<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. 1]
Filed by the Registrant [X]
Filed by a Party other than the Registrant ____
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SunGroup, Inc.
-----------------------
(Name of Registrant as Specified in its Charter)
------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[ ] No fee required
[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
Not applicable
2) Aggregate number of securities to which transaction applies:
Not applicable
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
Not applicable
4) Proposed maximum aggregate value of transaction:
$24,000,000
5) Total fee paid:
$4,800.00
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and date of filing.
1) Amount Previously Paid: ___________________________________
2) Form Schedule or Registration Statement No.: ______________
3) Filing Party: _____________________________________________
4) Date filed: _______________________________________________
<PAGE> 2
[ON SUNGROUP, INC. LETTERHEAD]
Dear Shareholder:
It is my pleasure to extend to you a cordial invitation to
attend a Special Meeting of Shareholders of SunGroup, Inc. to be held at 8:00
a.m. local time on Wednesday, May 27, 1998 at the Company's headquarters at 2201
Cantu Court, Suite 102-A, Sarasota, Florida 34212.
You are requested to read carefully the accompanying Notice of
Meeting and Proxy Statement. At the meeting, holders of common stock will be
asked to approve the sale of substantially all of the assets of the Company and
its subsidiaries, including radio stations KEAN-AM/FM, KROW-FM, Abilene, Texas;
KYKX-FM, Longview, Texas; KKYS-FM, Bryan, Texas; KKSS-FM, Albuquerque, New
Mexico; and KMJJ-FM, Shreveport, Louisiana (all of which are owned by
subsidiaries of the Company) to SunBurst Media, LP of Dallas, Texas. The Board
of Directors recommends that you vote in favor of the transaction.
We hope you will be able to attend the meeting in person.
Whether you expect to attend or not, we request that you complete and return the
enclosed proxy card in the enclosed postage-paid envelope. Your vote is
important.
I look forward to seeing you on May 27, 1998.
Sincerely,
JOHN W. BIDDINGER
President
<PAGE> 3
SUNGROUP, INC.
2201 CANTU COURT
SUITE 102-A
SARASOTA, FLORIDA 34212
---------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON May 27, 1998
---------------
Notice is hereby given that a Special Meeting of Shareholders
(the "Special Meeting") of SunGroup, Inc. (the "Company") will be held at 8:00
a.m. local time, on Wednesday, May 27, 1998, at the Company's headquarters, at
2201 Cantu Court, Suite 102-A, Sarasota, Florida 34212 for the following
purpose:
(1) To consider and vote upon a proposal to approve the Asset
Purchase Agreement, between the Company and SunBurst Media, LP, pursuant to
which the radio broadcast licenses and related assets of all of the Company's
owned and operated radio stations, representing substantially all of the
Company's assets, would be sold to SunBurst Media, LP. A copy of the Asset
Purchase Agreement is attached as Appendix I to, and is described in, the Proxy
Statement.
(2) To transact such other business as may properly come
before the Special Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
March 31, 1998 as the record date for the determination of shareholders
entitled to notice of and to vote at the Special Meeting.
Your attention is directed to the Proxy Statement accompanying
this notice for a more complete statement regarding matters to be acted upon at
the Special Meeting.
By the Order of the Board of Directors
James A. Hoetger, Secretary
Sarasota, Florida
May 11, 1998
YOUR REPRESENTATION AT THE SPECIAL MEETING IS IMPORTANT. TO ENSURE YOUR
REPRESENTATION, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. SHOULD YOU DESIRE TO REVOKE
YOUR PROXY, YOU MAY DO SO AS PROVIDED IN THE ACCOMPANYING PROXY STATEMENT AT ANY
TIME BEFORE IT IS VOTED.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION ............................................................... 1
Time, Date, Place and Purpose ....................................... 1
Proxies ............................................................. 1
Record Date and Voting Securities ................................... 2
Voting Procedures ................................................... 3
Rights of Dissenting Shareholders ................................... 3
Accompanying Materials .............................................. 3
PROPOSAL TO SELL SUBSTANTIALLY ALL OF THE COMPANY'S ASSETS ................. 3
General ............................................................. 3
Background and Reasons for the Proposed Transaction ................. 4
Board Recommendation ................................................ 5
Description of the Asset Purchase Agreement ......................... 5
Ongoing Corporate Operations ........................................ 8
Interests of Certain Persons in the Proposed Transaction ............ 8
Accounting Treatment ................................................ 9
Federal Income Tax Consequences ..................................... 9
Rights of Dissenting Shareholders ................................... 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ............. 12
PRO FORMA FINANCIAL INFORMATION ............................................ 13
General ............................................................. 13
Balance Sheet ....................................................... 15
Statements of Operations ............................................ 16
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ............................ 17
OTHER MATTERS .............................................................. 17
APPENDIX I -- ASSET PURCHASE AGREEMENT
APPENDIX II -- DISSENTERS' RIGHTS STATUTE
</TABLE>
<PAGE> 5
SUNGROUP, INC.
2201 Cantu Court
Suite 102-A
Sarasota, Florida 34212
(941) 377-6710
--------------------
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
To be Held May 27, 1998
--------------------
INTRODUCTION
TIME, DATE, PLACE AND PURPOSE
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of SunGroup, Inc. (the
"Company") for use at the Special Meeting of Shareholders (the "Special
Meeting") to be held at the Company's Headquarters on May 27, 1998, at 8:00 a.m.
eastern daylight savings time, and at any adjournment thereof.
The purpose of the Special Meeting is to consider and vote upon a
proposal to approve the Asset Purchase Agreement (the "Asset Purchase Agreement"
or "Agreement"), between the Company and its subsidiaries and SunBurst Media,
LP, a Delaware limited partnership ("SunBurst"), pursuant to which substantially
all of the assets of the Company's subsidiaries, including all of the radio
broadcast licenses, would be sold to SunBurst for $24 million (subject to a
$1,000,000 Holdback Escrow Fund and other contingent adjustments as presented in
the Agreement. Contingencies that could reduce the purchase price include the
presence of barter contracts, which the Company intends to eliminate, or unused
cash contracts, which the Company does not expect to exceed $25,000, or any
claims by SunBurst for breach of covenants or the inaccuracy of representations
made in the Agreement). Management of the Company is unaware of any relationship
or common ownership between the Company and the Purchaser. See "Proposal to Sell
Substantially all of the Company's Assets."
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED
THE SALE OF THE COMPANY'S RADIO BROADCAST LICENSES AND CERTAIN RELATED ASSETS
AND RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE ASSET PURCHASE AGREEMENT.
PROXIES
Proxies in the accompanying form are solicited on behalf of,
and at the direction of, the Board of Directors of the Company (hereinafter
sometimes referred to as the "Board"). All shares of Common Stock represented by
properly executed proxies, unless such proxies have previously been revoked,
will be voted at the meeting and, where the manner of voting is specified on the
proxy, will be voted in accordance with such specifications. Shares represented
by properly executed proxies on which no specification has been made will be
voted FOR the proposal to approve and adopt the Asset Purchase Agreement. If any
other matters are properly presented at
<PAGE> 6
the meeting for action, including a question of adjourning the meeting from time
to time, the persons named in the proxies and acting thereunder will have
discretion to vote on such matters in accordance with their best judgment. If a
properly executed proxy is returned and the shareholder has abstained from
voting on any matter, the shares represented by the proxy will be considered
present at the meeting for purposes of determining a quorum and for purposes of
calculating the vote, but will not be considered to have been voted in favor of
such matters.
When stock is held in the name of more than one person, each
such person should sign the proxy. If the shareholder is a corporation, the
proxy should be signed in the name of such corporation by an executive or other
authorized officer. If signed as attorney, executor, administrator, trustee,
guardian or in any other representative capacity, the signer's full title should
be given and, if not previously furnished, a certificate or other evidence of
appointment should be furnished. If an executed proxy is returned by a broker
holding shares in street name which indicates that the broker does not have
discretionary authority as to certain shares to vote on one or more matters,
such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be represented at the
meeting for purpose of calculating the vote with respect to such matter.
Any shareholder who executes and returns a proxy may revoke it
at any time before it is voted. Additionally proxies are available upon request
from James A. Hoetger, Secretary, SunGroup, Inc., 2201 Cantu Court, Suite 102-A,
Sarasota, Florida 34212.
Any shareholder who wishes to revoke a proxy can do so (i) by
executing a later-dated proxy relating to the same shares and delivering it to
James A. Hoetger prior to the vote at the Special Meeting, (ii) by written
notice of revocation received by James A. Hoetger prior to the vote at the
Special Meeting or (iii) by appearing in person at the Special Meeting, filing a
written notice of revocation and voting in person the shares to which the proxy
relates. Later-dated proxies and written notices of revocation may be mailed to
James A. Hoetger, but such revocations will only be effective if they are
received prior to the vote at the Special Meeting.
RECORD DATE AND VOTING SECURITIES
The Board has fixed the close of business on March 31, 1998
as the Record Date for determining the holders of outstanding shares of Common
Stock entitled to notice of, and to vote at, the Special Meeting. On the Record
Date, there were 6,848,503 shares of Common Stock issued, outstanding and
entitled to vote. Each holder of Common Stock is entitled to one vote,
exercisable in person or by proxy, for each share of Common Stock held of record
on the Record Date. As of the date preceding public announcement of the proposed
transaction, for which information was available, the sale price of the
Company's Common Stock was $0.54. The Notice of Special Meeting, this Proxy
Statement and the related Proxy Card are first being mailed to shareholders of
the Company on or about May 11, 1998.
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VOTING PROCEDURES
A majority of the shares of Common Stock entitled to vote,
represented in person or by proxy, is required to constitute a quorum. If a
quorum is not present at the time of the Special Meeting, or if for any reason
the Company believes that additional time should be allowed for the solicitation
of proxies, the Company may adjourn or postpone the Special Meeting with or
without a vote of the shareholders. If adjournment is proposed by the Company,
the person named on the enclosed proxy card will vote such shares for which they
have voting authority in favor of adjournment.
Each outstanding share of Common Stock will be entitled to one
vote on any matter voted on at the Special Meeting. The matter being submitted
to a vote of the shareholders will be approved if it receives the affirmative
vote of a majority of the votes cast (in person or by proxy) by the holders of
the shares of Common Stock represented and entitled to vote at the Special
Meeting, if a quorum is present. Abstentions and broker non-votes will be
counted for purposes of constituting a quorum, but will not have the effect of
voting against any matters presented at the Special Meeting.
Management is aware that the shares of stock owned by John W.
Biddinger, Dan E. Young and James M. Elliott will be voted in favor of the
Transaction. These individuals collectively own 46.9% of the Company's common
stock.
RIGHTS OF DISSENTING SHAREHOLDERS
Shareholders who object to the Asset Purchase Agreement may
exercise their dissenters' rights and obtain payment for the "fair value" of
their shares. See "Proposal to Sell Substantially All of the Company's Assets --
Rights of Dissenting Shareholders."
ACCOMPANYING MATERIALS
A copy of the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1997 shall be delivered to shareholders together with
this Proxy Statement.
PROPOSAL TO SELL SUBSTANTIALLY ALL
OF THE COMPANY'S ASSETS
GENERAL
At the Special Meeting, the shareholders of the Company will
be asked to consider and vote upon the approval of the Asset Purchase Agreement,
dated as of February 6, 1998, between the Company (and the Company's
subsidiaries) and SunBurst, which provides for the sale to SunBurst of the radio
broadcast licenses, and certain related assets, of all of the Company's owned
and operated radio stations: KEAN-AM/FM, KROW-FM Abilene, Texas; KYKX-FM
Longview, Texas; KKYS-FM Bryan, Texas; KKSS-FM Albuquerque, New Mexico; and
KMJJ-FM, Shreveport, Louisiana (the "Stations"). These stations constitute all
of the radio stations owned by the Company and its subsidiaries. The
consideration to be received by the Company for the sale of the Stations
consists of a cash payment of $24 million (subject to
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<PAGE> 8
adjustment) (the "Transaction"). The terms of the Agreement and the Stations to
be sold are described below under the caption "Description of the Asset Purchase
Agreement."
BACKGROUND AND REASONS FOR THE PROPOSED TRANSACTION
For the past six years, the Company's focus has been on
restructuring its debt obligations to generate sufficient cash flow to service
scheduled debt payments. There were substantial efforts to restructure or pay
down debts through negotiation and asset sales. During the first half of 1997,
the Company continued its efforts to restructure its indebtedness principally by
contacting a number of potential sources of long-term debt and equity. The
Company believed that these efforts, if successful, would allow the Company to
expand its radio station operations. Indeed during this period, the Company did
expand into one new market through the execution of a Local Management Agreement
and Right to Purchase Agreement for the Company to manage and ultimately
purchase radio station KALK-FM in Mt. Pleasant, Texas.
By August 1997, however, the Company's efforts to refinance
its principal indebtedness had not proven successful. Attempts to engage
potential refinancing sources did not materialize due to the Company's past
credit history.
In February of 1993, Conseco Capital Management, Inc., an
Indiana corporation and the Company's principal creditor, entered into a
settlement agreement with the Company permitting the Company to repay the
indebtedness owed to Conseco over a period of years in scheduled amounts (the
"Settlement Agreement"). The Settlement Agreement was entered between Conseco
(and certain subsidiaries) and the Company, John W. Biddinger, James A. Elliott,
Dan E. Young, Frank A. Woods, Arthur D. Tek and Robert Davies. As part of the
Settlement Agreement, the Company issued to two of Conseco's subsidiaries two
promissory notes in the respective original principal amounts of $880,000 and
$4,000,000 (the "Notes"). The Notes are due and payable from the Company's net
cash flow. As part of the Settlement Agreement, the Company issued certain
warrants to Conseco which are described below. (See "Security Ownership of
Certain Beneficial Owners and Management" below)
The Notes are secured by a pledge of stock of the Company's
subsidiaries. The Settlement Agreement also contains covenants limiting the
compensation payable to John Biddinger, limiting certain corporate overhead
expenditures, providing for inspection rights to Conseco, providing for certain
financial reporting requirements, limiting additional indebtedness which may be
incurred by the Company, limiting capital expenditures which may be incurred by
the Company, limiting inter-company loans, limiting employee loans, prohibiting
fraudulent conveyances, restricting subsidiary transactions and limiting sales
of the Company's assets. Upon the occurrence of a default, the Notes described
above become immediately due and payable.
In October 1997, Conseco alleged that the Company had violated
two of the covenants in the Settlement Agreement by paying excess compensation
to John Biddinger and incurring corporate overhead expenditures in excess of
those permitted by the covenants. The Company disputed these alleged violations
but Conseco continued to contend it had the right to exercise certain remedies,
including the right to exercise certain contingent warrants that were granted to
Conseco as part of the settlement agreement. The exercise of these warrants
would dilute the value of the shares currently held by the Company's other
shareholders and effectively give Conseco voting control over the Company.
As a result of the delays incurred in the Company's efforts to
locate refinancing and the demands of Conseco, in late summer and early fall of
1997 the Board determined that the Company must either (i) seek a merger
partner; or (ii) seek a purchaser of substantially all of the Company's assets.
In October 1997, Conseco contacted certain radio station
groups and the Company contacted radio station groups as well as William R. Rice
& Company, a media broker and investment banker, to explore potential asset
sales opportunities. In response to these efforts, in November 1997, the Company
received information from Conseco concerning their efforts. The efforts of
Conseco did not result in any letters of intent and reflected indications of
interest to purchase assets at prices considerably below those solicited by the
Company. Meanwhile the Company had received three letters of intent expressing
interest in the purchase of substantially all of the Company's assets. The Board
considered each of these letters of intent. The letter of intent provided by
SunBurst was superior, in the Board's opinion, to the other offers in that it
expressly allowed the Company to retain all rights to its accounts receivable
and its cash on hand (which approximated an aggregate of $1,620,000 at March 31,
1998) thus effectively increasing the net amount available for distribution to
shareholders. SunBurst also offered to explicitly agree to retain the station
managers and offered informal assurances that it would retain as many other
personnel as were economically feasible. As indicated, the Company received two
other offers. The first offer was for a purchase price of approximately
$1,000,000 less than the offer accepted by the Company. This offer also called
for the Company to split the brokerage fee to William R. Rice & Company.
Otherwise, the offer was comparable to the offer extended by SunBurst. The
second offer was less definitive than the SunBurst offer. The purchase price was
expressed as a range from $20 - $25 million. Also, the offer did not provide for
the Company to retain its cash and accounts receivable. Therefore, even if the
upper number were finally agreed upon, the treatment of cash and account
receivable made this a less attractive offer. These factors were key in the
Board's decision to accept SunBurst's offer. The Board also reconsidered the
Company's limited access to capital on terms
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acceptable to the Company, the dispute with the Company's principal
creditor and the Company's poor operating history. Based upon this review, in
November 1997, the Board unanimously approved pursuing further negotiations with
SunBurst.
From December 1997 until February 1998, management assisted
SunBurst with its due diligence process and negotiated the terms of the Asset
Purchase Agreement with SunBurst. On February 2, 1998, the Board of Directors
considered the Asset Purchase Agreement, in substantially the form attached to,
and described in, this Proxy Statement and unanimously approved the Transaction
(subject to shareholder approval) and recommended that the shareholders approve
the Transaction.
Conseco, while not conceding that the Company did not violate
the financial covenants set forth above, has agreed with the Company that it
will not exercise its remedies and that it would afford the Company the
opportunity to consummate the Transaction. If the Transaction does not close,
then the Company has every reason to believe that Conseco will reassert its
claims against the Company. In addition, as set forth below in the section
titled "Security Ownership of Certain Beneficial Owners and Management" Conseco
holds warrants to purchase 7,288,395.30 shares of the Company's common stock. If
all of these warrants were exercised, Conseco would own 58.1% of the common
stock of the Company. The Company is unable to predict what course of actions
Conseco would take if it gained control of the Company. Other than the warrants
and the debt owed to Conseco, there is no other affiliation between the Company
and Conseco.
Pursuant to the Asset Purchase Agreement, SunBurst will
acquire the radio broadcast licenses of the Company's subsidiaries and all
related assets. The Company will retain accounts receivable and cash. The Board
currently contemplates two distributions to shareholders with most of the net
proceeds from the Transaction being distributed as soon as practicable after
closing, and the remainder after the expiration of the Holdback Period and
winding up of the affairs of the Company. The Transaction is subject to a number
of conditions and there can be no assurance that the Company will be successful
in completing the Transaction. See "Description of the Asset Purchase
Agreement." If the Transaction is not consummated, the Company intends to seek
another buyer or buyers for its assets. If such a buyer or buyers are not found,
and additional financing is not forthcoming, the Company and/or the Company's
subsidiaries may be forced to liquidate.
The Board has determined that the Company's ability to remain
viable and competitive is in doubt because of (i) the Company's dispute with
Conseco, (ii) the Company's lack of time to obtain financing on competitive
terms, and (iii) the difficulty which the Company expects to encounter in
obtaining additional capital because of its dispute with Conseco.
The Board also recognizes that the potential exists that a
more favorable offer for these assets might be obtained if the Company or its
assets were marketed to potential buyers for a longer period of time. The Board
believes, however, that the dispute with Conseco and the lack of time to
refinance the Company's indebtedness does not afford the Company this
opportunity.
BOARD RECOMMENDATION
The Board of Directors of the Company has unanimously approved
the sale of the Stations to SunBurst pursuant to the Asset Purchase Agreement
and recommends that the shareholders vote FOR such proposal. The Board did not
obtain an investment banker opinion regarding the fairness of the Transaction to
Shareholders from a financial point of view. This decision was made by the Board
based upon the advice of senior management, representatives of Conseco and
representatives of William R. Rice & Company that the Company was unlikely to
receive offers which were superior to that extended by SunBurst. This decision
was also based on the widespread public information which is available regarding
sales in the radio industry and based on the costs to the Company involved in
obtaining such a fairness opinion.
DESCRIPTION OF THE ASSET PURCHASE AGREEMENT
GENERAL. The following is a brief summary of certain
provisions of the Agreement. This description is qualified in its entirety by
reference to the Agreement, a copy of which is attached to this Proxy Statement
as Appendix I. References to the "Company" below are
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generally deemed to include the Company's operating subsidiaries. Shareholders
are urged to read the Agreement in its entirety.
ASSETS. The assets to be purchased by SunBurst from the
Company and its subsidiaries generally include all of the material assets used
in connection with, or in the operation of, the Stations, including without
limitation: (i) the Federal Communications Commission ("FCC") licenses; (ii) the
real property; (iii) the personal property; (iv) the leases and agreements; (v)
the permits; (vi) the call letters and general intangibles; and (vii) the
subsidiaries' magnetic media, electronic data processing files, systems and
computer programs, logs, public files, records required by the FCC, vendor
contracts, supplies, maintenance records or similar business records relating to
or used in connection with the operation of the stations.
The assets to be sold specifically exclude (i) the Company's
accounts receivable; (ii) the Company's cash on hand at closing; and (iii) the
furnishings and office equipment located at the Company's executive offices in
Sarasota, Florida.
THE PURCHASER. SunBurst has its main office in Dallas, Texas
and either directly or indirectly is the owner of twelve (12) radio stations
throughout the southwest with other stations under contract. SunBurst's main
offices are located at 1350 One Galleria Tower, 13355 Noelle Road, Dallas, Texas
75240. Its general partner is SunBurst Media Corporation. John M. Borders serves
as President of the general partner. Based on information provided by SunBurst,
it is principally owned by John M. Borders, Don Turner and Media Communications
Partners, L.P. Mr. Borders also owns numerous radio stations throughout the
southwest and recently sold several stations he owned in Lake Charles,
Louisiana. SunBurst is not an affiliate of the Company, any of its officers or
directors, or Conseco. SunBurst has advised the Company that it has obtained
commitments for financing from third parties to fund its obligations under the
Agreement. The Company has also inspected the $1,200,000 letter of credit which
will secure SunBurst's obligations. (See "Description of the Asset Purchase
Agreement" below).
PURCHASE PRICE. Upon the terms and subject to the conditions
set forth in the Agreement, SunBurst will deliver to the Company on the closing
date, a cash payment in the amount of $24 million. The purchase price will be
subject to adjustments or allocations for various items, including adjustments
as follows: (i) the price will be reduced to the extent the Company's barter
contracts exceed $25,000 per market (provided SunBurst does not get a credit for
barter contracts for television advertisements, newspaper advertisements, and
other promotions related to the 1998 Spring Arbitron Book that do not exceed
$50,000 per market); and (ii) the price will be reduced to the extent that any
unused portion of a cash contract exceeds $20,000 per station or if such
contracts extend more than six (6) months from closing.
ACCOUNTS RECEIVABLE. As indicated earlier, the Company shall
retain all cash on hand and accounts receivable at the Closing. (As of March 31,
1998, the amount of the Company's accounts receivable equaled $1,321,408 and the
Company's cash on hand equaled $297,654. These numbers are of course subject to
change, depending on the actual results of the Company's operations.) SunBurst
has agreed to collect the accounts receivable for a period of six (6) months
following Closing. Every two (2) months during this period, SunBurst shall
account to the Company for the amounts collected and forward such amounts to the
Company. Any accounts receivable not collected during the six-month period will
be forwarded to the Company for collection.
ESCROW. The Asset Purchase Agreement provides for a $1.2
million letter of credit to be placed in escrow with an independent escrow agent
by SunBurst to secure performance of its obligations. This deposit will be made
after the shareholders approve the Agreement at the Special Meeting. The
Company's recourse against SunBurst in the event the Transaction does not close
is limited to the right to collect under the letter of credit.
CLOSING; CONDITIONS TO CLOSING. It is anticipated that if the
Transaction is approved by the shareholders at the Special Meeting, the closing
will take place during the
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<PAGE> 11
second quarter of 1998, depending upon FCC approval for transfer of the radio
broadcast licenses. Pursuant to the Agreement, the consummation of the
Transaction is subject to, and conditioned upon, among other things, (i)
approval by the Company's shareholders of the Agreement at the Special Meeting;
(ii) the final approval of the FCC to the renewals of the radio broadcast
licenses and their assignment to SunBurst; (iii) the satisfaction at or before
closing of all agreements, obligations and conditions of the Company and
SunBurst, as described in the Agreement; (iv) the material accuracy of the
representations and warranties made in the Agreement; (v) obtaining written
third party consents to all material leases and agreements where required by the
terms of the lease or agreement or substitution by the Company of equivalent
rights without materially adverse impact upon SunBurst's enjoyment of the
acquired assets; (vi) the remediation of any environmental problems at the
Stations; and (vii) the absence of any material adverse change in the acquired
assets. The Closing also is conditioned expressly upon the Company being able to
successfully locate and acquire a new location for the KEAN-FM transmitter site
on terms acceptable to SunBurst. The Asset Purchase Agreement also terminates if
the FCC has not granted final approval of the assignment of the radio broadcast
licenses within nine (9) months and if the Transaction does not otherwise close
within one (1) year.
As stated above, the material accuracy of the representations
and warranties in the Agreement is a condition precedent to the consummation of
the Transaction. One of the representations and warranties is that there are no
environmental problems at any of the Stations. There are several old capacitors
at several of the Stations. In order to comply with these representations and
warranties, the Company is arranging for the lawful disposal of these
capacitors. This is the only known environmental issue. To the best of the
Company's knowledge the Company has never been named as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act (which is also known as Superfund or CERCLA). The Company,
pursuant to the representations and warranties made in the Agreement will be
responsible for any environmental remediation which SunBurst may incur after
closing of the Transaction (other than for remediation which may be necessary
for acts of SunBurst or its successors or assigns).
REGULATORY MATTERS. The Transaction is contingent upon the FCC
giving its written approval to the proposed assignments of licenses to SunBurst
and those grants maturing into final approvals after the grants appear on public
notice. On March 30, 1998, the Company and SunBurst jointly filed an application
for assignment of license with the FCC. Public notice of the application will be
published by the FCC. Interested parties will then have a thirty (30) day period
within which to file objections to the application. If no objections are filed,
then the FCC absent other problems, will grant the application. The FCC will
then publish a second public notice announcing the grant and allowing interested
parties a second thirty (30) day period within which to file a request for the
FCC to reconsider the grant. After the expiration of the second thirty (30) day
period, the FCC has an additional ten (10) days to reconsider its own action. At
the end of this ten (10) day period the grant becomes final.
INDEMNIFICATION. The Agreement provides that the Company, upon
written notice by SunBurst, shall indemnify and hold harmless SunBurst and its
representatives, transferees and assignees from and against any loss, damage,
liability, claim, demand, judgment, or expense, including claims of third
parties arising out of the ownership of the acquired assets or the operations of
the Stations by the Company prior to closing. The Agreement provides that
SunBurst, upon written notice by the Company, shall indemnify and hold harmless
the Company and any of its directors, members, stockholders, officers, partners,
employees, agents, consultants, representatives, transferees and assignees from
and against any loss, damage, liability, claim, demand, judgment, or expense,
including claims of third parties arising out of the ownership of the acquired
assets or the operations of the Stations by SunBurst after closing. From the
purchase price, the sum of $1,000,000 (the "Holdback Escrow Fund") shall be
placed in escrow for these purposes and shall be held in escrow for one (1) year
(the "Holdback Period"). During the Holdback Period, interest on the escrowed
funds shall be paid to the Company. After the Holdback Period, all remaining
escrowed funds not used to satisfy claims, if any, by SunBurst shall be
distributed to the Company.
REPRESENTATIONS AND WARRANTIES. In the Agreement, the Company
makes certain representations and warranties to SunBurst, as are customary for
asset sales agreements. These representations and warranties generally include
the following: organization and corporate good standing; corporate structure of
the Company; corporate authority to execute the Agreement and complete the
Transaction; accuracy of schedules of historical cash receipts; accuracy of
annual and monthly financial statements; delivery of 1998 annual budgets;
absence of undisclosed
- 7 -
<PAGE> 12
liabilities; absence of certain changes or events; title to properties; absence
of material defaults under contracts or agreements; no violations of law; no
pending claims or investigations; compliance of employee benefit plans with
applicable laws; no adverse labor related matters; no conflicts with other
agreements; condition of assets; environmental matters; and various other
matters.
TERMINATION. Pursuant to the Agreement, the Transaction may be
terminated by SunBurst prior to closing upon (i) the occurrence of a material
breach by the Company of the Agreement or (ii) the occurrence of a material
adverse change in the performance of the Stations. In addition to the above, the
Agreement sets forth customary events which may bring about termination of the
Transaction prior to closing.
ESTIMATED NET PROCEEDS FROM THE PROPOSED TRANSACTION. The
Company estimates that after deducting expenses of the Transaction, the Holdback
Escrow Fund, taxes and repayment of all outstanding indebtedness, it will have
approximately $12 - $13 million of cash proceeds from the Transaction. From the
net proceeds of the Transaction, the Company estimates that it will distribute
to the Shareholders approximately $.90 to $1.00 per share, and the balance will
be used by the Company for expenses in winding up the affairs of the Company.
ONGOING CORPORATE OPERATIONS
If the Transaction is approved by the shareholders and closes,
the Company will have disposed of substantially all of its assets. The Board
anticipates that the Company will remain in existence only to handle any
post-closing matters with SunBurst, including claims against the Holdback Escrow
Fund, to liquidate its affairs, and to otherwise wind-up the business of the
Company.
INTERESTS OF CERTAIN PERSONS IN THE PROPOSED TRANSACTION
In connection with the Transaction, John W. Biddinger,
Chairman of the Board of Directors, President and Chief Executive Officer of the
Company, will enter into a three-year Consulting Agreement with SunBurst,
pursuant to which Mr. Biddinger will be paid the sum of $350,000 over a three
(3) year period in consideration of his provision of certain consulting services
to SunBurst subsequent to the Transaction. James A. Hoetger, Secretary of the
Company will enter into a similar Consulting Agreement pursuant to which Mr.
Hoetger will be paid $150,000 over a two (2) year period. The fees provided for
in these agreements are payable whether or not SunBurst requests Mr. Biddinger
and Mr. Hoetger to perform any services thereunder. Mr. Biddinger and Mr.
Hoetger will continue to receive their compensation from the Company pursuant to
their current employment contracts but have agreed that these contracts shall
terminate without any additional payment due by the Company upon the final
winding-up of the Company's affairs.
- 8 -
<PAGE> 13
ACCOUNTING TREATMENT
Under generally accepted accounting principles, upon
consummation of the Transaction, the Company will remove the net assets sold
from its consolidated balance sheet, and record the gain (or loss) on the sale
net of transaction, severance and other related costs, in its consolidated
statement of income. See "Pro Forma Financial Information."
FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated federal income tax
consequences to the Company of the Transaction is not intended as tax advice and
is not intended to be a complete description of the federal income tax
consequences of such Transaction. This summary is based upon the Internal
Revenue Code of 1986 (the "Code"), as presently in effect, the rules and
regulations promulgated thereunder, current administrative interpretations and
court decisions. No assurance can be given that future legislation, regulations,
administrative interpretations or court decisions will not significantly change
these authorities (possibly with retroactive effect).
No rulings have been requested or received from the Internal
Revenue Service ("IRS") as to the matters discussed and there is no intent to
seek any such ruling. Accordingly, no assurance can be given that the IRS will
not challenge the tax treatment of certain matters discussed or, if it does
challenge the tax treatment, that it will not be successful.
The discussion of federal income tax consequences set forth
below is directed primarily toward individual taxpayers who are citizens of the
United States. However, because of the complexities of federal, state and local
income tax laws, it is recommended that the Company's shareholders consult their
own tax advisors concerning the federal, state and local tax consequences of the
Transaction to them. Further, persons who are trusts, tax-exempt entities,
corporations subject to specialized federal income tax rules (for example,
insurance companies) or non-U.S. citizens or residents are particularly
cautioned to consult their tax advisors in considering the tax consequences of
the Transaction.
The Transaction will be a taxable sale by the Company upon
which gain or loss will be recognized by the Company. The amount of gain or loss
recognized by the Company with respect to the sale of a particular asset will be
measured by the difference between the amount realized by the Company on the
sale of that asset and the Company's tax basis in that asset. The amount
realized by the Company on the Transaction will include the amount of cash
received and the fair market value of any other property received. For purposes
of determining the amount realized by the Company with respect to specific
assets, the total amount realized by the Company will generally be allocated
among the assets according to the rules prescribed under Section 1060(a) of the
Code. The Company's bases in its assets are generally equal to their cost, as
adjusted for certain items, such as depreciation. However, the bases of assets
of stations acquired in a stock purchase are equal to the subsidiary's
historical cost adjusted for certain items, such as depreciation.
- 9 -
<PAGE> 14
The determination of whether gain or loss is recognized by the
Company will be made with respect to each of the assets to be sold. Accordingly,
the Company may recognize gain on the sale of certain assets and loss on the
sale of certain others, depending on the amount of consideration allocated to an
asset as compared with the basis of that asset. The Company will recognize a net
gain as a result of the sale of its assets, but believes its net operating loss
and tax credit carryovers will offset a substantial portion of the projected
gain on the sale of the assets. The Company's use of its net operating loss
carryovers may be restricted in the event of a change in control. The Company
has not investigated whether a change in control has occurred or might occur as
a result of certain warrants or other otherwise. For additional information,
please see the change in control paragraph below.
The proposed sale of substantially all of the assets of the
Company by itself will not produce any separate and independent federal income
tax consequences to the Company's shareholders. The distribution of any net
proceeds from the Company to the shareholders, however, will produce federal
income tax consequences to the Company's shareholders. The Board of Directors
has adopted a plan of complete liquidation that will take effect upon the
closing of the Transaction. The sale of assets in connection with the
Transaction and the distribution of the net proceeds to shareholders of the
Company will occur in accordance with that plan.
Generally if a corporation distributes assets, including cash,
to its shareholders in complete liquidation, the shareholders recognize capital
gain or loss on the distribution to the extent of the difference between the
amount received and their basis in the corporation's stock. If a series of
distributions are made under a plan of liquidation, a shareholder who holds a
single block of stock reports his gain only after he first recovers the cost or
other basis of all of his stock. Later distributions are treated as gain in
their full amount. A shareholder who owns blocks of stock bought at different
prices must allocate each distribution ratably among the blocks in the
proportion that the number of shares in each block bears to the total number of
shares held. Gain or loss is computed separately for each block.
A loss on a series of distributions in complete liquidation is
deductible only in the year when the loss is fully sustained - i.e., when the
last liquidating payment is received and not piecemeal with each distribution.
RIGHTS OF DISSENTING SHAREHOLDERS
Chapter 23 of the Tennessee Business Corporation Act provides
that a shareholder is entitled to dissent from, and obtain payment of the fair
value of his shares in the event of a sale of all or substantially all of the
assets of the Company. A shareholder who desires to dissent from the Transaction
must deliver to the Company, before a vote taken at the Special Meeting to
approve the Transaction, written notice of his intent to demand payment for his
shares if the proposed Transaction is effectuated. In addition, the dissenting
shareholder must refrain from voting any of his shares in favor of the
Transaction. Shareholders are advised that a vote against the proposal is not
sufficient notice for a shareholder to protect its rights to dissent under
Tennessee law.
If the Transaction is authorized at the Special Meeting, the
Company must deliver a written dissenter's notice to each dissenting shareholder
within ten days of authorization of the
- 10 -
<PAGE> 15
Transaction. The dissenter's notice must set forth the procedures and schedule
for making payment demand upon the Company (which must be made between the first
and second month following delivery of the dissenter's notice) and the forms
which must be completed. A shareholder receiving a dissenter's notice from the
Company must demand payment and deposit his shares in compliance with the terms
of the dissenter's notice. Shareholders who comply with the dissenter's notice
will retain all the rights of a shareholder until their rights are canceled by
the effectuation of the Transaction. Noncompliance by shareholders will result
in loss of the right to payment for their shares. A demand for payment filed by
a shareholder may not be withdrawn without the consent of the Company.
As soon as the Transaction is effectuated or upon receipt of a
payment demand, whichever is later, the Company shall pay each dissenter
properly demanding payment the amount the Company estimates to be the fair value
of his shares, plus accrued interest, accompanied by the Company's most recent
fiscal year end balance sheet in accordance with the dissenter's rights statute,
an income statement and statement of changes in shareholders' equity for such
fiscal year, the latest available interim financial statements, if any, a
statement of the Company's estimate of the fair value of the shares, an
explanation of how any interest was calculated, and a statement of the
dissenter's right to demand payment in the event he is not satisfied with the
fair value as calculated by the Company. If the Company does not effectuate the
Transaction within two months after the date set for demanding payment and
depositing share certificates, the Company shall return to the shareholders
their respective certificates.
The Company may elect to withhold payment from a dissenter who
was not a beneficial owner of his shares before February 6, 1998. After
effectuating the Transaction, the Company shall estimate the fair value of such
dissenting shareholder's holdings, plus accrued interest, and shall pay this
amount to each such dissenting shareholder who agrees to accept it in full
satisfaction for his demand. The Company shall also deliver a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment if
dissatisfied with the payment or offer of the Company.
Chapter 23 of the Tennessee Business Corporation Act further
provides that a dissenter who believes that the payment made by the Company for
his shares is less than the fair value per share, or who does not receive his
payment within two months after the date set for demanding payment, or who does
not have his certificates returned within two months after the date set for
demanding payment in the event that the transaction is not effectuated, may
reject the Company's offer and make written demand of his estimate of the fair
value of his shares and the amount of any interest due. Failure to make demand
for payment within one month after the Company pays or offers payment for a
dissenter's shares will result in the waiver of his right to demand payment.
If a demand for payment remains unsettled after proper written
demand is made, then a judicial proceeding must be commenced by the Company
within two months after receipt of such demand, requesting the court to
determine the fair value of the shares and accrued interest. If the Company does
not commence the proceeding within the two-month period, it shall pay each
dissenter whose demand remains unsettled the amount demanded by them. The
Company must
- 11 -
<PAGE> 16
make all dissenters whose demands remain unsettled parties to the proceeding.
Each dissenter made a party to such proceeding is entitled to judgment for the
amount, if any, by which the court finds the fair value of his shares, plus
accrued interest, exceeds the amount paid by the Company, or alternatively, the
fair value, plus accrued interest, of his after-acquired shares for which the
Company elected to withhold payment. The court is empowered with the right to
assess costs and counsel and expert witness fees against either party in an
equitable fashion.
The full text of Chapter 23 of the Tennessee Business
Corporation Act is attached to this Proxy Statement as Appendix II. Shareholders
are encouraged to read these provisions in their entirety for a full and precise
statement of their rights to dissent and seek appraisal under the Tennessee
Business Corporation Act.
The Company has made no special provision to permit
unaffiliated shareholders access to the Company or to obtain counsel or
appraisal services at the expense of the Company. However, under Tennessee
corporate law, any shareholder or his representative may examine and copy
Company records upon five days' written notice in accordance with the Tennessee
Business Corporation Act.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information as of March
31, 1998 (except as otherwise noted) concerning persons who are the beneficial
owners of more than five percent of the outstanding shares of the Company's
Common Stock and the Company's directors, certain of its executive officers and
all directors and executive officers as a group. Unless otherwise indicated,
each of the persons listed below has sole voting and investment power with
respect to the shares beneficially owned.
- 12 -
<PAGE> 17
<TABLE>
<CAPTION>
=========================================================================================================
Common Stock
- ---------------------------------------------------------------------------------------------------------
Number of Shares Beneficially
Name of Owner Owned(1) Percent of Outstanding Shares
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
John W. Biddinger 2,420,056 37%
7491 Albert Tillinghast Drive
Sarasota, Florida 34240
- ---------------------------------------------------------------------------------------------------------
Dan E. Young(2) 626,179 9.6%
3210 E. 96th Street
Indianapolis, IN 46260
- ---------------------------------------------------------------------------------------------------------
James M. Elliott 20,000 .3%
230 Fountain Square
P.O. Box 727
Bloomington, IN 47404
- ---------------------------------------------------------------------------------------------------------
Conseco, Inc.(3) 7,288,395 50.3%
11825 N. Pennsylvania Street
Carmel, IN 46032
- ---------------------------------------------------------------------------------------------------------
Antar & Co.(4) 1,911,014 29.7%
601 Jefferson Street
Houston, TX 77002
- ---------------------------------------------------------------------------------------------------------
All executive officers and directors as a group 3,066,435 45.5%
(3 persons)
=========================================================================================================
</TABLE>
(1) Pursuant to applicable rules promulgated by the Securities and Exchange
Commission, a person is deemed the beneficial owner of those shares not
outstanding which are subject to options, warrants, rights or commission
privileges if that person can exercise such options, warrants, rights or
privileges within 60 days. Any such shares are deemed to be outstanding for
the purpose of computing the percentage of outstanding Common Stock owned
by such persons individually, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Mr. Young holds 321,376 shares of Common Stock in the name of Young
Investments Company and 304,803 shares of common stock in his individual
retirement account. Mr. Young has 100% beneficial ownership and control of
Young Investments Company and his IRA.
(3) The Company has issued Conseco, Inc. warrants to purchase 7,288,395 shares
of its Common Stock. See "Potential Change in Control" below.
(4) The Management of the Company does not know for a certainty the identity of
the beneficial holders of the shares held of record by Antar & Co.,
(formerly Radio U.S.A., Ltd.).
Potential Change in Control:
Conseco, Inc. held presently exercisable, transferrable
warrants for 5,972,060 shares at a total exercise price of $1.00. If these
warrants were exercised, Conseco, Inc. would have controlled 48.1% of the
Company's common stock on a fully diluted basis. The warrants expire on February
15, 2003. Since certain restructured notes owed to Conseco, Inc. were not repaid
by February 15, 1998, Conseco, Inc. received additional warrants for 10% of the
Company's Common Stock on a fully diluted basis. Conseco would beneficially own
50.3% of the Company's outstanding shares upon the exercise after February 15,
1998 of all of its warrants.
PRO FORMA FINANCIAL INFORMATION
GENERAL
This unaudited pro forma financial information sets forth
certain information regarding the pro forma impact of the Transaction. The
Transaction is not expected to close until the second or third quarter of 1998
and is subject to shareholder approval and customary closing conditions
including, but not limited to, approval by the Federal Communications
Commission.
- 13 -
<PAGE> 18
The unaudited pro forma statement of operations does not purport to
present the Company's consolidated results of operations as they might have
been, or as they may be in the future, had the Transaction occurred on the
assumed dates.
The pro forma adjustments are based upon information currently
available and on certain assumptions, described within the footnotes to the pro
forma financial information, that management of the Company believes are
necessary and reasonable for a fair presentation of the pro forma financial
information. The pro forma balance sheet at December 31, 1997 reflects the
receipt of the cash proceeds from the sale and the repayment of all liabilities
as well as the reduction of all assets sold as if the sale occurred on the first
day of the year. It was also assumed that the net proceeds, excluding the
holdback escrow, was distributed at the same time. The pro forma financial
information and accompanying notes should be read in conjunction with the
historical consolidated financial statements of the Company for the fiscal year
ended December 31, 1997.
The pro forma statement of operations is not necessarily
indicative of the effects on the Company's financial position that would have
been attained had the Transaction occurred earlier.
- 14 -
<PAGE> 19
BALANCE SHEET
<TABLE>
<CAPTION>
Balance at
12/31/97 ProForma Adjustments ProForma
<S> <C> <C> <C>
Current Assets $ 4,574,020 $11,494,529 (1) $16,068,549
Fixed Assets 1,591,970 (1,591,970)(2) --
Other Assets 5,833,016 (5,833,016)(2) --
----------- ----------- -----------
TOTAL ASSETS $11,999,006 $ 4,069,543 $16,068,549
=========== =========== ===========
Current Liabilities $ 805,606 $ (805,606)(3) --
Notes Payable Current 9,981,522 (9,981,522)(3) --
Notes Payable Long Term 624,341 (624,341)(3) --
Tax Liabilities 1,108,395 3,098,755 (4) 4,207,150
----------- ----------- -----------
TOTAL LIABILITIES $12,519,864 $(8,312,714) $ 4,207,150
=========== =========== ===========
Common Stock $ 3,770,639 -- $ 3,770,639
Additional Capital 5,969,195 -- 5,969,195
Retained Earnings (10,260,692) 12,382,257 2,121,565
----------- ----------- -----------
TOTAL CAPITAL (520,858) $12,382,257 $11,861,399
=========== =========== ===========
TOTAL LIABILITIES & CAPITAL $11,999,006 $ 4,069,543 $16,068,549
=========== =========== ===========
</TABLE>
(1) Sale of current assets per share transaction and recording of cash proceeds
net of paying debt obligations. This includes $1,000,000 which is included
in the Holdback Escrow Fund.
(2) Assets sold pursuant to the terms of the Transaction.
(3) Repayment of all liabilities with proceeds of the sale.
(4) Adjustment of income tax liability to reflect the federal and state income
taxes owed on the gain from the sale. The assumption has been made that the
Company will have all of its tax net operating loss carryovers available to
reduce the gain. It may be determined later that these losses will be
limited under the Internal Revenue Code.
- 15 -
<PAGE> 20
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Balance at
12/31/97 ProForma Adjustments ProForma
<S> <C> <C> <C>
Operating Revenues $ 8,181,784 $ (8,181,784)(1) $ --
Operating Expenses:
Technical and Programming 2,050,326 (2,050,326)(1) --
Sales, general and administrative 5,024,839 (5,024,839)(1) --
200,000 (2)
----------- ------------ -----------
Total Operating Expenses 7,075,165 (6,875,165) 200,000
----------- ------------ -----------
Operating Income 1,106,619 (1,306,619) (200,000)
----------- ------------ -----------
Other Income & (Expenses):
Other (21,412) 21,412 (1) --
--
(Gain) on Sale of Assets --
-- (11,939,647)(3) 11,939,647
Interest Expense (349,034) (349,034)(1) --
Depreciation & Amortization (656,259) 656,259 (1) --
----------- ------------ -----------
Total Other Income & Expenses (1,026,705) 12,966,352 11,939,647
----------- ------------ -----------
Net Income Before Taxes 79,914 11,659,733 11,739,647
----------- ------------ -----------
Income Tax Expense (Benefit) (629,400) (629,400)(1) --
-- 4,174,949 (4) 4,174,949
----------- ------------ -----------
NET INCOME $ 709,314 $ 6,855,384 $ 7,564,698
=========== ============ ===========
Income Per Common Share $ 0.05 $ 0.52 $ 0.57
Weighted average number
of common and common
equivalent shares outstanding 13,163,562 13,163,562 13,163,562
</TABLE>
(1) Since the sales transaction is assumed to have been consummated on the
first day of the year, there would be no operating revenue or expenses, or
other income or expenses.
(2) Estimated costs to be incurred in winding down the operations of the
Company.
(3) Gain on the sale of assets.
(4) Tax expenses on the sale of assets and interest income less expenses of
winding down the operations of the Company. It is assumed that all net
operating losses will be available.
- 16 -
<PAGE> 21
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company (File
No. 000-03851) with the Commission pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), are incorporated into this Proxy
Statement by reference:
(a) The Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997, filed on March 31, 1998, a copy of which accompanies
this Proxy Statement as delivered to Shareholders.
OTHER MATTERS
The management of the Company is unaware of any other matters
that are to be presented for action at the Special Meeting. Should any other
matter properly come before the Special Meeting, however, the persons named in
the enclosed proxy will have discretionary authority to vote all proxies with
respect to such matter in accordance with their judgment.
Representatives of the Company's principal accountants are not
expected to be present at the Special Meeting and thus will not have the
opportunity to make any statements or respond to appropriate questions at the
Special Meeting.
All expenses incurred in connection with this solicitation,
including the cost of preparing, assembling, and mailing this proxy soliciting
material and Notice of Special Meeting, will be paid by the Company. In addition
to the use of the mails, proxies may be solicited by personal interview,
telephone and telegram by the directors, officers and regular employees of the
Company. Such persons will receive no additional compensation for such services.
Arrangements will also be made with certain brokerage firms and certain other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of Common Stock held of record by such
persons, and such brokers, custodians, nominees and fiduciaries will be
reimbursed for their reasonable out-of-pocket expenses incurred by them in
connection therewith.
- 17 -
<PAGE> 22
APPENDIX I
THE EXECUTION AND DELIVERY OF THIS AGREEMENT SHALL NOT RESULT IN THE LOSS OF ANY
CONTROL BY SELLERS WITH RESPECT TO ANY OF THE STATIONS OR ANY OTHER CONTROL THE
LOSS OF WHICH WOULD BE IN VIOLATION OF FCC RULES AND REGULATIONS, UNTIL SUCH
TIME AS THE FCC APPROVES THE CHANGE OF CONTROL OF ALL OF THE STATIONS FROM THE
SELLERS TO THE BUYER AND THE CLOSING HAS IN FACT TAKEN PLACE.
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated February 3, 1998 is entered into
by and between the Sellers (hereafter defined) and Buyer (hereafter defined).
RECITALS:
A. Sellers are collectively the owners of the Assets (hereafter
defined) which include licenses duly granted by the Federal Communications
Commission.
B. Buyer desires to purchase the Assets from Sellers, and Sellers
desire to sell the Assets to Buyer, subject to approval of the Federal
Communications Commission and upon the terms and provisions of this Agreement.
NOW, THEREFORE, Know All Men By These Presents, that for and in
consideration of the premises and the respective agreements hereinafter set
forth, the parties hereto agree, covenant, warrant and represent as follows:
Section 1. Definitions. For purposes of this Agreement the
following terms shall have the indicated meaning:
"ABI" means Abilene Broadcasting, Inc., a Texas corporation.
"ACCOUNTS RECEIVABLE" means the rights of Sellers, and each of them, to
receive cash payments for the sale of air time and all other services
and business of the Stations rendered or sold at any time prior to the
Closing Date.
"AFFILIATE" means with reference to the Person indicated by the context
any Person directly or indirectly controlling, controlled by or under
common control with
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 1
<PAGE> 23
such indicated Person and any director, shareholder, officer, partner,
principal, member, owner or employee of any of such Persons. For
purposes of this definition and this Agreement, the term "control" (and
correlative terms) means the power, whether by contract, equity
ownership or otherwise, to direct the policies or management of a
Person.
"AGREEMENT" means this Asset Purchase Agreement and all Exhibits and
Schedules attached hereto.
"APPLICABLE LAWS" means all laws, statutes, rules, regulations,
ordinances, judgments, orders, decrees, injunctions and writs of any
Governmental Entity (including, but not limited to, the FCC and the
FAA) having jurisdiction over the Assets and/or the business and/or
operations of the Stations, or any of them, as each of the foregoing
may be in effect on or prior to the Closing.
"ALPHA-WEB" means Alpha-Web, Inc., a Louisiana corporation.
"ARKLATEX" means Arklatex, Inc. a Louisiana corporation.
"ASI" means Air Signs, Inc., a [______] corporation.
"ASSETS" is defined in Section 2.
"BANKING EVENT" means that a general moratorium on commercial banking
activities in New York, New York shall have been declared by any
federal or state authority.
"BARTER CONTRACTS" mean those Contracts which provide for the exchanges
by a Station of its advertising time for goods or services, other than
in connection with the licensing of programs and programming material.
"BARTER PAYABLES" mean, at the point in time then being referred to,
the aggregate value of all then remaining unaired broadcast time due
from a Station under Barter Contracts based upon the contract stated
value of such broadcast time.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 2
<PAGE> 24
"BARTER RECEIVABLES" mean, at the point in time then being referred to,
the aggregate value of all then remaining unused or unapplied goods or
services due to a Station under Barter Contracts based upon the
contract stated value of such goods or services.
"BBCI" means Big Bass Classics, Inc., a Tennessee corporation.
"BUSINESS DAY" means any day other than (i) Saturday or Sunday or (ii)
a day on which commercial banks in Dallas, Texas are authorized or
required to be closed.
"BUYER" means Sunburst Media, LP, a Delaware limited partnership, and
as to any Permitted Assignee, Buyer shall mean such Permitted Assignee
as to that portion of the Assets comprising a particular Station that
such Permitted Assignee shall acquire the rights to purchase hereunder
from Sunburst Media, LP, all as contemplated by Section 39.
"CASH CONTRACTS" mean cash contracts for the sale of air time and all
other services and business of a Station that are entered into in the
ordinary course of business.
"CESSATION DATE" shall mean the date on which a Trading Event, Banking
Event, Conflict Event, or a Station Event ends.
"CHOSES IN ACTION" means a right to receive or recover property, debt,
or damages on a cause of action, whether pending or not and whether
arising in contract, tort or otherwise, including, but not limited to,
rights to indemnification, damages for breach of warranty or any other
event or circumstance, judgments, settlements, and proceeds from
judgments or settlements.
"CLOSING" is defined in Section 25.
"CLOSING DATE" is defined in Section 25.
"CODE" means the Internal Revenue Code of 1986, as amended. All
references to a particular section of the
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 3
<PAGE> 25
Code shall be deemed to include references to the successor or amended
section thereto.
"COMPANY REPORTS" has the meaning set forth in Section 17(aa).
"CONFLICT EVENT" shall mean the occurrence of any major armed conflict
involving the participation by a substantial segment of the armed
forces of the United States of America.
"CONSECO" shall mean Conseco Capital Management, Inc., an Indiana
corporation.
"CONTRACTS" means all agreements, contracts, or other binding
commitments or arrangements, as amended, whether written or oral, to
which any party comprising Sellers is a party or is otherwise bound or
which affects or relates to the Assets or the business or operations of
any of the Stations, including leases for the Ground Leased Real
Property and the Leased Real Property.
"EMPLOYEE BENEFIT PLANS" means any "employee benefit plan" within the
meaning of Section 3(3) of ERISA and any bonus, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, vacation, severance, disability, death benefit,
hospitalization or insurance plan providing benefits to any present or
former employee or contractor of any of Sellers or any member of the
ERISA Group maintained by any such entity or as to which any such
entity has any liability or obligation.
"ENCUMBRANCES" means all claims, demands, restrictions, tenancies,
possessory interests, assessments, covenants, restrictions, rights of
first refusal, defects in title, burdens, options or other encumbrances
of any kind.
"ENVIRONMENTAL LAWS" means all Applicable Laws and rules of common law
pertaining to the environment, natural resources, and public or
employee health and safety including the Comprehensive Environmental
Response Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.)
("CERCLA"), the Emergency Planning and Community Right to
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 4
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Know Act and the Superfund Amendments and Reauthorization Act of 1986,
the Resource Conservation and Recovery Act, the Hazardous and Solid
Waste Amendments Act of 1984, the Clean Air Act, the Clean Water Act,
the Toxic Substances Control Act, the Safe Drinking Water Act, the
Occupational Safety and Health Act of 1970, the Oil Pollution Act of
1990, the Hazardous Materials Transportation Act, and any similar or
analogous statutes, regulations and decisional law of any Governmental
Entity, as each of the foregoing may be amended and in effect on or
prior to the Closing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA GROUP" has the meaning set forth in Section 17(m).
"ESA'S" means Environmental Site Assessments.
"ESCROW AGENT" means William R. Rice Co., 11711 N. Meridian Street,
Suite 200, Carmel, Indiana 46032.
"EVENT DATE" shall mean the date on which a Trading Event, Banking
Event, Conflict Event, or a Station Event shall first occur.
"EXCLUDED ASSETS" is defined in Section 9.
"EXISTING LIENS" are those Liens against any of the Assets which are
set forth on SCHEDULE 1(A) attached hereto
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"FCC APPLICATIONS" is defined in Section 14.
"FCC LICENSES" is defined in Section 14.
"FINAL FCC CONSENT" is defined in Section 14.
"FINANCING LEASES" mean any tangible (or movable) personal property
lease which is either (a) in effect a
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 5
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financing arrangement for the purchase of any item of tangible (or
movable) personal property or (b) a lease of any item of tangible (or
movable) personal property for a material portion of the useful life
thereof or (c) listed on SCHEDULE 5 attached hereto.
"GAAP" means generally accepted accounting principles in the United
States.
"GO AHEAD DATE" is defined in Section 22(q).
"GOVERNMENTAL ENTITY" means any governmental department, commission,
board, bureau, agency, court or other instrumentality of the United
States or of any state, county, parish or municipality, jurisdiction,
or other political subdivision thereof, including the FCC, the FAA, the
SEC and the IRS.
"GROUND LEASED REAL PROPERTY" means all of the leasehold interests,
easements, licenses, rights to access and rights-of-way which are used
or held for use in the business and operations of any Station as
described in SCHEDULE 1(B).
"HOLDBACK AMOUNT" is the sum of One Million Dollars ($1,000,000) which
shall be delivered to the Escrow Agent at Closing to be held,
administered and distributed pursuant to the Indemnification Escrow
Agreement as provided further in this Agreement.
"INDEMNIFICATION ESCROW AGREEMENT" shall mean the Indemnification
Escrow Agreement in the form attached hereto as EXHIBIT 34.
"INDEMNITY ESCROW AGENT" shall mean the escrow agent under the
Indemnification Escrow Agreement in the form attached hereto as EXHIBIT
34.
"INITIAL FCC CONSENT" is defined in Section 14.
"INTELLECTUAL PROPERTY" means all trademarks, Know-how, copyrights,
copyright registrations and applications for registration, and all
other intellectual property rights, whether registered or not, licensed
to, or owned by,
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 6
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Sellers relating to the business or operations of any Station,
including the call letters of each of the Stations and the goodwill
related to the foregoing.
"IRS" means the Internal Revenue Service.
"KEY STATION PERSONNEL" as to each Station, means the Station
Management, independent programming consultants and the morning show
on-air personalities.
"KNOW-HOW" means all plans, ideas, concepts and data, research records,
all promotional literature, customer and supplier lists and similar
data and information and all other confidential or proprietary
technical and business information.
"KNOWLEDGE" means, with respect to the party indicated by the context,
the actual knowledge of such party (including, but not limited to, the
actual knowledge of such party's partners, officers, directors,
employees, consultants, and counsel), together with such additional
knowledge as would be acquired by a reasonable person upon conducting
reasonable and diligent inquiry concerning the subject matter in
question.
"LEASED REAL PROPERTY" means all of the leasehold interests, easements,
licenses, rights to access and rights-of-way (other than Ground Leased
Real Property) which are used or held for use in the business and
operations of any Station as described in SCHEDULE 1(C), and as such
Schedule is modified by any addition or permitted deletion thereto
between the date hereof and the Closing Date.
"LIENS" mean liens, security interests, pledges, mortgages, conditional
sale, title retention agreements and any other similar claims or
charges against any of the Assets for the payment of some debt,
obligation or liability.
"MATERIAL ADVERSE EVENT" means any event, fact, condition or
circumstance that results in a material adverse effect on the business,
operations, properties, financial condition, prospects, results of
operations, assets or
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 7
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liabilities of any one or more of the Stations, including, but not
limited to, any or all of the following: (a) the occurrence of a
Station Event; (b) the failure of any Station to transmit its fully
authorized broadcast signal for any reason, technical or otherwise,
during its prescribed hours of operation except for the failure to
transmit its fully authorized broadcast signal which does not, in any
one instance, exceed 24 consecutive hours or which does not, in all
such instances, exceed 48 hours (whether or not consecutive) in the
aggregate; (c) any one or more of the Stations experiencing a ten
percent (10%) or more drop in ratings in the 12+, All Persons,
demographic as measured by Arbitron Ratings Service (the "12+
Demographic") determined with reference to the most recent ratings in
the 12+ Demographic for such Station issued prior to the date of this
Agreement; (d) the loss of any Contract, rights to conduct business or
other Asset that is material to the continued operations of any one or
more of the Stations; or (e) the loss of the services of a significant
number of the Key Station Personnel at any one or more of the Stations;
except that the failure of Buyer to hire the Key Employees named in
Section 10-B shall not be deemed a Material Adverse Event. TO AVOID ANY
CONFUSION AND TO REMOVE ALL DOUBT, IT IS CLEARLY AGREED AND UNDERSTOOD
THAT A MATERIAL ADVERSE EVENT WITH RESPECT TO ONLY ONE OF THE STATIONS
SHALL BE DEEMED A MATERIAL ADVERSE EVENT FOR ALL PURPOSES OF THIS
AGREEMENT.
"MATERIAL" means that something is either significant or important and
"IMMATERIAL" means that something is neither significant nor important.
"MULTIEMPLOYER PLAN" has the meaning set forth in Section 3(37)
or Section 4001(a)(3) of ERISA.
"OWNED REAL PROPERTY" means those parcels of real property owned in fee
and used or held for use by any of the Sellers as described in SCHEDULE
1(D), and all buildings, structures, improvements, and fixtures
thereon, together with all rights of way, easements, privileges, and
appurtenances pertaining or belonging thereto, including any right,
title, and interest of
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 8
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Sellers in and to any street or other property adjoining any portion of
such property.
"PERMITTED ASSIGNEE" is defined in Section 39.
"PERMITTED EXCEPTIONS" mean any of the following as applicable to any
particular item of the Assets: (i) the lien for current taxes not yet
due and payable, (ii) utility easements and any other easements,
reservations, restrictions or other matters which are not inconsistent
with or contrary to the current and anticipated use of any parcel of
the Subject Real Property, (iii) matters that are set forth in any
Title Binder or Survey with respect to any parcel of Subject Real
Property to which Buyer does not timely object as provided in Section
16(e), (iv) landlord's liens arising under state law or by contract,
provided that no default shall have occurred giving rise to enforcement
of any such lien, and (v) liens created by Buyer upon the Closing.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, or
other entity, including a Governmental Entity.
"PURCHASE PRICE" is defined in Section 11.
"RSGBCS" means Radio SunGroup of Bryan/College Station, Inc., a Texas
corporation.
"RSGT" means RadioSunGroup of Texas, Inc., a Texas corporation.
"SELLERS" collectively mean SGI, RSGT, RSGBCS, SGBL, SGBNM, ASI, BBCI,
Arklatex, Alpha-Web, SMI and ABI "SELLER" means one of the Sellers as
indicated by the context.
"SEC" shall mean the Securities Exchange Commission.
"SENIOR LENDER" means that non-affiliated third party lender of the
Buyer providing the debt financing for the Transaction on a senior lien
basis.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 9
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"SGI" means SunGroup, Inc., a Tennessee corporation.
"SGBL" means SunGroup Broadcasting of Louisiana, Inc., a
Louisiana corporation.
"SGBNM" means SunGroup Broadcasting of New Mexico, Inc., a New Mexico
corporation.
"SMI" means Sun Management, Inc., a Tennessee corporation.
"STATIONS" shall mean Radio Stations KEAN-FM, KEAN-AM, KROW-FM,
KYKX-FM, KKYS-FM, KMJJ-FM and KKSS-FM all as ongoing businesses and
"STATION" shall mean any one of the Stations as indicated by the
context.
"STATION ASSETS" shall mean, as to any particular Station then being
referred to, that portion of the Assets which are described on the
appropriate Schedule 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 or 2.7, as the case
may be.
"STATION EVENT" means any act of nature (including fires, floods,
earthquakes, and storms), calamity, casualty or condemnation or the act
or omission to act of any Governmental Entity having jurisdiction over
a Station that has caused such Station not to be operating in a manner
substantially consistent with the operations conducted before such
Station Event.
"STATION EXPENSES" mean all expenses arising out of the business and
operation of the Stations, as determined on a Station by Station basis,
of any nature, kind and type whatsoever and however arising, including,
but not limited to, tower rent, artist personal appearance fees, show
production fees, all utilities, insurance, vehicle expense, programming
costs, repairs and maintenance, travel expenses, employee compensation,
business and license fees, employee benefits, including accrued
vacation and sick leave, health, dental and medical benefits, employee
expense reimbursements, sales commissions and fees and other
commissions and fees, SESAC, ASCAP and BMI payments, expenses under
Contracts, property and ad valorem taxes (pro rated on a per diem
basis) and other Taxes, office expenses, property and
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 10
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equipment rentals, applicable copyright or other fees, sales and
service charges, general and administrative expenses, accounts payable
and trade payables.
"STATION LICENSES" mean the KEAN-FM Licenses (as defined in Schedule
2.1) , the KEAN-AM Licenses (as defined in Schedule 2.2), the KROW-FM
Licenses (as defined in Schedule 2.3), the KYKX-FM Licenses (as defined
in Schedule 2.4), the KKYS-FM Licenses (as defined in Schedule 2.5),
the KMJJ-FM Licenses (as defined in Schedule 2.6) and the KKSS-FM
Licenses (as defined in Schedule 2.7).
"STATION MANAGEMENT" means, as to each Station, the general manager,
station manager, general sales manager, local sales manager,
programming director, business manager, or persons performing
comparable duties.
"SUBJECT REAL PROPERTY" means the Owned Real Property and the Ground
Leased Real Property.
"TAXES" means taxes, charges, fees, imposts, levies, interest,
penalties, additions to tax or other assessments or fees of any kind,
including, but not limited to, income, corporate, capital, excise,
property, sales, use, turnover, value added and franchise taxes,
deductions, withholdings and customs duties, imposed by any
Governmental Entity and any payments with respect to Taxes required
under any tax-sharing agreement.
"TAX RETURNS" means any return, report, information return or other
document (including any related or supporting information) filed or
required to be filed with any Governmental Entity in connection with
the determination, assessment, collection or administration of any
Taxes or the administration of any Applicable Laws relating to any
Taxes.
"TRADING EVENT" shall mean that trading generally in securities on the
New York Stock Exchange shall have been materially suspended or
materially limited.
"TRANSACTION" means the sale and purchase of all of the Stations as
contemplated by this Agreement and all other
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 11
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transactions contemplated by this Agreement and the other Transaction
Documents.
"TRANSACTION DOCUMENTS" means this Agreement, Bill of Sale and
Assignment of Interests and Assumption, Escrow Agreement,
Indemnification Escrow Agreement(s), Special Warranty Deeds,
Assignments of Ground Leased Real Property, Assignments of Leased Real
Property, Consulting Agreements, certificates, and all other
agreements, instruments, certificates and other matters delivered in
connection with the Transaction; provided that with respect to a
Permitted Assignee, the Transaction Documents shall mean only those of
the Transaction Documents which pertain to the acquisition of the
particular Station Assets being acquired by such Permitted Assignee and
to which the Permitted Assignee is a party, and shall not mean any of
the other Transaction Documents.
Section 2. Sale of Assets. Subject to the approval of the FCC and
subject to the terms and conditions of this Agreement, Sellers agree to sell,
transfer, assign and convey unto Buyer, free and clear of all Liens and
Encumbrances, except for the Permitted Exceptions, and Buyer agrees to purchase
and accept the transfer, assignment and conveyance from Sellers of, good and
marketable title to the licenses, assets, properties, contracts, rights, titles
and interests described on Schedules 2.1 through 2.8, inclusive (the KEAN-FM
Assets, the KEAN-AM Assets, the KROW-FM Assets, the KYKX-FM Assets, the KKYS-FM
Assets, the KMJJ-FM Assets, the KKSS-FM Assets and the Additional Assets are
collectively referred to herein as the "Assets").
(a) The licenses, assets, properties, contracts, rights, titles
and interests comprising KEAN-FM as set forth on Schedule 2.1
(the "KEAN-FM Assets").
(b) The licenses, assets, properties, contracts, rights, titles
and interests comprising KEAN-AM as set forth on Schedule 2.2
(the "KEAN-AM Assets").
(c) The licenses, assets, properties, contracts, rights, titles
and interests comprising KROW-FM as set forth on Schedule 2.3
(the "KROW-FM Assets").
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(d) The licenses, assets, properties, contracts, rights, titles
and interests comprising KYKX-FM as set forth on Schedule 2.4
(the "KYKX-FM Assets").
(e) The licenses, assets, properties, contracts, rights, titles
and interests comprising KKYS-FM as set forth on Schedule 2.5
(the "KKYS-FM Assets").
(f) The licenses, assets, properties, contracts, rights, titles
and interests comprising KMJJ-FM as set forth on Schedule 2.6
(the "KMJJ-FM Assets").
(g) The licenses, assets, properties, contracts, rights, titles
and interests comprising KKSS-FM as set forth on Schedule 2.7
(the "KKSS-FM Assets").
(h) The construction permits, licenses, assets, properties,
contracts, rights, titles and interests of the Sellers as set
forth on Schedule 2.8 (the "Additional Assets").
Section 3. Provisions Regarding Cash Contracts. At the Closing Sellers
shall provide Buyer with a then current listing of all Cash Contracts separately
stated for each of the Stations then in effect. All Cash Contracts entered into
by Sellers between the date of this Agreement and the Closing Date shall be
consistent with sound business and financial practices and shall be at rates no
less than currently charged for the same or similar services. Furthermore,
Sellers agree that they will obtain the advance written approval of Buyer before
any of the Sellers enters into any Cash Contract under which the commitment to
be assumed by Buyer at Closing as to any one Station (i) will exceed $5,000 of
broadcast time, (ii) will exceed, when combined with all other Cash Contracts to
be assumed by Buyer at Closing, $20,000 of broadcast time or (iii) will extend
at least six (6) months beyond the Closing. In connection with the preceding
sentence, SGI agrees that it will contact Don L. Turner (or such other person as
may hereafter be designated by Buyer) at the address set forth in the notice
provisions hereof following which Buyer will have until the close of the second
Business Day thereafter to approve or disapprove of such Cash Contract; and if
Buyer shall not approve of such Cash Contract in writing, then it shall be
deemed that the Buyer did not approve of such Cash Contract. For purposes of
determining the $5,000 and $20,000 commitments described in the preceding
sentence,
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<PAGE> 35
the rates at the particular Station in question shall be the greater of (a) the
rates in effect as of the date of this Agreement and (b) the rates in effect as
of the date of Closing. If on or prior to the time of Closing, any of the
Sellers have either pre-billed or collected a pre-payment under a Cash Contract
for which the broadcast time will not be aired or the services will not be
rendered, as the case may be, until after the Closing, then the Purchase Price
shall be reduced by the amount of such pre-billings and pre-payments.
Section 4. Provisions Regarding Barter Contracts. Sellers represent to
Buyer that all existing Barter Contracts (on a Station by Station basis) are set
forth on SCHEDULE 4 attached hereto and the list referred to in Section 17(s)
hereof. Sellers agree that prior to Closing Sellers will not, without Buyer's
prior written approval, enter into any further Barter Contracts the air time for
which will not be run off in full prior to Closing. At the Closing Sellers shall
provide Buyer with a then current listing of all Barter Contracts then in
effect. Sellers will assign to Buyer all Barter Contracts which are in effect at
the Closing Date. Sellers will assign to Buyer all Barter Receivables remaining
at the time of Closing. Buyer will assume all Barter Payables remaining at the
time of Closing. Sellers agree that they will use commercially reasonable best
efforts to run off all of the remaining air time for all Barter Contracts prior
to Closing. If at the time of Closing the amount of the Barter Payables in any
one or more of the (i) Abilene, (ii) Bryan/College Station, (iii) Longview, (iv)
Shreveport and (v) Albuquerque markets shall exceed $25,000, then the Purchase
Price shall be reduced by an amount equal to the excess by which the Barter
Payables in each market exceeds $25,000; and for these purposes, no credit shall
be given for Barter Payables which may be below $25,000 in any particular market
or the number of Stations owned by Sellers in a particular market.
Notwithstanding the preceding sentence, there shall be excluded from the Barter
Payables for purposes of the $25,000 limitation, any Barter Payables that (a)
are incurred for television advertising and other advertising and promotion of
the Station which are directly related to the 1998 Spring Arbitron Ratings Book
and (b) that do not exceed $50,000 per market as described above.
Section 5. Provisions Regarding Financing Leases. Attached hereto as
SCHEDULE 5 is a list of all Financing Leases of all items of tangible personal
property included within the Assets. Sellers agree with respect to each
Financing Lease that either (i) Sellers
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 14
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will fully prepay and satisfy such Financing Lease at or prior to Closing and
deliver, or cause to be delivered, good and marketable title to each item of
tangible personal property covered by such Financing Lease free and clear of any
Liens and Encumbrances or (ii) the Purchase Price shall be reduced by the amount
equal to the present value of the remaining obligation of the lessee due under
such Financing Leases discounted to the Closing Date at an annual rate of eight
percent (8%) and the Sellers shall assign, and the Buyer shall assume, such
Financing Lease to Buyer.
Section 6. Provisions Regarding Certain Contracts. With respect to any
Contract other than Cash Contracts, Barter Contracts and Financing Leases which
are covered by Sections 3, 4 and 5 hereof, to the extent an obligation or
liability thereunder has been assumed by the Buyer and any of the Sellers have
received any compensation or other benefit with respect to the obligation or
liability assumed by the Buyer, then Sellers agree that the Purchase Price shall
be reduced by the amount equal to the amount of such compensation or other
benefit received by any of the Sellers.
Section 7. Provisions Regarding Unscheduled Contracts and Renewals,
Replacements Etc. of Scheduled Contracts. If as of the date hereof there is any
Contract that is in existence, but is not included on any of SCHEDULES 2.1(F),
2.2(F), 2.3(F), 2.4(F), 2.5(F), 2.6(F) OR 2.7(F), (an "Unscheduled Contract")
then the Sellers agree to assign same to Buyer at Closing, but only if the Buyer
requests such assignment; and if the Buyer does not request such assignment,
then the Sellers will be responsible for such Unscheduled Contract and will
indemnify Buyer with respect to same. In the case of renewals, extensions or
replacements of any of the Contracts listed on any of SCHEDULES 2.1(F), 2.2(F),
2.3(F), 2.4(F), 2.5(F), 2.6(F) OR 2.7(F), the Sellers agree that they will not
in any case renew, extend or replace any of such Contracts for a term exceeding
one (1) year or otherwise on terms more burdensome to the applicable Station(s)
without the prior consent of Buyer; and if such consent is not obtained such
Contract shall be deemed and considered for all purposes as an Unscheduled
Contract. Additionally, Sellers will assign to Buyer all other Contracts entered
into by any of Sellers from the date hereof to the Closing Date with respect to
the operations of any of the Stations (except Cash Contracts, Barter Contracts
and Financing Leases which are provided for separately under Sections 3, 4 and 5
hereof) which, as to any one Station, are either (i) made in the
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 15
<PAGE> 37
normal course of business and which do not, in the case of any single contract,
involve a commitment (contingent or otherwise) to be assumed by Buyer of more
than $2,000 and which in the aggregate do not involve commitments (contingent or
otherwise) to be assumed by Buyer of more than $10,000 or (ii) consented to in
writing by Buyer.
Section 8. Accounts Receivable Collection Agreement.
(a) For a period commencing on the Closing Date and ending on the last
day of the sixth (6th) full calendar month following the Closing Date (such
period is referred to as the "Collection Period"), Buyer will have the sole and
exclusive right on a Station by Station basis (to the exclusion of all persons
including, but not limited to, the Sellers) to collect for the account of
Sellers the Accounts Receivable.
(b) Within three (3) business days following the Closing Date, Sellers
will furnish Buyer with a complete and current accounts receivable list, current
as of the Closing Date, detailing customer name, address, amount owed, aging and
invoice numbers.
(c) All receipts on the collection of an Account Receivable from a
particular account debtor shall be applied first to the oldest outstanding
invoice, unless the payment is made with reference to a specific invoice in
which case the payment shall be allocated to the specific invoice. Any monies or
payments received by Buyer which are in payment for commercial air time or for
other services or business provided by Buyer on or after the Closing Date shall
belong to the Buyer and Buyer shall not be obligated to remit any of such sums
to Sellers. The Buyer will not, without the written consent of Sellers,
compromise or settle for less than full value any of the Accounts Receivable.
(d) If any account debtor shall dispute his obligation to Sellers, if
any account debtor shall pay any invoice of Buyer's before having paid in full
all outstanding invoices due to Sellers or if any Account Receivable shall be
deemed uncollectible by Buyer, then the Buyer shall return such disputed, unpaid
or deemed uncollectible account to Sellers and Buyer will thereafter have no
further responsibility with respect to the collection thereof.
(e) On the 10th day of each month immediately following each calendar
month during the Collection Period the Buyer will provide
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 16
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Sellers with a list of all Accounts Receivable collected during the preceding
calendar month. On the 10th day of the month immediately following the second
(2nd) full calendar month of the Collection Period, Buyer will remit to Sellers
all sums collected by Buyer (and not theretofore remitted to Sellers) from the
Accounts Receivable through the end of the second (2nd) full calendar month of
the Collection Period. On the 10th day of the month immediately following the
fourth (4th) full calendar month of the Collection Period, Buyer will remit to
Sellers all sums collected by Buyer (and not theretofore remitted to Sellers)
from the Accounts Receivable through the end of the fourth (4th) full calendar
month of the Collection Period. On the 10th day of the month immediately
following the end of the Collection Period, Buyer will remit to Sellers all
remaining sums collected by Buyer (and not theretofore remitted to Sellers) from
the Accounts Receivable through the end of the Collection Period. The Sellers
are responsible for the payment of all sales commissions (and other costs of
generating the Accounts Receivable) due to any persons resulting from the
collection of or otherwise with respect to the Accounts Receivable.
(f) The obligation of Buyer hereunder will be to use reasonable efforts
to collect the Accounts Receivable in the ordinary course of business and does
not extend to the institution of litigation, employment of counsel or other
collection agency, or any other extraordinary means of collection, including the
sending of demand letters.
(g) If requested by Buyer, Sellers will provide the Buyer with a power
of attorney which will be sufficient for the purposes of evidencing to the
various account debtors the exclusive authority of the Buyer to collect the
Accounts Receivable.
(h) At the conclusion of the Collection Period the collection rights to
all of the remaining uncollected Accounts Receivable shall automatically revert
to Seller; and Buyer will thereafter have no further responsibility with respect
to the collection of the Accounts Receivable.
(i) Sellers hereby represent to Buyer that all mail and other
correspondence concerning each respective Station is mailed to the address set
forth on SCHEDULE 17 (EE) for the current studio site of each such Station.
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Section 9. Assets Retained by Sellers. Sellers and Buyer agree that the
assets and properties belonging to Sellers that are set forth in more detail and
description on SCHEDULE 9 attached hereto (referred to herein as the "Excluded
Assets") are not part of the Assets and are not to be sold to Buyer and Buyer is
not intending to purchase same. The parties hereto agree that in order for any
asset, property, license, right, title or interest of any nature owned, claimed
or controlled by any of the Sellers that pertains or relates to any of the
Stations (that might reasonably be considered by Buyer to be used or usable in
connection with any of the Stations) to not be part of the Assets, such asset,
property, license, right, title or interest must be described on SCHEDULE 9 with
sufficient enough detail to reasonably identify same; otherwise it is agreed
that such asset, property, license, right, title or interest shall constitute a
part of the Assets and is to be delivered to Buyer at Closing.
Section 10. Liabilities. The parties hereto agree that all obligations,
debts, claims and other liabilities (referred to herein simply as "liabilities")
of Sellers shall remain the liabilities of Sellers and Buyer will not assume,
nor be required to assume, any liabilities of Sellers except that at the Closing
the Buyer will assume those liabilities accruing from and after Closing under
Contracts that are assumed by Buyer at Closing.
Section 10-A. Consulting Agreements. At the Closing Buyer shall enter
into a Consulting Agreement in the form of EXHIBIT 10-A with each of John W.
Biddinger and James Hoetger. The Consulting Agreement for John W. Biddinger
shall provide for aggregate consulting payments in the amount of $350,000 over
36 months at a rate of $9,722.22 per month. The Consulting Agreement for James
Hoetger shall provide for aggregate consulting payments in the amount of
$150,000 over 24 months at a rate of $6,250 per month.
Section 10-B. Management Employments Agreements. At the Closing Buyer
shall offer employment to each of the following Station General Managers of
Sellers provided such persons continue to be employed by Sellers in the same
capacities as they are currently employed by Sellers at the time of Closing: Jan
Stott (Bryan/College Station), Edgar C. Cearley, III (Longview), John K. Wilson
(Shreveport), Louis P. Murray (Abilene), Mary Ellen Merrigan (Albuquerque). All
of the terms of each such employment shall be determined by agreement of Buyer
and the particular employee; provided that Buyer agrees the term of employment,
subject to
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 18
<PAGE> 40
termination for cause as defined in the employment agreement, shall be at least
until December 31, 1998 and the rate of compensation (regularly recurring and
bonus and commission arrangements) until December 31, 1998 shall be no less than
such rates currently provided for in the existing written employment agreement
of such employee dated January 1, 1997; provided further that the preceding
proviso shall not be construed to mean that Buyer is required to offer any
employee any termination, severance, "golden parachute" or other benefits beyond
that which Buyer is willing to offer.
Section 11. Amount and Payment of Purchase Price. As consideration for
the sale of the Stations from Sellers to Buyer and the other agreements,
warranties and representations of Sellers made herein, Buyer shall pay to
Sellers at Closing a Purchase Price (herein so called) in the amount of Twenty
Four Million Dollars ($24,000,000), subject to adjustment as provided in
Sections 3, 4, 5 and 6. At the Closing, the Buyer shall (i) deliver the Holdback
Amount to the Indemnity Escrow Agent to be held, administered and distributed
pursuant to the Indemnification Escrow Agreement and (ii) shall pay the
remaining balance of the Purchase Price, after reduction for the Holdback Amount
and after adjustment as provided in this Section, in cash, as instructed by
Sellers in wire transfer instructions delivered to Buyer at least one (1) day
prior to Closing.
Section 12. Escrow Provisions. Sellers, Buyer and Escrow Agent have
entered into the Escrow Agreement dated of even date herewith (the "Escrow
Agreement"). Within two (2) Business Days following the Go Ahead Date the Buyer
shall deposit with the Escrow Agent an irrevocable letter of credit in the
amount of One Million Two Hundred Thousand Dollars ($1,200,000) (said $1,200,000
letter of credit is referred to herein as the "Escrow Letter of Credit"). The
Escrow Letter of Credit shall be held and distributed as provided in this
Agreement. At the Closing Sellers and Buyer will direct the Escrow Agent to
deliver the Escrow Letter of Credit to Buyer.
Section 13. Payment of Station Expenses. Sellers and Buyer agree to the
following terms and provisions regarding the payment of Station Expenses:
(a) Sellers shall bear the cost of, and indemnify Buyer from,
all Station Expenses incurred at any time prior to, or attributable to
the operations of the
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<PAGE> 41
Stations prior to, the Closing Date. Buyer shall bear the cost of, and
indemnify Sellers from, all Station Expenses incurred at any time on or
after, or attributable to the operations of the Stations on or after,
the Closing Date.
(b) On the Closing Date (a) the Sellers shall pay the entirety
of their respective accounts payable existing on the Closing Date and
(b) the Sellers shall pay to their respective employees, agents and
representatives all accrued wages, salaries, bonuses, commissions and
all other accrued liabilities and payments, including accrued vacation
pay, that are due to any employee of any of the Sellers, or that would
otherwise become due to any employee of any of the Sellers at a later
date, on account of any contract, agreement, understanding, policy,
plan, program or benefit of any of the Sellers existing on or prior to
Closing.
(c) Sellers agree that they will use their respective best
faith efforts to fully and accurately determine all remaining Station
Expenses incurred through the Closing Date, including all accounts
payable and other Station Expenses for which invoices have not been
received on or before the Closing Date, but will be received thereafter
for Station Expenses incurred on or prior to the Closing Date. At the
Closing the Sellers shall pay all such Station Expenses directly to the
appropriate parties. However, to the extent direct payment on the
Closing Date is not practical, the Sellers agree to make adequate
provision therefore by making a cash payment to Buyer at the Closing in
the amount of the remaining estimated Station Expenses which are the
responsibility of the Sellers to pay; and the Buyer will apply such
amount to the payment of Sellers' Station Expenses and account to the
Sellers for same. However, if the Sellers' estimated cash payment is
insufficient to pay the remaining Station Expenses on or before the due
dates thereof, then the Sellers shall either promptly (i) pay said
Station Expenses as requested by Buyer or (ii) authorize the Indemnity
Escrow Agent to pay said Station Expenses out of the Holdback Amount.
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<PAGE> 42
(d) Sellers and Buyer agree that within forty five (45) days
following Closing each of them will provide the other with an
accounting of any Station Expenses paid by such party (or with respect
to which such party has received an invoice) that are the
responsibility of the other party to pay and Buyer will also at that
time provide Sellers with an accounting of the application by the Buyer
of the cash payment received from the Sellers as described in Section
13(c). At such time Sellers and Buyer agree to make adjusting payments
between themselves and/or promptly make appropriate third party
payments, as the case may be, such that Sellers and Buyer shall have
each paid their own respective Station Expenses.
Section 14. FCC Approval.
(a) Consummation of the Transaction is conditioned upon the FCC having
given its consents in writing (without, in Buyer's reasonable opinion, any
condition materially adverse to Buyer) to the assignment and change of control
from Sellers to Buyer ("FCC Consent") of all licenses, permits and
authorizations granted by the FCC to Sellers relating to the operation of each
of the Stations (collectively, the "FCC Licenses") and said consents having
become Final FCC Consent.
(b) For purposes of this Agreement, such FCC Consent shall be deemed to
be Initial FCC Consent (herein so called) once it is granted and published. For
purposes of this Agreement, such FCC Consent shall be deemed to have become
Final FCC Consent (herein so called) after it is granted and published and when
the time for administrative or judicial review or reconsideration has expired
and when the time for the filing of any protest, request for stay, petition for
rehearing, reconsideration or appeal of such order of consent has expired and no
protest, request for stay, petition for rehearing, reconsideration or appeal has
been timely filed and is pending. Once Initial FCC Consent shall have occurred,
Buyer may waive the condition of Final FCC Consent as set forth in Section
23(o).
(c) The parties agree to proceed to file or cause to be filed all
necessary applications (collectively, the "FCC Applications") requesting FCC
consent to the Transaction on or before the 15th Business Day following the Go
Ahead Date; provided that neither party hereto shall be liable to the other for
the failure to file
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 21
<PAGE> 43
by said 15th Business Day if such party has proceeded with due diligence and in
good faith. In no event shall the FCC Applications be filed later than 20
Business Days following the Go Ahead Date.
(d) The parties agree with each other that each of them will prosecute
the FCC Applications, including all necessary amendments and supplements
thereto, in good faith and with due diligence. Each party agrees that it will
timely, promptly and fully respond to all matters involving the FCC
Applications. If an objection to the grant of the FCC Applications is raised
before the FCC by any party, or is raised by the FCC upon its own motion, then
Buyer and Sellers shall each use their individual and joint best efforts to
resolve such objection in a manner that will permit grant of the FCC
Applications within the time period required by this Agreement; and if the said
objection pertains to any portion of this Agreement, then Buyer and Sellers
agree to examine the objection in good faith and to amend this Agreement to
delete or otherwise modify any provision found objectionable if said can be
accomplished without materially decreasing the rights or benefits of either
party under this Agreement and without materially increasing the obligations or
duties of either party under this Agreement.
(e) If the FCC shall not have consented to the Transaction within nine
(9) months following the filing of the FCC Applications, then this Agreement
shall be terminable by either Buyer (assuming Buyer is not in default under this
Section) or Sellers (assuming Sellers are not in default under this Section)
upon written notice to the other unless the FCC has theretofore set one or more
of the FCC Applications for a hearing in which case this Agreement shall be
extended for a sufficient period of time to permit the hearing to be held and
the FCC to make a decision.
Section 15. Allocation of Purchase Price. No later than 45 days after
the close of the calendar year in which Closing shall take place, Seller and
Buyer may allocate the Purchase Price among the Assets in accordance with their
relative fair market values based upon an appraisal to be obtained by Buyer;
provided that the gross fair market value of the Assets comprising a particular
Station with respect to which the rights to acquire were assigned to a Permitted
Assignee shall be an amount equal to that portion of the Purchase Price funded
by such Permitted Assignee; and provided further the gross fair market value of
the Assets comprising each
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 22
<PAGE> 44
of the other Stations acquired by Sunburst Media, LP shall be an amount as
determined in good faith by the Buyer. If either (i) Buyer shall not obtain such
appraisal or (ii) if Buyer shall obtain such appraisal, but the Seller and the
Buyer fail to agree to allocate the Purchase Price in accordance with such
appraisal, then Seller and Buyer shall allocate the Purchase Price, on a Station
by Station basis, in accordance with the following: first, an amount equal to
the replacement cost for the tangible assets shall be allocated to the tangible
assets; second, in the case of Subject Real Property, the amount of coverage for
title insurance or title opinion purposes as specified on Schedule 1(d); third,
$25,000 shall be allocated to goodwill; and fourth, the balance shall be
allocated to the Station Licenses and other intangible assets. Seller and Buyer
agree to report the allocation of the Purchase Price, as determined in
accordance with the foregoing, for purposes of Section 1060 of the Internal
Revenue Code of 1986 and for other tax purposes.
Section 16. Sale Provisions Regarding Subject Real Property. In
addition to the other terms and provisions of this Agreement which apply to the
Assets of which the Subject Real Property is a part, the following terms and
provisions shall also apply to the sale of each parcel of the Subject Real
Property:
(a) Warranty of Title. Sellers represent and warrant to Buyer
that at the Closing Sellers will have and will convey to Buyer good and
fee simple title to each parcel of the Subject Real Property, free and
clear of any and all Liens and Encumbrances except the Permitted
Exceptions. Notwithstanding anything else in this Agreement to the
contrary, Sellers agree that, at their sole cost and expense, (i) they
will pay all liabilities secured by Liens against each parcel of the
Subject Real Property and have such Liens removed and (ii) they will
discharge all Encumbrances against each parcel of the Subject Real
Property, other than for the Permitted Exceptions; it being the intent
of the parties hereto that each parcel of the Subject Real Property
shall be conveyed to Buyer free and clear of all Liens and Encumbrances
other than for the Permitted Exceptions.
(b) Zoning Ordinances. Sellers represent and warrant to Buyer
that each parcel of the Subject Real Property is not in violation of
any applicable zoning
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 23
<PAGE> 45
ordinances. If prior to Closing Buyer should determine that any parcel
of the Subject Real Property is in violation of any zoning ordinances
(it being understood that the Buyer shall have no obligation to make
any investigation), then Buyer may either (i) close the Transaction, if
it is otherwise ready to close, and receive such parcel of the Subject
Real Property with any such zoning violations and retain its rights for
breach of warranty or (ii) terminate the Agreement by written notice to
Sellers and the Escrow Letter of Credit shall be returned to Buyer and
Buyer shall retain its rights for breach of warranty.
(c) Buyer's Inspection. Sellers hereby grant Buyer and its
representatives the right to enter each parcel of the Subject Real
Property for purposes of conducting physical inspections; provided that
Buyer agrees to indemnify and hold Sellers free and harmless of and
from any and all liabilities, claims, demands and expenses, of any kind
or nature arising or accruing as a result of any activities of Buyer on
each parcel of the Subject Real Property prior to Closing.
(d) Title Binder, Survey and Environmental Audit. Within
forty-five (45) days after the Go Ahead Date, Sellers shall, at
Sellers' expense, obtain and deliver to Buyer, the following:
(1) A copy of a current on-the-ground survey ("Survey") of
each parcel of the Subject Real Property made by a duly
licensed surveyor reasonably acceptable to the Buyer. The
Survey shall be in a form acceptable to the Title Company
(hereinafter defined) in order to allow the Title Company to
delete the survey exception (except as to "shortages in area")
from the Title Policy to be issued by the Title Company. Each
Survey shall show the location of all buildings and
improvements on the parcel of the Subject Real Property
covered by such Survey.
(2) A title commitment ("Title Binder") covering the Property
binding a title company
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 24
<PAGE> 46
reasonably acceptable to Buyer (the "Title Company") to issue
an Owner's Policy of Title Insurance on the standard form of
policy prescribed by the applicable State Board of Insurance
at the Closing in the indicated amount for each parcel of the
Subject Real Property as set forth on SCHEDULES 1(B) AND (D).
There shall also be included with the Title Binder true,
correct and legible copies of any and all instruments referred
to in the Title Binder as constituting exceptions or
restrictions upon the title of the applicable party of the
Sellers. In the case of real estate located in Louisiana, if
an Owner's Policy of Title Insurance is not available, then
adequate opinion of reputable local counsel licensed to
practice law in Louisiana shall be utilized instead.
(3) A Phase I ESA on each parcel of the Subject Real Property
addressed to Buyer and issued by a professional environmental
consulting firm reasonably acceptable to Buyer (and performed
in a manner that at a minimum satisfies the requirements of
ASTM Practice E 1527-94) stating that after due inspection
there is no action required to place the particular parcel of
the Subject Real Property into compliance with Environmental
Laws or if there is any further investigation required or some
other action required to place the property into compliance
with Environmental Laws, the nature of the condition or
suspected condition and the nature of the further
investigation or further action required.
(4) Any Phase II ESA's recommended by the environmental
consulting firm.
(e) Objections to Title Binder and Survey. Buyer shall have
thirty (30) days after the receipt of the Survey and the Title Binder
as to each separate parcel of the Subject Real Property to review them
and to deliver in writing to Sellers such objections as Buyer may
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<PAGE> 47
reasonably have to anything contained in them other than for the
Permitted Exceptions. Any such item to which Buyer shall not object
shall also be deemed a "Permitted Exception" as to the particular
parcel of the Subject Real Property. Any Liens and Encumbrances shall
automatically be deemed objected to by Buyer whether or not Buyer
objects in writing at such time. If there are other objections by Buyer
to matters (excluding Liens and Encumbrances which Sellers are required
to remove under the terms of this Agreement) Sellers shall exercise
their best faith efforts to satisfy such other matters prior to
Closing. If Sellers deliver written notice to Buyer prior to Closing
that Sellers are unable to satisfy such other matters, then Buyer may
either close the Transaction and receive such title as Sellers are able
to convey or elect not to close the Transaction by written notice to
Sellers delivered within twenty (20) days after Sellers' written notice
to Buyer and the Escrow Letter of Credit shall be returned to Buyer.
(f) Objections for Environmental Matters. Buyer shall have
thirty (30) days after the receipt of the Phase I ESA as to each
separate parcel of the Subject Real Property to review it and to
deliver in writing to Sellers such objections as Buyer may reasonably
have to anything contained therein. If there are objections by Buyer,
Sellers shall satisfy such objections prior to Closing. If Sellers
deliver written notice to Buyer prior to Closing that Sellers are
unable to satisfy such objections, then Buyer may either close the
Transaction and receive the particular parcel of the Subject Real
Property or elect not to close the Transaction by written notice to
Sellers delivered within twenty (20) days after Sellers' written notice
to Buyer and the Escrow Letter of Credit shall be returned to Buyer.
(g) Deliveries at Closing. At the Closing, Sellers shall
deliver to the Buyer (i) a Special Warranty Deed conveying each parcel
of the Subject Real Property to the Buyer subject only to the Permitted
Exceptions; (ii) an Owner's Title Policy issued by the underwriter
pursuant to the Title Binder, with the survey exception deleted (except
as to shortages in area) subject only to the Permitted Exceptions; and
(iii) possession of each parcel
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<PAGE> 48
of the Subject Real Property. In case of a dispute as to the form of
any document required hereunder, such as the Special Warranty Deed, the
current form prepared by the State Bar of the State in which the parcel
of Subject Real Property is situated shall be conclusively deemed
reasonable.
(h) Closing Costs. Each party hereto shall pay its share of
the closing costs which are normally assessed by the Title Company
against a seller or buyer in a sale of real estate in the county where
the property is located except that the Sellers shall pay the premium
cost of the Title Policy. Real estate taxes and ad valorem taxes for
the current year shall be pro rated at the Closing effective as of the
Closing Date. If the Closing shall occur before the tax rate is fixed
for the then current year, the apportionment of taxes shall be upon the
basis of the tax rate for the preceding year applied to the latest
assessed valuation, but any difference in actual and estimated ad
valorem taxes for the year of sale actually paid by Buyer shall be
adjusted between the parties upon receipt of written evidence of the
payments thereof. All taxes imposed because of a change of use of the
Property after the Closing shall be for the account of Buyer.
(i) Condemnation. If prior to the Closing, condemnation
proceedings are commenced with respect to any parcel of the Subject
Real Property, Buyer may at any time on or prior thirty (30) days
following notice of such fact terminate this Agreement by delivery of
written notice to Sellers. In the event of such termination, neither
party shall have any further right or obligation under this Agreement
and the Escrow Letter of Credit shall be returned to Buyer.
Section 17. Representations and Warranties of Sellers. Except as set
forth on the SCHEDULE OF EXCEPTIONS TO WARRANTIES attached hereto as SCHEDULE 17
and with the understanding that Buyer is relying on such representations and
warranties being correct in all respects in entering into and performing this
Agreement, Sellers hereby represent and warrant to Buyer as follows:
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 27
<PAGE> 49
(a) Organization, Good Standing, Etc. Each party comprising
Seller is corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, 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. Sellers have delivered to Buyer true and
complete copies of their respective Articles of Incorporation and
Bylaws, with all amendments, if any, as in effect at the date of this
Agreement. None of the Sellers is in violation of any provisions of its
Articles of Incorporation or Bylaws.
(b) Corporate Structure of SunGroup. SunGroup, Inc. owns all
of the issued and outstanding stock, all classes, of (1) RadioSunGroup
of Texas, Inc., (2) RadioSunGroup of Bryan/College Station, Inc., (3)
SunGroup Broadcasting of New Mexico, Inc., (4) SunGroup Broadcasting of
Louisiana, Inc., (5) Big Bass Classics, Inc., (6) Sun Management, Inc.,
a Tennessee corporation, and (7) Abilene Broadcasting, Inc., a Texas
corporation. SunGroup, Inc. is a holding company only and does conduct
any active business operations other than providing management services
to its subsidiaries. Arklatex, Inc. and Alpha-Web, Inc. are wholly
owned subsidiaries of SunGroup Broadcasting of Louisiana, Inc. All of
the issued and outstanding stock of Air Signs, Inc. is owned by the
following companies in the following proportions: RadioSunGroup of
Texas, Inc., 40%; RadioSunGroup of Bryan/College Station, Inc., 20%;
SunGroup Broadcasting of New Mexico, Inc., 20%; and SunGroup
Broadcasting of Louisiana, Inc., 20%. SunGroup, Inc. does not own, or
have any rights to acquire, an interest in any other Person, whether as
a shareholder, partner, principal, member or otherwise.
(c) Authority. Subject to obtaining the approval of the Board
of Directors and the requisite number of shares of voting stock of the
respective corporations comprising the Sellers as set forth in Section
22 (q), Sellers have all requisite power and authority to enter into
the Transaction Documents and to consummate the
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 28
<PAGE> 50
Transaction. Except for the approval of the Board of Directors and the
requisite number of shares of voting stock of the respective
corporations comprising the Sellers as set forth in Section 22 (q), the
execution and delivery of the Transaction Documents by Sellers and the
consummation by Sellers of the Transaction have been duly authorized by
all necessary action on the part of Sellers. The Transaction Documents
have been, or upon execution and delivery will be, duly executed and
delivered and constitute the valid and binding obligations of Sellers
enforceable against them in accordance with their terms, 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.
(d) Cash Receipt Schedules. The Sellers have heretofore
delivered to the Buyer schedules showing, on a month by month basis,
the ordinary cash receipts from the sale of air time on each of the
Stations (separately stated for each Station) for the calendar year
ended 12/31/95, 12/31/96 and for the twelve month period ended 12/31/97
(the "Monthly Cash Reports"). Furthermore, commencing on February 15,
1998 and continuing on or before the 15th day of each consecutive month
thereafter until the Closing, the Sellers will continue to provide the
Buyer with a Monthly Cash Report in the same format showing for the
immediately preceding calendar month the ordinary cash receipts from
the sale of air time on each of the Stations (separately stated for
each Station) for such month. For example on February 15, 1998 Sellers
will provide Buyer with the Monthly Cash Report for the month ended
January 31, 1998. The Monthly Cash Reports are, and the information to
be contained on the Monthly Cash Reports will be, true, correct and
complete in all material respects and correctly show, and will
correctly show, the amount of ordinary cash receipts from the sale of
air time on each of the Stations (separately stated for each Station)
for the particular month being shown, and does not reflect, and will
not reflect, any other source of cash including, but not limited to,
loan
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 29
<PAGE> 51
proceeds, capital contributions and cash receipts from any sources
other than the sale of air time on any of the Stations.
(e-1) Sellers' Annual Financial Statements. SGI has delivered
to the Buyer the Sellers' audited annual balance sheet and income and
expense statements, including supplemental information schedules,
prepared on a consolidated basis (the "Annual Financial Statements")
for fiscal years ended 12/31/95 and 12/31/96. No later than May 15,
1998, or immediately when available if sooner, SGI will deliver to
Buyer the Annual Financial Statements for fiscal year ending 12/31/97.
The Annual Financial Statements have been, and will be, prepared in
accordance with GAAP consistently applied, and accurately reflect, and
will reflect, the subject matter contained therein and do not omit, and
will not omit, any material item which, if omitted, would cause the
Annual Financial Statements to be materially misleading. Furthermore,
the Annual Financial Statements do reflect, and will reflect,
substantially, materially and accurately the financial condition and
results of operations of the Stations for the periods covered thereby.
(e-2) Sellers' Monthly Financial Statements. SGI have
heretofore delivered to the Buyer the Sellers' monthly income and
expense statements on a Station by Station basis (the "Monthly
Financial Statements") for the twelve month periods ended 12/31/95 and
12/31/96 and for the eleven month period ended 11/30/97. Furthermore,
commencing on or before the last day of January, 1998 and continuing on
or before the last day of each consecutive month thereafter until the
Closing, the Sellers will provide the Buyer with an income and expense
statements on a Station by Station basis for the immediately preceding
calendar month. For example on January 31, 1998 the Sellers will
provide the Buyer with the Monthly Financial Statements for the month
ended December 31, 1997. The Monthly Financial Statements have been,
and will be, prepared in accordance with GAAP consistently applied, and
accurately reflect, and will reflect, the subject matter contained
therein and do not omit, and will not omit, any material item which, if
omitted, would cause the Monthly Financial Statements to be materially
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<PAGE> 52
misleading. Furthermore, the Monthly Financial Statements do reflect,
and will reflect, substantially, materially and accurately the
financial condition and results of operations of the Stations for the
periods covered thereby.
(f) Sellers' 1998 Annual Budgets. The Sellers have heretofore
delivered to the Buyer the Sellers' 1998 Annual Budgets and 1998 Budget
Detail for each of the Stations (the "1998 Station Budgets"). The
Sellers reasonably believe that the Stations 1998 Station Budgets
represent the bona fide business plans of the Sellers, and are based on
projections and assumptions of Sellers' respective managements which
are reasonable in light of the Stations' historical business
performance and present business prospects.
(g) Absence of Undisclosed Liabilities. Sellers have disclosed
to Buyer all liabilities or potential liabilities of Sellers which
have, or could have, an adverse impact on, or otherwise create or could
create a Lien or Encumbrance against, the Assets.
(h) Absence of Certain Changes or Events. At any time since
December 1, 1997 there has not been, and from and after the date hereof
and until the Closing, there shall not be:
(1) Any Material Adverse Event;
(2) Without Buyer's prior approval any increase in the
compensation required to be paid by Buyer to any employees or
agents of Sellers under Contracts that Buyer will assume at
Closing;
(3) Any employment contracts other than contracts terminable
without liability by the employer upon notice of 10 days or
less and other than for those which will expire prior to
Closing;
(4) Any sale, lease, transfer, assignment, abandonment or
other disposition of any of the
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<PAGE> 53
Assets other than (i) dispositions of obsolete property, (ii)
property in connection with the acquisition of replacement
property of equal value, or (iii) as to any one Station,
assets having a value of less than $3,000, in the aggregate,
disposed of in the ordinary course of business and consistent
with past practices.
(i) Title to Properties. Except for the Existing Liens which
are to be removed at Closing and the Permitted Exceptions, all Assets
to be conveyed to Buyer pursuant to this Agreement are presently and
shall remain prior to Closing free and clear of all Liens and
Encumbrances. At the Closing the Sellers shall convey good and
marketable title in and to all of the Assets free and clear of all
Liens and Encumbrances except for the Permitted Exceptions.
(j) Defaults. As of the date of this Agreement, at all times
prior to Closing and at Closing, Sellers are not, and shall not be, in
material violation of the rights of any third party or in material
default or arrears under any Contract, Station License, or other
obligation of Sellers that is relevant or material to the business and
operations of the Stations, the Assets or the Transaction.
(k) Violations of Law. As of the date of this Agreement, at
all times prior to Closing and at Closing Sellers are not, and shall
not be, in violation of any Applicable Law which violations could have
a material adverse impact on the Sellers, the ownership or operations
of any of the Stations, the Assets or the Transaction.
(l) Pending Matters. No claim, investigation, litigation or
proceeding at law, in equity, or before any Governmental Entity is now,
or at anytime prior to or at the Closing shall be, pending or, to the
Knowledge of Sellers is now, or at anytime prior to or at the Closing
shall be, threatened against Sellers, any of the Stations, the Station
Licenses or any of the Assets, which claims, investigations,
litigations or proceedings
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 32
<PAGE> 54
could have a material adverse impact on any of the Sellers, the
ownership or operation of any of the Stations, any of the Assets or the
Transaction. There is not presently, or at anytime prior to or at the
Closing there shall not be, any claim, investigation, litigation or
proceeding pending or, to Sellers' Knowledge, threatened which affects
the title or interest of any of the Sellers in or to any of the Assets
or which would prevent or adversely affect the ownership or operation
of the Assets by Buyer, or the ownership or operation of any of the
Stations by Buyer.
(m) Employee Benefit Plans. None of the Employee Benefit Plans
are subject to Title IV of ERISA. The present value of all accrued
benefits (vested and unvested) under all the Employee Pension Benefit
Plans, which any of the Sellers or any other trades or businesses under
common control within the meaning of Section 4001(b)(1) of ERISA with
any of the Sellers (collectively, the "ERISA Group") maintains, or to
which any of the Sellers or any member of the ERISA Group is or has
been obligated to contribute (the "Pension Plans"), did not, as of the
respective last annual valuation dates for such Pension Plans, exceed
the value of the assets of such Pension Plan allocable to such
benefits. None of the Employee Pension Benefit Plans or any of their
related trusts has been terminated or partially terminated. None of the
Sellers or any member of the ERISA Group has contributed or been
obligated to contribute to any Multiemployer Plan. Except as set forth
on SCHEDULE 17(M), none of the Sellers nor any member of the ERISA
Group has any Employee Benefit Plans. True, correct, and complete
copies of each of the Employee Benefit Plans, and related trusts, if
applicable, have been furnished to Buyer, along with the most recent
report filed on Form 5500, if available, and summary plan description
with respect to each Employee Benefit Plan required to file Form 5500.
(n) Labor. As of the date of this Agreement and at all times
prior to and at the Closing none of the Sellers are, nor will any of
the Sellers be, a party to any collective bargaining agreements. None
of the Sellers have agreed to recognize any union or other collective
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 33
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bargaining representative, nor has any union or other collective
bargaining representative been certified as the exclusive bargaining
representative of any of the employees of any of the Sellers. To the
Sellers' Knowledge and excluding any fact, event or circumstance that
has not resulted or would not result in a Material Adverse Event,
Sellers (1) are, and have always been in substantial compliance with
all Applicable Laws regarding labor, employment and employment
practices, terms and conditions of employment, equal employment
opportunity, employee benefits, affirmative action, wages and hours,
occupational safety and health, immigration, and workers' compensation,
(2) are not engaged, nor have they ever engaged, in any unfair labor
practices, and have no, and have not ever had any, unfair labor
practice charges or complaints before the National Labor Relations
Board pending or, to the Knowledge of Sellers threatened against them
or any of them, (3) have no, and have not ever had any, grievances,
arbitrations, or other proceedings arising or asserted to arise under
any collective bargaining agreement, pending or, to the Knowledge of
Sellers threatened, against them or any of them and (4) have no, and
have not ever had any, charges, complaints, or proceedings before the
Equal Employment Opportunity Commission, Department of Labor or any
other Governmental Entity responsible for regulating employment
practices, pending, or, to Sellers' Knowledge, threatened against them
or any of them. There is no labor strike, slowdown, work stoppage or
lockout pending or, to the Knowledge of Sellers, threatened against or
affecting any of the Sellers, and Sellers have not ever experienced any
labor strike, slowdown, work stoppage or lockout. To the Knowledge of
Sellers no union organizational campaign or representation petition is
currently pending with respect to any of the employees of any of the
Sellers.
(o) Full Disclosure. At the date of this Agreement and at all
times prior to Closing and at Closing Sellers have, and will have,
disclosed all facts, events, circumstances and conditions that result,
or could result, in a Material Adverse Event or a Station Event. The
Sellers have not withheld, and will not withhold, knowledge of events,
conditions or facts of which any of the Sellers have Knowledge, and
which are inconsistent
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with or contrary to any of Sellers' representations and warranties as
set forth in any of the Transaction Documents. The disclosure to Buyer
of any such events, conditions or facts after the date hereof shall not
operate as a waiver of or exception to the affected representation or
warranty or any other provision of this Agreement. None of the
representations and warranties made by Sellers in any of the
Transaction Documents or other instrument furnished to Buyer pursuant
hereto or thereto 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.
(p) No Conflicts, Breach or Violation. Subject to obtaining
FCC Consent as described in Section 14 hereof and obtaining the
consents and approvals described on SCHEDULE 17(R), the execution and
delivery of the Transaction Documents by Sellers do not, and the
performance by Sellers of the Transaction will not, (1) violate,
conflict with, or result in any breach of any provision any of Sellers'
respective Articles of Incorporation or Bylaws, shareholders'
agreements, and other corporate governance documents applicable to any
of the Sellers, (2) violate, conflict with, or result in a violation or
breach of, or constitute a default (with or without due notice or lapse
of time or both) under, or permit the termination of, or result in the
acceleration of, or entitle any party to accelerate (whether as a
result of a change of control of Sellers or otherwise) any obligation,
or result in the loss of any benefit, or give any person the right to
require any security to be repurchased, or give rise to the creation of
any Lien upon any of the Assets under any of the terms, conditions, or
provisions of any loan or credit agreement, note, bond, mortgage,
indenture, or deed of trust, or any license, lease, Contract, or other
instrument or obligation to which any of the Sellers is a party or by
which any of the Sellers or any of the Assets may be bound or
subjected, or (3) violate any Applicable Law.
(q) Governmental Consents. Except for the FCC, no consent of
any governmental body, entity, unit or agency
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 35
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is required for the performance of Sellers' obligations hereunder and
otherwise for the consummation of the Transaction by Sellers.
(r) Third Party Consents. Except as set forth on SCHEDULE
17(R) and as contemplated by Section 22(q), no consent of any person is
required for the performance of Sellers' obligations hereunder, the
conveyance of all Assets to Buyer hereunder and otherwise for the
consummation of the Transaction by Sellers.
(s) Accurate Information. Sellers have delivered to Buyer
accurate lists and summary descriptions, hereby certified to be correct
by the Sellers, of the following:
(1) Itemized lists of all material fixed assets and equipment
of each of the Stations, all of which are a part of the Assets
to be delivered to Buyer at Closing;
(2) True and correct copies of all written Contracts (or
written memorandums describing oral Contracts) pertaining to
the ownership or operation of any of the Stations;
(3) All trademarks, tradenames, service marks and copyright
registrations and applications, if any, included within the
Assets;
(4) The names and current salary rates of all of the employees
of each of the Stations;
(5) Lists of active customer accounts for each of the
Stations, including for each account, the customer's name,
address, kind of business and billing history;
(6) A list of all Barter Contracts currently in existence and
the Barter Receivable balances and Barter Payable balances
thereof, separately stated as to each of the Stations; and
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(7) A list of all Cash Contracts currently in existence,
separately stated as to each of the Stations.
(t) Completeness of Assets. The Assets being sold and
delivered to the Buyer pursuant to this Agreement constitute all of the
material assets, properties, rights and privileges owned and operated
by the Sellers in the operation of the Stations. The assets, properties
and rights described on SCHEDULES 2.1 THROUGH 2.7 hereof, inclusive,
constitute a complete and accurate listing of all material items of
real property and personal property owned or leased by any of the
Sellers and used, acquired for use or usable in the ownership and
operation of the Stations. There is no material asset used or required
by Sellers in the proper and normal conduct of business of each of the
Stations which is not owned or leased by Sellers and which is not
listed or described in Section 2 or any of the Schedules referred to
therein; provided that all Assets are hereby represented by the Sellers
to be owned, and not leased, except to the extent set forth on SCHEDULE
5 attached hereto.
(u) Operation of Stations in Compliance with Applicable Laws.
The respective physical facilities, transmitting facilities, studio
facilities, electrical and mechanical systems and all studio,
broadcasting and transmitting equipment of each of the Stations are
being, have been, and pending Closing will be, operated in accordance
with the terms of each of the respective FCC Licenses of each of the
Stations and all Applicable Law, and on the Closing Date will be in
full compliance with the rules and regulations of the FCC and all
Applicable Law; except that no warranty is being made with respect to
minor and immaterial violations, if any, of city and county local laws
and ordinances. Sellers have the power and authority to own and operate
all of the Stations and the Assets and hold, and on the Closing Date
will continue to hold, valid FCC Licenses and valid authorizations from
other applicable Governmental Entities which are necessary for Sellers
to own and operate all of the Stations and the Assets in accordance
with Applicable Law. All FCC Licenses that have expired at their most
recent expiration dates have been renewed
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 37
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by the FCC and are presently valid licenses. No action or proceeding is
pending or, to the Knowledge of Sellers, threatened, or on the Closing
Date will be threatened or pending, before the FCC or any other
Governmental Entity for the cancellation or material and adverse
modification of the respective FCC Licenses or other governmental
authorizations of each of the Stations. The material required by 47
C.F.R. ss. 73.3526 to be kept in the public inspection file of each of
the Stations is in such file.
(v) Condition of Tangible Assets. All tangible personal
property items with a replacement cost (new) in excess of $1,000
included within the Assets are, and prior to and at Closing will be, in
good operating condition for the intended use and operation of such
tangible assets except for ordinary wear and tear.
(w) Condition of Intangible Assets. The intangible personal
property items comprising the Assets will be delivered to Buyer in such
a manner and condition that Buyer will have full enjoyment of the
rights and privileges attendant thereto.
(x) No Other Agreements. Sellers are not a party to any
outstanding agreements with any Person other than Buyer for transfer or
sale, directly or indirectly, of any interest in all or any part of the
Assets.
(y) FCC Consent. Sellers know of no reason why the FCC would
not consent to the assignment of the FCC Licenses to Buyer.
(z) Warranty Regarding Solvency. The net saleable
value of each of the Seller's assets as of the date
hereof, and at all times prior to and at the Closing,
exceeds, and will exceed, the liabilities of such Seller.
(aa) Taxes and Company Reports. Sellers have paid all Taxes
which have become due and payable on or prior to Closing in the full
amount of the liability thereof and have filed all Tax Returns to be
filed with respect to Taxes. There are presently no Taxes of any kind
which are due and payable which have not already been paid. Sellers
have timely filed all forms, reports, statements,
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 38
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and other documents required to be filed with the FCC. Sellers have
filed all forms, reports, statements, and other documents required to
be filed with any and all Governmental Entities. All such forms,
reports, statements and other documents required to be filed with the
FCC or any other Governmental Entity are referred to herein,
collectively, as the "Company Reports". The Company Reports were
prepared in all material respects in accordance with the requirements
of Applicable Law.
(bb) Barter Balances. The Barter Receivables balance and the
Barter Payables balance as of the date hereof for each Stations do not
exceed the amounts set forth on SCHEDULE 17(BB).
(cc) Environmental Matters. There is not presently, nor at or
prior to the Closing will there be, any material violation of any
Environmental Laws with respect to any parcel of the Subject Real
Property which imposes any liability on the owner or operator of such
real estate for any environmental condition or hazard, including, but
not limited to, any liability for cleanup or remediation of any
environmental condition or hazard or which would otherwise obligate any
of the Sellers or, with the passage of time, could cause any of the
Sellers, or the Buyer, to be obligated to clean up, remedy or otherwise
restore to a former condition, by itself or jointly with others, any
contaminated surface water, ground water, soil or any natural resources
associated therewith (such violation being referred to herein as an
"Environmental Violation"). The operations of the Sellers conducted on
the real property and facilities owned, operated, or leased by any of
the Sellers comply and have at all times complied in all material
respects with all Applicable Laws and rules of common law pertaining to
the environment, natural resources, and public or employee health and
safety, including all Environmental Laws and the Sellers have not been
notified otherwise by any Governmental Entity or other Person.
(dd) Insurance. Seller has heretofore provided Buyer with an
accurate summary of all casualty, fire, general liability and other
forms of insurance and all fidelity bonds held by or applicable to the
Stations.
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The insurance coverages effected by the policies of insurance presently
maintained (and which will be maintained until Closing) by Sellers with
respect to the operations, assets, or business of the Stations are
usual and customary and no less than historically carried by Sellers.
No event has occurred, including the failure by Sellers to give any
adequate notice or information, that limits or impairs the rights of
Sellers under any such insurance policies in such a manner as could
result in a Material Adverse Event. Excluding insurance policies that
have expired and been replaced in the ordinary course of business, no
insurance policy has been canceled within the last two years prior to
the date hereof.
(ee) Lien Search Information. SCHEDULE 17(EE) sets forth as to
each of the Stations for all periods of time since January 1, 1992 the
following information: (i) the full and correct legal name of the FCC
licensee of such Station and any d/b/a's for such Person, (ii) all call
letters used for such Station, (iii) the main studio address for such
Station, including the name of the county in which the main studio was
or is located and (iv) the address of the main transmitter site for
such Station including the name of the county in which the main
transmitter site was or is located. Except as set forth on SCHEDULE
1(A) there are no Liens, recorded or unrecorded, against any of the
Assets.
(ff) Certain Agreements. SCHEDULE 17(FF) lists each (1)
employment or consulting Contract to which any of the Sellers are a
party other than those which may be terminated by the employer without
liability upon written notice of 30 days or less, (2) Contract under
which any party thereto remains obligated to provide goods or services
having a value, or to make payments aggregating, in excess of $5,000
per year, and (3) Contract that is material to the operation of the
Stations. To the Sellers' Knowledge, each such Contract described in
SCHEDULE 17(FF) or required to be so described is a valid and binding
obligation of Sellers and is in full force and effect, and any
amendments to any of such Contracts are listed in SCHEDULE 17(FF).
Sellers and, to the Knowledge of Sellers, each other party to such
Contracts, have performed in all material respects the obligations
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 40
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required to be performed by such other party under such Contracts and
is not (with or without lapse of time or the giving of notice, or both)
in breach or default thereunder. SCHEDULE 17(FF) identifies, as to each
such Contract listed thereon, whether the consent of the other party
thereto is required, and the amount of any payments required, in order
for such Contract to continue in full force and effect upon the
consummation of the Transaction or whether such Contract can be
canceled by the other party without liability to such other party due
to the consummation of the Transaction. A complete copy of each written
Contract and a description of each oral Contract set forth in SCHEDULE
17(FF) has been provided to Buyer prior to the date of this Agreement.
Except as provided in SCHEDULE 17(FF), none of the Sellers is a party
to any oral or written agreement, plan or arrangement with any employee
or other station or broadcast personnel of any of the Sellers (whether
an employee, consultant or an independent contractor) (4) the benefits
of which are contingent, or the terms of which are materially altered,
upon, or result from, the occurrence of a transaction involving any of
the Sellers of the nature of the Transaction, (5) providing severance
benefits longer than 30 days or other benefits after the termination of
employment or other contractual relationship regardless of the reason
for such termination and regardless of whether such termination is
before or after a change of control, (6) under which any person may
receive payments subject to the tax imposed by Section 4999 of the Code
or (7) any of the benefits of which will be increased, or the vesting
of benefits of which will be accelerated, by the consummation of the
Transaction or the value of any of the benefits of which will be
calculated on the basis of the Transaction.
(gg) Conflicts of Interest. Except as set forth on SCHEDULE
(GG), no Affiliate of any of the Sellers owns, or will own at anytime
prior to or at Closing, directly or indirectly, any interest in, or is
a director, officer or principal employee of, or a consultant to, any
Person which (i) is a competitor, supplier or customer of the Stations,
(ii) is in any way associated with or involved in the business
conducted by any of the Stations or (iii) owns, directly or indirectly,
in whole or in part, any
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 41
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property, asset or right which any of the Sellers are presently
operating or using.
(hh) Owned Real Property. SCHEDULE 1(D) contains an accurate
description of all the Owned Real Property. Sellers have good and
marketable, fee simple, absolute title in and to the Owned Real
Property. Sellers have sufficient title to such easements, rights of
way and other rights appurtenant to each parcel of the Owned Real
Property as are necessary to permit ingress and egress to and from the
Owned Real Property to a public way, and the improvements on the Owned
Real Property have access to such sewer, water, gas, electric,
telephone and other utilities as are necessary to allow the business of
Sellers that is operated thereon to be operated in the ordinary course;
provided that if it shall be later determined by Survey, Title
Commitment or otherwise that the representation and warranty contained
in the preceding clause shall be incorrect in any respect and the
Transaction shall not be consummated for that or any other reason, then
the Sellers shall not be liable to Buyer for damages for the breach of
such warranty and representation. There is no pending condemnation or
similar proceeding affecting the Owned Real Property, or any portion
thereof, and to the Knowledge of Seller, no such action is threatened.
Except as set forth on SCHEDULE 1(D), the improvements located on the
Owned Real Property are in sufficiently good condition (except for
ordinary wear and tear) to allow the business of the Sellers to be
operated in the ordinary course and there has been no damage to such
improvements that affects the conduct of such business in any material
respect that has not been repaired or remedied. Except as set forth on
SCHEDULE 1(D), there are no lessees or tenants at will in possession of
any portion of any of the Owned Real Property other than Seller,
whether as lessees, tenants at will, trespassers or otherwise. Except
as set forth on SCHEDULE 1(D), no zoning, building or other federal,
state or municipal law, ordinance, regulation or restriction is
violated in any material respect by the continued maintenance,
operation or use of the Owned Real Property or any tract or portion
thereof or interest therein in its present manner. The current use of
the Owned Real Property and all parts thereof does not
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 42
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violate any restrictive covenants of record affecting any of the Owned
Real Property. All necessary licenses and permits issued by any
Governmental Entity with respect to the Owned Real Property have been
obtained, have been validly issued and are in full force and effect.
(ii) Ground Leased Real Property and Other Leased Real
Property. SCHEDULES 1(B) AND 1(C) contains an accurate description of
all the lease agreements (oral or written) of real property used or
held for use in the business and operations of each of the Stations as
now conducted. To Sellers' Knowledge each lease agreement described in
SCHEDULES 1(B) AND 1(C) is a valid and binding obligation of one or
more parties comprising the Seller and is in full force and effect
without amendment other than as described in SCHEDULES 1(B) AND 1(C).
Except as otherwise disclosed on SCHEDULES 1(B) AND 1(C), Sellers are
not, and to the Knowledge of the Sellers, no other party is, in default
under any such real estate lease. Subject to obtaining the Consents
disclosed in SCHEDULE 17(R), Seller has the full legal power and
authority to assign its rights under the leases listed in SCHEDULES
1(B) AND 1(C), to Buyer. All leasehold interests (including the
improvements thereon) created by the lease agreements listed on
SCHEDULES 1(B) AND 1(C) are available for immediate use in the conduct
of the business and operations of each of the Stations as currently
conducted.
Section 18. Representations and Warranties by Buyer. Buyer hereby
represents and warrants to Sellers as follows:
(a) Organization. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and is duly qualified to conduct business and in
good standing under the laws of the State of Texas. As to any Permitted
Assignee this representation and warranty shall be deemed revised to
read to refer to the form of organization of the Permitted Assignee.
Buyer has all requisite power and authority to carry on its business,
and is duly qualified to do business, and is in good standing, in each
jurisdiction in which the character of the properties owned by it or
the nature of the business
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 43
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transacted by it makes such qualification required by law.
(b) Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement has been duly and validly
authorized by Buyer.
(c) Binding Agreement. The Transaction Documents have been, or
upon execution and delivery will be, duly executed and delivered and
constitute the valid and binding obligations of Buyer enforceable
against it in accordance with their terms, 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).
(d) No Breach or Violation. The execution, delivery and
performance of this Agreement and the consummation of the Transaction
does not and will not conflict with, or result in any material breach
or violation of, any applicable provision of law or administrative
regulation or any material mortgage, lien, lease, agreement,
instrument, order, judgment or decree, or any other material obligation
or restriction of any kind to which Buyer is a party or by which its
properties are bound.
(e) Governmental Consents. Except for the FCC, no consent of
any Governmental Entity is required for the performance of Buyer's
obligations hereunder and otherwise for the consummation of the
Transaction by Buyer.
(f) Third Party Consents. Other than for the consent of
Buyer's existing non-affiliated third party lenders, no consent of any
person is required for the performance of Buyer's obligations hereunder
and otherwise for the consummation of the Transaction.
(g) Warranty Regarding Solvency. The net saleable value of the
Buyer's assets as of the date hereof, and at
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all times prior to and at the Closing, exceeds, and will exceed, the
liabilities of the Buyer.
(h) Warranty Regarding Financial Ability. To its Knowledge the
Buyer has the financial resources and ability necessary to fund the
Purchase Price and otherwise meet its obligations hereunder.
(i) 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.
(j) FCC Consent. Buyer knows of no reason why the FCC would
not consent to the assignment of the FCC Licenses to Buyer.
Section 19. Survival of Representations and Warranties Etc. All of the
representations and warranties (1) of the Sellers contained in sub-sections (b),
(d), (e-1), (e-2), (f), (g), (h), (j), (k), (l), (m), (n), (p), (q), (r), (t)
(v), (w), (x), (y), (z), (bb), (dd), (ff), (gg) and (ii) of Section 17 and (2)
of the Buyer contained in sub-sections (d), (e), (f), (g), (h), (i) and (j) of
Section 18 shall survive for only a period of two (2) years after the Closing
and shall at that time terminate. All other representations and warranties of
the Sellers contained in this Agreement and (ii) of the Buyer contained
elsewhere in this Agreement shall survive the Closing and shall continue for all
applicable periods of limitations. All of the covenants and agreements of
Sellers and Buyer contained herein shall survive the Closing and shall continue
until fully performed.
Section 20. Risk of Loss. Risk of loss, damage or destruction to the
physical property to be sold and conveyed hereunder shall be upon Sellers until
Closing and thereafter upon Buyer. In the event any such damage, destruction or
loss occurs on or prior to Closing, (e.g., without limitation, damage or
destruction to the any tower, antennae, studio, broadcasting or transmitting
facilities) and such loss, damage or destruction either materially interferes or
disrupts the operation of any of
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 45
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the Stations (e.g., without limitation, the failure of any of the Stations to
transmit, or material interruption(s) of, its normal authorized broadcast
signal) or results in a Material Adverse Event then Buyer may elect any of the
following: (i) to consummate the Closing on the Closing Date and accept the
property in its then condition, in which event, Sellers shall assign to Buyer
all Sellers' rights under any insurance or pay over to Buyer all proceeds of
insurance covering the property damage, destruction or loss, (ii) postpone
Closing until such time as the loss, damage or destruction is repaired or
replaced to its condition intended by this Agreement, provided that such
postponement may not exceed six (6) months or (iii) terminate this Agreement
with Buyer receiving the Escrow Letter of Credit.
Section 21. Pre-Closing Covenants of Buyer. Buyer agrees to perform the
following covenants pending Closing:
(a) Buyer agrees that if at anytime prior to Closing it should
determine (it being understood that there shall be no duty to
investigate or other duty of due diligence) that the Sellers have
breached any warranty or representation, the Buyer will give the
Sellers notice and a reasonable opportunity (not less than 20 days) to
cure such breach and the Closing shall be postponed to permit the
Sellers to cure unless the Buyer waives the breach so that Closing can
occur as otherwise scheduled.
(b) Buyer shall promptly deliver to Sellers any and all
information regarding events, transactions, conditions or other matters
occurring subsequent to the date of this Agreement and on or prior to
Closing (i) that have a material adverse impact on, or that could
reasonably be expected to have a material adverse impact on, the
accuracy or effectiveness of any of the representations and warranties
made in this Agreement by Buyer or (ii) that would otherwise cause any
of Buyer's representations and warranties made in this Agreement to
Sellers to be untrue or incomplete in any respect either on the date of
this Agreement or at any time on or prior to Closing.
(c) Buyer shall not take any action, or permit any action to
be taken, that would cause any of Buyer's
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representations and warranties made in this Agreement to Seller to be
untrue or incomplete in any material respect at anytime on or prior to
Closing.
Section 22. Pre-Closing Covenants and Agreements of Sellers. Sellers
agree that Sellers will promptly do and perform the following pending Closing:
(a) Sellers shall pay all Taxes as same shall become due and
payable and shall timely file all necessary Tax Returns with respect to
such Taxes.
(b) Sellers shall promptly deliver to Buyer any and all
information regarding events, transactions, conditions or other matters
occurring subsequent to the date of this Agreement and on or prior to
Closing (i) that have a material adverse impact on, or that could
reasonably be expected to have a material adverse impact on, the
accuracy or effectiveness of any of the representations and warranties
made in this Agreement by Sellers, (ii) that would otherwise cause any
of Sellers' representations and warranties made in this Agreement to
Buyer to be untrue or incomplete in any respect either on the date of
this Agreement or at any time on or prior to Closing or (iii) that
result in, or could forseeably result in, a Material Adverse Event.
(c) Sellers will give to Buyer and its counsel, accountants,
and other representatives reasonable access, during normal business
hours throughout the period prior to Closing, to all of Sellers'
properties, equipment, books, Contracts, commitments, and records
related to any of the Stations and will furnish to Buyer during such
period all information concerning the business and affairs of all of
the Stations as Buyer may reasonably request.
(d) Sellers shall conduct the business and affairs of each of
the Stations in accordance with their best business judgment and
Sellers will not enter into any commitment affecting any of the
Stations that is unusual or outside the normal course of sound
operation of the Stations and Sellers will not materially change any
programming (including music formats) and sales policies
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 47
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of any of the Stations except those fully consistent with sound
broadcasting practices provided Sellers advise Buyer beforehand.
(e) Sellers shall not (i) make any dispositions of any of the
Assets except for dispositions of items of tangible personal property
in the ordinary course of business, but only when replaced by items of
equal or greater value, (ii) suffer or permit a change of control of
any of the Sellers to occur, or (iii) otherwise take any action that
adversely affects the ability of the Sellers to consummate the
Transaction in accordance with the terms of this Agreement.
(f) Sellers will use their best efforts to preserve the
business of each of the Stations and to keep the Stations'
organizations intact, to keep available to Buyer the services of the
Key Station Personnel and to preserve for Buyer the goodwill of
Sellers' customers. Notwithstanding the foregoing, and prior to
Closing, Sellers will not, without the prior consent of Buyer, pay any
substantial bonuses or significantly adjust the rates of commission or
compensation of any Station employee; provided that the Sellers may (i)
pay bonuses due under the terms and provisions of the "Biddinger
Invitational Cash Flow Tournament" in the form attached to SCHEDULE
17(M) and (ii) pay bonuses required to be paid under written employment
agreements.
(g) Sellers will keep and maintain the property and equipment
of each of the Stations in normal operating repair and efficiency and
in material compliance with all Applicable Law.
(h) Sellers shall have complete control of the equipment,
operation and programming of each of the Stations; however Sellers
agree to advise Buyer on such matters as Buyer may reasonably request.
(i) Sellers shall not take any action, or permit any action to
be taken, that would cause any of Sellers' representations and
warranties made in this Agreement to Buyer to be untrue or incomplete
in any material respect at anytime on or prior to Closing.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 48
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(j) At the appropriate time after Initial FCC Consent, but
prior to Closing, Sellers agree that Buyer may extend offers of
employment to the employees of each of the Stations upon such terms and
conditions as Buyer shall decide.
(k) Sellers will collect the Accounts Receivable in the
ordinary course of business and will not, regardless of any past
practices or customs, take any of the following actions with respect to
the creation or collection of Accounts Receivable: (1) settle any
Account Receivable for less than the full amount owed, (2) offer any
discounts, premiums or other incentives of any kind in exchange for
early or quick payment of any Account Receivable, (3) other than for
historic seasonal adjustments in the rates charged by Sellers for sale
of air time and other services of the Stations, decrease the rates
charged by the Sellers, (4) change or modify Sellers' billing practices
or the timing of billing cycles or intervals or (5) undertake any
actions or course of dealings that are intended to accelerate the
normal rate of collection of Accounts Receivable.
(l) Sellers agree that if at anytime prior to Closing it
should determine (it being understood that there shall be no duty to
investigate or other duty of due diligence) that the Buyer has breached
any of its warranties or representations, the Sellers will give the
Buyer notice and a reasonable opportunity (not less than 20 days) to
cure such breach and the Closing shall be postponed to permit the Buyer
to cure unless the Sellers waive the breach so that Closing can occur
as otherwise scheduled.
(m) Sellers shall not terminate any of the Key Station
Personnel without prior consultation with Buyer regarding the basis for
such termination.
(n) Sellers shall not enter into, or enter into negotiations
or discussions with any person other than Buyer with respect to, any
local marketing agreement, time brokerage agreement, joint sales
agreement, or any other similar agreement.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 49
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(o) Sellers shall not, directly or indirectly, through any
agent, financial advisor, banker or other representative, or otherwise,
solicit, initiate, or encourage the submission of any proposal or offer
from any Person relating to any acquisition or purchase of all or any
material portion of the Assets or participate in any negotiations
regarding, or furnish to any other person any information with respect
to, or otherwise cooperate in any way with, or assist or participate
in, facilitate, or encourage, any effort or attempt by any other Person
to do or seek the foregoing. Sellers shall immediately communicate to
Buyer the material terms of any such proposal (and the identity of the
party making such proposal) which it may receive and, if such proposal
is in writing, the Sellers shall promptly deliver a copy of such
proposal to Buyer. Sellers immediately shall cease and cause to be
terminated all existing discussions or negotiations, if any, with any
parties conducted heretofore with respect to any of the foregoing. The
provisions of this sub-section shall not apply if the Buyer shall
remain in material breach of this Agreement following Sellers' notice
to Buyer specifying the nature of the breach and granting to the Buyer
a reasonable opportunity of no less than 20 days to cure said beach.
(p) Sellers shall deliver to Buyer within 45 days of the Go
Ahead Date a Phase I ESA on each item of Leased Real Property addressed
to Buyer and issued by a professional environmental consulting firm
reasonably acceptable to Buyer (and performed in a manner that at a
minimum satisfies the requirements of ASTM Practice E 1527-94) stating
that after due inspection there is no action required to place the
particular parcel of the Leased Real Property into compliance with
Environmental Laws or if there is any further investigation required or
some other action required to place the property into compliance with
Environmental Laws, the nature of the condition or suspected condition
and the nature of the further investigation or further action required.
(q) The obligations of the Seller and the Buyer hereunder are
subject to and conditioned upon the Board of Directors of SGI and the
requisite number of shares of voting stock of SGI approving the
Transaction Documents
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 50
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and the Transaction. SGI will properly notify and hold meetings of its
Board of Directors and shareholders no later than thirty (30) days
after the date of this Agreement (said 30th day is referred to as the
"Sellers' Approval Date") to vote upon a proposal to approve the
execution and delivery by each of the parties comprising Sellers of the
Transaction Documents, and any amendments thereto subsequently approved
by the President of SGI, and the consummation of the Transaction in
accordance with the terms and provisions of the Transaction Documents,
as amended. Assuming the Board of Directors and requisite number of
shares of voting stock of SGI approve the Transaction Documents and the
Transaction as provided in the preceding sentence, then the Board of
Directors of SGI will cause the Board of Directors and the sole
corporate shareholders of the other parties comprising Sellers to
likewise approve the execution and delivery by each such party of the
Transaction Documents, and any amendments thereto subsequently approved
by the President of such party, and the consummation of the Transaction
in accordance with the terms and provisions of the Transaction
Documents, as amended. If the foregoing described approvals are not
obtained by the Sellers' Approval Date, then this Agreement shall be
deemed terminated and no party hereto shall have any further obligation
to any other party hereto. If the foregoing described approvals are
obtained on or prior to the Sellers' Approval Date, then the President
of SGI shall within 2 Business Days send written notice (the "Sellers'
Approval Notice") to the Buyer stating that all necessary board of
directors' and shareholders' approvals as contemplated by this
provision have been validly obtained. Immediately and automatically
upon the Buyer's receipt of the Sellers' Approval Notice this Agreement
shall be deemed fully executed and delivered by and among the parties
hereto. The later to occur of (i) the date on which the Buyer receives
the Sellers' Approval Notice and (ii) March 3, 1998, shall be referred
to herein as the "Go Ahead Date". If the Go Ahead Date shall not have
occurred by March 18, 1998, then this Agreement shall be deemed
terminated and no party hereto shall have any further obligation to any
other party hereto.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 51
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(r) As of the date of this Agreement, RSGT's rights to
KTAB-TV's tower site for use as KEAN-FM's main transmitter site are
verbal and on a month-to-month basis. Buyer has no present intention to
acquire the Station Assets of KEAN-FM if a long term solution (of no
less than 10 years) on terms satisfactory to the Buyer in its sole
discretion (referred to as the "KEAN-FM Transmitter Site Solution") is
not obtained by the time of Closing. Sellers agree to use their best
faith efforts prior to Closing to obtain a KEAN-FM Transmitter Site
Solution at Sellers' sole cost and expense.
(s) Sellers agree to remediate at their sole cost and expense
prior to Closing and in accordance with all Applicable Law any
Environmental Violation on any Subject Real Property owned or occupied
by any of the Sellers; and if the Sellers shall fail to remediate same,
then Buyer shall have the right to refuse to accept the affected
Subject Real Property and proceed to Closing without accepting or
assuming the Sellers' rights and obligations with respect thereto
whether the Subject Real Property is owned or leased by Sellers.
Section 23. Conditions Precedent to Obligations of Buyer. All
obligations of Buyer under this Agreement are subject to the fulfillment at or
prior to Closing of each of the following conditions unless waived in writing by
Buyer. If Buyer shall elect not to close because of the failure of any of the
following conditions which Buyer will not waive in writing, then Buyer shall
have the option (i) to cancel this Agreement and be entitled to the immediate
return of the Escrow Letter of Credit or (ii) postpone Closing until such time
as such condition has either been met or waived. The conditions precedent are as
follows:
(a) Sellers' representations and warranties contained in this
Agreement shall be deemed to have been made again at and as of the
Closing Date and shall then be true in all material respects; provided
that any representation or warranty of Sellers contained herein that is
already qualified by a materiality standard or a Material Adverse Event
qualification shall not be compounded again by this Section for
materiality.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 52
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(b) Sellers shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or
complied with prior to or at the Closing.
(c) Buyer shall have been furnished with a certificate of the
Sellers dated the Closing Date certifying the fulfillment of the
foregoing two conditions.
(d) Buyer shall not have discovered any material adverse
error, misstatement, or omission in Sellers' representations and
warranties made in this Agreement that have not been cured by the time
of Closing.
(e) Buyer and Senior Lender shall have been furnished with a
written legal opinion, dated the Closing Date, of Sellers' legal
counsel, Boult Cummings Conners & Berry PLC, opining as to such matters
and in such form and substance as the Buyer and Senior Lender shall
reasonably request, including, but not limited to:
(1) The execution, delivery and performance of the Transaction
Documents by Sellers has been duly authorized and approved by
all requisite actions and proceedings.
(2) The Transaction Documents have been duly executed and
delivered by Sellers and constitutes the valid, binding and
enforceable obligation of Sellers in accordance with their
respective terms, 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.
(3) All other actions and proceedings required by law or the
Transaction Documents to be taken by Sellers at or prior to
the Closing in connection with the Transaction
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 53
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Documents and the Transaction been duly and validly taken.
(4) Except as may be specified by such counsel, he does not
know of any litigation, proceeding or government investigation
pending or threatened against or relating to Sellers, the
Assets, the Station, or to the Transaction, and any legal
impediment to the continued operation of the Stations in the
ordinary course.
(5) That based upon the results of complete and adequate lien
and title searches conducted at the direction of such counsel,
such counsel knows of no creditor, claimant or other person
claiming any interest or making any demand against the
Stations or any of the Assets that will not be released at
Closing.
The foregoing legal opinion shall not be limited to the laws of any one
jurisdiction and shall cover the laws of the jurisdictions of Texas,
Tennessee, New Mexico and Louisiana, as applicable to the subject
matter of the particular opinion; and for these purposes Sellers' legal
counsel may rely upon the opinions of reputable legal counsel licensed
to practice laws in those jurisdictions as to the portions of the
opinion peculiar to those jurisdictions. Additionally, each Permitted
Assignee and its Senior Lender shall also be entitled to receive a
legal opinion as described in this item (e), but only as may be related
to the Station Assets being acquired by such Permitted Assignee and the
Transaction Documents to which such Permitted Assignee is a party.
(f) Buyer and Senior Lender shall have been furnished with a
written legal opinion, dated the Closing Date, in form and substance
reasonably acceptable to Buyer and Senior Lender, of competent and
reputable FCC legal counsel who is reasonably acceptable to Buyer and
Senior Lender, opining as to such matters as the Buyer and Senior
Lender shall reasonably request, including, but not limited to:
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 54
<PAGE> 76
(1) The execution and delivery of the Agreement, and the
performance by the Sellers of their obligations in accordance
with the Agreement will not violate the Communications Act of
1934 or the rules and regulations of the FCC.
(2) Exhibit "A" to the legal opinion completely lists all of
the licenses, permits and authorizations granted by the FCC to
Sellers (collectively, the "FCC Licenses") in connection with
the ownership and operation of the Station. The FCC Licenses
are in full force and effect and, to such counsel's knowledge,
constitute the only licenses, permits, and authorizations of
the FCC required for the present broadcast operations of the
Station. The FCC Licenses for each Station are issued in the
name of and validly held by one of the Sellers. The FCC
Licenses are not subject to any conditions outside the
ordinary course.
(3) The most recent renewal of the FCC Licenses has been
granted by the FCC in the ordinary course.
(4) The FCC has granted its consent to the assignment of the
FCC Licenses to Buyer without the imposition of conditions
outside the ordinary course and such FCC consent is in full
force and effect and has become final.
(5) There is no judgment, decree, or order that has been
issued by the FCC against Sellers or concerning the Station or
the FCC Licenses, other than FCC orders affecting the radio
station industry in general. There is no action, proceeding,
investigation, notice of apparent liability or order of
forfeiture pending or outstanding or, to such counsel's
knowledge, threatened by the FCC against Sellers or concerning
the Station or the FCC Licenses.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 55
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(6) After such counsel's review of the records on file with
the FCC, and to the best of such counsel's knowledge, there is
no complaint or proceeding pending before the FCC relating to
actions by (or omissions of) Sellers as a result of which an
investigation, notice of apparent liability, order of
forfeiture or other FCC order or decision could issue from the
FCC affecting the right of Sellers to hold any of the FCC
Licenses or to operate the Station.
(7) There has been filed with the FCC with respect to the
Station by the Sellers all material reports, applications,
documents, instruments and information required to be filed by
such licensee under the published rules and regulations of the
FCC.
Additionally, each Permitted Assignee and its Senior Lender shall also
be entitled to receive a legal opinion as described in this item (f),
but only as may be related to the FCC Licenses being acquired by such
Permitted Assignee.
(g) Sellers will have obtained and delivered to Buyer the
results of complete and adequate lien searches (effective to within a
reasonable date prior to Closing, but not to exceed 30 days prior to
Closing) conducted by a reputable private research firm acceptable to
Buyer which results demonstrate that no financing statements, judgment
liens and tax liens (federal, state and local) are filed of record with
respect to any of the Assets except for those which will be released at
Closing.
(h) Buyer will have received (i) from each lessor under each
Ground Leased Real Property and Leased Real Property and from the other
party to each material Contract listed on SCHEDULE 17(FF) a letter
confirming that to the knowledge of the lessor there are no material
defaults or other adverse conditions existing under such Lease and such
other matters as Buyer may reasonably require and (ii) from each and
every third party who is a party to any Contract that Buyer will assume
at Closing
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 56
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a letter consenting to the assignment of such Contract to the extent
consent is required under the terms of such Contract or in accordance
with applicable law.
(i) There shall not be in effect any temporary restraining
order, preliminary or permanent injunction, or other order, decree or
administrative ruling issued by any Governmental Entity or other legal
restraint or prohibition preventing the consummation of the
Transaction.
(j) No action shall have been taken nor any statute, rule, or
regulation shall have been enacted by any Governmental Entity that
makes the consummation of the Transaction illegal.
(k) There shall not exist any Environmental Violation at any
parcel of the Subject Real Property or on any Leased Real Property.
(l) All other conditions to Buyer's obligation to close as set
forth in this Agreement have been either satisfied in all material
respects or waived by Buyer.
(m) A Material Adverse Event shall not have occurred prior to
Closing; however if a Material Adverse Event shall have occurred prior
to Closing, the adverse effects thereof shall have been removed,
remedied or rectified to the satisfaction of the Buyer prior to
Closing.
(n) Sellers shall have timely delivered to Buyer all Monthly
Cash Reports, Annual Financial Statements and Monthly Financial
Statements as required by Section 17(d), (e-1) and (e-2).
(o) Final FCC Consent has been obtained.
(p) Sellers shall have obtained a KEAN-FM Transmitter Site
Solution.
(q) Sellers shall have remediated in accordance with all
Applicable Law, and at their sole cost and expense, all Environmental
Violations which exist at all
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 57
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facilities of all Stations including, but not limited to, the presence
of PCB's at any transmitter site.
(r) Senior Lender shall have received from the Lessors or
Landlords of all Ground Leased Real Property and Leased Real Property
such agreements containing such terms and provisions as Senior Lender
shall normally require such as, but not limited to, subordination of
liens, rights of access, cure and notice (it is understood that the
Sellers shall have no obligation under this Agreement to insure that
such Lessors and Landlords will execute and deliver such agreements to
Senior Lender).
Section 24. Conditions Precedent to Obligations of Sellers. All
obligations of Sellers under this Agreement are subject to the fulfillment at or
prior to Closing of each of the following conditions (unless waived in writing
by Seller):
(a) Buyer's warranties and representations contained in this
Agreement shall be deemed to have been made again at and as of the
Closing Date and shall then be true in all material respects; provided
that any representation or warranty of Buyer contained herein that is
already qualified by a materiality standard or a Material Adverse Event
qualification shall not be compounded again by this Section for
materiality.
(b) Buyer shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or
complied with prior to or at Closing.
(c) Sellers shall have been furnished with a Certificate of
appropriate officers of the General Partner of Buyer (or in the case of
a Permitted Assignee, that certificate which would be applicable to the
form of organization of the Permitted Assignee), dated the Closing
Date, certifying the fulfillment of the foregoing two conditions.
(d) Sellers shall have not discovered any material adverse
error, misstatement or omission in Buyer's warranties and
representations made in this Agreement which have not been cured by the
time of Closing.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 58
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(e) Sellers shall have been furnished with an opinion, dated
the Closing Date, of Winstead Sechrest & Minick P.C., counsel for
Buyer, (or in the case of a Permitted Assignee, legal counsel,
reasonably acceptable to Sellers, for the Permitted Assignee)
substantially to the effect that:
(1) The execution, delivery and performance of the Transaction
Documents by Buyer (or in the case of a Permitted Assignee,
those Transaction Documents to which such Permitted Assignee
is a party) has been duly authorized and approved by all
requisite actions and proceedings.
(2) The Transaction Documents (or in the case of a Permitted
Assignee, those Transaction Documents to which such Permitted
Assignee is a party) have been duly executed and delivered by
Buyer and constitutes the valid, binding and enforceable
obligations of Buyer in accordance with their respective
terms, 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.
(3) All other actions and proceedings required by law or the
Transaction Documents (or in the case of a Permitted Assignee,
those Transaction Documents to which such Permitted Assignee
is a party) to be taken by Buyer at or prior to the Closing in
connection with the Transaction Documents and the Transaction
been duly and validly taken.
(4) Except as may be specified by such counsel, he does not
know of any litigation, proceeding or government investigation
pending or threatened against or relating to Buyer or to the
Transaction.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 59
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Additionally, reputable legal counsel for each Permitted Assignee,
shall also deliver to Sellers a legal opinion as described in this item
(e), but only as may be related to the Station Assets being acquired by
such Permitted Assignee and the Transaction Documents to which such
Permitted Assignee is a party.
(f) There shall not be in effect any temporary restraining
order, preliminary or permanent injunction, or other order, decree or
administrative ruling issued by any Governmental Entity or other legal
restraint or prohibition preventing the consummation of the
Transaction.
(g) No action shall have been taken nor any statute, rule, or
regulation shall have been enacted by any Governmental Entity that
makes the consummation of the Transaction illegal.
Section 25. Closing.
(a) The consummation of the Transaction (the "Closing") shall take
place at the offices of Sunburst Media, LP in Dallas, Texas within ten (10)
business days following (i) Final FCC Consent or (ii) Buyer's waiver of Final
FCC Consent after Initial FCC Consent unless Sellers shall have some reason to
believe that a petition or motion for review or reconsideration of the Initial
FCC Consent may be filed by some third party, in which case the parties shall
wait for Final FCC Consent. If Final FCC Consent shall have been obtained (or
waived as provided in the preceding sentence), but not all of the other
conditions precedent to the obligations of Buyer to close as set forth in
Section 23 hereof have been satisfied or if a Material Adverse Event shall have
occurred prior to Closing and the adverse effects thereof shall not have been
removed, remedied or rectified to the satisfaction of the Buyer prior to
Closing, then, in any such case, Buyer at its option may extend (and re-extend)
the time for Closing in order for such unsatisfied conditions to be satisfied.
If Final FCC Consent shall have been obtained, but not all of the other
conditions precedent to the obligations of Sellers to close as set forth in
Section 24 hereof have been satisfied, then Sellers at their option may extend
(and re-extend) the time for Closing in order for such unsatisfied conditions to
be satisfied. As used in this Agreement, the term "Closing Date" means the date
on which Closing takes place. If the
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 60
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Closing shall not have occurred by the first anniversary of the Go Ahead Date,
then, subject to any applicable postponement provided for in Section 20 and
subsections (b) and (c) of this Section, this Agreement shall be terminable by
either Buyer (assuming Buyer is not in default under this Agreement) or Sellers
(assuming Sellers are not in default under this Agreement) upon written notice
to the other.
(b) If a Trading Event, Banking Event or Station Event shall occur,
then the following provisions shall control the timing of the Closing. If the
Cessation Date is less than 60 days after the Event Date, then Buyer may in its
discretion extend the Closing to a date specified by the Buyer that is not later
than 30 days after the Cessation Date. If the Cessation Date is more than 60
days, but less than 90, days after the Event Date, Buyer shall in its discretion
elect on the first to occur of (i) the 10th Business Day after the Cessation
Date or (ii) the 90th day after the Event Date (the "Election Date") to either
(1) close the transactions contemplated by this Agreement on the later to occur
of the 10th Business Day after the Election Date or the 90th day after the Event
Date or (2) terminate this Agreement. If the Cessation Date has not occurred by
the 90th day after the Event Date, then on the 90th day after the Event Date
Buyer, in its discretion, shall elect to close the transactions contemplated by
this Agreement on the fifth Business Day after the 90th day or terminate this
Agreement. If the 90th day shall not occur on a Business Day, then the next
Business Day shall be deemed the 90th day.
(c) If a Conflict Event shall occur, then Buyer, in its discretion, may
extend the Closing to a date specified by the Buyer not to exceed 90 days after
the Event Date.
(d) If necessary to comply with FCC rules the parties agree to file
with the FCC (and diligently prosecute) whatever motions, requests or other
matters as are necessary to extend (and re-extend) any closing deadlines
imposed by the FCC until such time as all of the conditions to Closing as set
forth herein have been met.
Section 26. Documents To Be Delivered by Sellers at Closing.
At the Closing Sellers shall make the following deliveries to Buyer:
(a) Sellers' bring down certificate required by Section 23(c);
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 61
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(b) Results of the lien searches (described in Section 23(g);
(c) Opinion of Sellers' legal counsel as required by Section
23(e);
(d) Opinion of Sellers' FCC legal counsel as required by
Section 23(f);
(e) Certificates of Existence and Good Standing for each of the
Sellers issued by the appropriate Governmental Entities of
their respective states of incorporation and by the
appropriate Governmental Entities of the respective states in
which they are authorized to conduct business;
(f) Certified copies of the resolutions of the Board of Directors
and shareholders of each of the parties comprising the Sellers
authorizing the execution, delivery and performance of the
Transaction Documents by the Sellers;
(g) Bill of Sale and Assignment of Interest and Assumption in
the form attached hereto as EXHIBIT 26(G) (as to the
conveyance of Assets);
(h) Special Warranty Deeds to all Owned Real Property;
(i) Separate recordable Assignments to all Ground Leased Real
Property;
(j) Separate Assignments to all Leased Real Property;
(k) Indemnification Escrow Agreement;
(l) Consulting Agreements;
(m) The payment required by Section 13(c);
(n) Any items regarding the Subject Real Property which are
required by Section 16;
(o) The Release from CONSECO as described in SCHEDULE 17; and
(p) Any other items required by this Agreement.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 62
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Section 27. Documents To Be Delivered by Buyer at Closing.
At the Closing Buyer shall make the following deliveries to Seller:
(a) Payment of the Purchase Price as described in Section 11;
(b) Buyer's bring down certificate required by Section 24(c);
(c) Certificate of Existence and Good Standing for Buyer
issued by the state of its incorporation or organization;
(d) Certificate of Authority and Good Standing for Buyer
issued by the States of Texas, Louisiana and New Mexico,
as applicable;
(e) Opinion of Buyer's legal counsel as required by Section
24(e);
(f) Certified copy of the resolutions of the Board of
Directors of the General Partner of the Buyer (or in the
case of a Permitted Assignee, those resolutions which are
applicable to the form of organization applicable to the
Permitted Assignee) authorizing the execution, delivery
and performance of the Transaction Documents (or in the
case of a Permitted Assignee, those Transaction Documents
to which such Permitted Assignee is a party) by the
Buyer;
(g) Bill of Sale and Assignment of Interest and Assumption in
the form attached hereto as EXHIBIT 26(G) (as to the
assumption); and
(h) Indemnification Escrow Agreement; and
(i) Any other items required by this Agreement.
Section 28. Rights and Remedies If Closing Shall Not Occur.
(a) If (1) the Closing shall not take place due to either (i)
the FCC refusing to consent to the assignment and change of control or (ii) the
FCC consenting to the assignment and change of control, but in Buyer's
reasonable opinion, with condition(s) materially adverse to Buyer, and (2) both
Sellers and Buyer shall have timely and fully met their obligations with respect
to the
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 63
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filing and prosecution of the FCC Applications as set forth in Section 14, then
(x) this Agreement shall terminate, (y) there shall be no liability of any party
hereto to any other party hereto as a result of such termination notwithstanding
any breach or alleged breach of other provisions of this Agreement by any party
that are not related to the filing and prosecution of the FCC Applications and
(z) the Escrow Letter of Credit shall be returned to Buyer.
(b) If the Transaction is otherwise ready to close in
accordance with the terms of this Agreement and all the conditions precedent to
Buyer's obligation to close as set forth in this Agreement have been met and
Buyer wrongfully fails to deliver the Purchase Price to Sellers at Closing, then
Sellers shall thereby take, as their liquidated damages and as their sole and
exclusive remedy, the Escrow Letter of Credit; provided that if either (i) the
Buyer wrongfully fails to deliver written instructions to the Escrow Agent to
deliver the Escrow Letter of Credit to the Sellers and the Escrow Letter of
Credit is not delivered to Sellers or (ii) the Buyer wrongfully disputes the
obligation of the issuer of the Escrow Letter of Credit to honor draws made
thereunder by Sellers, then the Sellers shall not be restricted to the Escrow
Letter of Credit as their liquidated damages and as their sole and exclusive
remedy; provided that the Buyer's failure to deliver written instructions or the
Buyer's dispute of the issuer's obligation shall not be considered wrongful for
purposes hereof unless such actions are determined in a finding of the
arbitrators or a court of competent jurisdiction to have been taken by Buyer in
bad faith. Upon Buyer's delivery of written instructions to the Escrow Agent to
deliver the Escrow Letter of Credit to the Sellers, Buyer shall have no further
liability to Sellers with respect to the Transaction Documents, this Agreement
and the Transaction and Sellers shall have no further rights or remedies against
Buyer at law or equity. TO AVOID ANY CONFUSION AND TO REMOVE ANY DOUBT, THIS
PROVISION CONTAINED IN THIS SUB-SECTION (B) DESCRIBES THE ONE AND ONLY
CIRCUMSTANCE CONTAINED IN ANY AND ALL AGREEMENTS BY AND AMONG THE PARTIES HERETO
UNDER WHICH THE SELLERS SHALL BE ENTITLED TO THE ESCROW LETTER OF CREDIT. IN ALL
OTHER SITUATIONS THE BUYER SHALL BE ENTITLED TO THE RETURN OF THE ESCROW DEPOSIT
UPON THE CLOSING OF THE TRANSACTION OR TERMINATION OF THIS AGREEMENT WITHOUT A
CLOSING HAVING TAKEN PLACE.
(c) If the Transaction is otherwise ready to close in accordance with
the terms of this Agreement and all the conditions
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 64
<PAGE> 86
precedent to Sellers' obligation to close have been met in accordance with the
terms of this Agreement and Sellers fail to deliver the Assets to Buyer at
Closing, then (i) Buyer may pursue its remedy of specific performance as set
forth in Section 29 and may also take such other actions and seek such other
remedies and relief as Buyer shall be entitled under all applicable law and (ii)
regardless of the remedy or relief sought by Buyer, if Buyer so elects, Buyer
shall be entitled to a return of the Escrow Letter of Credit. If (i) the
Transaction shall not be close, or can not close on the terms set forth in this
Agreement, due to the breach by the Sellers of any of Sellers' material
warranties, representations, agreements and covenants contained in this
Agreement, (ii) such breach can not be cured by the Sellers during the time
periods permitted by this Agreement or as may be extended by Buyer acting in
good faith and (iii) Buyer does not elect to postpone Closing as permitted by
this Agreement, then Buyer shall have the right to terminate this Agreement
without liability to the Sellers and without prejudice to, or diminution of,
Buyer's rights and remedies for such breach under applicable law.
Section 29. Specific Performance Granted to Buyer. Sellers and Buyer
hereby stipulate that each of the Stations is a unique property licensed to
operate by the FCC on one of a limited number of channels servicing its
respective city of license. Therefore, the remedy of specific performance of
Sellers' obligations under this Agreement is hereby expressly granted to Buyer
by Sellers. If the Transaction is otherwise ready to close in accordance with
the terms of this Agreement and all the conditions precedent to Sellers'
obligation to close have been met in accordance with the terms of this Agreement
and Sellers shall fail or refuse to close the Transaction, then Buyer shall have
the right to bring an action in a court of proper jurisdiction or to institute
arbitration proceedings to compel Sellers to specifically perform the
Transaction in accordance with the terms set forth in this Agreement. Nothing
herein shall preclude Buyer from exercising any other rights or remedies that it
may have under applicable law.
Section 30. Further Assurances. From time to time on or after Closing,
at the request of Buyer, and without further consideration, Sellers and their
respective successors and assigns will execute and deliver such instruments of
conveyance and transfer as Buyer may reasonably request to more effectively
convey, transfer to and vest in Buyer, and to more effectively put
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 65
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Buyer in ownership, possession or control of each of the Stations and all of the
Assets.
Section 31. Indemnification by Sellers. Without in any way limiting the
warranties, representations or agreements contained herein, or the rights or
remedies available to Buyer for the breach thereof, Sellers hereby, jointly and
severally, agree to indemnify and hold Buyer, and its successors and assigns,
free and harmless from and against, and to fully reimburse and compensate Buyer
for, as the case may be, any and all loss, liability, damage or expense
(including reasonable attorneys' fees) arising from (i) the breach of any
representations, warranties, agreements and covenants made in any of the
Transaction Documents by Sellers to Buyer, (ii) the operations of all of the
Stations prior to the Closing and (iii) any Environmental Violation existing on
the date hereof or at the Closing; provided that with respect to Environmental
Violations the Buyer must make written claim to the Sellers no later than the
second (2nd) anniversary of Closing. This Section will apply to claims of
indemnification made against Sellers by Buyer based upon claims made against
Buyer by third parties. This Section will also apply to claims made by Buyer
directly against Sellers not involving any third party claim against Buyer.
Section 32. Indemnification by Buyer. Without in any way limiting the
warranties, representations or agreements contained herein, or the rights or
remedies available to Sellers for the breach thereof, Buyer hereby agrees to
indemnify and hold Sellers, and their respective successors and assigns, free
and harmless from and against, and to fully reimburse and compensate Sellers for
any and all loss, liability, damage or expense (including reasonable attorneys'
fees) arising from (i) the breach of any representations, warranties, agreements
and covenants made in any of the Transaction Documents by Buyer to Sellers and
(ii) the operations of the Stations after Closing. This Section will apply to
claims of indemnification made against Buyer by Sellers based upon claims made
against Sellers by third parties. This Section will also apply to claims made by
Sellers directly against Buyer not involving any third party claim against
Sellers.
Section 33. Third Party Claims. In the event of third party claims
giving rise to a claim for indemnification under this Agreement, then the party
seeking indemnification ("Indemnified Party") shall notify the other party
("Indemnifying Party") in writing as soon as practicable but in no event later
than thirty
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(30) days after receipt of such claims. The Indemnified Party's failure to give
thirty (30) day's notice shall not preclude it from seeking indemnification
hereunder unless such failure has materially prejudiced the Indemnifying Party's
ability to defend such a claim. The Indemnifying Party shall promptly defend
such claim by counsel of its own choosing. The Indemnified Party shall cooperate
with the Indemnifying Party in the defense of such claim. The Indemnifying Party
shall copy the Indemnified Party with all correspondence, pleadings, memorandum
and other such matters and otherwise keep the Indemnified Party fully informed
regarding the defense of such claim. The Indemnifying Party may settle the claim
on such terms as the Indemnifying Party and the claimant may agree with the
Indemnifying Party being responsible for all costs and expenses of such
settlement; provided that (i) if there is a reasonable probability that a claim
may materially and adversely affect the Indemnified Party, the Indemnified Party
shall have the right, at its own cost and expense, to defend, compromise or
settle such claim against it, (ii) if the facts giving rise to indemnification
hereunder shall involve a possible claim by the Indemnified Party against a
third party, the Indemnified Party shall have the right, at its own cost and
expense, to undertake the prosecution, compromise and settlement of such claim;
and (iii) the Indemnifying Party will not, without the Indemnified Party's
written consent, settle or compromise any claim or consent to any entry of
judgment (a) which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect to such claim and (b) which includes any provision which
requires the Indemnified Party to pay any money or render any other performance.
If the Indemnifying Party within reasonable time after notice of a claim fails
to defend the Indemnified Party, then the Indemnified Party shall be entitled to
undertake the defense, compromise or settlement of such claim at the expense of
and for the account and risk of the Indemnifying Party.
Section 34. Indemnification Escrow Agreement. Attached hereto as
EXHIBIT 34 is the Indemnification Escrow Agreement which the Sellers and Buyer
will enter into at Closing. At the Closing the Buyer will, on behalf of the
Sellers, deliver to the Indemnity Escrow Agent the Holdback Amount which the
Indemnity Escrow Agent will hold, administer and distribute pursuant to the
terms and conditions of the Indemnification Escrow Agreement. Sellers hereby
covenant and agree that at any time Sellers are or shall become obligated to
indemnify the Buyer under the any of the terms of the
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 67
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Transaction Documents, including Section 31 of this Agreement, then Sellers
shall, at Buyer's request, execute and deliver to the Indemnity Escrow Agent
written instructions to release to the Buyer that portion of the Holdback Amount
as is necessary to indemnify the Buyer.
Section 35. Expenses of Transaction. The parties shall be obligated for
their own respective costs and expenses related to this Agreement and the
transactions hereunder, and no party shall be obligated for such costs and
expenses of any other party. Each party will be solely responsible for the
expenses incurred by it in the preparation, filing and prosecution of the FCC
Applications; provided that, all fees paid to the FCC in connection with the
assignment of the FCC Licenses from Sellers to Buyer will be borne equally by
Sellers, on the one hand, and Buyer, on the other hand. In the event that either
Sellers or Buyer shall pay more than 50% of said FCC fees, then the other party
shall reimburse the paying party for the excess amount over 50% promptly after
written request therefor.
Section 36. Brokers. The sole and exclusive broker on the Transaction
is William R. Rice Co. ("Rice") pursuant to an agreement by and between Rice and
Sunburst Media, LP (the "Broker Agreement"). Subject to and conditioned upon the
consummation of the Transaction, the Buyer agrees to pay to Rice a brokerage fee
pursuant to the Brokerage Agreement in the following manner: (i) Buyer shall pay
Rice $162,000 at Closing and (ii) Buyer shall pay Rice $7,625 per month (without
interest) for 24 months commencing one month after the Closing Date and
continuing thereafter on the same day of each succeeding month until all $7,625
monthly payments have been made. Sellers agree that they will indemnify the
Buyer from and against all claims and demands made by any broker claiming by,
through or under any of the Sellers.
Section 37. Publicity. Sellers and Buyer shall consult with each other
in good faith with regard to all press releases and other publicity issued at or
prior to the Closing concerning this Agreement or the Transaction and, except as
may be required by applicable laws or the applicable rules and regulations of
any Governmental Entity or in connection with the matters described in Section
22(q), neither Buyer nor Sellers shall issue any such press release or other
publicity concerning these matters without the prior written consent of the
other party.
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Section 38. Notices. All notices or other communications ("notices")
required or permitted by this Agreement shall be sufficiently given if in
writing and (i) personally delivered, by any courier service such as Federal
Express, (ii) mailed by registered or certified mail, return receipt requested,
first class postage prepaid, or (iii) sent by facsimile transmission (FAX) with
an accompanying telephone call to the person being noticed. All notices shall be
deemed to have been given either (a) if personally delivered, then at the time
of actual delivery thereof to any person entitled to receive such notice or
officer or employee thereof, (b) if mailed, then at the completion of the fifth
(5th) full calendar day following the mailing thereof or (c) if faxed, then upon
the successful completion of the FAX transmission and the accompanying telephone
call. For purposes of this Agreement, the following addresses and telephone and
FAX numbers shall be used:
Any or all of the parties comprising Sellers, c/o SunGroup, Inc., 2201
Cantu Court, Suite 102-A, Sarasota, Florida 34212; telephone
941-377-6710; FAX 941-378-5449.
With a copy to: Mr. Charles Sanger, Boult, Cummings, Conners & Berry,
414 Union Street, Suite 1200, Nashville, Tennessee 37219; telephone
615-252-2331; FAX 615-252-6331.
SUNBURST Media, LP, 1350 One Galleria Tower, 13355 Noel Road, Dallas,
Texas 75240, Attention: Mr. John M. Borders; telephone 972-702-7371;
FAX 972-503-2183.
With a copy to: Mr. Robert Stanton, Winstead Sechrest & Minick P.C.,
5400 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270; telephone
214-745-5159; FAX 214-745-5390.
Any of the above addresses and numbers may be changed by written notice
delivered to the other parties in the same manner as described in this Section.
If any notification, communication or action is required or permitted to be
given or taken within a certain period of time and the last date for doing so
falls on a day that is not a Business Day, then the last day for such
notification, communication or action shall be extended to the first date
thereafter that is a Business Day.
Section 39. Provisions Regarding Assignment.
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(a) The Sellers and the Buyer contemplate that the Buyer will either
(i) assign its rights and delegate its duties under the Transaction Documents to
purchase the Station Assets of one or more of the Stations or (ii) agree to make
such an assignment and delegation immediately prior to or upon the Closing to
one or more Persons (any one such Persons being referred to herein as a
"Permitted Assignee").
(b) At anytime during the five (5) Business Day period following the Go
Ahead Date, the Buyer shall have the right and authority (A) (i) to assign (a)
the rights to purchase at Closing the Station Assets of one or more of the
Stations, (b) the full benefit of the warranties, representations, covenants and
agreements made by Sellers with respect to such Station Assets and (c) the other
rights, privileges and remedies of the Buyer arising under the Transaction
Documents as to such Station Assets and (ii) to delegate the associated
liabilities, duties and obligations of the Buyer arising under the Transaction
Documents as to the particular Station Assets and/or (B) to agree to make such
assignment and delegation described in (A) immediately prior to or upon the
Closing. The Buyer shall notify the Sellers of all such assignments and
delegations, or agreements to make such assignments and delegations, to
Permitted Assignees.
(c) Such assignment and delegation shall be upon such terms, provisions
and conditions as the Buyer and the Permitted Assignee shall agree up to the
same and full extent as though the Sellers and the Permitted Assignee had
entered into a separate written agreement as to the particular Station Assets on
the same terms and conditions as set forth herein; except that the amounts of
the Purchase Price and the Holdback Amount may be allocated between Sunburst
Media, LP and the Permitted Assignee as they shall agree between themselves.
Furthermore, the Sellers shall not be a third party beneficiary of any agreement
of Buyer to make such an assignment and delegation to a Permitted Assignee;
provided that immediately prior to or upon the Closing at which time the
assignment and delegation will become effective, the Sellers and the Permitted
Assignee will be deemed to be in a direct contractual relationship with each
other under this Agreement and the other Transaction Documents, but only as the
terms and provisions of this Agreement and the other Transaction Documents
relate or pertain to the Station Assets being acquired by such Permitted
Assignee.
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(d) Without limiting the provisions of subsections (a), (b) and (c) of
this Section, the effects of any such assignment and delegation to a Permitted
Assignee will include the following: (1) except as provided in any written
assignment agreement(s) which effects the assignment and delegation, the
Permitted Assignee will become, as to the applicable Station Assets, the Buyer
for all purposes of this Agreement and the other applicable Transaction
Documents related to those Station Assets, (2) as determined by Buyer at or
prior to the time of filing the FCC Applications either (i) the FCC Form 314
Application for the applicable FCC Licenses will reflect the Permitted Assignee
as the assignee of such FCC Licenses directly from the applicable Seller or (ii)
the FCC Form 314 Application for such FCC Licenses will reflect the Buyer as the
assignee of such FCC Licenses directly from the applicable Seller and there will
be filed simultaneously with the FCC a second FCC Form 314 Application showing
the Buyer as the assignor and the Permitted Assignee as the assignee of such FCC
Licenses, (3) the Sellers will deliver at Closing to such Permitted Assignee, as
the Buyer of the applicable Station Assets, all the items described in Section
26, insofar as such items relate to the sale of the applicable Station Assets to
the Permitted Assignee, including separate legal opinions and a separate
Indemnification Escrow Agreement between Sellers and the Permitted Assignee
pursuant to which the Indemnity Escrow Agent will hold a portion of the Holdback
Amount and (4) the Permitted Assignee, as the Buyer of the applicable Station
Assets, will deliver at Closing to the Sellers all the items described in
Section 27, insofar as such items relate to the purchase of the applicable
Station Assets from the Sellers including the legal opinion and the counterpart
to the Indemnification Escrow Agreement referred to in the preceding item.
(e) Notwithstanding the preceding subparagraphs of this Section,
regardless of any such assignment and delegation from Sunburst Media, LP to any
Permitted Assignee, (i) as between the Sellers and Sunburst Media, LP, Sunburst
Media, LP shall remain liable, to the exclusion of any Permitted Assignee, for
all of the obligations arising on or prior to Closing of the Buyer as set forth
in this Agreement, (ii) if the Transaction shall not close for any reason
Sellers shall have no claims or demands against any Permitted Assignee, (iii)
there shall be only one Escrow Agreement between Sellers and Sunburst Media, LP
pursuant to which the Escrow Agent shall hold only one Escrow Letter of Credit
in the amount of $1,200,000, (iv) the sale of all of the Stations will be closed
simultaneously on the Closing Date and (v) prior to Closing the
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Sellers shall only be required to send notices required hereunder and supply
reports, financial and other information required hereunder only to Sunburst
Media, LP who shall be responsible to forward, as applicable, such notices and
information to the Permitted Assignees.
(f) Upon advance written notice to Sellers containing an identification
of the lender and a statement that the lender is providing funds to the Buyer to
consummate the Transaction, Buyer may make a collateral assignment of its rights
under this Agreement to any institutional lender that provides funds to Buyer to
consummate the Transaction. Sellers shall execute an acknowledgment of such
collateral assignments in such form as Buyer's institutional lenders may
reasonably request; provided, however, that unless and until written notice is
given to Sellers that any such collateral assignment has been foreclosed upon,
Sellers shall be entitled to deal exclusively with Buyer as to any matters
arising under this Agreement or any of the other Transaction Documents.
(g) Except as provided in the preceding provisions of this Section,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any of the parties hereto, whether by operation
of law or otherwise.
Section 40. Buyer's Consent. Sellers and Buyer agree that whenever any
event, condition or transaction occurs or has occurred of which Sellers are
required to give notice to Buyer pursuant to this Agreement, that the consent of
Buyer thereto shall not be deemed an assumption of any liability, responsibility
or duty relating the subject matter of the consent unless Buyer expressly agrees
to an assumption at that time. Furthermore, Buyer will not be deemed to have
consented to any event, condition or transaction unless such consent shall be in
writing.
Section 41. Attorneys' Fees. If any party to this Agreement shall ever
be required to file a law suit or institute other legal action against any other
party hereto based upon this Agreement, any of the other Transaction Documents
or the Transaction, then the prevailing party shall be entitled to recover
reasonable attorney's fees and court costs incurred with respect to such law
suit or other legal action from the non-prevailing party.
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Section 42. Construction. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All Schedules and Exhibits attached
hereto are hereby incorporated herein for all purposes.
Section 43. Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties named herein and their respective
successors and assigns. No term or provision of this Agreement is intended to
confer, or confers, upon any person not a party to this Agreement any rights or
remedies under or by reason of this Agreement. THERE ARE NO THIRD PARTY
BENEFICIARIES OF THIS AGREEMENT.
Section 44. Arbitration. Any controversy, dispute or claim arising out
of or in connection with or relating to this Agreement, the Transaction and any
document and instrument delivered in connection therewith (the "Transaction
Documents") or the breach, termination or validity thereof or any transaction
contemplated hereby or thereby (any such controversy, dispute or claim being
referred to as a "Dispute") shall be finally settled by arbitration conducted
expeditiously in accordance with the Commercial Arbitration Rules then in force
(the "AAA Rules") of the American Arbitration Association (the "AAA"). There
shall be a panel of three arbitrators which shall be constituted pursuant to AAA
procedure within fifteen (15) business days of receipt of the demand for
arbitration by the respondent(s) in any such proceeding. Each of the arbitrators
shall be an attorney with no less than fifteen (15) years' experience in the
practice of business law (preferably with experience in the acquisition and
financing of communications businesses). The situs for an arbitration pursuant
to this Section shall be Dallas, Texas. A final award shall be rendered as soon
as reasonably possible and, in any event, within ninety (90) days of the filing
with AAA any demand for arbitration; provided, however, that if the arbitrators
determine by majority vote that fairness so requires, such ninety (90) day
period may be extended by no more than sixty (60) additional days. The parties
agree that the arbitrators shall have the right and power to shorten the length
of any notice periods or other time periods provided in the AAA Rules and to
implement expedited procedures under the AAA Rules in order to ensure that the
arbitration process is completed within the time frames provided herein. The
arbitration decision or award shall be reasoned and in writing. Judgment on the
decision or award rendered by the arbitrators may
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 73
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be entered and specifically enforced in any court having jurisdiction thereof.
Notwithstanding the provisions of this Section, any arbitration held pursuant to
the provisions of this Section shall be governed by the Federal Arbitration Act.
All arbitrations commenced pursuant to this Agreement shall be consolidated and
heard by the initially constituted panel of arbitrators. The arbitrators are
hereby authorized to allocate the attorney's fees and costs of arbitration
between the parties based upon the arbitrators' assessment of the relative
merits of the parties' positions, any other factors the arbitrators shall deem
applicable and in the interest of achieving an equitable result.
Section 45. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, AND ENFORCEABLE UNDER, THE LAWS OF
THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE IN TEXAS AND THAT ARE TO BE
WHOLLY PERFORMED IN TEXAS WITHOUT REFERENCE TO THE CHOICE-OF-LAW PRINCIPLES OF
TEXAS.
Section 46. Consent to Jurisdiction. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF TEXAS AND THE UNITED STATES DISTRICT COURTS FOR THE STATE OF TEXAS, AS
WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM
SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF ANY OF ITS OBLIGATIONS ARISING HEREUNDER OR UNDER OR IN CONNECTION WITH THE
OTHER TRANSACTION DOCUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY, INCLUDING, WITHOUT LIMITATION, ANY PROCEEDING RELATING TO
ANCILLARY MEASURES IN AID OF ARBITRATION, PROVISIONAL REMEDIES AND INTERIM
RELIEF, OR ANY PROCEEDING TO ENFORCE ANY ARBITRAL DECISION OR AWARD. EACH OF THE
PARTIES TO THIS AGREEMENT EXPRESSLY WAIVES ANY AND ALL OBJECTIONS HE OR IT MAY
HAVE AS TO VENUE, INCLUDING, WITHOUT LIMITATION, THE INCONVENIENCE OF SUCH
FORUM, IN ANY OF SUCH COURTS. IN ADDITION, EACH OF THE PARTIES TO THIS AGREEMENT
CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR U.S. CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH PARTY AT THE
ADDRESS PROVIDED HEREIN.
Section 47. Waiver of Jury Trial. WITHOUT LIMITATION OF THE PROVISIONS
OF SECTION 44, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY VOLUNTARILY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENTS OR OTHER AGREEMENTS, DOCUMENTS
AND INSTRUMENTS EXECUTED IN CONNECTION HEREWITH.
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Section 48. Merger Clause. This Agreement represents the entire
agreement of the parties hereto and supersedes all prior agreements,
understandings, letters of intent and negotiations concerning the subject matter
hereof. Furthermore, the Sellers have delivered to the Buyer a substantial
amount of documents, data and other information ("Station Information")
concerning the Stations. However, it is agreed and understood that any
discrepancies or inconsistencies between such Station Information and the
representations, warranties, covenants and agreements of the Sellers made
herein, and the review of the Station Information by Buyer, shall not under any
circumstances constitute an exception or limitation of any representation,
warranty, covenant or agreement of the Sellers made herein; it being understood
that all of the exceptions and limitations to the representations, warranties,
covenants and agreements of the Sellers made herein have been specifically and
expressly set forth in this Agreement (or the Schedules and Sub-Schedules
attached hereto) and no where else, including, but not limited to, the Station
Information.
Section 49. SGI as Agent For All Sellers. SGBL, SGBNM, RSGBCS, RSGT,
ASI, ABI, BBCI, SMI, Arklatex and Alpha-Web hereby irrevocably designate and
appoint SGI as their agent for any and all matters related to or arising out of
the Transaction Documents and the Transaction and hereby authorize and instruct
Buyer to deal with representatives of SGI for all such matters.
Section 50. No Reversionary Interest. The parties expressly agree,
pursuant to Section 73.1150 of the FCC's rules, that Seller does not retain any
right to reassignment of any of the FCC Licenses in the future, or to operate or
use the facilities of the Stations for any period beyond the Closing Date.
Section 51. Counterparts. This Agreement shall be executed in multiple
counterparts, each of which shall be deemed an original of this Agreement.
Section 52. References and Titles. All references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections,
and other subdivisions of this Agreement unless expressly provided otherwise.
The words "this Agreement," "herein," "hereby," "hereunder," and "hereof," and
words of similar import, refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The
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words "this Section," "this subsection," and words of similar import, refer only
to the Sections or subsections hereof in which such words occur. The word "or"
is not exclusive, and the word "including" (in its various forms) means
"including without limitation." Pronouns in masculine, feminine, or neuter
genders shall be construed to state and include any other gender and words,
terms, and titles (including terms defined herein) in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
expressly requires. Unless the context otherwise requires, all defined terms
contained herein shall include the singular and plural and the conjunctive and
disjunctive forms of such defined terms.
Section 53. Miscellaneous. This Agreement shall not be amended except
pursuant to a written instrument executed by all of the parties hereto. If any
provision of this Agreement, or the application of any such provision to any
person or circumstance, shall be held invalid by a court of competent
jurisdiction, the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to which the Agreement
is held invalid, shall not be affected thereby. No modification or waiver of any
provision of this Agreement shall be effective unless in writing and signed by
the party against whom such modification or waiver is asserted, and no failure
to exercise any right, power or privilege hereunder shall operate to restrict
the exercise of the same right, power or privilege upon any other occasion or to
restrict the exercise of any other right, power or privilege upon the same or
any other occasion. The rights and remedies of the parties hereto are cumulative
and are not exclusive of any right or remedies which they may otherwise have.
[The rest of this page left blank intentionally.]
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IN WITNESS WHEREOF, the undersigned parties have signed and delivered this
Agreement as of the date and year first above written.
SELLERS:
SUNGROUP, INC.
By:
------------------------------
John W. Biddinger
Its: President
RADIOSUNGROUP OF TEXAS, INC.
By:
------------------------------
John W. Biddinger
Its: President
SUNGROUP BROADCASTING OF NEW
MEXICO, INC.
By:
------------------------------
John W. Biddinger
Its: President
SUNGROUP BROADCASTING OF
LOUISIANA, INC.
By:
------------------------------
John W. Biddinger
Its: President
RADIOSUNGROUP OF BRYAN/COLLEGE
STATION, INC.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 77
<PAGE> 99
IN WITNESS WHEREOF, the undersigned parties have signed and delivered
this Agreement as of the date and year first above written.
SELLERS:
SUNGROUP, INC.
By:___________________________
John W. Biddinger
Its: President
RADIOSUNGROUP OF TEXAS, INC.
By:___________________________
John W. Biddinger
Its: President
SUNGROUP BROADCASTING OF NEW
MEXICO, INC.
By:___________________________
John W. Biddinger
Its: President
SUNGROUP BROADCASTING OF
LOUISIANA, INC.
By:___________________________
John W. Biddinger
Its: President
RADIOSUNGROUP OF BRYAN/COLLEGE
STATION, INC.
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 77
<PAGE> 100
By:___________________________
John W. Biddinger
Its: President
BIG BASS CLASSICS, INC.
By:___________________________
John W. Biddinger
Its: President
AIR SIGNS, INC.
By:___________________________
John W. Biddinger
Its: President
ARKLATEX, INC.
By:___________________________
John W. Biddinger
Its: President
ALPHA-WEB, INC.
By:___________________________
John W. Biddinger
Its: President
SUN MANAGEMENT, INC.
By:___________________________
John W. Biddinger
Its: President
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 78
<PAGE> 101
ABILENE BROADCASTING, INC.
By:___________________________
John W. Biddinger
Its: President
ASSET PURCHASE AGREEMENT SUNBURST/SUNGROUP PAGE 79
<PAGE> 102
Appendix II
- ------------------
CHAPTER 23 OF TITLE 48 OF TENNESSEE CODE ANNOTATED
DISSENTERS' RIGHTS
Part 1
Right to Dissent and Obtain Payment for Shares.
48-23-101. Definitions.
48-23-102. Right to dissent.
48-23-103. Dissent by nominees and beneficial owners.
Part 2
Procedure for Exercise of Dissenters' Rights.
48-23-201. Notice of dissenters' rights.
48-23-202. Notice of intent to demand payment.
48-23-203. Dissenters' notice.
48-23-204. Duty to demand payment.
48-23-205. Share restrictions.
48-23-206. Payment.
48-23-207. Failure to take action.
48-23-208. After-acquired shares.
48-23-209. Procedure if shareholder dissatisfied with payment or offer.
Part 3
Judicial Appraisal of Shares.
48-23-301. Court action.
48-23-302. Court costs and counsel fees.
- --------------------
PART 1
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
48-23-101. Definitions.
As used in this chapter, unless the context otherwise requires:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder;
(2) "Corporation" means the issuer of the shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer;
(3) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under ss. 48-23-102 and who exercises that right when and in the manner
required by part 2 of this chapter;
(4) "Fair value", with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation of
the corporate action;
(5) "Interest" means interest from the effective date of the corporate action
that gave rise to the shareholder's right to dissent until the date of payment,
at the average auction rate paid on United
<PAGE> 103
States treasury bills with a maturity of six (6) months (or the closest maturity
thereto) as of the auction date for such treasury bills closest to such
effective date;
(6) "Record shareholder" means the person in whose name shares are registered in
the records of a corporation or the beneficial owner of shares to the extent of
the rights granted by a nominee certificate on file with a corporation; and
(7) "Shareholder" means the record shareholder or the beneficial shareholder.
48-23-102. Right to dissent.
(a) A shareholder is entitled to dissent from, and obtain payment of the fair
value of the shareholder's shares in the event of, any of the following
corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If shareholder approval is required for the merger by ss. 48-21-104 or the
charter and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its parent under
ss. 48-21-105;
(2) Consummation of a plan of share exchange to which the corporation is a party
as the corporation whose shares will be acquired, if the shareholder is entitled
to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
(1) year after the date of sale;
(4) An amendment of the charter that materially and adversely affects rights in
respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of the
shares;
(C) Alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter, or to
cumulate votes, other than a limitation by dilution through issuance of shares
or other securities with similar voting rights; or
(E) Reduces the number of shares owned by the shareholder to a fraction of a
share, if the fractional share is to be acquired for cash under ss. 48-16-104;
or
(5) Any corporate action taken pursuant to a shareholder vote to the extent the
charter, bylaws, or a resolution of the board of directors provides that voting
or nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for the shareholder's
shares under this chapter may not challenge the corporate action creating the
shareholder's entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding the provisions of subsection (a), no shareholder may dissent
as to any shares of a security which, as of the date of the effectuation of the
transaction which would otherwise give rise to dissenters' rights, is listed on
an exchange registered under ss. 6 of the Securities Exchange Act of 1934, as
amended, or is a "national market system security," as defined in rules
promulgated pursuant to the Securities Exchange Act of 1934, as amended.
48-23-103. Dissent by nominees and beneficial owners.
<PAGE> 104
(a) A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
(1) person and notifies the corporation in writing of the name and address of
each person on whose behalf the record shareholder asserts dissenters' rights.
The rights of a partial dissenter under this subsection are determined as if the
shares as to which the partial dissenter dissents and the partial dissenter's
other shares were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares of any
one (1) or more classes held on the beneficial shareholder's behalf only if the
beneficial shareholder:
(1) Submits to the corporation the record shareholder's written consent to the
dissent not later than the time the beneficial shareholder asserts dissenters'
rights; and
(2) Does so with respect to all shares of the same class of which the person is
the beneficial shareholder or over which the person has power to direct the
vote.
- --------------------
PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
48-23-201. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under ss. 48-23-102
is submitted to a vote at a shareholders' meeting, the meeting notice must state
that shareholders are or may be entitled to assert dissenters' rights under this
chapter and be accompanied by a copy of this chapter.
(b) If corporate action creating dissenters' rights under ss. 48-23-102 is taken
without a vote of shareholders, the corporation shall notify in writing all
shareholders entitled to assert dissenters' rights that the action was taken and
send them the dissenters' notice described in ss. 48-23-203.
(c) A corporation's failure to give notice pursuant to this section will not
invalidate the corporate action.
48-23-202. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under ss. 48-23-102
is submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights must:
(1) Deliver to the corporation, before the vote is taken, written notice of the
shareholder's intent to demand payment for the shareholder's shares if the
proposed action is effectuated; and
(2) Not vote the shareholder's shares in favor of the proposed action. No such
written notice of intent to demand payment is required of any shareholder to
whom the corporation failed to provide the notice required by ss. 48-23-201.
(b) A shareholder who does not satisfy the requirements of subsection (a) is not
entitled to payment for the shareholder's shares under this chapter.
48-23-203. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under ss. 48-23-102
is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
ss. 48-23-202.
<PAGE> 105
(b) The dissenters' notice must be sent no later than ten (10) days after the
corporate action was authorized by the shareholders or effectuated, whichever is
the first to occur, and must:
(1) State where the payment demand must be sent and where and when certificates
for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the principal terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not the person asserting dissenters' rights acquired
beneficial ownership of the shares before that date;
(4) Set a date by which the corporation must receive the payment demand, which
date may not be fewer than one (1) nor more than two (2) months after the date
the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter if the corporation has not
previously sent a copy of this chapter to the shareholder pursuant to
ss. 48-23-201.
48-23-204. Duty to demand payment.
(a) A shareholder sent a dissenters' notice described in ss. 48-23-203 must
demand payment, certify whether the shareholder acquired beneficial ownership of
the shares before the date required to be set forth in the dissenters' notice
pursuant to ss. 48-23-203(b)(3), and deposit the shareholder's certificates in
accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits the shareholder's share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are cancelled or modified by the effectuation of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit the shareholder's share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for the shareholder's shares under this chapter.
(d) A demand for payment filed by a shareholder may not be withdrawn unless the
corporation with which it was filed, or the surviving corporation, consents
thereto.
48-23-205. Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received until the proposed corporate
action is effectuated or the restrictions released under ss. 48-23-207.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the effectuation of the proposed corporate action.
48-23-206. Payment.
(a) Except as provided in ss. 48-23-208, as soon as the proposed corporate
action is effectuated, or upon receipt of a payment demand, whichever is later,
the corporation shall pay each dissenter who complied with ss. 48-23-204 the
amount the corporation estimates to be the fair value of each dissenter's
shares, plus accrued interest.
<PAGE> 106
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending not
more than sixteen (16) months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year, and
the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under ss. 48-23-209;
and
(5) A copy of this chapter if the corporation has not previously sent a copy of
this chapter to the shareholder pursuant to ss. 48-23-201 or ss. 48-23-203.
48-23-207. Failure to take action.
(a) If the corporation does not effectuate the proposed action that gave rise to
the dissenters' rights within two (2) months after the date set for demanding
payment and depositing share certificates, the corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send a
new dissenters' notice under ss. 48-23-203 and repeat the payment demand
procedure.
48-23-208. After-acquired shares.
(a) A corporation may elect to withhold payment required by ss. 48-23-206 from a
dissenter unless the dissenter was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the principal terms of the proposed
corporate action.
(b) To the extent the corporation elects to withhold payment under subsection
(a), after effectuating the proposed corporate action, it shall estimate the
fair value of the shares, plus accrued interest, and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of the dissenter's
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand payment under ss. 48-23-209.
48-23-209. Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and amount of interest due,
and demand payment of the dissenter's estimate (less any payment under ss.
48-23-206), or reject the corporation's offer under ss. 48-23-208 and demand
payment of the fair value of the dissenter's shares and interest due, if:
(1) The dissenter believes that the amount paid under ss. 48-23-206 or offered
under ss. 48-23-208 is less than the fair value of the dissenter's shares or
that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under ss. 48-23-206 within two (2)
months after the date set for demanding payment; or
(3) The corporation, having failed to effectuate the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within two (2) months after the date set for demanding
payment.
<PAGE> 107
(b) A dissenter waives the dissenter's right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's demand
in writing under subsection (a) within one (1) month after the corporation made
or offered payment for the dissenter's shares.
- --------------------
PART 3
JUDICIAL APPRAISAL OF SHARES
48-23-301. Court action.
(a) If a demand for payment under ss. 48-23-209 remains unsettled, the
corporation shall commence a proceeding within two (2) months after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the two-month period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding in a court of record having
equity jurisdiction in the county where the corporation's principal office (or,
if none in this state, its registered office) is located. If the corporation is
a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of this
state) whose demands remain unsettled, parties to the proceeding as in an action
against their shares and all parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one (1) or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus accrued interest, exceeds the amount paid by the
corporation; or
(2) For the fair value, plus accrued interest, of the dissenter's after-acquired
shares for which the corporation elected to withhold payment under
ss. 48-23-208.
48-23-302. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under ss. 48-23-301 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess costs against all or
some of the dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously, or not in good faith
in demanding payment under ss. 48-23-209.
(b) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable against:
<PAGE> 108
(1) The corporation and in favor of any or all dissenters if the court finds the
corporation did not substantially comply with the requirements of part 2 of this
chapter; or
(2) Either the corporation or a dissenter, in favor of any other party, if the
court finds that the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect to the rights
provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited.
<PAGE> 109
Appendix A
SUNGROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR USE AT THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT 8:00 A.M, LOCAL
TIME, ON MAY 27, 1998.
The undersigned hereby appoints John W. Biddinger and James A.
Hoetger, and each of them, attorneys and proxies with full power of substitution
to vote in the name of, and as proxy for, the undersigned all the shares of
common stock of SunGroup, Inc. (the "Company") held of record by the undersigned
on March 31, 1998, at the Special Meeting of Shareholders of the Company to be
held at 8:00 a.m., local time, on May 27, 1998, at the Company's headquarters
at 2201 Cantu Court, Suite 102-A, Sarasota, Florida 34212 and at any adjournment
thereof.
(1) To approve the Asset Purchase Agreement, between the
Company and SunBurst Media, LP, pursuant to which the radio broadcast licenses
and related assets, constituting all of the Company's owned and operated radio
stations, representing substantially all of the Company's assets, would be sold
to SunBurst Media, LP.
___ YES ____ NO ___ ABSTAIN
(2) In their discretion, the Proxies are authorized to
consider and take action upon such other matters as may properly come before the
meeting or any adjournment thereof.
PROPERLY EXECUTED PROXIES WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO SUCH DIRECTIONS ARE GIVEN, SUCH PROXIES WILL BE VOTED FOR THE
ASSET SALES TRANSACTION REFERRED TO IN PROPOSAL (1).
The undersigned revokes any prior proxies to vote the shares covered by this
proxy.
Date:_____________, 1998. _____________________________________________
Signature
_____________________________________________
Signature
(When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If shareholder is a corporation, corporate name should
be signed by an authorized officer and the corporate seal affixed. If
shareholder is a partnership, please sign in partnership name by authorized
persons. For joint accounts, each joint owner should sign.)
PLEASE MARK, SIGN, DATE, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED REPLY
ENVELOPE.
