PAYMENT OF THE
PURCHASE PRICE AND EXCHANGE OF DOCUMENTS
Upon the basis of the representations, warranties, covenants and agreements
and on the terms and subject to the conditions set forth herein, on the Closing
Date (as hereinafter defined):
1.1 ASSETS. Seller shall sell and Buyer shall purchase substantially all
of the tangible and intangible assets owned or leased by Seller and used or
useful in connection with the operation of the Radio Stations (excluding cash
and cash equivalent assets) including, but not limited to, the assets more
particularly described as follows (collectively, the "Assets"):
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(a) All right, title and interest in, to and under all personal
property and equipment owned or leased by Seller and used or useful in
connection with the operation of the Radio Stations, including, but not
limited to, office equipment, record libraries, records, cartridge tapes,
compact discs, news archives, promotional materials, and all other
materials of a commercial nature for use in said operations, together with
any replacements thereof and additions thereto made between the date hereof
and the Closing Date. A correct and complete inventory summary of these
materials by category and quantity is set forth in the attached SCHEDULE
1.1(A). Not less than five (5) business days prior to the Closing Date,
Seller shall deliver to Buyer a listing of any changes to Schedule 1.1(a)
which, as so updated, will be correct and complete.
(b) All right, title and interest in, to and under the advertising
contracts listed on the attached SCHEDULE 1.1(B) with clients and customers
of Seller, and such additional advertising contracts as are existing as of
the Closing Date. Not less than five (5) business days prior to the
Closing Date, Seller shall deliver to Buyer a list of any changes to
Schedule 1.1(b) which are necessary to reflect the termination, expiration
or entry into contracts, arrangements and programs occurring following the
date hereof. In the ordinary course of its business, Schedule 1.1(b) is
(and as updated, will be) a correct and complete listing of all such
advertising contracts of the Radio Stations.
(c) All right, title and interest in, to and under the contracts and
agreements entered into by Seller in connection with the operation and
programming of the Radio Stations (the "Contracts"), and all contracts and
agreements entered into by Seller between the date hereof and the Closing
Date which Buyer agrees to assume at the Closing, subject to their approval
by Buyer. Where the consent to assignment of other parties of said
contracts and agreements is required, Seller agrees to use commercially
reasonable efforts to try to obtain any required consent by the Closing
Date. A complete current list of such contracts and agreements is included
in the attached SCHEDULE 1.1(C). Not less than five (5) business days prior
to the Closing Date, Seller shall deliver to Buyer a list of any changes to
Schedule 1.1(c) which are necessary to reflect the termination, expiration
or entry into contracts and agreements, occurring following the date
hereof.
(d) All right, title and interest in, to and under permits,
authorizations or licenses issued to Seller by the FCC and any other
governmental authority in connection with the operation of the Radio
Stations, (the "Licenses") together with all FCC logs, reports and records
relating thereto, and any renewals or modifications of such items between
the date hereof and the Closing Date, and together with any applications
filed by Seller and pending on the Closing Date, including, but not limited
to those listed in the attached SCHEDULE 1.1(D). Not less than five (5)
business days prior to the Closing Date, Seller shall deliver to Buyer a
listing of any changes to Schedule 1.1(d). Schedule 1.1(d) is (and as
updated, will be) a correct and complete listing of all such Licenses.
(e) All right, title and interest in, to and under all real property
and leases and
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subleases of real property (the "Real Property Leases"), easements,
licenses, right of access, rights of way and other real property interests
which are held or owned by Seller and used or useful in the operation of
the Radio Stations, between Seller and others, together with a copy of each
such lease and sublease. A complete legal description of such real estate
and a complete and accurate list of all such leases and subleases and
other real property rights is set forth in the attached SCHEDULE 1.1(E).
Where the consent of other parties to Seller's assignment of any Real
Property Leases or other real property rights to Buyer is required, Seller
will use commercially reasonable efforts to obtain any required consent by
the Closing Date.
(f) All right, title and interest in, to and under the call letters
"WVBO," "WOSH "WOGB," trademarks, trade names, service marks, franchises,
copyrights, including registrations and applications for registration of
any of them, jingles, logos, and slogans or licenses to use same, together
with any associated goodwill including all business goodwill of the Radio
Stations) and any additions thereto between the date hereof and the Closing
Date including, but not limited to, those described on the attached
SCHEDULE 1.1(F).
(g) All right, title and interest in, to and under all trade (cash)
accounts receivable for the Radio Stations (but excluding non-cash (barter)
agreements)(hereinafter the "Accounts Receivable"). A complete and current
list of Seller's accounts receivable, with aging, is attached as SCHEDULE
1.1(G). Two days prior to the Closing Date, Seller shall deliver to Buyer
an updated Schedule 1.1(g).
(h) All programs and programming materials, in whatever form, all
market studies, promotional or advertising materials used or useful in the
operation of the Radio Stations and all copyrights therefore.
(i) All causes of action, and other rights of recovery against third
parties for any loss, damage or destruction of any of the Radio Stations or
of any of the Assets or breach of duty or obligation with respect thereto.
(j) Any and all assets not specifically identified on the
aforementioned Schedules 1.1(a) through 1.1(i) but which are of the same
general category and nature as the assets listed on the respective
Schedules, owned by Seller and used or useful in the operation of the Radio
Stations, whether or not located on the premises where the principal
operations of the Radio Stations are conducted as of the date of execution
of this Agreement, as set forth in the attached SCHEDULE 1.1(J).
At Closing, the Assets shall be transferred to Buyer free and clear of all
liens, liabilities and encumbrances whatsoever, except Permitted Liens (as
hereinafter defined).
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1.2. CONDITION OF PERSONAL PROPERTY. Seller represents and warrants to
Buyer that all of the assets described in Sections 1.1(a) and 1.1(h) are in good
working condition, repair and order for the normal operations of the Radio
Stations, and are in compliance with FCC and the Federal Aviation Administration
requirements, and will be in such condition on the Closing Date.
1.3 PURCHASE PRICE. Buyer agrees to purchase all of the Assets from
Seller and the Seller agrees to sell all of the Assets to Buyer for the Purchase
Price of Six Million Nine Hundred Fifty Thousand and 00/100 Dollars
($6,950,000.00) (the "Cash Payment") plus a dollar amount equal to the aggregate
of all "current" trade (cash) accounts receivable valued as of the Closing Date,
adjusted for bad debts (the "Accounts Receivable Payment"). For purposes of this
Agreement, "current" trade (cash) accounts receivable means those accounts
arising from advertising and billed in the ordinary course of business,
consistent with Seller's past policies, not more than 120 days prior to the
Closing Date, minus any specifically identified bad debts which Seller
identifies on SCHEDULE 1.3 at the Closing. The parties hereto shall, by the
Closing Date, complete a list of all of the assets covered by this Agreement and
allocate the Purchase Price between tangible and intangible assets on a basis as
detailed as is reasonable according to the business standards of this industry.
1.4 PAYMENT OF PURCHASE PRICE; EARNEST MONEY; ESCROW AGENT.
(a) On the Closing Date, Buyer shall pay to Seller, or its assignee,
in cash or by wire transfer, the sum of the Cash Payment and the Accounts
Receivable Payment, subject to the following deductions and credits on the
Closing Date:
(1) Earnest Money in the amount of Three Hundred Forty Seven
Thousand Five Hundred and 00/100 Dollars ($347,500) which Buyer shall deliver
into escrow to the Escrow Agent described in (b) below on the date set forth in
Section 1.2 of this Agreement, plus interest earned thereon.
(2) Appropriate credits for real and personal property taxes,
prorated to the Closing Date.
(b) Buyer and Seller hereby mutually agree that Broadcast Asset
Management, Inc. shall act as Escrow Agent for purposes of this
transaction, and that the relationship between the Escrow Agent and the
parties hereto shall be governed by a certain Escrow Agreement, attached
hereto as SCHEDULE 1.4 which shall be executed by the Escrow Agent and the
parties hereto, simultaneous with the execution of this Agreement. The
Earnest Money referenced in this section, after being placed in escrow,
shall be deposited by the Escrow Agent with a federally insured financial
institution in an interest bearing account as directed by the Escrow
Agreement. Interest earned on the deposit shall accrue to the benefit of
Buyer, and, together with the principal amount of the escrow deposit, shall
be payable to Seller and credited against the aforementioned Purchase Price
on the Closing Date. If this Agreement is terminated without Closing of
the transaction contemplated
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herein, the Earnest Money and all accrued interest shall be paid to Buyer
or to Seller as provided in the Escrow Agreement.
1.5 PRORATION OF INCOME AND EXPENSES.
(a) ADJUSTMENT TIME AND ITEMS. Except as otherwise provided herein,
all income and expenses arising from the conduct of the business and
operation of the Radio Stations shall be prorated between Buyer and Seller
in accordance with generally accepted accounting principles as of 11:59
p.m., Oshkosh, Wisconsin time, on the date immediately preceding the
Closing Date. Such prorations shall include, without limitation, all ad
valorem, real estate and other property taxes (but excluding taxes arising
by reason of the transfer of the Assets as contemplated hereby, which,
shall be paid as set forth in Section 11.9 of this Agreement), business and
license fees, music and other license fees (including any retroactive
adjustments thereof, which retroactive adjustments shall not be subject to
the sixty day limitation set forth in Section 1.5(b) hereof), utility
expenses, rents and similar prepaid and deferred items attributable to the
ownership and operation of the Radio Stations. Salaries, wages, sales
commissions, fringe benefit accruals, vested leave time (i.e. earned sick
leave and vacation) and termination or severance pay for employees arising
or accruing prior to the Closing Date shall not be pro-rated but shall be
the sole responsibility of Seller.
(b) DETERMINATION. The prorations contemplated by this Section, to
the extent practicable, shall be made as set forth in subsection (a),
above, and shall be implemented on the Closing Date. As to those
prorations not capable of being ascertained on the Closing Date, an
adjustment and proration as of the time stated in subsection (a) above
shall be made within sixty (60) days of the Closing Date. In the event of
any disputes between the parties as to such adjustments, the amounts not in
dispute shall nonetheless be paid at such time and such disputes shall be
determined by the accounting firm of Wipley & Ulrich, Appleton, Wisconsin,
and the fees and expenses of said accountant shall be paid one-half (1/2)
by Seller and one-half (1/2) by Buyer.
1.6 ASSUMED LIABILITIES; RETAINED LIABILITIES.
(a) ASSUMED LIABILITIES. Subject to the provisions of Section
1.6(b), on the Closing Date, Buyer shall assume and undertake to pay,
satisfy or discharge the following: the liabilities, obligations and
commitments of Seller (other than any liability arising from Seller's
noncompliance with the contracts to be assigned and assumed by Buyer on or
prior to the Closing Date) arising or to be performed on or after the
Closing Date under (A) the contracts on Schedule 1.1(c), (B) the real
property and Real Property Leases on Schedule 1.1(e); (C) personal property
leases on Schedule 1.1(a); (D) the advertising contracts listed on Schedule
1.1(b); (E) the licenses set forth on Schedule 1.1(d), in each case as of
the date hereof; (F) the Accounts Receivable referred to on
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Schedule 1.1(g), above; and (G) any other contracts entered into between
the date hereof and the Closing Date which Buyer may in its sole discretion
expressly agrees in writing to assume (collectively, the "Assumed
Liabilities").
(b) RETAINED LIABILITIES. Except as set forth in Section 1.6(a)
hereof, Buyer expressly does not, and shall not, assume or be deemed to
assume, under this Agreement or otherwise by reason of the transaction
contemplated hereby, any liabilities, obligations or commitments of Seller
of any nature whatsoever (collectively, the "Retained Liabilities").
Without limiting the generality of the foregoing, it is understood and
agreed that Buyer is not agreeing to, and shall not, assume any liability
or obligation of Seller to Seller's employees (whether under any existing
written or oral agreements with Seller or otherwise, including any such
liability or obligation in respect of wages, salaries, bonuses, accrued
vacation or sick pay or any other matter) and any liability for Seller's
taxes or trade payables arising on or prior to the Closing Date.
1.7 TRANSFER OF ASSETS AND DELIVERY OF DOCUMENTS. (1) On the Closing
Date, Seller shall deliver, or cause to be delivered, to Buyer the following
documentation:
(a) BILL OF SALE. A bill of sale in the form attached hereto as
SCHEDULE 1.7(1)(A) ("Bill of Sale"), transferring to the Buyer all of the
personal property and equipment identified on Schedules 1.1(a) and 1.1(j),
including, but not limited to, the transmitting towers and antennas with
existing hardware, guy wires and anchor points all free and clear of all
liens and encumbrances.
(b) WARRANTY DEED. A warranty deed in the form attached hereto as
SCHEDULE 1.7(1)(B) ("Warranty Deed") in recordable form and stating that
title to the owned real estate described on Schedule 1.1(e) is free and
clear of all liens and encumbrances, except for easements, restrictions,
rights-of-way of record and property taxes for the current year which are
not yet due and payable (the "Permitted Liens").
(c) ASSIGNMENT AND ASSUMPTION AGREEMENT. A written Assignment and
Assumption Agreement in the form attached hereto as SCHEDULE 1.7(1)(C)
("Assignment and Assumption Agreement"), assigning to the Buyer the
liabilities, obligations and commitments of Seller arising or to be
performed on or after the Closing Date under (A) the contracts on Schedule
1.1(c), (B) the real property and Real Property Leases on Schedule 1.1(e);
(C) personal property leases on Schedule 1.1(a); (D) the advertising
contracts listed on Schedule 1.1(b); (E) the licenses set forth on Schedule
1.1(d), in each case as of the date hereof; (F) the Accounts Receivable
referred to on Schedule 1.1(g), above; and (G) any other contracts entered
into between the date hereof and the Closing Date which Buyer may, in its
sole discretion, expressly agree in writing to assume. Seller shall also
deliver any consents obtained from the parties to those contracts and
agreements being assigned hereunder which by their terms require such
consents for assignment to Buyer.
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(d) UNEMPLOYMENT ACCOUNT. At Buyer's option, the appropriate form,
properly executed, transferring to Buyer Seller's unemployment compensation
account and experience rate for purposes of determining Buyer's
unemployment compensation contributions.
(e) CERTIFICATE OF SECRETARY. A certificate, dated as of the Closing
Date, by the Secretary of Seller certifying the resolutions of the Board of
Directors and shareholders of the Seller approving the execution and
delivery of this Agreement and each of the other documents authorizing the
consummation of the transactions contemplated hereby and thereby, together
with copies of Seller's articles of incorporation, bylaws and listing of
Seller's officers and directors.
(f) CERTIFICATE OF OFFICER. A certificate, dated as of the Closing
Date, by an officer of Seller to the effect that the representations and
warranties of Seller contained in this Agreement are true and complete in
all material respects on and as of the Closing Date as if made on and as of
that date, that, to Seller's knowledge, there is no litigation claim or
proceeding pending against Seller with respect to the transactions
described in this Agreement, and that Seller has complied with or performed
in all material respects all terms, covenants and conditions to be complied
with or performed by it on or prior to the Closing Date.
(g) EVIDENCE OF DISCHARGE OF LIENS. Evidence of discharge of all
liens on the Assets or the Radio Stations, except Permitted Liens.
(h) OPINION OF SELLER'S COUNSEL. An opinion of Seller's counsel in
the form of SCHEDULE 1.7(1)(H) attached hereto.
(i) RECORDS. To the extent available, originals or copies of all
program, operations, transmissions, or maintenance logs and all other
records required to be maintained by the FCC with respect to the Radio
Stations, including the public file for the Radio Stations, left at the
Radio Stations and thereby delivered to Buyer.
(j) ALLOCATION OF PURCHASE PRICE. Documents reflecting the parties'
agreement with respect to the allocation of the Purchase Price.
(k) COVENANT NOT TO COMPETE. A covenant not to compete in the form
of the attached SCHEDULE 1.10.
(l) OTHER DOCUMENTS. Such other documents, instruments and
agreements as Buyer shall request and as shall be reasonably necessary to
consummate the transactions contemplated by this Agreement, each in form
and substance reasonably satisfactory to counsel for Buyer.
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(2) On the Closing Date, Buyer shall deliver or cause to be delivered to
Seller the following documentation:
(a) PURCHASE PRICE. The Purchase Price.
(b) ASSIGNMENT AND ASSUMPTION AGREEMENT. The Assignment and
Assumption Agreement.
(c) CERTIFICATE OF MANAGER OR MEMBER. A certificate, dated as of the
Closing Date, by a manager, or if none exists, by a member, certifying as
to the resolutions of Buyer approving the execution and delivery of this
Agreement and each of the other documents authorizing the consummation of
the transactions contemplated hereby and thereby, together with a copy of
Buyer's articles of organization, operating agreement and a listing of
Buyer's members or managers.
(d) CERTIFICATE OF MEMBER A certificate, dated the Closing Date, by
a member of Buyer to the effect that the representations and warranties of
Buyer contained in this Agreement are true and complete in all material
respects on and as of the Closing Date as if made on and as of that date,
that to Buyer's knowledge, there is no litigation. claim or proceeding
pending against Buyer with respect to the transactions described herein,
and that Buyer has complied with or performed in all material respects all
terms, covenants and conditions to be complied with or performed by it on
or prior to the Closing Date.
(e) ALLOCATION OF PURCHASE PRICE. A document executed by both
parties hereto (see Section 1.7(1)(j)) reflecting their agreement with
respect to the allocation of the Purchase Price.
(f) OPINION OF BUYER'S COUNSEL. An opinion of Buyer's counsel in the
form of SCHEDULE 1.7(2)(F) attached hereto.
(g) COVENANT NOT TO COMPETE. The aforementioned Covenant Not to
Compete.
(h) OTHER DOCUMENTS. Such other documents, instruments and
agreements as Seller shall request and as shall be reasonably necessary to
consummate the transactions contemplated by this Agreement, each in form
and substance reasonably satisfactory to counsel for Seller.
1.8 CLOSING. The Closing, subject to the conditions set forth herein,
shall take place at the law offices of Lathrop & Clark, 122 W. Washington Ave.,
Suite 1000, Madison, WI 53701-1507, or at such other place as the parties may
mutually agree. For purposes of this Agreement, the "Closing" shall mean and
describe the meeting between the parties hereto, subsequent to the satisfaction
of all terms and conditions set forth herein, to fully consummate the
transaction
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described herein. The "Closing Date" shall mean a date fixed by Seller which is
not less than five (5) business days or more than ten (10) business days after
the date on which the FCC Consent (as defined in Section 7.1 hereof) shall have
become a Final Order provided however that Seller and Buyer may, by mutual
agreement, elect to waive finality; in which event, the Closing shall occur on
the tenth business day after the date such notice is given, or at such earlier
date that the Seller or Buyer (whichever gives such notice) specifies. For
purposes of this Agreement, the term "Final Order" means action by the FCC
consenting to the assignment of a license issued by the FCC which is not
reversed, stayed, enjoined, set aside, annulled or suspended, and with respect
to which action no timely request for stay, petition for rehearing or appeal is
pending, and as to which the time for filing any such request, petition or
appeal or reconsideration by the FCC on its own motion has expired.
1.9. COVENANT OF NON-INTERFERENCE. Between the date of this Agreement and
the Closing Date, management and control of the Radio Stations shall be the sole
responsibility of, and in the complete discretion of Seller, subject to Section
4.1 of this Agreement. It is further understood and agreed that, effective as
of the Closing Date, and thereafter, Seller shall have no control over, nor
right to intervene in, nor participate in, the operation of the Radio Stations,
nor to supervise any programs on the Radio Stations.
1.10 COVENANT NOT TO COMPETE. On the Closing Date, Seller shall execute,
and shall cause Mid-West Management, Inc., William R. Walker, Philip Fisher,
Richard T. Record and William Rittman, and any other person mutually agreed upon
by the parties hereto, to execute a covenant not to compete with Buyer in the
market served by the Radio Stations in the form of SCHEDULE 1.10 attached
hereto.
1.11 EMPLOYER AND EMPLOYEE BENEFITS. Attached hereto as SCHEDULE 1.11 is a
correct and complete listing of all employees of Seller, working at the, or in
connection with Radio Stations, setting forth their respective positions, job
descriptions, salaries or wages, and all other forms of compensation paid to
them for their work at the Radio Stations. Upon notice to Seller, and at
mutually agreeable times, Seller will permit Buyer to meet with its employees
prior to the Closing Date. Buyer may, at its option, extend offers of
employment to all or any of Seller's employees effect on the Closing Date.
Seller will not take any action to preclude or discourage any of Seller's
employees from accepting any offer of employment extended by Buyer. At Seller's
option, the general manager of the Radio Stations may participate in any meeting
between Buyer and any employee of the Radio Stations.
1.12 FINANCING. During the forty-five (45) day period following the date
of this Agreement, Buyer will use commercially reasonable and good faith efforts
to conclude equity financing for the purchase of the Radio Stations
contemplated hereby, on terms acceptable to Buyer in its sole discretion. In
the event that Buyer obtains such equity financing during such forty-five day
period, Buyer will immediately deposit the Earnest Money with the Escrow Agent.
In the event Buyer is unable to obtain such equity financing during said time
period, either Buyer or Seller may, at their option by notice to the other,
terminate this Agreement without further
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obligation or penalty.
1.13 DUE DILIGENCE. Buyer may test and inspect all of the Assets, Seller's
financial records and other books and records relating to the Radio Stations
within forty-five (45) days of the date of execution of this Agreement to
determine (1) if the Assets are in the condition called for by this Agreement;
and (2) that Seller's financial records reflect the income generating capacity
of the Radio Stations upon which the Purchase Price is based. Such inspection
and testing shall be conducted so as not to interfere unreasonably with or
disrupt the operation of the Radio Stations. In the event that, in Buyer's
reasonable judgment, following Buyer's inspection and testing of the Assets, the
condition of any of the Assets does not comply with the terms this Agreement,
Buyer shall immediately provide written notice to Seller of such failure, (which
shall include a copy of the written inspection report). Thereafter, the parties
hereto will cooperate with each other to reach an agreement on the method of
compliance with the terms of this Agreement. In the event the parties hereto
cannot agree on the method or the payment of the costs to restore any such Asset
to the condition required by this Agreement, either Buyer or Seller may, upon
written notice to the other, terminate this Agreement. If, after inspection of
Seller's financial records, Buyer concludes, in its good faith judgment, that a
material discrepancy exists in the value of the Radio Stations as compared to
the purchase price for the Radio Stations as set forth by the parties hereto in
their Letter of Intent dated January 2, 1997, Buyer shall immediately provide
written notice to Seller of its findings. Thereafter, the parties may cooperate
to reach an agreement on whether an appropriate adjustment to the Purchase Price
is warranted, and if so, the amount of the adjustment; or either party may
terminate this Agreement without any liability upon written notice to the other
party.
1.14 CONDUCT OF BUSINESS PRIOR TO CLOSING. Between the date hereof and the
Closing Date, Seller will conduct the business of the Radio Stations only in the
ordinary course, consistent with its past practices, including but not limited
to the following:
(a) the personal property used and useful in the operation of the
Radio Stations will be maintained in normal operating condition and repair;
(b) no material personal property or real property used and useful in
the operation of the Radio Stations will be sold, transferred or
terminated, and no additional material personal property or real property
will be acquired, except for acquisition made in the normal and ordinary
course of business;
(c) no new lien or encumbrance against the Assets will be created;
(d) material Contracts and advertising agreements will not be
modified or terminated, and those material contracts and advertising
contracts identified in a written notice by Buyer will not be renewed and
material contracts and advertising agreements that will remain in effect
after the Closing Date will not be entered into, in each case, without
Buyer's consent;
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(e) Seller will take all commercially reasonable actions to preserve
and maintain the Licenses and the intellectual property listed on Schedule
1.1(f) and will operate the Radio Stations in compliance with all provisions of
the FCC licenses, Communications Act and the rules and regulations of the FCC;
(f) Seller will not alter its credit and collection policies or it
accounting policies;
(g) Seller will not alter the benefits available to its employees,
but may renew employment contracts in the normal and ordinary course of
business upon notice to Buyer;
(h) the programming of the Radio Stations will not be materially
altered from the current format; and
(i) Seller will use commercially reasonable efforts to preserve
relationships with employees, advertisers, vendors, and others currently
dealing with the Radio Stations.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
In addition to representations, warranties, and covenants made elsewhere in
this Agreement, Seller represents, warrants and covenants to Buyer that both as
of the date hereof and as of the Closing Date, each of the following statements
are, and shall be, correct and complete:
2.1 ORGANIZATION AND STANDING OF SELLER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Wisconsin and has all requisite power and authority to: (i) own, lease, operate
and sell the Assets; and (ii) carry on the business of the Radio Stations as now
being conducted and as proposed to be conducted by Seller between the date
hereof and the Closing Date.
2.2 AUTHORIZATION AND BINDING OBLIGATION. Seller has the power and
authority to enter into and perform this Agreement and the transactions
contemplated hereby, and Seller's execution, delivery and performance of this
Agreement, and the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on its part. This Agreement has
been duly executed and delivered by Seller and this Agreement constitutes, and
the agreements to be executed in connection herewith will, subject to approval
by the FCC, constitute the valid and binding obligation of Seller enforceable in
accordance with their terms.
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2.3 OWNERSHIP OF ASSETS. Seller now owns and on the Closing Date will own
the Assets and has and will have, subject to FCC approval, full power and
authority to sell, transfer and assign such Assets (including the assets of the
former Valley Radio Results Partnership) to Buyer in the manner provided herein,
free and clear of any and all liens except for Permitted Liens. There are no
assets used or useful in the operation of the Radio Stations other than the
Assets, except for cash on hand and cash equivalent assets.
2.4 COMMISSION LICENSES AND COMPLIANCE WITH FCC REQUIREMENTS.
(a) All licenses, permits, authorizations, franchises, certificates of
compliance, and consents of governmental bodies, including, without
limitation, the FCC licenses, used or useful in the operation of the Radio
Stations as they are now being operated are detailed in Schedule 1.1(d) and
are in full force and effect, are unimpaired by any acts or omissions of
Seller or Seller's employees or agents, and are free and clear of any
restrictions which might limit the full operation of the Radio Stations.
Except as set forth in Schedule 1.1(d), no condition exists or event has
occurred that permits, or after notice or lapse of time, or both, would
permit, the revocation or termination of any such license, permit, consent,
franchise, or authorization (other than pursuant to their express
expiration date) or the imposition of any material restriction or
limitation upon the operation of the Radio Stations as now conducted.
Except as set forth in Schedule 1.1(d), Seller is not aware of any reason
why the FCC licenses might not be renewed in the ordinary course or
revoked.
(b) Each of the Radio Stations is in material compliance with the
FCC's policy on exposure to radio frequency radiation. No renewal of any
FCC License would constitute a major environmental action under the FCC's
rules or policies. Access to the Radio Stations' transmission facilities
is restricted in accordance with the policies of the FCC.
(c) Except as set forth in Schedule 1.1(d), to the best of Seller's
knowledge, Seller is not the subject of any FCC or other governmental
investigation or any notice of violation or order,or any material
complaint, objection, petition to deny, or opposition issue by or filed
with the FCC or any other governmental authority in connection with the
operation of or authorization for the Radio Stations, and there are no
proceedings (other than rulemaking proceedings of general applicability)
before the FCC or any other governmental authority that could adversely
affect any of the FCC Licenses or the authorizations listed in Schedule
1.1(d).
(d) Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Radio Stations all material
reports, applications, documents, instruments, and other information,
required to be filed, and will continue to make such filings through the
Closing Date.
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2.5 INSURANCE. There is presently in force adequate fire, theft and
general casualty insurance in respect to the Assets together with general
liability insurance covering the business and operation of the Radio Stations.
Seller will maintain such insurance in force until the Closing Date. Such
policies are valid and enforceable, and provide adequate insurance coverage for
the Assets and operations of the Radio Stations. A list of such policies
showing the names of the insurers, the property or liability insured and the
amounts of coverage is attached hereto as SCHEDULE 2.5.
2.6 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Seller has good and marketable title to all of the properties
and Assets described in this Agreement, and has not sold or otherwise
disposed of any such properties or Assets referred to in Section 1.1
(except for Assets acquired or disposed of in the normal and ordinary
course of business) and the same will be true and correct as of the Closing
Date. Buyer, at its option and expense, prior to the Closing Date, may
conduct a Uniform Commercial Code name search under the name of Seller,
with the Wisconsin Secretary of State and the Winnebago County Register of
Deeds. If the written reports from such searches indicate the presence of
liens on any of Seller's property, all such liens shall be removed,
satisfied or otherwise released by Seller on or prior to the Closing Date.
(b) With respect to the leases of real and personal property listed
in Schedule 1.1(d): (i) the lease is in full force and effect; (ii) all
accrued and payable rents have been paid; (iii) Seller has been in
peaceable possession since the beginning of the original term of such lease
and is not in default hereunder, and no waiver, indulgence, postponement of
Seller's obligations have been granted by the lessor; (iv) no event of
default, and no event that with the giving of notice, the lapse of time, or
the happening of any further event would become a default, under any such
lease has occurred; (v) Seller has not violated any material term or
condition under any such lease in any respect; and (vi) each material
covenant to be performed by Seller under such lease has been fully
performed.
(c) With respect to the Radio Stations' transmitter sites (the
"Sites"), (i) there are no encroachments on any portion of the Sites
owned, lease, or used by Seller by any buildings, structures, or
improvements located on adjoining real estate; (ii) none of the buildings,
structures or improvements (including any guy wires or anchors) owned,
leased or used by Seller on the Sites encroach upon adjoining real estate
and all such buildings, structures and improvements conform to all
"setback" lines, easements, and other restrictions or rights of record
established by applicable building, zoning or safety ordinances; (iii) the
radio transmission facilities owned, leased or used by Seller at the Sites
conform in all material respects to all regulations, codes, ordinances, and
statutes of all applicable governmental authorities, including, without
limitation all environmental protection and sanitary laws and regulations,
occupational safety and health regulations and electrical codes. All
towers and other structures owned, lease or used by Seller at the Sites are
painted and lighted in material compliance with the rules and requirements
of the
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FCC, the Federal Aviation Administration, and all applicable requirements
of state and local law.
2.7 ABSENCE OF CONFLICTS. Neither Seller's entry into this Agreement, nor
its sale of the Assets and the transfer of the Radio Stations as contemplated by
this Agreement will (a) violate any law, regulation, judgment, order or
restriction applicable, the Assets or the Radio Stations; (b) violate the
provisions of Seller's articles of incorporation and by-laws; (c) conflict with
or cause a breach or termination of or give rise to any lien under any
agreement, lease, license or instrument of indebtedness. Other than violations,
conflicts or breaches which will not have a material adverse effect on the
Stations or the Assets. Other than the filings with and approvals by the FCC
contemplated hereby, Seller does not need to give notice to or obtain the
consent of any governmental agency or unit to conclude the transactions
contemplated hereby.
2.8 LITIGATION. There is no litigation, action, suit, investigation or
proceeding pending or, to Seller's knowledge, threatened against or affecting
Seller or the Radio Stations, or involving any of the Assets, at law or in
equity, or before any federal, state, municipal, local, or other government or
authority, and there has been no assertion and, to Seller's knowledge, no
grounds to assert any claim against Seller which or before any administrative
agency or arbitrator (including, without limitation, any proceeding which seeks
the forfeiture of, or opposes the renewal of any of the Licenses) (a) could
reasonably be expected to have an adverse affect on the financial condition,
Assets, or operations of the Radio Stations or (b) seeks to enjoin or prohibit,
or other questions the validity of, any action to be taken pursuant to or in
connection with this Agreement.
2.9 ABSENCE OF ADVERSE AGREEMENTS. Seller is not a party to any agreement
or instrument or subject to any judgment, order or decree, or rule or regulation
of any court or governmental agency or authority which adversely affects or, to
the best Seller's knowledge, in the future may materially and adversely affect
the financial condition, operation, or assets of the Radio Stations.
2.10 CONTRACTS. Schedules 1.1(b), 1.1(c) and 1.1(e) attached hereto
contains a list of all of the agreements, leases and other contracts to which
the Radio Stations and Seller are a party or by which, as of the date hereof,
the Radio Stations and Seller may be bound or obligated in any way or which are
required to operate the Radio Stations in the manner in which it is currently
operated. All of such agreements, leases and other contracts are valid, binding
and enforceable by Seller in accordance with their respective terms. The
aforedescribed agreements, contracts and leases shall not be rendered
unenforceable by their assignment and transfer to Buyer. Seller is not in
material breach or default thereof, there is no claim of breach or default, and
Seller has no knowledge of any act or omission which has occurred or which has
been threatened which could result in a breach or default thereof. Seller has
delivered complete and accurate copies of all such agreements, contracts, and
leases to Buyer as they are currently in effect.
2.11 INTELLECTUAL PROPERTY. Schedule 1.1(f) attached hereto contains a
list of all intellectual property applied for, issued to or owned by the Seller
or under which Seller is a
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licensee and used in the conduct of the business and operation of the Radio
Stations. Such intellectual property is all of the intellectual property used
in connection with the operation of the Radio Stations in the manner conducted
by Seller.
2.12 INSOLVENCY. No insolvency proceedings of any character, including but
not limited to bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting Seller or any of
the Assets is pending or, to the best knowledge of Seller, threatened, and
Seller has made no assignment for the benefit of creditors, nor taken any
actions with a view to, or which would constitute the basis for, the institution
of any insolvency proceedings.
2.13 COMMISSION OR FINDER'S FEE. To the extent that Seller employs a
broker, any commission, finder's fee or similar payment in connection with this
Agreement or any matter related hereto shall be paid by, and the sole obligation
of, Seller.
2.14 ENVIRONMENTAL. To the best of Seller's knowledge, Seller has complied
with all laws (including rules and regulations thereunder) of federal, state,
and local governments (and all agencies thereof) concerning the environment,
public health, and safety, and employee health and safety, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against Seller alleging any failure to comply
with any such law or regulation. Seller has not unlawfully generated, stored,
released or disposed of any hazardous waste or hazardous substance including
Polychlorinated Byphenyls ("PCBs") in connection with the operation of the Radio
Stations. To the best of Seller's knowledge, no hazardous waste has been
generated, stored or disposed of by any other person on the real estate occupied
by Seller, the Radio Stations or their transmitters. As used herein, the term
"hazardous waste" shall mean as defined in federal and state environmental
statutes. The technical equipment included in the Assets does not contain any
PCBs. To the best of Seller's knowledge, there is no asbestos insulation or
other asbestos-containing materials at the Radio Stations. At its option,
Buyer may conduct an Environmental Audit of the real property referenced in
this Agreement. One-half of the cost of any such audit shall be born by Seller
and one-half by Buyer.
2.15 WARRANTIES TRUE AND CORRECT. No warranty or representation by Seller
contained in this Agreement or in any certificate or other instrument to be
furnished pursuant hereto contains or will contain any untrue statement of fact
or omits or will omit to state any fact required to make the statement therein
contained not misleading. Seller shall provide Buyer prompt written notice of
any change in any of the information contained in the representations and
warranties made in Article II hereof.
2.16 COMPLIANCE WITH BULK SALES LAWS; SALES TAX. Seller will comply with
all bulk sales laws to the extent they may be applicable to this transaction.
Seller does not hold a Wisconsin sales tax permit.
2.17 FINANCIAL STATEMENTS. The financial statements of Seller provided to
Buyer have
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been prepared in accordance GAAP applied on a consistent basis throughout the
periods covered thereby, are correct and complete in all material respects and
are consistent with the books and records of Seller (which books and records
are correct and complete in all material respects).
2.18 TAX MATTERS. Seller has filed all tax returns that it was required to
file. Except for 1997 real and personal property taxes (which are payable in
1998), all taxes owed by Seller have been paid (including payroll withholding
taxes). To the best knowledge of Seller, there are no security interests on any
of the Assets that arose in connection with any failure (or alleged failure) to
pay an tax.
2.19 EMPLOYEE BENEFITS. To Seller's knowledge, each employee benefit plan
(and each related insurance contract) complies in form and operation in all
material respects with the applicable requirements of ERISA and the Internal
Revenue Code. SCHEDULE 2.19 lists all employee benefit plans that Seller
maintains or to which Seller contributes for the benefit of any current employee
of Seller.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer hereby represents, warrants and covenants to Seller that both as of
the date hereof and as of the Closing Date, each of the following statements
are, and shall be, correct and complete :
3.1 BUYER'S ORGANIZATION. Buyer is a limited liability company duly
organized, validly existing and in good standing under and by virtue of the laws
of the State of Delaware and has all requisite power and authority to (i) own,
lease, and operate its properties and carry on its business, and (ii) enter into
this Agreement and perform the transactions contemplated hereby.
3.2 APPROVALS. The execution and delivery of this Agreement by Buyer and
the performance of its obligations hereunder has been duly authorized by
appropriate resolutions of Buyer and this Agreement constitutes, subject to
approval by the FCC, a valid and binding obligation of Buyer in accordance
with its terms.
3.3 CAPABILITY. There are no facts which, under the Communications Act of
1934, as amended, or the existing rules and regulations of the FCC, would
disqualify Buyer as an assignee of the FCC licenses. Subject to Section 1.12,
hereof, Buyer knows of no facts or information, financial or otherwise, which
would or will prevent Buyer from completing this transaction in accordance with
the terms of this Agreement.
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3.4 WARRANTIES TRUE AND CORRECT. No warranty or representation by Buyer
contained in this Agreement or in any certificate or other instrument to be
furnished pursuant hereto contains or will contain any untrue statement of fact
or omits or will omit to state any material fact required to make the statement
therein contained not misleading.
ARTICLE IV
EXAMINATION BY BUYER PRIOR TO CLOSING
Buyer and Seller hereby agree as follows:
4.1 EXAMINATION BY BUYER. From the date of this Agreement until the
Closing Date, Seller will accord to Buyer, its officers, counsel, accountants,
engineers and other representatives full access to its properties, contracts,
commitments and FCC, financial and other related records, at all reasonable
times during business hours, and such representatives will be furnished true and
complete copies of the same as such representatives may reasonably request;
provided, however, that such review shall be conducted so as to not interfere
unreasonably with or disrupt the business and broadcast operations of Seller.
Upon at least 24 hours notice to Seller, Seller shall cause the employees of the
Radio Stations to furnish and discuss with Buyer and its representatives the
information described in this Section 4.1.
4.2 CONFIDENTIALITY. Buyer agrees that it and its representatives will
use commercially reasonable efforts to maintain the confidence of and not
utilize in any manner (other than to analyze the transactions contemplated by
this Agreement) all data and information so obtained from Seller, and if this
transaction is not consummated, Buyer and its officers, agents and
representatives will return to Seller all such data in its possession, including
all copies made thereof.
4.3 EXCLUSIVITY. From the date Buyer deposits the Earnest Money with the
Escrow Agent (the "Deposit Date"), Seller will not solicit, initiate, encourage,
participate, facilitate or provide any information with respect to any proposal
or offer of any person or entity other than Buyer relating to any merger,
consolidation, recapitalization, acquisition of the Radio Stations, the Assets,
the FCC Licenses, or its capital stock or any similar transaction. From the
date of this Agreement, Seller will promptly notify Buyer of any such offer or
contract with respect to any such transaction. From the date of this Agreement
until the Deposit Date, Buyer may solicit, encourage, participate, facilitate or
provide any information with respect to any proposed offer of any person or
entity other than Buyer relating to any merger, consolidation, recapitalization,
acquisition of the Radio Stations, the Assets, the FCC licenses, or its capital
stock or any similar transaction. If Seller is prepared to accept any other
offer of any person or entity other than Buyer, Seller will notify Buyer and,
unless Buyer tenders the Earnest Money to the Escrow Agent within two (2)
business days, Seller may accept the other offer.
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4.4 REAL ESTATE. Seller will, by the Closing Date, obtain, at Seller's
expense, policies of title insurance on all owned real estate included in the
Assets, in the amount of the fully assessed value of all such owned real estate,
with such endorsements as Buyer may reasonably request, except that Buyer shall
bear the additional cost and expense of obtaining the endorsements it desires to
have included in the title insurance policies. Seller shall obtain, at Buyer's
expense surveys of the real estate owned by the Seller.
ARTICLE V
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS HEREUNDER
The obligations of Buyer under this Agreement are subject at the Closing
Date to the conditions listed in this Article. Buyer may waive any one or more
of the following conditions, by written notice delivered at or prior to the
Closing Date, other than that of the FCC Consent:
5.1 FCC APPROVAL. The FCC shall have issued the FCC Consent (as defined
in Section 7.1 hereof) without any condition that would have a material adverse
effect upon Buyer, and such FCC Consent shall have become a Final Order (as
defined in Section 1.8 hereof).
5.2 SELLER REPRESENTATIONS AND WARRANTIES AND COVENANTS. Seller's
representations and warranties contained in this Agreement and in any document
delivered pursuant hereto shall be true and correct in all material respects as
of the Closing Date as if made on and as of that date. Seller shall have
performed and complied in all material respects with all agreements, covenants
and conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
5.3 GOVERNMENTAL AUTHORIZATIONS. Seller shall be the holder of the
Licenses and there shall not have been any modification of any of such Licenses
which has, or will have, a material adverse effect on the Radio Stations or the
conduct of its business and operation. No proceedings shall be pending which
seeks or the effect of which reasonably could be to revoke, cancel, fail to
renew, suspend, modify or impose any material condition upon any Licenses or any
material licenses, permits or authorizations of the Radio Stations.
5.4 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the Assets, business, prospects, condition (financial or otherwise) or
results of Seller, the Assets or the Radio Stations.
5.5 NO ADVERSE PROCEEDINGS. No suit, action, claim or governmental
proceeding shall be pending against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered against,
any party hereto which would render it unlawful, as of the Closing Date, to
effect the transactions contemplated by this Agreement in accordance with its
terms.
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5.6 CLOSING DELIVERIES. Seller shall have delivered to Buyer those items
required to be delivered at or prior to the Closing Date under the terms of this
Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are subject at the Closing
Date to the conditions set forth in this Agreement. Seller may waive any one
or more of the following conditions, by written notice delivered at or prior to
the Closing Date, other than those in Section 6.1.
6.1 FCC APPROVAL. The FCC shall have issued the FCC Consent for the Radio
Stations without any condition that would have a material adverse effect upon
Seller.
6.2 BUYER REPRESENTATION AND WARRANTIES. Buyer's representations
contained in this Agreement shall be true and correct as of the Closing Date in
all material respects. Buyer shall have performed and complied in all material
respects with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
6.3 CLOSING DELIVERIES. Buyer shall have delivered to Seller all items
required to be delivered at or prior to the Closing Date under the terms of this
Agreement.
ARTICLE VII
FCC CONSENT
7.1. FCC CONSENT. It is specifically understood and agreed by Buyer and
Seller that the Closing and the assignment of the FCC licenses, permits and
other authorizations pertaining to the Radio Stations are expressly conditioned
on and are subject to the prior consent and approval of the FCC or its Staff
acting pursuant to delegated authority (the "FCC Consent").
7.2. ASSIGNMENT APPLICATIONS. Within ten (10) business days after Buyer's
deposit of the Earnest Money with the Escrow Agent, Seller and Buyer shall
jointly file with the FCC an application for assignment of the FCC licenses,
permits and authorizations pertaining to the Radio Stations (the "Assignment
Application") from Seller to Buyer. The cost of the FCC filing fees in
connection with the Assignment Application shall be divided equally between the
parties. Each party shall pay their own attorneys' fees. Seller and Buyer
shall thereafter prosecute the Assignment Application with all reasonable
diligence and otherwise use commercially reasonable efforts to obtain the grant
of the Assignment Application as expeditiously as practicable (but
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neither Seller nor Buyer shall have any obligation to satisfy complainants or
the FCC by taking any steps which would have a material adverse effect upon it
or upon any affiliated entity). If the FCC Consent imposes any condition on
either party to the Assignment Application, such parties shall use commercially
reasonable efforts to comply with such condition; provided, however, that
neither party shall be required hereunder to comply with any condition that
would have a material adverse effect upon the Radio Stations, it or any
affiliated entity. Seller and Buyer shall jointly oppose any requests for
reconsideration or judicial review of the FCC Consent and shall jointly request
from the FCC any extension of the effective period of the FCC Consent if the
Closing shall not have occurred prior to the expiration of the original
effective period of the FCC Consent. Nothing in this Section 7.2 shall be
construed to limit either party's right to terminate this Agreement pursuant to
Article VIII hereof.
ARTICLE VIII
TERMINATION
8.1 GROUNDS FOR TERMINATION.
This Agreement may be terminated by either Buyer or Seller, provided that
the party seeking to terminate is not in breach of any of its material
obligations under this Agreement, upon the occurrence of any of the following:
(a) If, on or prior to the Closing Date, the other party breaches any
of its material obligations contained herein, and such breach is not cured
by the earlier of the Closing Date or twenty (20) business days after
receipt of the notice of breach from the non-breaching party; or
(b) If any Assignment Application is designated for hearing; or
(c) If any Assignment Application is denied by Final Order; or
(d) If there shall be in effect any judgment, or final decree order
that would prevent or make unlawful the consummation of this Agreement; or
(e) If the Closing has not occurred within two hundred seventy (270)
days after the Assignment Applications are tendered for filing; or
(f) If either party hereto terminates this Agreement pursuant to
Section 1.13 or Section 1.12, above.
8.2 LIABILITY. The termination of this Agreement under Section 8.1 shall
not relieve any party of any liability for breach of this Agreement prior to the
date of termination.
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ARTICLE IX
DEFAULT
9.1 DEFAULT BY SELLER. In the event this Agreement is not closed because
of default on the part of the Seller, Buyer shall be entitled to pursue any and
all available legal or equitable remedies for any actual and consequential
damages and reasonable attorney's fees sustained as a consequence of such
default including, without limitation, the remedy of specific performance.
9.2 DEFAULT BY BUYER. In the event this Agreement is not closed because
of default on the part of the Buyer, Seller shall be entitled to pursue any and
all available legal or equitable remedies for any actual and consequential
damages and reasonable attorney's fees sustained as a consequence of such
default, including, without limitation, the remedy of specific performance.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER. Seller hereby covenants and agrees to
hold harmless, defend, and indemnify Buyer, its successors and assigns, from and
against any claims, actions, suits, proceedings, assessment judgments, costs,
losses, damages, liabilities, liens, encumbrances, charges, fines, penalties and
expenses (including without limitation reasonable attorneys' fees)
(collectively, "Damages") asserted against, resulting from, imposed upon or
incurred by Buyer directly or indirectly relating to or arising out of: or as a
consequence of: (i) the business and operation of the Radio Stations prior to
and on the Closing Date, (ii) any inaccuracy of any representation or warranty
herein or in any certificate, document or instrument delivered hereunder on the
part of the Seller; (iii) any failure by Seller to perform and comply with any
of its covenants, conditions or agreements set forth in this Agreement; (iv) any
l failure to comply with any "bulk sales" laws applicable to the transactions
contemplated hereby; (v) a claim by any person or entity based on any
arrangement or agreement to pay a commission, finder's fee or similar payment in
connection with this Agreement made or alleged to have been made by Seller; and
(vi) the Retained Liabilities.
10.2 INDEMNIFICATION BY BUYER. Buyer hereby covenants and agrees to
hold harmless, defend and indemnify Seller, its successors and assigns, from
and against any Damages asserted against, resulting from, imposed upon or
incurred by Seller directly or indirectly relating to or arising out of: (i) the
business and operation of the Radio Stations after the Closing Date; (ii) any
inaccuracy of any representation or warranty herein or in any certificate,
document or instrument delivered hereunder on the part of the Buyer; (iii) the
Assumed Liabilities; (iv) any failure by Buyer to perform any of its covenants,
conditions or agreements set forth in this Agreement; and
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(v) a claim by any person or entity based on any arrangement or agreement to pay
a commission, finder's fee or similar payment in connection with this Agreement
made or alleged to have been made by Buyer.
10.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein shall survive the Closing for a period of two (2)
years (five (5) years for Section 2.18) following the Closing Date and, in each
case, without regard for Buyer's or Seller's actual knowledge of a breach
thereof. Notwithstanding anything to the contrary contained herein, the
indemnification obligations contained in Sections 10.1 and 10.2 arising in
connection with the Retained Liabilities and Assumed Liabilities, as well as the
representations and warranties set forth in the aforementioned Bill of Sale and
Warranty Deed, shall survive forever.
10.4 PROCEDURES.
(a) NOTICE. Promptly after the receipt by either party (the
"Indemnified Party") of notice of any claim or the commencement of any
action or proceeding which may entitle such party to indemnification under
this Section, such party shall give the other party (the "Indemnifying
Party") written notice of such claim or the commencement of such action or
proceeding and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting from such claim. The failure to
give the Indemnifying Party timely notice under this Section 10.4 shall not
preclude the Indemnified Party from seeking indemnification from the
Indemnifying Party unless, and to the extent that, such failure has
materially prejudiced the Indemnifying Party's ability to defend the claim
or litigation.
(b) ASSUMPTION OF DEFENSE. If the Indemnifying Party assumes the
defense of any such claim or litigation resulting therefrom with counsel
reasonably acceptable to the Indemnified Party, the obligations of the
Indemnifying Party as to such claim shall be limited to taking all steps
necessary in the defense or settlement of such claim or litigation
resulting therefrom and to holding the Indemnified Party harmless from and
against any losses, damages and liabilities caused by or arising out of any
settlement approved by the Indemnifying Party or any judgment in connection
with such claim or litigation resulting therefrom; provided, however, the
Indemnified Party may participate, at its expense, in the defense of such
claim or litigation provided that the Indemnifying Party shall direct and
control the defense of such claim or litigation. The Indemnified Party
shall cooperate and make available all books and records reasonably
necessary and useful in connection with the defense. The Indemnifying
Party shall not, in the defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment, except with the written
consent of the Indemnified Party, or enter into any settlement, except with
the written consent of the Indemnified Party, 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
claim or litigation.
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(c) NON-ASSUMPTION OF DEFENSE. If the Indemnifying Party shall not
assume the defense of any such claim or litigation resulting therefrom, the
Indemnified Party may, but shall have no obligation to, defend against such
claim or litigation in such manner as it may deem appropriate, and the
Indemnified Party may compromise or settle such claim or litigation without
the Indemnifying Party's consent. The Indemnifying Party shall promptly
reimburse the Indemnified Party for the amount of all expenses, legal or
otherwise and including the amounts of judgments entered or settlements
agreed to, incurred by the Indemnified Party in connection with the defense
against or settlement of such claim or litigation. If no settlement of the
claim or litigation is made, 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 expenses,
legal or otherwise, incurred by the Indemnified Party in the defense
against such claim or litigation.
ARTICLE XI
MISCELLANEOUS
11.1 ENTIRE AGREEMENT; BINDING EFFECT. This Agreement, and the Schedules
attached hereto constitute the entire agreement between the parties hereto with
respect to the subject matter hereof, and supersedes any and all prior
agreements, arrangements and understandings relating to the matters provided for
herein. No party shall be in any manner responsible as to any warranties,
representations, or guarantees except as specifically set forth herein. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective heirs, legal representatives, successors and assigns
of the parties hereto.
11.2 APPLICABLE LAW. This Agreement is made pursuant to and shall be
construed under the laws of the State of Wisconsin, subject, however, to all
applicable rules and regulations of the FCC.
11.3 NOTICES, ETC. All notices, requests, demand and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
personally delivered or five (5) days after being deposited in the United States
mail, certified mail, postage prepaid, return receipt requested, or twenty-four
(24) hours after delivery to a reputable courier service which guarantees
overnight delivery, addressed as follows:
(a) IF SELLER, TO:
Thomas A. Walker
Value Radio Corp., Inc.
c/o Mid-West Management
2740 Ski Lane
Madison WI 53713
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With copy to:
Jerry E. McAdow, Esq.
Lathrop & Clark
122 W. Washington Avenue
Suite 1000
Madison, WI 53701-1507
(b) IF TO BUYER, TO:
Terrence J. Leahy
Cumulus Media, L.L.C.
c/o Quaestus Management Corp.
330 E. Kilbourn Ave. Suite 250
Milwaukee, WI 53202
With copy to:
Richard Bonick
Cumulus Media LLC
c/o Century Broadcasting
875 N. Michigan Avenue
Chicago IL 60611
Peter Trybula
Baker & Daniels
205 W. Jefferson Blvd, Suite 250
South Bend, IN 46601
11.4 COUNTERPARTS. This Agreement may be signed in counterpart originals,
which collectively, when each of the parties hereto have signed a counterpart,
shall have the same legal effect as if all signatures had appeared on the same
physical document.
11.5 SEVERABILITY. The parties agree that if any provision of this
Agreement shall under any circumstances be deemed invalid or inoperative, this
Agreement shall be construed with the invalid or inoperative provision deleted,
and the rights and obligations of the parties shall be construed and enforced
accordingly; provided, however, that if the deletion of any provision materially
alters the burdens or benefits of either party, the parties agree to negotiate
in good faith such modifications to this Agreement as are appropriate to insure
the burdens and benefits of each party are reasonably comparable to those
originally contemplated and expected.
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11.6 WAIVER. No waiver by either party hereto of a breach of any of the
terms and conditions of this Agreement by the other party shall be construed as
a waiver by such party of any subsequent breach.
11.7 EXPENSES. Except as otherwise set forth in Sections 7.2, 1.5(b), 4.4
and 2.14 herein, the parties hereto shall pay their own expenses, including,
without limitation, brokers', accountants' and attorneys' fees incurred in
connection with the negotiation and consummation of the transactions
contemplated by this Agreement.
11.8 RISK OF LOSS. The risk of loss or damage by fire or other casualty
or cause to those physical properties which are the subject of this Agreement
shall, until the Closing Date, be upon Seller. In the event of any material
damage, deterioration (normal wear and tear excepted) destruction, or loss
materially adversely affecting any item of tangible property included in the
Assets, the parties shall have the following options:
(i) If the loss is covered by insurance, Buyer may choose
between taking the insurance payment in lieu of the lost property or
require Seller to use the insurance proceeds to restore the lost
assets to the condition they were in prior to the casualty, normal
wear and tear excepted.
(ii) If there are either no or inadequate insurance proceeds to
cover the loss, Buyer shall be entitled, at its option, to (i) receive
from Seller the dollar amount required to restore such assets to the
condition such assets were in prior to the damage or destruction or
(ii) credit Buyer's cost of repair or restoration of such assets
against the Purchase Price or (iii) terminate this Agreement without
any liability.
11.9 FURTHER ASSURANCES. After the Closing, each party shall from time to
time, at the request of and without further cost or expense to the other,
execute and deliver such other instruments and take such other actions as may
reasonably be requested in order to more effectively consummate the transactions
contemplated hereby.
11.10 HEADINGS. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
11.11 AMENDMENTS AND WAIVERS. No amendment, waiver of compliance with
any provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the parties
hereto.
11.12 ASSIGNMENT. Except as set forth in this section, neither Buyer
nor Seller may assign this Agreement without the written consent of both Buyer
and Seller. Such consent shall not be unreasonably withheld. Seller may assign
all of its right, title and interest in, to and under this Agreement to the
aforementioned Qualified Intermediary, who shall than, subject to the terms and
conditions of this Agreement, have the right to receive the Purchase Price from
Buyer, and cause Seller to transfer, convey and assign to Buyer, the Assets.
Buyer may assign all of its right,
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title and interest in, to and under the Agreement to one or more affiliated
entities, who shall then, subject to the terms and conditions of this Agreement,
have the right to receive the Assets and to pay to Seller in full the Purchase
Price therefore.
11.13 PRESS RELEASES AND ANNOUNCEMENTS. Neither Buyer nor Seller shall
issue any press release or announcement relating to the subject matter of this
Agreement prior to the Closing Date without the prior written approval of the
other party; provided, however, that any party may make any public disclosure it
believes in good faith is required by law or regulation (in which case the
disclosing party will advise the other party prior to making the disclosure).
11.14 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person other than Buyer and Seller and their
respective successors and permitted assigns.
IN WITNESS WHEREOF, the undersigned parties hereto have duly executed this
Agreement or a counterpart thereof as of the date first above written.
[SIGNATURES TO FOLLOW]
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VALUE RADIO CORP., Seller
By:
--------------------------------
Thomas A. Walker, Treasurer
CUMULUS MEDIA, L.L.C.,, Buyer
By:
--------------------------------
Richard Weening, Manager
For the limited purpose of guaranteeing Seller's obligations under Article
X of this Agreement, Midwest Management, Inc., a Wisconsin corporation, joins in
this Agreement.
MID-WEST MANAGEMENT, INC.
By:
--------------------------------
Thomas A. Walker, President
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Exhibit 10.68
ASSET PURCHASE AGREEMENT
RADIO STATIONS WUSW-FM/WNAM-AM
This Asset Purchase Agreement, (hereafter referred to as "Agreement") made
this day of February, 1997, by and between Value Radio Corporation, a
Wisconsin corporation (hereinafter referred to as "Seller") and Cumulus Media,
L.L.C., a Delaware limited liability company (hereinafter referred to as
"Buyer").
W I T N E S S E T H:
WHEREAS, Seller is the holder of authorizations issued by the Federal
Communications Commission (the "FCC") for radio stations WUSW-FM, licensed to
Oshkosh, Wisconsin and WNAM-AM, licensed to Menasha, Wisconsin (hereinafter the
"Radio Stations"); and
WHEREAS, Buyer desires to purchase from Seller substantially all of the
assets used or useful in the operation of the Radio Stations, as more
particularly described below in this Agreement, upon the terms and conditions
set forth herein; and
WHEREAS, Seller desires to sell said assets to Buyer upon such terms and
subject to such conditions.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
hereby mutually covenant and agree as follows:
ARTICLE I
TRANSFER OF ASSETS, PAYMENT OF THE
PURCHASE PRICE AND EXCHANGE OF DOCUMENTS
Upon the basis of the representations, warranties, covenants and agreements
and on the terms and subject to the conditions set forth herein, on the Closing
Date (as hereinafter defined):
1.1 ASSETS. Seller shall sell and Buyer shall purchase substantially all
of the tangible and intangible assets owned or leased by Seller and used or
useful in connection with the operation of the Radio Stations (excluding cash
and cash equivalent assets) including, but not limited to, the assets more
particularly described as follows (collectively, the "Assets"):
(a) All right, title and interest in, to and under all personal
property and equipment owned or leased by Seller and used or useful in
connection with the operation of the Radio Stations, including, but not
limited to, office equipment, record libraries, records, cartridge tapes,
compact discs, news archives, promotional materials, and all other
materials of a commercial nature for use in said operations, together with
any
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replacements thereof and additions thereto made between the date hereof and
the Closing Date. A correct and complete inventory summary of these
materials by category and quantity is set forth in the attached SCHEDULE
1.1(A). Not less than five (5) business days prior to the Closing Date,
Seller shall deliver to Buyer a listing of any changes to Schedule 1.1(a),
which, as so updated, will be correct and complete.
(b) All right, title and interest in, to and under the advertising
contracts listed on the attached SCHEDULE 1.1(B) with clients and customers
of Seller, and such additional advertising contracts as are existing as of
the Closing Date. Not less than five (5) business days prior to the
Closing Date, Seller shall deliver to Buyer a list of any changes to
Schedule 1.1(b) which are necessary to reflect the termination, expiration
or entry into contracts, arrangements and programs occurring following the
date hereof. In the ordinary course of its business, Schedule 1.1(b) is
(and as updated, will be) a correct and complete listing of all such
advertising contracts of the Radio Stations.
(c) All right, title and interest in, to and under the contracts and
agreements entered into by Seller in connection with the operation and
programming of the Radio Stations (the "Contracts"), and all contracts and
agreements entered into by Seller between the date hereof and the Closing
Date which Buyer agrees to assume at the Closing, subject to their approval
by Buyer. Where the consent to assignment of other parties of said
contracts and agreements is required, Seller agrees to use commercially
reasonable efforts to try to obtain any required consent by the Closing
Date. A complete current list of such contracts and agreements is included
in the attached SCHEDULE 1.1(C). Not less than five (5) business days prior
to the Closing Date, Seller shall deliver to Buyer a list of any changes to
Schedule 1.1(c) which are necessary to reflect the termination, expiration
or entry into contracts and agreements, occurring following the date
hereof.
(d) All right, title and interest in, to and under permits,
authorizations or licenses issued to Seller by the FCC and any other
governmental authority in connection with the operation of the Radio
Stations, (the "Licenses") together with all FCC logs, reports and records
relating thereto, and any renewals or modifications of such items between
the date hereof and the Closing Date, and together with any applications
filed by Seller and pending on the Closing Date, including, but not limited
to those listed in the attached SCHEDULE 1.1(D). Not less than five (5)
business days prior to the Closing Date, Seller shall deliver to Buyer a
listing of any changes to Schedule 1.1(d). Schedule 1.1(d) is (and as
updated, will be) a correct and complete listing of all such Licenses.
(e) All right, title and interest in, to and under all real property
and leases and subleases of real property (the "Real Property Leases"),
easements, licenses, right of access, rights of way and other real property
interests which are held or owned by Seller and used or useful in the
operation of the Radio Stations, between Seller and others, together with a
copy of each such lease and sublease. A complete legal description of such
real estate and a complete and accurate list of all such leases and
subleases and other
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real property rights is set forth in the attached SCHEDULE 1.1(E). Where
the consent of other parties to Seller's assignment of any Real Property
Leases or other real property rights to Buyer is required, Seller will use
commercially reasonable efforts to obtain any required consent by the
Closing Date.
(f) All right, title and interest in, to and under the call letters
"WUSW," "WNAM," trademarks, trade names, service marks, franchises,
copyrights, including registrations and applications for registration of
any of them, jingles, logos, and slogans or licenses to use same, together
with any associated goodwill including all business goodwill of the Radio
Stations) and any additions thereto between the date hereof and the Closing
Date including, but not limited to, those described on the attached
SCHEDULE 1.1(F).
(g) All right, title and interest in, to and under all trade (cash)
accounts receivable for the Radio Stations (but excluding non-cash (barter)
agreements)(hereinafter the "Accounts Receivable"). A complete and current
list of Seller's accounts receivable, with aging, is attached as SCHEDULE
1.1(G). Two days prior to the Closing Date, Seller shall deliver to Buyer
an updated Schedule 1.1(g).
(h) All programs and programming materials, in whatever form, all
market studies, promotional or advertising materials used or useful in the
operation of the Radio Stations and all copyrights therefore.
(i) All causes of action, and other rights of recovery against third
parties for any loss, damage or destruction of any of the Radio Stations or
of any of the Assets or breach of duty or obligation with respect thereto.
(j) Any and all assets not specifically identified on the
aforementioned Schedules 1.1(a) through 1.1(i) but which are of the same
general category and nature as the assets listed on the respective
Schedules, owned by Seller and used or useful in the operation of the Radio
Stations, whether or not located on the premises where the principal
operations of the Radio Stations are conducted as of the date of execution
of this Agreement, as set forth in the attached SCHEDULE 1.1(J).
At Closing, the Assets shall be transferred to Buyer free and clear of all
liens, liabilities and encumbrances whatsoever, except Permitted Liens (as
hereinafter defined).
1.2. CONDITION OF PERSONAL PROPERTY. Seller represents and warrants to
Buyer that all of the assets described in Sections 1.1(a) and 1.1(h) are in good
working condition, repair and order for the normal operations of the Radio
Stations, and are in compliance with FCC and the Federal Aviation Administration
requirements, and will be in such condition on the Closing Date.
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1.3 PURCHASE PRICE. Buyer agrees to purchase all of the Assets from
Seller and the Seller agrees to sell all of the Assets to Buyer for the Purchase
Price of Five Million Two Hundred Thousand and 00/100 Dollars ($5,200,000.00)
(the "Cash Payment") plus a dollar amount equal to the aggregate of all
"current" trade (cash) accounts receivable valued as of the Closing Date,
adjusted for bad debts (the "Accounts Receivable Payment"). For purposes of this
Agreement, "current" trade (cash) accounts receivable means those accounts
arising from advertising and billed in the ordinary course of business,
consistent with Seller's past policies, not more than 120 days prior to the
Closing Date, minus any specifically identified bad debts which Seller
identifies on SCHEDULE 1.3 at the Closing. The parties hereto shall, by the
Closing Date, complete a list of all of the assets covered by this Agreement and
allocate the Purchase Price between tangible and intangible assets on a basis as
detailed as is reasonable according to the business standards of this industry.
1.4 PAYMENT OF PURCHASE PRICE; EARNEST MONEY; ESCROW AGENT.
(a) On the Closing Date, Buyer shall pay to Seller, or its assignee,
in cash or by wire transfer, the sum of the Cash Payment and the Accounts
Receivable Payment, subject to the following deductions and credits on the
Closing Date:
(1) Earnest Money in the amount of Two Hundred Sixty Thousand
and 00/100 Dollars ($260,000) which Buyer shall deliver into escrow to the
Escrow Agent described in (b) below on the date set forth in Section 1.2 of
this Agreement, plus interest earned thereon.
(2) Appropriate credits for real and personal property taxes,
prorated to the Closing Date.
(b) Buyer and Seller hereby mutually agree that Broadcast Asset
Management, Inc. shall act as Escrow Agent for purposes of this
transaction, and that the relationship between the Escrow Agent and the
parties hereto shall be governed by a certain Escrow Agreement, attached
hereto as SCHEDULE 1.4 which shall be executed by the Escrow Agent and the
parties hereto, simultaneous with the execution of this Agreement. The
Earnest Money referenced in this section, after being placed in escrow,
shall be deposited by the Escrow Agent with a federally insured financial
institution in an interest bearing account as directed by the Escrow
Agreement. Interest earned on the deposit shall accrue to the benefit of
Buyer, and, together with the principal amount of the escrow deposit, shall
be payable to Seller and credited against the aforementioned Purchase Price
on the Closing Date. If this Agreement is terminated without Closing of
the transaction contemplated herein, the Earnest Money and all accrued
interest shall be paid to Buyer or to Seller as provided in the Escrow
Agreement.
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1.5 PRORATION OF INCOME AND EXPENSES.
(a) ADJUSTMENT TIME AND ITEMS. Except as otherwise provided herein,
all income and expenses arising from the conduct of the business and
operation of the Radio Stations shall be prorated between Buyer and Seller
in accordance with generally accepted accounting principles as of 11:59
p.m., Oshkosh, Wisconsin time, on the date immediately preceding the
Closing Date. Such prorations shall include, without limitation, all ad
valorem, real estate and other property taxes (but excluding taxes arising
by reason of the transfer of the Assets as contemplated hereby, which,
shall be paid as set forth in Section 11.9 of this Agreement), business and
license fees, music and other license fees (including any retroactive
adjustments thereof, which retroactive adjustments shall not be subject to
the sixty day limitation set forth in Section 1.5(b) hereof), utility
expenses, rents and similar prepaid and deferred items attributable to the
ownership and operation of the Radio Stations. Salaries, wages, sales
commissions, fringe benefit accruals, vested leave time (i.e. earned sick
leave and vacation) and termination or severance pay for employees arising
or accruing prior to the Closing Date shall not be pro-rated but shall be
the sole responsibility of Seller.
(b) DETERMINATION. The prorations contemplated by this Section, to
the extent practicable, shall be made as set forth in subsection (a),
above, and shall be implemented on the Closing Date. As to those
prorations not capable of being ascertained on the Closing Date, an
adjustment and proration as of the time stated in subsection (a) above
shall be made within sixty (60) days of the Closing Date. In the event of
any disputes between the parties as to such adjustments, the amounts not in
dispute shall nonetheless be paid at such time and such disputes shall be
determined by the accounting firm of Wipley & Ulrich, Appleton, Wisconsin,
and the fees and expenses of said accountant shall be paid one-half (1/2)
by Seller and one-half (1/2) by Buyer.
1.6 ASSUMED LIABILITIES; RETAINED LIABILITIES.
(a) ASSUMED LIABILITIES. Subject to the provisions of Section
1.6(b), on the Closing Date, Buyer shall assume and undertake to pay,
satisfy or discharge the following: the liabilities, obligations and
commitments of Seller (other than any liability arising from Seller's
noncompliance with the contracts to be assigned and assumed by Buyer on or
prior to the Closing Date) arising or to be performed on or after the
Closing Date under (A) the contracts on Schedule 1.1(c), (B) the real
property and Real Property Leases on Schedule 1.1(e); (C) personal property
leases on Schedule 1.1(a); (D) the advertising contracts listed on Schedule
1.1(b); (E) the licenses set forth on Schedule 1.1(d), in each case as of
the date hereof; (F) the Accounts Receivable referred to on Schedule
1.1(g), above; and (G) any other contracts entered into between the date
hereof and the Closing Date which Buyer may in its sole discretion
expressly agrees in writing to assume (collectively, the "Assumed
Liabilities").
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(b) RETAINED LIABILITIES. Except as set forth in Section 1.6(a)
hereof, Buyer expressly does not, and shall not, assume or be deemed to assume,
under this Agreement or otherwise by reason of the transaction contemplated
hereby, any liabilities, obligations or commitments of Seller of any nature
whatsoever (collectively, the "Retained Liabilities"). Without limiting the
generality of the foregoing, it is understood and agreed that Buyer is not
agreeing to, and shall not, assume any liability or obligation of Seller to
Seller's employees (whether under any existing written or oral agreements with
Seller or otherwise, including any such liability or obligation in respect of
wages, salaries, bonuses, accrued vacation or sick pay or any other matter) and
. any liability for Seller's taxes or trade payables arising on or prior to the
Closing Date.
1.7 TRANSFER OF ASSETS AND DELIVERY OF DOCUMENTS. (1) On the Closing
Date, Seller shall deliver, or cause to be delivered, to Buyer the following
documentation:
(a) BILL OF SALE. A bill of sale in the form attached hereto as
SCHEDULE 1.7(1)(A) ("Bill of Sale"), transferring to the Buyer all of the
personal property and equipment identified on Schedules 1.1(a) and 1.1(j),
including, but not limited to, the transmitting towers and antennas with
existing hardware, guy wires and anchor points all free and clear of all
liens and encumbrances.
(b) WARRANTY DEED. A warranty deed in the form attached hereto as
SCHEDULE 1.7(1)(B) ("Warranty Deed") in recordable form and stating that
title to the owned real estate described on Schedule 1.1(e) is free and
clear of all liens and encumbrances, except for easements, restrictions,
rights-of-way of record and property taxes for the current year which are
not yet due and payable (the "Permitted Liens").
(c) ASSIGNMENT AND ASSUMPTION AGREEMENT. A written Assignment and
Assumption Agreement in the form attached hereto as SCHEDULE 1.7(1)(C)
("Assignment and Assumption Agreement"), assigning to the Buyer the
liabilities, obligations and commitments of Seller arising or to be
performed on or after the Closing Date under (A) the contracts on Schedule
1.1(c), (B) the real property and Real Property Leases on Schedule 1.1(e);
(C) personal property leases on Schedule 1.1(a); (D) the advertising
contracts listed on Schedule 1.1(b); (E) the licenses set forth on Schedule
1.1(d), in each case as of the date hereof; (F) the Accounts Receivable
referred to on Schedule 1.1(g), above; and (G) any other contracts entered
into between the date hereof and the Closing Date which Buyer may, in its
sole discretion, expressly agree in writing to assume. Seller shall also
deliver any consents obtained from the parties to those contracts and
agreements being assigned hereunder which by their terms require such
consents for assignment to Buyer.
(d) UNEMPLOYMENT ACCOUNT. At Buyer's option, the appropriate form,
properly executed, transferring to Buyer Seller's unemployment compensation
account and experience rate for purposes of determining Buyer's
unemployment compensation
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contributions.
(e) CERTIFICATE OF SECRETARY. A certificate, dated as of the Closing
Date, by the Secretary of Seller certifying the resolutions of the Board of
Directors and shareholders of the Seller approving the execution and
delivery of this Agreement and each of the other documents authorizing the
consummation of the transactions contemplated hereby and thereby, together
with copies of Seller's articles of incorporation, bylaws and listing of
Seller's officers and directors.
(f) CERTIFICATE OF OFFICER. A certificate, dated as of the Closing
Date, by an officer of Seller to the effect that the representations and
warranties of Seller contained in this Agreement are true and complete in
all material respects on and as of the Closing Date as if made on and as of
that date, that, to Seller's knowledge, there is no litigation claim or
proceeding pending against Seller with respect to the transactions
described in this Agreement, and that Seller has complied with or performed
in all material respects all terms, covenants and conditions to be complied
with or performed by it on or prior to the Closing Date.
(g) EVIDENCE OF DISCHARGE OF LIENS. Evidence of discharge of all
liens on the Assets or the Radio Stations except Permitted Liens.
(h) OPINION OF SELLER'S COUNSEL. An opinion of Seller's counsel in
the form of SCHEDULE 1.7(1)(H) attached hereto.
(i) RECORDS. To the extent available, originals or copies of all
program, operations, transmissions, or maintenance logs and all other
records required to be maintained by the FCC with respect to the Radio
Stations, including the public file for the Radio Stations, left at the
Radio Stations and thereby delivered to Buyer.
(j) ALLOCATION OF PURCHASE PRICE. Documents reflecting the parties'
agreement with respect to the allocation of the Purchase Price.
(k) COVENANT NOT TO COMPETE. A covenant not to compete in the form
of the attached SCHEDULE 1.10.
(l) OTHER DOCUMENTS. Such other documents, instruments and
agreements as Buyer shall request and as shall be reasonably necessary to
consummate the transactions contemplated by this Agreement, each in form
and substance reasonably satisfactory to counsel for Buyer.
(2) On the Closing Date, Buyer shall deliver or cause to be delivered to
Seller the following documentation:
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(a) PURCHASE PRICE. The Purchase Price.
(b) ASSIGNMENT AND ASSUMPTION AGREEMENT. The Assignment and
Assumption Agreement.
(c) CERTIFICATE OF MANAGER OR MEMBER. A certificate, dated as of the
Closing Date, by a manager, or if none exists, by a member, certifying as
to the resolutions of Buyer approving the execution and delivery of this
Agreement and each of the other documents authorizing the consummation of
the transactions contemplated hereby and thereby, together with a copy of
Buyer's articles of organization, operating agreement and a listing of
Buyer's members or managers.
(d) CERTIFICATE OF MEMBER A certificate, dated the Closing Date, by
a member of Buyer to the effect that the representations and warranties of
Buyer contained in this Agreement are true and complete in all material
respects on and as of the Closing Date as if made on and as of that date,
hat to Buyer's knowledge, there is no litigation. claim or proceeding
pending against Buyer with respect to the transactions described herein,
and that Buyer has complied with or performed in all material respects all
terms, covenants and conditions to be complied with or performed by it on
or prior to the Closing Date.
(e) ALLOCATION OF PURCHASE PRICE. A document executed by both
parties hereto (see Section 1.7(1)(j)) reflecting their agreement with
respect to the allocation of the Purchase Price.
(f) OPINION OF BUYER'S COUNSEL. An opinion of Buyer's counsel in the
form of SCHEDULE 1.7(2)(F) attached hereto.
(g) COVENANT NOT TO COMPETE. The aforementioned Covenant Not to
Compete.
(h) OTHER DOCUMENTS. Such other documents, instruments and
agreements as Seller shall request and as shall be reasonably necessary to
consummate the transactions contemplated by this Agreement, each in form
and substance reasonably satisfactory to counsel for Seller.
1.8 CLOSING. The Closing, subject to the conditions set forth herein,
shall take place at the law offices of Lathrop & Clark, 122 W. Washington Ave.,
Suite 1000, Madison, WI 53701-1507, or at such other place as the parties may
mutually agree. For purposes of this Agreement, the "Closing" shall mean and
describe the meeting between the parties hereto, subsequent to the satisfaction
of all terms and conditions set forth herein, to fully consummate the
transaction described herein. The "Closing Date" shall mean a date fixed by
Seller which is not less than five (5) business days or more than ten (10)
business days after the date on which the FCC Consent (as defined in Section 7.1
hereof) shall have become a Final Order provided however that Seller and
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Buyer may, by mutual agreement, elect to waive finality; in which event, the
Closing shall occur on the tenth business day after the date such notice is
given, or at such earlier date that the Seller or Buyer (whichever gives such
notice) specifies. For purposes of this Agreement, the term "Final Order" means
action by the FCC consenting to the assignment of a license issued by the FCC
which is not reversed, stayed, enjoined, set aside, annulled or suspended, and
with respect to which action no timely request for stay, petition for rehearing
or appeal is pending, and as to which the time for filing any such request,
petition or appeal or reconsideration by the FCC on its own motion has expired.
1.9. COVENANT OF NON-INTERFERENCE. Between the date of this Agreement and
the Closing Date, management and control of the Radio Stations shall be the sole
responsibility of, and in the complete discretion of Seller, subject to Section
4.1 of this Agreement. It is further understood and agreed that, effective as
of the Closing Date, and thereafter, Seller shall have no control over, nor
right to intervene in, nor participate in, the operation of the Radio Stations,
nor to supervise any programs on the Radio Stations.
1.10 COVENANT NOT TO COMPETE. On the Closing Date, Seller shall execute,
and shall cause Mid-West Management, Inc., William R. Walker, Philip Fisher,
Richard T. Record, and William H. Rittman, and any other person mutually agreed
upon by the parties hereto to execute a covenant not to compete with Buyer in
the market served by the Radio Stations in the form of SCHEDULE 1.10 attached
hereto.
1.11 EMPLOYER AND EMPLOYEE BENEFITS. Attached hereto as SCHEDULE 1.11 is a
correct and complete listing of all employees of Seller, working at the, or in
connection with Radio Stations, setting forth their respective positions, job
descriptions, salaries or wages, and all other forms of compensation paid to
them for their work at the Radio Stations. Upon notice to Seller, and at
mutually agreeable times, Seller will permit Buyer to meet with its employees
prior to the Closing Date. Buyer may, at its option, extend offers of
employment to all or any of Seller's employees effect on the Closing Date.
Seller will not take any action to preclude or discourage any of Seller's
employees from accepting any offer of employment extended by Buyer. At Seller's
option, the general manager of the Radio Stations may participate in any meeting
between Buyer and any employee of the Radio Stations.
1.12 FINANCING. During the forty-five (45) day period following the date
of this Agreement, Buyer will use commercially reasonable and good faith efforts
to conclude equity financing for the purchase of the Radio Stations
contemplated hereby, on terms acceptable to Buyer in its sole discretion. In
the event that Buyer obtains such equity financing during such forty-five day
period, Buyer will immediately deposit the Earnest Money with the Escrow Agent.
In the event Buyer is unable to obtain such equity financing during said time
period, either Buyer or Seller may, at their option by notice to the other,
terminate this Agreement without further obligation or penalty.
1.13 DUE DILIGENCE. Buyer may test and inspect all of the Assets, Seller's
financial
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records and other books and records relating to the Radio Stations within
forty-five (45) days of the date of execution of this Agreement to determine (1)
if the Assets are in the condition called for by this Agreement; and (2) that
Seller's financial records reflect the income generating capacity of the Radio
Stations upon which the Purchase Price is based. Such inspection and testing
shall be conducted so as not to interfere unreasonably with or disrupt the
operation of the Radio Stations. In the event that, in Buyer's reasonable
judgment, following Buyer's inspection and testing of the Assets, the condition
of any of the Assets does not comply with the terms this Agreement, Buyer shall
immediately provide written notice to Seller of such failure, (which shall
include a copy of the written inspection report). Thereafter, the parties
hereto will cooperate with each other to reach an agreement on the method of
compliance with the terms of this Agreement. In the event the parties hereto
cannot agree on the method or the payment of the costs to restore any such Asset
to the condition required by this Agreement, either Buyer or Seller may, upon
written notice to the other, terminate this Agreement. If, after inspection of
Seller's financial records, Buyer concludes, in its good faith judgment, that a
material discrepancy exists in the value of the Radio Stations as compared to
the purchase price for the Radio Stations as set forth by the parties hereto in
their Letter of Intent dated January 2, 1997, Buyer shall immediately provide
written notice to Seller of its findings. Thereafter, the parties may cooperate
to reach an agreement on whether an appropriate adjustment to the Purchase Price
is warranted, and if so, the amount of the adjustment; or either party may
terminate this Agreement without any liability upon written notice to the other
party.
1.14 CONDUCT OF BUSINESS PRIOR TO CLOSING. Between the date hereof and the
Closing Date, Seller will conduct the business of the Radio Stations only in the
ordinary course, consistent with its past practices, including but not limited
to the following:
(a) the personal property used and useful in the operation of the
Radio Stations will be maintained in normal operating condition and repair;
(b) no material personal property or real property used and useful in
the operation of the Radio Stations will be sold, transferred or
terminated, and no additional material personal property or real property
will be acquired, except for acquisition made in the normal and ordinary
course of business;
(c) no new lien or encumbrance against the Assets will be created;
(d) material Contracts and advertising agreements will not be
modified or terminated, and those material contracts and advertising
contracts identified in a written notice by Buyer will not be renewed and
material contracts and advertising agreements, that will remain in effect
after the Closing Date will not be entered into, in each case, without
Buyer's consent;
(e) Seller will take all commercially reasonable actions to preserve
and maintain the Licenses and the intellectual property listed on Schedule
1.1(f) and will
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operate the Radio Stations in compliance with all provisions of the FCC
licenses, Communications Act and the rules and regulations of the FCC;
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(f) Seller will not alter its credit and collection policies or it
accounting policies;
(g) Seller will not alter the benefits available to its employees,
but may renew employment contracts in the normal and ordinary course of
business upon notice to Buyer;
(h) the programming of the Radio Stations will not be materially
altered from the current format; and
(i) Seller will use commercially reasonable efforts to preserve
relationships with employees, advertisers, vendors, and others currently
dealing with the Radio Stations.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
In addition to representations, warranties, and covenants made elsewhere in
this Agreement, Seller represents, warrants and covenants to Buyer that both as
of the date hereof and as of the Closing Date, each of the following statements
are, and shall be, correct and complete:
2.1 ORGANIZATION AND STANDING OF SELLER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Wisconsin and has all requisite power and authority to: (i) own, lease, operate
and sell the Assets; and (ii) carry on the business of the Radio Stations as now
being conducted and as proposed to be conducted by Seller between the date
hereof and the Closing Date.
2.2 AUTHORIZATION AND BINDING OBLIGATION. Seller has the power and
authority to enter into and perform this Agreement and the transactions
contemplated hereby, and Seller's execution, delivery and performance of this
Agreement, and the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on its part. This Agreement has
been duly executed and delivered by Seller and this Agreement constitutes, and
the agreements to be executed in connection herewith will, subject to approval
by the FCC, constitute the valid and binding obligation of Seller enforceable in
accordance with their terms.
2.3 OWNERSHIP OF ASSETS. Seller now owns and on the Closing Date will own
the Assets and has and will have, subject to FCC approval, full power and
authority to sell, transfer and assign such Assets (including the assets of the
former Valley Radio Results Partnership) to Buyer in the manner provided herein,
free and clear of any and all liens except for Permitted Liens. There are no
other assets used or useful in the operation of the Radio Stations other than
the Assets, except for cash on hand and cash equivalent assets.
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2.4 COMMISSION LICENSES AND COMPLIANCE WITH FCC REQUIREMENTS. (a) All
licenses, permits, authorizations, franchises, certificates of compliance, and
consents of governmental bodies, including, without limitation, the FCC
licenses, used or useful in the operation of the Radio Stations as they are now
being operated are detailed in Schedule 1.1(d) and are in full force and effect,
are unimpaired by any acts or omissions of Seller or Seller's employees or
agents, and are free and clear of any restrictions which might limit the full
operation of the Radio Stations. Except as set forth in Schedule 1.1(d), no
condition exists or event has occurred that permits, or after notice or lapse of
time, or both, would permit, the revocation or termination of any such license,
permit, consent, franchise, or authorization (other than pursuant to their
express expiration date) or the imposition of any material restriction or
limitation upon the operation of the Radio Stations as now conducted. Except as
set forth in Schedule 1.1(d), Seller is not aware of any reason why the FCC
licenses might not be renewed in the ordinary course or revoked.
(b) Each of the Radio Stations is in material compliance with the
FCC's policy on exposure to radio frequency radiation. No renewal of any
FCC License would constitute a major environmental action under the FCC's
rules or policies. Access to the Radio Stations' transmission facilities
is restricted in accordance with the policies of the FCC.
(c) Except as set forth in Schedule 1.1(d), to the best of Seller's
knowledge, Seller is not the subject of any FCC or other governmental
investigation or any notice of violation or order,or any material
complaint, objection, petition to deny, or opposition issue by or filed
with the FCC or any other governmental authority in connection with the
operation of or authorization for the Radio Stations, and there are no
proceedings (other than rulemaking proceedings of general applicability)
before the FCC or any other governmental authority that could adversely
affect any of the FCC Licenses or the authorizations listed in Schedule
1.1(d).
(d) Seller has filed with the FCC and all other governmental
authorities having jurisdiction over the Radio Stations all material
reports, applications, documents, instruments, and other information,
required to be filed, and will continue to make such filings through the
Closing Date.
2.5 INSURANCE. There is presently in force adequate fire, theft and
general casualty insurance in respect to the Assets together with general
liability insurance covering the business and operation of the Radio Stations.
Seller will maintain such insurance in force until the Closing Date. Such
policies are valid and enforceable, and provide adequate insurance coverage for
the Assets and operations of the Radio Stations. A list of such policies
showing the names of the insurers, the property or liability insured and the
amounts of coverage is attached hereto as SCHEDULE 2.5.
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2.6 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Seller has good and marketable title to all of the properties
and Assets described in this Agreement, and has not sold or otherwise
disposed of any such properties or Assets referred to in Section 1.1
(except for Assets acquired or disposed of in the normal and ordinary
course of business) and the same will be true and correct as of the Closing
Date. Buyer, at its option and expense, prior to the Closing Date, may
conduct a Uniform Commercial Code name search under the name of Seller,
with the Wisconsin Secretary of State and the Winnebago County Register of
Deeds. If the written reports from such searches indicate the presence of
liens on any of Seller's property, all such liens shall be removed,
satisfied or otherwise released by Seller on or prior to the Closing Date.
(b) With respect to the leases of real and personal property listed
in Schedule 1.1(d): (i) the lease is in full force and effect; (ii) all
accrued and payable rents have been paid; (iii) Seller has been in
peaceable possession since the beginning of the original term of such lease
and is not in default hereunder, and no waiver, indulgence, postponement of
Seller's obligations have been granted by the lessor; (iv) no event of
default, and no event that with the giving of notice, the lapse of time, or
the happening of any further event would become a default, under any such
lease has occurred; (v) Seller has not violated any material term or
condition under any such lease in any respect; and (vi) each material
covenant to be performed by Seller under such lease has been fully
performed.
(c) With respect to the Radio Stations' transmitter sites (the
"Sites"), (i) there are no encroachments on any portion of the Sites owned,
lease, or used by Seller by any buildings, structures, or improvements
located on adjoining real estate; (ii) none of the buildings, structures or
improvements (including any guy wires or anchors) owned, leased or used by
Seller on the Sites encroach upon adjoining real estate and all such
buildings, structures and improvements conform to all "setback" lines,
easements, and other restrictions or rights of record established by
applicable building, zoning or safety ordinances; (iii) the radio
transmission facilities owned, leased or used by Seller at the Sites
conform in all material respects to all regulations, codes, ordinances, and
statutes of all applicable governmental authorities, including, without
limitation all environmental protection and sanitary laws and regulations,
occupational safety and health regulations and electrical codes. All
towers and other structures owned, lease or used by Seller at the Sites are
painted and lighted in material compliance with the rules and requirements
of the FCC, the Federal Aviation Administration, and all applicable
requirements of state and local law.
2.7 ABSENCE OF CONFLICTS. Neither Seller's entry into this Agreement, nor
its sale of the Assets and the transfer of the Radio Stations as contemplated by
this Agreement will (a) violate any law, regulation, judgment, order or
restriction applicable, the Assets or the Radio Stations; (b) violate the
provisions of Seller's articles of incorporation and by-laws; (c) conflict with
or cause a breach or termination of or give rise to any lien under any
agreement, lease, license or instrument
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of indebtedness. Other than violations, conflicts or breaches which will not
have a material adverse effect on the Stations or the Assets. Other than the
filings with and approvals by the FCC contemplated hereby, Seller does not need
to give notice to or obtain the consent of any governmental agency or unit to
conclude the transactions contemplated hereby.
2.8 LITIGATION. There is no litigation, action, suit, investigation or
proceeding pending or, to Seller's knowledge, threatened against or affecting
Seller or the Radio Stations, or involving any of the Assets, at law or in
equity, or before any federal, state, municipal, local, or other government or
authority, and there has been no assertion and, to Seller's knowledge, no
grounds to assert any claim against Seller which or before any administrative
agency or arbitrator (including, without limitation, any proceeding which seeks
the forfeiture of, or opposes the renewal of any of the Licenses) (a) could
reasonably be expected to have an adverse affect on the financial condition,
Assets, or operations of the Radio Stations or (b) seeks to enjoin or prohibit,
or other questions the validity of, any action to be taken pursuant to or in
connection with this Agreement.
2.9 ABSENCE OF ADVERSE AGREEMENTS. Seller is not a party to any agreement
or instrument or subject to any judgment, order or decree, or rule or regulation
of any court or governmental agency or authority which adversely affects or, to
the best Seller's knowledge, in the future may materially and adversely affect
the financial condition, operation, or assets of the Radio Stations.
2.10 CONTRACTS. Schedules 1.1(b), 1.1(c) and 1.1(e) attached hereto
contains a list of all of the agreements, leases and other contracts to which
the Radio Stations and Seller are a party or by which, as of the date hereof,
the Radio Stations and Seller may be bound or obligated in any way or which are
required to operate the Radio Stations in the manner in which it is currently
operated. All of such agreements, leases and other contracts are valid, binding
and enforceable by Seller in accordance with their respective terms. The
aforedescribed agreements, contracts and leases shall not be rendered
unenforceable by their assignment and transfer to Buyer. Seller is not in
material breach or default thereof, there is no claim of breach or default, and
Seller has no knowledge of any act or omission which has occurred or which has
been threatened which could result in a breach or default thereof. Seller has
delivered complete and accurate copies of all such agreements, contracts, and
leases to Buyer as they are currently in effect.
2.11 INTELLECTUAL PROPERTY. Schedule 1.1(f) attached hereto contains a
list of all intellectual property applied for, issued to or owned by the Seller
or under which Seller is a licensee and used in the conduct of the business and
operation of the Radio Stations. Such intellectual property is all of the
intellectual property used in connection with the operation of the Radio
Stations in the manner conducted by Seller.
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2.12 INSOLVENCY. No insolvency proceedings of any character, including but
not limited to bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting Seller or any of
the Assets is pending or, to the best knowledge of Seller, threatened, and
Seller has made no assignment for the benefit of creditors, nor taken any
actions with a view to, or which would constitute the basis for, the institution
of any insolvency proceedings.
2.13 COMMISSION OR FINDER'S FEE. To the extent that Seller employs a
broker, any commission, finder's fee or similar payment in connection with this
Agreement or any matter related hereto shall be paid by, and the sole obligation
of, Seller.
2.14 ENVIRONMENTAL. To the best of Seller's knowledge, Seller has complied
with all laws (including rules and regulations thereunder) of federal, state,
and local governments (and all agencies thereof) concerning the environment,
public health, and safety, and employee health and safety, and no charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against Seller alleging any failure to comply
with any such law or regulation. Seller has not unlawfully generated, stored,
released or disposed of any hazardous waste or hazardous substance including
Polychlorinated Byphenyls ("PCBs") in connection with the operation of the Radio
Stations. To the best of Seller's knowledge, no hazardous waste has been
generated, stored or disposed of by any other person on the real estate occupied
by Seller, the Radio Stations or their transmitters. As used herein, the term
"hazardous waste" shall mean as defined in federal and state environmental
statutes. The technical equipment included in the Assets does not contain any
PCBs. To the best of Seller's knowledge, there is no asbestos insulation or
other asbestos-containing materials at the Radio Stations. At its option,
Buyer may conduct an Environmental Audit of the real property referenced in
this Agreement. One-half of the cost of any such audit shall be born by Seller
and one-half by Buyer.
2.15 WARRANTIES TRUE AND CORRECT. No warranty or representation by Seller
contained in this Agreement or in any certificate or other instrument to be
furnished pursuant hereto contains or will contain any untrue statement of fact
or omits or will omit to state any fact required to make the statement therein
contained not misleading. Seller shall provide Buyer prompt written notice of
any change in any of the information contained in the representations and
warranties made in Article II hereof.
2.16 COMPLIANCE WITH BULK SALES LAWS; SALES TAX. Seller will comply with
all bulk sales laws to the extent they may be applicable to this transaction.
Seller does not hold a Wisconsin sales tax permit.
2.17 FINANCIAL STATEMENTS. The financial statements of Seller provided to
Buyer have been prepared in accordance GAAP applied on a consistent basis
throughout the periods covered thereby, are correct and complete in all material
respects and are consistent with the books and records of Seller (which books
and records are correct and complete in all material respects).
16
<PAGE>
2.18 TAX MATTERS. Seller has filed all tax returns that it was required to
file. Except for 1997 real and personal property taxes (which are payable in
1998), all taxes owed by Seller have been paid (including payroll withholding
taxes). To the best knowledge of Seller, there are no security interests on any
of the Assets that arose in connection with any failure (or alleged failure) to
pay an tax.
2.19 EMPLOYEE BENEFITS. To Seller's knowledge, each employee benefit plan
(and each related insurance contract) complies in form and operation in all
material respects with the applicable requirements of ERISA and the Internal
Revenue Code. SCHEDULE 2.19 lists all employee benefit plans that Seller
maintains or to which Seller contributes for the benefit of any current employee
of Seller.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer hereby represents, warrants and covenants to Seller that both as of
the date hereof and as of the Closing Date, each of the following statements
are, and shall be, correct and complete :
3.1 BUYER'S ORGANIZATION. Buyer is a limited liability company duly
organized, validly existing and in good standing under and by virtue of the laws
of the State of Delaware and has all requisite power and authority to (i) own,
lease, and operate its properties and carry on its business, and (ii) enter into
this Agreement and perform the transactions contemplated hereby.
3.2 APPROVALS. The execution and delivery of this Agreement by Buyer and
the performance of its obligations hereunder has been duly authorized by
appropriate resolutions of Buyer and this Agreement constitutes, subject to
approval by the FCC, a valid and binding obligation of Buyer in accordance
with its terms.
3.3 CAPABILITY. There are no facts which, under the Communications Act of
1934, as amended, or the existing rules and regulations of the FCC, would
disqualify Buyer as an assignee of the FCC licenses. Subject to Section 1.12,
hereof, Buyer knows of no facts or information, financial or otherwise, which
would or will prevent Buyer from completing this transaction in accordance with
the terms of this Agreement.
3.4 WARRANTIES TRUE AND CORRECT. No warranty or representation by Buyer
contained in this Agreement or in any certificate or other instrument to be
furnished pursuant hereto contains or will contain any untrue statement of fact
or omits or will omit to state any material fact required to make the statement
therein contained not misleading.
17
<PAGE>
ARTICLE IV
EXAMINATION BY BUYER PRIOR TO CLOSING
Buyer and Seller hereby agree as follows:
4.1 EXAMINATION BY BUYER. From the date of this Agreement until the
Closing Date, Seller will accord to Buyer, its officers, counsel, accountants,
engineers and other representatives full access to its properties, contracts,
commitments and FCC, financial and other related records, at all reasonable
times during business hours, and such representatives will be furnished true and
complete copies of the same as such representatives may reasonably request;
provided, however, that such review shall be conducted so as to not interfere
unreasonably with or disrupt the business and broadcast operations of Seller.
Upon at least 24 hours notice to Seller, Seller shall cause the employees of the
Radio Stations to furnish and discuss with Buyer and its representatives the
information described in this Section 4.1.
4.2 CONFIDENTIALITY. Buyer agrees that it and its representatives will
use commercially reasonable efforts to maintain the confidence of and not
utilize in any manner (other than to analyze the transactions contemplated by
this Agreement) all data and information so obtained from Seller, and if this
transaction is not consummated, Buyer and its officers, agents and
representatives will return to Seller all such data in its possession, including
all copies made thereof.
4.3 EXCLUSIVITY. From the date Buyer deposits the Earnest Money with the
Escrow Agent (the "Deposit Date"), Seller will not solicit, initiate, encourage,
participate, facilitate or provide any information with respect to any proposal
or offer of any person or entity other than Buyer relating to any merger,
consolidation, recapitalization, acquisition of the Radio Stations, the Assets,
the FCC Licenses, or its capital stock or any similar transaction. From the
date of this Agreement, Seller will promptly notify Buyer of any such offer or
contract with respect to any such transaction. From the date of this Agreement
until the Deposit Date, Buyer may solicit, encourage, participate, facilitate or
provide any information with respect to any proposed offer of any person or
entity other than Buyer relating to any merger, consolidation, recapitalization,
acquisition of the Radio Stations, the Assets, the FCC licenses, or its capital
stock or any similar transaction. If Seller is prepared to accept any other
offer of any person or entity other than Buyer, Seller will notify Buyer and,
unless Buyer tenders the Earnest Money to the Escrow Agent within two (2)
business days, Seller may accept the other offer.
4.4 REAL ESTATE. Seller will, by the Closing Date, obtain, at Seller's
expense, policies of title insurance on all owned real estate included in the
Assets, in the amount of the fully assessed value of all such owned real estate,
with such endorsements as Buyer may reasonably request, except that Buyer shall
bear the additional cost and expense of obtaining the endorsements it desires to
have included in the title insurance policies. Seller shall obtain, at
18
<PAGE>
Buyer's expense surveys of the real estate owned by the Seller.
ARTICLE V
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS HEREUNDER
The obligations of Buyer under this Agreement are subject at the Closing
Date to the conditions listed in this Article. Buyer may waive any one or more
of the following conditions, by written notice delivered at or prior to the
Closing Date, other than that of the FCC Consent:
5.1 FCC APPROVAL. The FCC shall have issued the FCC Consent (as defined
in Section 7.1 hereof) without any condition that would have a material adverse
effect upon Buyer, and such FCC Consent shall have become a Final Order (as
defined in Section 1.8 hereof).
5.2 SELLER REPRESENTATIONS AND WARRANTIES AND COVENANTS. Seller's
representations and warranties contained in this Agreement and in any document
delivered pursuant hereto shall be true and correct in all material respects as
of the Closing Date as if made on and as of that date. Seller shall have
performed and complied in all material respects with all agreements, covenants
and conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
5.3 GOVERNMENTAL AUTHORIZATIONS. Seller shall be the holder of the
Licenses and there shall not have been any modification of any of such Licenses
which has, or will have, a material adverse effect on the Radio Stations or the
conduct of its business and operation. No proceedings shall be pending which
seeks or the effect of which reasonably could be to revoke, cancel, fail to
renew, suspend, modify or impose any material condition upon any Licenses or any
material licenses, permits or authorizations of the Radio Stations.
5.4 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the Assets, business, prospects, condition (financial or otherwise) or
results of Seller, the Assets or the Radio Stations.
5.5 NO ADVERSE PROCEEDINGS. No suit, action, claim or governmental
proceeding shall be pending against, and no order, decree or judgment of any
court, agency or other governmental authority shall have been rendered against,
any party hereto which would render it unlawful, as of the Closing Date, to
effect the transactions contemplated by this Agreement in accordance with its
terms.
5.6 CLOSING DELIVERIES. Seller shall have delivered to Buyer those items
required to be delivered at or prior to the Closing Date under the terms of this
Agreement.
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<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are subject at the Closing
Date to the conditions set forth in this Agreement. Seller may waive any one
or more of the following conditions, by written notice delivered at or prior to
the Closing Date, other than those in Section 6.1.
6.1 FCC APPROVAL. The FCC shall have issued the FCC Consent for the Radio
Stations without any condition that would have a material adverse effect upon
Seller.
6.2 BUYER REPRESENTATION AND WARRANTIES. Buyer's representations
contained in this Agreement shall be true and correct as of the Closing Date in
all material respects. Buyer shall have performed and complied in all material
respects with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
6.3 CLOSING DELIVERIES. Buyer shall have delivered to Seller all items
required to be delivered at or prior to the Closing Date under the terms of this
Agreement.
ARTICLE VII
FCC CONSENT
7.1. FCC CONSENT. It is specifically understood and agreed by Buyer and
Seller that the Closing and the assignment of the FCC licenses, permits and
other authorizations pertaining to the Radio Stations are expressly conditioned
on and are subject to the prior consent and approval of the FCC or its Staff
acting pursuant to delegated authority (the "FCC Consent").
7.2. ASSIGNMENT APPLICATIONS. Within ten (10) business days after Buyer's
deposit of the Earnest Money with the Escrow Agent, Seller and Buyer shall
jointly file with the FCC an application for assignment of the FCC licenses,
permits and authorizations pertaining to the Radio Stations (the "Assignment
Application") from Seller to Buyer. The cost of the FCC filing fees in
connection with the Assignment Application shall be divided equally between the
parties. Each party shall pay their own attorneys' fees. Seller and Buyer
shall thereafter prosecute the Assignment Application with all reasonable
diligence and otherwise use commercially reasonable efforts to obtain the grant
of the Assignment Application as expeditiously as practicable (but neither
Seller nor Buyer shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon the Radio
Stations, it or upon any affiliated entity). If the FCC Consent imposes any
condition on either party to the Assignment Application, such parties shall use
commercially reasonable efforts to comply with such condition;
20
<PAGE>
provided, however, that neither party shall be required hereunder to comply with
any condition that would have a material adverse effect upon the Radio Stations,
it or any affiliated entity. Seller and Buyer shall jointly oppose any requests
for reconsideration or judicial review of the FCC Consent and shall jointly
request from the FCC any extension of the effective period of the FCC Consent if
the Closing shall not have occurred prior to the expiration of the original
effective period of the FCC Consent. Nothing in this Section 7.2 shall be
construed to limit either party's right to terminate this Agreement pursuant to
Article VIII hereof.
ARTICLE VIII
TERMINATION
8.1 GROUNDS FOR TERMINATION.
This Agreement may be terminated by either Buyer or Seller, provided that
the party seeking to terminate is not in breach of any of its material
obligations under this Agreement, upon the occurrence of any of the following:
(a) If, on or prior to the Closing Date, the other party breaches any
of its material obligations contained herein, and such breach is not cured by
the earlier of the Closing Date or twenty (20) business days after receipt of
the notice of breach from the non-breaching party; or
(b) If any Assignment Application is designated for hearing; or
(c) If any Assignment Application is denied by Final Order; or
(d) If there shall be in effect any judgment, or final decree order
that would prevent or make unlawful the consummation of this Agreement; or
(e) If the Closing has not occurred within two hundred seventy (270)
days after the Assignment Applications are tendered for filing; or
(f) If either party hereto terminates this Agreement pursuant to
Section 1.13 or Section 1.12, above.
8.2 LIABILITY. The termination of this Agreement under Section 8.1 shall
not relieve any party of any liability for breach of this Agreement prior to the
date of termination.
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<PAGE>
ARTICLE IX
DEFAULT
9.1 DEFAULT BY SELLER. In the event this Agreement is not closed because
of default on the part of the Seller, Buyer shall be entitled to pursue any and
all available legal or equitable remedies for any actual and consequential
damages and reasonable attorney's fees sustained as a consequence of such
default including, without limitation, the remedy of specific performance.
9.2 DEFAULT BY BUYER. In the event this Agreement is not closed because
of default on the part of the Buyer, Seller shall be entitled to pursue any and
all available legal or equitable remedies for any actual and consequential
damages and reasonable attorney's fees sustained as a consequence of such
default, including, without limitation, the remedy of specific performance.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER. Seller hereby covenants and agrees to
hold harmless, defend, and indemnify Buyer, its successors and assigns, from and
against any claims, actions, suits, proceedings, assessment judgments, costs,
losses, damages, liabilities, liens, encumbrances, charges, fines, penalties and
expenses (including without limitation reasonable attorneys' fees)
(collectively, "Damages") asserted against, resulting from, imposed upon or
incurred by Buyer directly or indirectly relating to or arising out of: or as a
consequence of: (i) the business and operation of the Radio Stations prior to
and on the Closing Date, (ii) any inaccuracy of any representation or warranty
herein or in any certificate, document or instrument delivered hereunder on the
part of the Seller; (iii) any failure by Seller to perform and comply with any
of its covenants, conditions or agreements set forth in this Agreement; (iv) any
l failure to comply with any "bulk sales" laws applicable to the transactions
contemplated hereby; (v) a claim by any person or entity based on any
arrangement or agreement to pay a commission, finder's fee or similar payment in
connection with this Agreement made or alleged to have been made by Seller; and
(vi) the Retained Liabilities.
10.2 INDEMNIFICATION BY BUYER. Buyer hereby covenants and agrees to
hold harmless, defend and indemnify Seller, its successors and assigns, from
and against any Damages asserted against, resulting from, imposed upon or
incurred by Seller directly or indirectly relating to or arising out of: (i) the
business and operation of the Radio Stations after the Closing Date; (ii) any
inaccuracy of any representation or warranty herein or in any certificate,
document or instrument delivered hereunder on the part of the Buyer; (iii) the
Assumed Liabilities; (iv) any failure by Buyer to perform any of its covenants,
conditions or agreements set forth in this Agreement; and (v) a claim by any
person or entity based on any arrangement or agreement to pay a commission,
finder's fee or similar payment in connection with this Agreement made or
alleged to have been
22
<PAGE>
made by Buyer.
10.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein shall survive the Closing for a period of two (2)
years (five (5) years for Section 2.18) following the Closing Date and, in each
case, without regard for Buyer's or Seller's actual knowledge of a breach
thereof. Notwithstanding anything to the contrary contained herein, the
indemnification obligations contained in Sections 10.1 and 10.2 arising in
connection with the Retained Liabilities and Assumed Liabilities, as well as the
representations and warranties set forth in the aforementioned Bill of Sale and
Warranty Deed, shall survive forever.
10.4 PROCEDURES.
(a) NOTICE. Promptly after the receipt by either party (the
"Indemnified Party") of notice of any claim or the commencement of any
action or proceeding which may entitle such party to indemnification under
this Section, such party shall give the other party (the "Indemnifying
Party") written notice of such claim or the commencement of such action or
proceeding and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting from such claim. The failure to
give the Indemnifying Party timely notice under this Section 10.4 shall not
preclude the Indemnified Party from seeking indemnification from the
Indemnifying Party unless, and to the extent that, such failure has
materially prejudiced the Indemnifying Party's ability to defend the claim
or litigation.
(b) ASSUMPTION OF DEFENSE. If the Indemnifying Party assumes the
defense of any such claim or litigation resulting therefrom with counsel
reasonably acceptable to the Indemnified Party, the obligations of the
Indemnifying Party as to such claim shall be limited to taking all steps
necessary in the defense or settlement of such claim or litigation
resulting therefrom and to holding the Indemnified Party harmless from and
against any losses, damages and liabilities caused by or arising out of any
settlement approved by the Indemnifying Party or any judgment in connection
with such claim or litigation resulting therefrom; provided, however, the
Indemnified Party may participate, at its expense, in the defense of such
claim or litigation provided that the Indemnifying Party shall direct and
control the defense of such claim or litigation. The Indemnified Party
shall cooperate and make available all books and records reasonably
necessary and useful in connection with the defense. The Indemnifying
Party shall not, in the defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment, except with the written
consent of the Indemnified Party, or enter into any settlement, except with
the written consent of the Indemnified Party, 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
claim or litigation.
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<PAGE>
(c) NON-ASSUMPTION OF DEFENSE. If the Indemnifying Party shall not
assume the defense of any such claim or litigation resulting therefrom, the
Indemnified Party may, but shall have no obligation to, defend against such
claim or litigation in such manner as it may deem appropriate, and the
Indemnified Party may compromise or settle such claim or litigation without the
Indemnifying Party's consent. The Indemnifying Party shall promptly reimburse
the Indemnified Party for the amount of all expenses, legal or otherwise and
including the amounts of judgments entered or settlements agreed to, incurred by
the Indemnified Party in connection with the defense against or settlement of
such claim or litigation. If no settlement of the claim or litigation is made,
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 expenses, legal or otherwise, incurred by the Indemnified Party in
the defense against such claim or litigation.
ARTICLE XI
MISCELLANEOUS
11.1 ENTIRE AGREEMENT; BINDING EFFECT. This Agreement, and the Schedules
attached hereto constitute the entire agreement between the parties hereto with
respect to the subject matter hereof, and supersedes any and all prior
agreements, arrangements and understandings relating to the matters provided for
herein. No party shall be in any manner responsible as to any warranties,
representations, or guarantees except as specifically set forth herein. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective heirs, legal representatives, successors and assigns
of the parties hereto.
11.2 APPLICABLE LAW. This Agreement is made pursuant to and shall be
construed under the laws of the State of Wisconsin, subject, however, to all
applicable rules and regulations of the FCC.
11.3 NOTICES, ETC. All notices, requests, demand and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
personally delivered or five (5) days after being deposited in the United States
mail, certified mail, postage prepaid, return receipt requested, or twenty-four
(24) hours after delivery to a reputable courier service which guarantees
overnight delivery, addressed as follows:
(a) IF SELLER, TO:
Thomas A. Walker
Value Radio Corp.
c/o Mid-West Management, Inc.
2740 Ski Lane
Madison WI 53713
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<PAGE>
With copy to:
Jerry E. McAdow, Esq.
Lathrop & Clark
122 W. Washington Avenue
Suite 1000
Madison, WI 53701-1507
(b) IF TO BUYER, TO:
Terrence J. Leahy
Cumulus Media, L.L.C.
c/o Quaestus Management Corp.
330 E. Kilbourn Ave. Suite 250
Milwaukee, WI 53202
With copy to:
Richard Bonick
Cumulus Media LLC
c/o Century Broadcasting
875 N. Michigan Avenue
Chicago IL 60611
Peter Trybula
Baker & Daniels
205 W. Jefferson Blvd, Suite 250
South Bend, IN 46601
11.4 COUNTERPARTS. This Agreement may be signed in counterpart originals,
which collectively, when each of the parties hereto have signed a counterpart,
shall have the same legal effect as if all signatures had appeared on the same
physical document.
11.5 SEVERABILITY. The parties agree that if any provision of this
Agreement shall under any circumstances be deemed invalid or inoperative, this
Agreement shall be construed with the invalid or inoperative provision deleted,
and the rights and obligations of the parties shall be construed and enforced
accordingly; provided, however, that if the deletion of any provision materially
alters the burdens or benefits of either party, the parties agree to negotiate
in good faith such modifications to this Agreement as are appropriate to insure
the burdens and benefits of each party are reasonably comparable to those
originally contemplated and expected.
25
<PAGE>
11.6 WAIVER. No waiver by either party hereto of a breach of any of the
terms and conditions of this Agreement by the other party shall be construed as
a waiver by such party of any subsequent breach.
11.7 EXPENSES. Except as otherwise set forth in Sections 7.2, 1.5(b). 4.4
and 2.14 herein, the parties hereto shall pay their own expenses, including,
without limitation, brokers', accountants' and attorneys' fees incurred in
connection with the negotiation and consummation of the transactions
contemplated by this Agreement.
11.8 RISK OF LOSS. The risk of loss or damage by fire or other casualty
or cause to those physical properties which are the subject of this Agreement
shall, until the Closing Date, be upon Seller. In the event of any material
damage, deterioration (normal wear and tear excepted) destruction, or loss
materially adversely affecting any item of tangible property included in the
Assets, the parties shall have the following options:
(i) If the loss is covered by insurance, Buyer may choose
between taking the insurance payment in lieu of the lost property or
require Seller to use the insurance proceeds to restore the lost
assets to the condition they were in prior to the casualty, normal
wear and tear excepted.
(ii) If there are either no or inadequate insurance
proceeds to cover the loss, Buyer shall be entitled, at its option, to
(i) receive from Seller the dollar amount required to restore such
assets to the condition such assets were in prior to the damage or
destruction or (ii) credit Buyer's cost of repair or restoration of
such assets against the Purchase Price or (iii) terminate this
Agreement without any liability.
11.9 FURTHER ASSURANCES. After the Closing, each party shall from time to
time, at the request of and without further cost or expense to the other,
execute and deliver such other instruments and take such other actions as may
reasonably be requested in order to more effectively consummate the transactions
contemplated hereby.
11.10 HEADINGS. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
11.11 AMENDMENTS AND WAIVERS. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing signed by the parties
hereto.
11.12 ASSIGNMENT. Except as set forth in this section, neither Buyer nor
Seller may assign this Agreement without the written consent of both Buyer and
Seller. Such consent shall not be unreasonably withheld. . Buyer may assign
all of its right, title and interest in, to and under the Agreement to one or
more affiliated entities, who shall then, subject to the terms and conditions of
this Agreement, have the right to receive the Assets and to pay to Seller in
full the Purchase Price therefore.
11.13 PRESS RELEASES AND ANNOUNCEMENTS. Neither Buyer nor Seller shall
issue any press release or announcement relating to the subject matter of this
Agreement prior to the Closing
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<PAGE>
Date without the prior written approval of the other party; provided, however,
that any party may make any public disclosure it believes in good faith is
required by law or regulation (in which case the disclosing party will advise
the other party prior to making the disclosure).
11.14 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person other than Buyer and Seller and their
respective successors and permitted assigns.
IN WITNESS WHEREOF, the undersigned parties hereto have duly executed this
Agreement or a counterpart thereof as of the date first above written.
[SIGNATURES TO FOLLOW]
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<PAGE>
VALUE RADIO CORP., Seller
By:
--------------------------------
Thomas A. Walker, Treasurer
CUMULUS MEDIA, L.L.C.,, Buyer
By:
--------------------------------
Richard Weening, Manager
For the limited purpose of Guaranteeing Seller's obligations under Article
X of this Agreement, Midwest Management, Inc., a Wisconsin corporation, joins in
this Agreement.
MID-WEST MANAGEMENT, INC.
By:
--------------------------------
Thomas A. Walker, President
28
<PAGE>
EXHIBIT 12.1
CUMULUS MEDIA INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Net loss................................................................................................. $ 3,578
Income tax expense....................................................................................... 67
---------
3,511
---------
Fixed charges:
Interest expense......................................................................................... 927
Amortization of debt expense............................................................................. 65
Portion ( 1/3) of rentals representative of interest expense............................................. 66
---------
1,058
---------
Loss before income taxes and fixed charges............................................................... $ 2,453
---------
---------
Preferred dividend requirement........................................................................... $ 274
---------
Ratio of pre-tax income to net income.................................................................... 1.0
---------
Preferred dividend factor................................................................................ 274
Total fixed charges...................................................................................... 1,058
---------
Total fixed charges and preferred dividends.............................................................. $ 1,332
---------
---------
Ratio of earnings to fixed charges and preferred dividend requirements................................... (A)
---------
---------
</TABLE>
(A) As a result of the net loss incurred in 1997, the Company was unable to
fully cover the indicated fixed charges and preferred dividends. Earnings
did not cover fixed charges and preferred dividend requirements by $3,785 in
1997.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our reports as of the dates and relating
to the financial statements of the companies listed below, which appear in such
Prospectus.
<TABLE>
<CAPTION>
COMPANY DATE OF REPORT
- -------------------------------------------------------------------------------------- --------------------------
<S> <C>
Cumulus Media Inc. March 18, 1998
Arbor Radio LP February 19, 1998
Beaumont Skywave, Inc. February 10, 1998
Caribbean Communications Company Limited March 9, 1998
Carolina Broadcasting, Inc. and Georgetown Radio, Inc. March 4, 1998
Castle Broadcasting Limited Partnership March 18, 1998
Clearly Superior Radio Properties February 24, 1998
Communications Properties, Inc. January 10, 1998
Crystal Radio Group, Inc. March 13, 1998
Forjay Broadcasting Corporation January 23, 1998
HVS Partners February 25, 1998
Jan-Di Broadcasting, Inc. February 24, 1998
K-Country, Inc. February 27, 1998
Lesnick Communications, Inc. February 20, 1998
Louisiana Media Interests, Inc. and Subsidiaries March 9, 1998
M&M Partners February 24, 1998
The Midwestern Broadcasting Company, Radio Stations
WWWM-FM and WLQR-AM February 11, 1998
Mustang Broadcasting Company March 5, 1998
Ninety Four Point One, Inc. and KAYD AM/FM February 20, 1998,
except as to Note 7,
which is as of March 6,
1998
Pamplico Broadcasting, L.P. February 13, 1998
Phoenix Broadcast Partners, Inc. March 16, 1998
Savannah Valley Broadcasting Radio Properties February 27, 1998
Seacoast Radio Company, LLC February 24, 1998
Sunny Broadcasters, Inc. February 24, 1998
Tallahassee Broadcasting, Inc. February 20, 1998
Tryon-Seacoast Communications, Inc. February 20, 1998
Value Radio Corporation February 24, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPANY DATE OF REPORT
- -------------------------------------------------------------------------------------- --------------------------
<S> <C>
Wilks Broadcast Acquisitions, Inc. February 16, 1998
WJCL-FM February 27, 1998
WKKO-FM, WRQN-FM, WTOD-AM and WIMX-FM February 6, 1998
</TABLE>
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ PRICE WATERHOUSE LLP
Chicago, Illinois
March 27, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated March 2, 1998 on our audit of the consolidated financial
statements of Republic Corporation and subsidiary (radio broadcasting operations
only) as of December 31, 1997 and 1996 and for each of the three years in the
period ended December 31, 1997. We also consent to the reference to our firm
under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Montgomery, Alabama
March 30, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated February 27, 1998 on our audit of the financial statements of
Savannah Communications, L.P. as of December 31, 1997 and 1996 and for each of
the two years in the period ended December 31, 1997. We also consent to the
reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Atlanta, Georgia
March 30, 1998
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We have issued our reports dated February 24, 1998, accompanying the
financial statements of New Frontier Communications, Inc. contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts."
/s/ Johnson, Miller & Co.
Odessa, Texas
March 27, 1998
1
<PAGE>
EXHIBIT 23.5
CONSENT OF MCGLADREY & PULLEN, LLP
To the Board of Directors
Cumulus Media Inc.
We hereby consent to the use in this Registration Statement on Form S-1 of
our report, dated February 11, 1998, except for Note 13 as to which the date is
February 19, 1998, relating to the combined financial statements of JKJ
Boradcasting, Inc., Missouri River Broadcasting, Inc., Ingstad Mankato, Inc.,
James Ingstad Broadcasting, Inc. and Hometown Wireless, Inc. We also consent to
the reference to our Firm under the captions "Experts" in the Prospectus.
/s/ McGladrey & Pullen, LLP
Pierre, South Dakota
March 27, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion of our report dated February 11, 1997 on the
divisional financial statements of Fritz Broadcasting, Inc. Toledo Division for
the years ended December 29, 1996 and December 31, 1995 in the Registration
Statement on Form S-1 filed on March 30, 1998 by Cumulus Media Inc. for the
registration of Class A Common Stock.
/s/ Plante & Moran, LLP
Troy, Michigan
March 30, 1998
<PAGE>
Exhibit 99.1
AFFIDAVIT
---------
I, Richard W. Weening, being duly sworn, hereby depose and state:
(i) I am Executive Chairman and Treasurer of Cumulus Media Inc.
(the "Company").
(ii) The Company is presently a wholly owned subsidiary of Cumulus
Media, LLC ("Media LLC"). The Company and Media LLC intend to effect three
proposed underwritten public offerings (the "Proposed Offerings"), one of
approximately _____________ shares of the Company's Class A common stock, one
of approximately _______ shares of the ____% Series A Cumulative Exchangeable
Redeemable Preferred Stock Due 2009, and one of ______ aggregate principal
amount of the Company's Senior Subordinated Notes Due 2008, and a series of
transactions in connection therewith (collectively, with the Proposed
Offerings, the "Transactions").
(iii) Prior to the completion of the Proposed Offerings, Media LLC
and the Company do not believe it is desirable for persons who are not
stockholders or employees of the Company, Media LLC or any of their
respective subsidiaries or affiliates to be members of the Company's Board of
Directors. Once the Company is a publicly-held company, the Company and Media
LLC believe it would be appropriate to include "independent directors" on the
Board of Directors of the Company and, in accordance with the New York Stock
Exchange listing requirements, will appoint persons to the Board of Directors
of the Company to serve as "independent directors."
<PAGE>
(iv) Messrs. Robert H. Sheridan, III and Ralph B. Everett have
agreed to serve as directors of the Company after completion of the Proposed
Offerings. None of such persons is a stockholder or employee of the Company,
Media LLC or any of their respective subsidiaries or affiliates. None of such
persons has been asked to participate, nor has any such persons participated,
in the Transactions, nor has any of such persons been asked to participate in
the preparation of the Registration Statements relating to the Proposed
Offerings.
(v) Each of Robert H. Sheridan, III and Ralph B. Everett has
advised me that he is agreeable to serving as a director of the Company after
completion of the Proposed Offerings, but will not consent to being named in
the Registration Statements for the Proposed Offerings as a person about to
become a director because of his lack of any involvement with the
Registration Statements of the Company prior to the completion of the
Proposed Offerings. As a result of the foregoing, I believe that the
obtaining of such consent is impracticable.
/s/ Richard W. Weening
--------------------------------
Richard W. Weening
Subscribed and sworn to before me
this 27th day of March, 1998
/s/ Sandy Lee
- ----------------------------------
Notary Public
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