THIS DOCUMENT IS A COPY OF A DOCUMENT FILED ON MARCH 31, 1997 PURSUANT TO A RULE
201 TEMPORARY HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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Annual Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the Fiscal Year Ended December 31, 1996 Commission file number 0-16265.
EZ COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0829355
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10800 Main Street
Fairfax, Virginia 22030
(Address of principal executive offices)
(703) 591-1000
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of Each Exchange on Which Registered
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Class A Common Stock, NASDAQ National Market
par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
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9.75% Senior Subordinated Notes Due 2005
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X].
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 17, 1997 was approximately $245,224,122. As of March 17,
1997, 6,465,128 shares of Class A Common Stock and 2,697,897 shares of Class B
Common Stock were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the proxy statement for the annual shareholders meeting are
incorporated by reference into Part III.
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EZ COMMUNICATIONS, INC.
TABLE OF CONTENTS
Part I Page
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ITEM 1. Business 3-12
ITEM 2. Properties 12-13
ITEM 3. Legal Proceedings 13-14
ITEM 4. Submission of Matters to a Vote of Security Holders 14
Part II
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ITEM 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 14-15
ITEM 6. Selected Financial Data 15-16
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-19
ITEM 8. Financial Statements and Supplementary Data 19-20
ITEM 9. Changes In and Disagreements With Accountants On
Accounting and Financial Disclosure 20
Part III
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ITEM 10. Directors and Executive Officers of the Registrant 20
ITEM 11. Executive Compensation 20
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management 20
ITEM 13. Certain Relationships and Related Transactions 20
Part IV
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ITEM 14. Exhibits, Financial Statement Schedule, and Reports On
Form 8-K 20-26
Signatures 27
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EZ desires to take advantage of the new "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. EZ's Report on Form 10-K
contains "forward-looking statements" including statements concerning
projections, plans, objectives, future events or performance and underlying
assumptions and other statements which are other than statements of historical
fact. For a description of the important factors, among others, that may have
affected and could in the future affect EZ's actual results and could cause EZ's
actual results for subsequent periods to differ materially from those expressed
in any forward-looking statement made by or on behalf of EZ, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
PART I
ITEM 1. BUSINESS
BACKGROUND
EZ Communications, Inc. (the "Company" or "EZ") is a publicly traded
radio broadcasting company that, as of March 17, 1997, owns and/or operates
twenty FM and six AM radio stations serving eight of the nation's top 40 radio
revenue markets (Philadelphia, Seattle, St. Louis, Pittsburgh, Sacramento,
Kansas City, Charlotte and New Orleans). EZ owns at least two FM stations in
each of its markets. The Company's portfolio of stations is diversified in terms
of format, target demographics, geographic location and phase of development.
The Company believes that this diversity helps to insulate the Company from
downturns in specific markets and changes in musical tastes.
The Company's strategy is to acquire and operate radio stations in
large markets with an emphasis on the nation's 30 largest markets. As part of
this strategy, the Company seeks to maximize its presence in each of its markets
through, among other things, the ownership of multiple station combinations. The
Company seeks to own and operate multiple station combinations as a way to
establish a leading position in each of its markets as measured by audience
ratings and revenue share. Operating multiple station combinations has enabled
the Company to program a greater number of stations, strategically position
those stations in a variety of formats, attract top talent, and improve the
range of products and services available to advertisers, thereby making EZ's
stations a more attractive alternative to advertisers and better positioning EZ
to compete effectively for available dollars against other media, including
newspapers and television. Additionally, multiple station combinations allow
station consolidation and centralization, creating certain cost and operational
efficiencies and enhancing consistency of management and talent excellence.
The Company regularly evaluates potential acquisitions both in markets
that it does not currently serve and in markets in which it would like to
achieve a larger presence. Acquisition candidates may include individual
stations, pairs of stations in a single market or groups of stations that may
operate in a number of major markets. After acquiring a station, the Company
seeks to improve net revenue and broadcast cash flow by a variety of means such
as changing the station's programming format, reducing its operating expenses,
or combining its operations with an existing station operated by the Company in
the same market. The Company intends to continue to pursue opportunities for
expansion, including opportunities to acquire multiple radio stations in the
same local market as allowed under the recently enacted Telecommunications Act
of 1996.
EZ's management team has significant experience in the radio
broadcasting industry. As of March 17, 1997, the Company has owned and operated
37 radio stations in 15 different geographic markets with a variety of
programming formats during the Company's 29 year history. EZ was founded in 1967
by Arthur Kellar, Chairman of the Board, and in 1974 Alan Box, President and
Chief Executive Officer, joined the Company. Together, Mr. Kellar and Mr. Box
own 29.5% of the outstanding capital stock of the Company, representing 80.7% of
the voting power of the Company.
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RECENT DEVELOPMENTS
The Merger
In August 1996, the Company entered into a merger agreement (as amended
in September 1996) with American Radio Systems Corporation ("American") pursuant
to which the Company will be merged directly with and into American with
American continuing as the surviving entity. Pursuant to the merger agreement,
each holder of the Company's Common Stock will receive (i) $11.75 in cash and
(ii) 0.9 shares of American's Class A Common Stock per share. In February 1997,
the companies received regulatory consent to the merger from the Department of
Justice. Ultimate consummation of the merger, which is expected in the second
quarter of 1997, is still subject to the consent of the Federal Communications
Commission.
Recent Acquisitions and Pending Sales and Exchanges
Set forth below is a discussion of the Company's acquisitions and
dispositions of radio stations since January 1, 1996, which have not been
described in the 1995 or previous Annual or Quarterly Reports, as well as a
discussion of pending sales and exchanges.
Recent Acquisition. In April 1996, the Company entered into an
agreement to acquire the assets of stations KEZK-FM and KFNS-AM St. Louis for
$48,000,000. At the same time, the Company began programming and marketing the
stations pursuant to a Time Brokerage Agreement ("TBA"). The purchase price of
the acquisition, which was consummated in July 1996, was funded from borrowings
under the Company's Credit Facility. This acquisition provided the Company with
a third FM station in St. Louis, as well as a formidable position in the adult
contemporary format. The addition of KFNS-AM (sports format) complements the
Company's rights to the NFL's St. Louis Rams broadcasts.
Pending Sales. In December 1996, the Company entered into an agreement
to sell the assets of KMPS-AM Seattle for approximately $2 million. Consummation
of the transaction, which is expected to close in the second quarter of 1997, is
subject to certain conditions, including the consents of certain third parties,
and the Federal Communications Commission's approval of the transfer of the
broadcast licenses.
In November 1996, the Company entered into an agreement to sell the
assets of KTRS-AM, formerly KSD-AM St. Louis for approximately $10 million. In
January 1997, the buyer began programming and marketing the station pursuant to
a Local Marketing Agreement ("LMA"). Consummation of the transaction, which is
expected to close in the second quarter of 1997, is subject to certain
conditions, including the consents of certain third parties, and the Federal
Communications Commission's approval of the transfer of the broadcast licenses.
Pending Exchanges. In March 1996, the Company entered into an asset
exchange agreement with an unrelated party, whereby the Company agreed to
exchange stations WEZB-FM, WRNO-FM and WBYU-AM New Orleans and $7,500,000 in
cash for stations KBKS-FM (formerly KCIN-FM) and KRPM-AM Seattle. At the same
time, both parties began programming and marketing the stations pursuant to
separate TBA's. The consummation of the exchange, which is expected to occur in
the second quarter of 1997, is subject to the consent of the Federal
Communications Commission ("FCC"), which first must grant the pending
application for renewal of the license of WEZB-FM, and the expiration or earlier
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act").
In December 1996, the Company entered into an asset exchange agreement
with an unrelated party, whereby the Company will exchange stations WIOQ-FM and
WUSL-FM Philadelphia for stations WRFX-FM, WPEG-FM, WBAV-FM, WBAV-AM, and
WFNZ-AM Charlotte, and an asset purchase agreement to purchase station WNKS-FM
Charlotte for approximately $10 million. Consummation of the asset exchange
agreement is not conditioned on consummation of the asset purchase agreement,
although consummation of the asset purchase agreement is conditioned on
consummation of the asset exchange agreement. Consummation of the exchange and
the acquisition, which is expected in the second quarter of 1997, is subject to
the consent of the FCC. In order,
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among other things, to meet applicable FCC requirements, the Company is required
to place WRFX-FM in an insulated voting trust or sell the station. In December
1996, the Company sought authority to place the station in a trust. In February
1997, the Company entered into an asset exchange agreement with an unrelated
party, whereby the Company will exchange station WRFX-FM Charlotte for station
WDSY-FM Pittsburgh and $20 million cash consideration. Consummation of the
exchange, which is expected in the second or third quarters of 1997, is subject
to the consent of the FCC and the expiration or earlier termination of the HSR
waiting period.
GENERAL
Operating Philosophy
The Company seeks to maximize its audience ratings for each of its
stations and to generally achieve the largest possible share of radio
advertising revenue in its markets. By operating multiple station combinations
in its markets, the Company has the opportunity to position its stations in
complementary formats that may enable the Company to achieve a high
concentration of listeners in a variety of formats, attract top talent, and
improve the range of products and services available to advertisers, thereby
making the Company's stations a more attractive alternative to advertisers and
better positioning the Company to compete effectively for available dollars
against other media, including newspapers and television. Additionally, multiple
station combinations allow station consolidation and centralization, creating
certain cost and operational efficiencies and enhancing consistency of
management and talent excellence.
The Company employs a variety of innovative techniques to increase its
audience ratings and to generate revenue in its markets. As an example of that
effort, the Company's Seattle station, KMPS-FM, became during 1994, the first
commercial country station to have an interactive world-wide web site on the
Internet. During 1995, that station continued to evolve its Internet
applications, by forming collaborations offering Internet access to listeners
and broadcasting the station's programming in real time on the Internet. While
in its early stages, management believes that these Internet applications have
the potential to create supplemental revenue sources for the Company.
The Company believes that effective sales training is essential to
strong operating performance and believes that its training is superior to the
industry as a whole. The Company has a comprehensive sales training program,
called "A Promise For Excellence," which emphasizes the staged, on-going
development of the Company's sales professionals. The program includes, among
other things, sales managers' training meetings, regular Company-wide sales
staff conference calls and testing, auditing, and oversight by the training
committee. As an adjunct to the training and management of its sales staff, the
Company's stations have, for over 18 years, participated in a sales incentive
travel program developed by the Company and known as the "EZ Marketing Seminar."
This incentive travel program involves owners and managers of some of the
largest advertisers in the Company's various markets, and enables the Company's
general managers and senior executives to establish ongoing relationships with
these key advertisers.
The Company concentrates on developing its general managers, who are
responsible for the day-to-day operations of the stations in their respective
geographic markets and are compensated, in part, based on their station's
financial performance. To enhance internal coordination and to effect broader
usage of successful sales and programming techniques, the Company holds
quarterly meetings and monthly conference calls among its senior managers. While
day-to-day operations of the stations are run by the general managers, the
Company minimizes costs by centralizing common functions such as long-range
planning, the establishment of policies and procedures, general accounting and
auditing, resource allocation, regulatory compliance and license renewals.
In an effort to add and retain new listeners, the Company's stations
typically will engage in significant local promotional activities which include
extensive community involvement. The Company's Seattle stations were presented
with the national Humanitarian Award by the Country Music Association, the
Company's Pittsburgh station received the Media Awareness Award (Radio) by the
National Commission Against Drunk Driving in
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recognition of its Designated Driver Program and one of the Company's
Philadelphia stations has been widely acclaimed for its "Stop the Violence"
program. In addition, in St. Louis, the Company has created an extensive program
known as "Outreach St. Louis, Inc.," which features a daily, informational radio
segment on St. Louis area non-profit organizations designed to educate the
public on how to access or support the valuable services provided by such
organizations. It also acts as a broker to match requests for goods or services
with donors, and serves as the vehicle for a grant-funding program to place
charitable contributions with qualifying recipients.
Acquisition Strategy
The Company endeavors to make acquisitions of stations that have
positive broadcast cash flow, that have the potential for greater revenue and
significant operating efficiencies and that can create opportunities for
multiple station ownership in a market. In analyzing potential acquisitions, the
Company generally considers (i) the size, rate of growth and projected future
rate of growth of the market's revenue, population and retail sales, (ii)
whether the proposed station has a competitive signal with a broad market
coverage area, (iii) whether there is a niche in the local spectrum of radio
formats or whether one of the station's competitors has an obvious
vulnerability, (iv) the operating history and financial performance of the
station, (v) the terms of the purchase and (vi) the minimum level of performance
that can be expected from the station under the Company's management.
The Company believes that there are several potential benefits that
result from operating multiple stations within the same market. First, each
additional station in a market provides the Company with a larger amount of the
prime advertising time to make available for sale to potential advertisers.
Second, the more signals programmed by the Company, the greater the audience
share the Company can achieve in a particular target demographic group. Third,
the Company is able to consolidate administrative, engineering and management
expenses to produce substantial cost savings. Finally, the purchase of
additional stations in an existing market allows the Company to take advantage
of its market expertise and existing relationships with advertisers.
The Company does not apply a fixed formula to determine the purchase
price of radio stations. The Company does not focus solely on multiples of
broadcast cash flow because it generally seeks to acquire untapped potential in
addition to existing broadcast cash flow. Assessing a station's potential is
more difficult in markets in which the Company does not have an existing station
group. With multiple station ownership, the Company can use its current
operating experience and existing relationships with advertisers in a particular
market in assessing the degree of improvement in programming service and
broadcast cash flow that is possible from a potential acquisition in that
market. The Company frequently evaluates potential acquisitions of radio
stations. However, the Company has no present understanding, commitment or
agreement with respect to any such acquisition other than as described in
"Recent Developments - Pending Acquisition".
Advertising Sales
Virtually all of the Company's revenues are generated from the sale of
local and national advertising for broadcast on its radio stations. Additional
broadcasting revenue is generated from network compensation payments and other
miscellaneous transactions. Local sales are made by a station's sales staff.
National sales are made by firms specializing in radio advertising sales on the
national level, in exchange for a commission from the Company that is based on
the Company's gross revenue from the advertising obtained. Approximately 80% of
the Company's broadcasting revenue for the year ended December 31, 1996, was
generated from the sale of local advertising.
The Company believes that radio is an efficient and cost-effective
means for advertisers to reach specific demographic groups. Advertising rates
charged by radio stations are based primarily on (i) a station's audience share
within the demographic groups targeted by advertisers, (ii) the number of
stations in the market competing for the same demographic groups, (iii) the
supply of and demand for radio advertising time and (iv) certain qualitative
factors. Rates are generally highest during morning and afternoon commuting
hours.
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A station's listenership is reflected in ratings surveys that estimate
the number of listeners tuned to a station and the time they spend listening to
that station. Each station's ratings are used by advertisers and advertising
representatives to consider advertising with the station, and are used by the
Company to chart audience growth, set advertising rates and adjust programming.
The radio broadcast industry's principal ratings service is Arbitron, which
publishes monthly and quarterly ratings surveys for significant domestic radio
markets. These surveys are the Company's primary source of ratings data with
respect to its stations.
Competition
The success of each of the Company's radio stations is dependent, to a
significant degree, upon its audience ratings and its share of the overall
advertising revenue within its market. The radio broadcasting industry is a
highly competitive business. The Company's radio stations compete for listeners
and advertising revenue directly with other radio stations, as well as other
media within their markets. The Company's audience ratings and market share are
subject to change and any adverse change in a particular market could have a
material and adverse effect on the revenue of the Company's stations located in
that market. There can be no assurance that any one of the Company's stations
will be able to maintain and increase its current audience ratings and
advertising revenue market share.
The radio broadcasting industry is also subject to competition from new
media technologies that may be developed or introduced, such as the delivery of
audio programming by cable television systems and by digital audio broadcasting
formats to local and national audiences. On March 3, 1997, the FCC announced a
plan to auction two satellite radio slots to the four pending applicants that
have proposed to offer satellite delivered digital radio service. The auction is
scheduled for April 1, 1997. Also, on March 3, 1997, the FCC issued technical
and service rules for the new service. The Company cannot predict at this time
the effect, if any, that any such new technologies may have on the radio
broadcasting industry. The radio broadcasting industry historically has grown in
terms of total revenues despite the introduction of new technologies for the
delivery of entertainment and information, such as television broadcasting,
cable television, audio tapes, compact disks and cellular telephones.
Companies that operate radio stations must always be alert to the
possibility of another station changing its programming format to compete
directly for listeners and advertisers. There are typically other
well-capitalized firms competing in the same geographic markets as the Company.
If these firms decide to convert one of their stations to a format similar to
that of one of the Company's radio stations in the same geographic area, the
result could be lower ratings and advertising revenue, increased promotion and
other expenses and consequently lower station operating income.
As a result of abolition of the national limit on the number of
stations that may be owned by one entity and liberalization of the local
ownership rules by the Telecommunications Act of 1996 (the "1996 Act"), the
radio industry has shown a trend toward consolidation which is likely to
continue. The trend towards consolidation will increase competition among
purchasers for radio stations, including stations which the Company may find
attractive, which may, in turn, increase the price of such stations to the
Company.
Employees
At December 31, 1996, the Company employed 484 full time and 231 part
time persons. With the exception of the on-air announcers of stations WBZZ-FM
and WZPT-FM Pittsburgh and WIOQ-FM Philadelphia, who are members of the American
Federation of Television and Radio Artists ("AFTRA"), the Company's employees
are not covered by collective bargaining agreements. The AFTRA agreements for
Pittsburgh and Philadelphia expire in May 1997 and July 1998, respectively. The
Company considers its relations with its employees and AFTRA to be good.
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Community Involvement
The Company considers its community involvement to be of considerable
importance, and to that end each of the Company's stations participates in many
community programs, fund raisers and activities that benefit a wide variety of
organizations. Charitable organizations that have been the beneficiaries of the
Company's marathons, walkathons, swimathons, parades, food banks, fairs and
festivals include, among others, the United Negro College Fund, Ronald McDonald
house, Big Brothers, Big Sisters, Red Cross, United Way, Salvation Army and
research foundations seeking cures for multiple sclerosis, cystic fibrosis,
leukemia, sickle cell anemia and AIDS and helping to fight drug abuse.
Subsidiaries
The Company conducts all of its operations through direct and indirect
subsidiaries. In addition, in 1995, the Company formed a wholly-owned
subsidiary, Radio Data Group, Inc. ("RDG"), to explore new technologies with
potential applications to radio broadcasting. RDG does not contribute materially
to the Company's revenue. In June 1996, three unrelated third parties, including
American, each bought a 25% equity interest in RDG.
Federal Regulation of Radio Broadcasting
The radio broadcasting industry is subject to extensive and changing
regulation governing among other things, technical operations; ownership,
business, and employment practices; and certain types of program content
(including indecent and obscene program material).
The ownership, operation and sale of radio broadcast stations
(including those licensed to the Company) are subject to the jurisdiction of the
FCC, which acts under authority granted by the Communications Act. The
Communications Act prohibits the assignment of an FCC license or any transfer of
control of an FCC licensee without the prior written approval of the FCC. In
determining whether to grant requests for consents to such assignments or
transfers, and in determining whether to grant or renew a radio broadcast
license, the FCC considers a number of factors pertaining to the licensee (and
proposed licensee) including compliance with alien ownership restrictions, rules
governing the multiple ownership and cross-ownership of broadcast and other
media properties, the "character" of the applicant and those persons or entities
holding "attributable" interests in the applicant, and compliance with the
Anti-Drug Abuse Act of 1988. Among other things, the FCC assigns frequency bands
for radio broadcast stations; issues, renews, revokes and modifies radio
broadcast station licenses; regulates transmitting equipment used by radio
broadcast stations; adopts and implements regulations and policies that directly
or indirectly affect the ownership, operation, program content and employment
and business practices of radio broadcast stations. The FCC also has the power
to impose penalties for violations of its rules and the Communications Act.
On February 8, 1996, the President signed the Telecommunications Act of
1996 ("Telecommunications Act") which substantially amended the Communications
Act. The Telecommunications Act, among other things, eliminated the national
radio broadcast ownership restrictions in the FCC's broadcast ownership
regulations and raised the ceiling on the number of radio broadcast stations
that a single entity may own in a local radio market. The precise number of
stations that may be commonly owned in a particular local market depends upon
the number of commercial radio stations serving the local market.
The following is a brief summary of certain provisions of the
Communications Act and specific FCC rules and policies. Reference should be made
to the Communications Act, the FCC's rules and the public notices and rulings of
the FCC for further information concerning the nature and extent of federal
regulation of radio broadcast stations.
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License Renewal. Under the Telecommunications Act, radio broadcast
licenses are granted for maximum terms of eight years and upon application may
be renewed for additional terms. Broadcast licenses may be renewed through an
application to the FCC. The Communications Act authorizes the filing of
petitions to deny against a license renewal application during specified periods
after the renewal application has been filed. Interested parties, including
members of the listening public, may file petitions to deny as a means to raise
issues concerning the renewal applicant's qualifications. The Telecommunications
Act removed the opportunity for the filing of competing applications against an
incumbent licensee at renewal time. Instead, the FCC will renew the broadcast
licenses if the incumbent meets three requirement: (1) the station has served
the public interest, convenience and necessity; (2) the licensee has not
seriously violated the Communications Act or the FCC rules; and (3) there have
been no other violations, which, taken together, would constitute a pattern of
abuse of the Communications Act or the FCC rules. If an applicant for renewal
fails to satisfy this tripartite standard, the FCC nevertheless may renew the
license on appropriate terms and conditions, including renewal for less than a
full license term. The FCC may not consider applications for the channel by
other parties until it first has decided to deny the renewal to the incumbent.
Before denying renewal to an incumbent, the FCC must allow the licensee a
hearing on the licensee's alleged failure to satisfy the statutory standard. The
Communications Act prohibits the FCC from considering whether another licensee
would be preferable until it first has determined that the incumbent does not
qualify for renewal. In recent years, there have been a number of petitions to
deny filed with respect to broadcast license renewal applications, but in the
vast majority of cases the FCC has renewed incumbent operators' stations
licenses. Also, during certain periods when a renewal application is pending,
the transferability of the applicant's license may be restricted. The Company is
not aware of any facts or circumstances that would prevent it from obtaining
renewal of the radio broadcast licenses that it holds other than those items
described under Item 3: "Legal Proceedings" below. There can be no assurance,
however, that each of the Company's licenses will necessarily be renewed.
The following table sets forth the calendar year in which the Company
acquired each of its radio stations and the current expiration date of each
station's main FCC broadcast license:
FCC Station License Renewal Dates
Geographic Calendar Year of Current License
Station Call Letters Market Served Acquisition Expiration Date
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WIOQ-FM* Philadelphia, PA 1989 8/1/98
WUSL-FM* Philadelphia, PA 1994 8/1/98
KMPS-FM Seattle-Tacoma, WA 1986 2/1/98
KZOK-FM Seattle-Tacoma, WA 1994 2/1/98
KYCW-FM Seattle-Tacoma, WA 1996 2/1/98
KBKS-FM+ Seattle-Tacoma, WA 1996 2/1/98
KRPM-AM+ Seattle-Tacoma, WA 1996 2/1/98
KMPS-AM* Seattle-Tacoma, WA 1986 2/1/98
KYKY-FM St. Louis, MO 1985 2/1/97(2)
KEZK-FM St. Louis, MO 1996 2/1/05
KSD-FM St. Louis, MO 1993 2/1/97(2)
KFNS-AM St. Louis, MO 1996 12/1/04
KTRS-AM*+ St. Louis, MO 1993 2/1/97(2)
WBZZ-FM Pittsburgh, PA 1977 8/1/98(1)
WZPT-FM Pittsburgh, PA 1994 8/1/98
KNCI-FM Sacramento, CA 1986 12/1/97
KRAK-FM Sacramento, CA 1994 12/1/97
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KHTK-AM Sacramento, CA 1986 12/1/97
KFKF-FM Kansas City, MO 1996 6/1/97
KBEQ-FM Kansas City, MO 1995 2/1/05
KOWW-AM Kansas City, MO 1995 2/1/97(3)
WSOC-FM Charlotte, NC 1992 12/1/03
WSSS-FM Charlotte, NC 1972 12/1/03
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(1) See "Legal Proceedings" below for a discussion of the competing application
filed for the WBZZ-FM license and the petition to deny filed with respect
to the WBZZ-FM license renewal application. The application has been
granted, and the Company is awaiting administrative finality of that
action.
(2) Renewal pending. See "Legal Proceedings"
(3) Renewal pending.
+ Stations currently being programmed and marketed pursuant to TBAs.
* Stations currently under contract for sale.
Ownership Matters. Under the Communications Act, a broadcast license
may not be granted to or held by any corporation that has more than one-fifth of
its capital stock owned or voted by aliens or their representatives, by foreign
governments or their representatives, or by non-U.S. corporations. Under the
Communications Act, a broadcast license also may not be granted to or held by
any corporation more than one-fourth of the capital stock of which is owned of
record, voted, or subject to control by aliens, unless specific FCC
authorization is obtained. These restrictions apply in modified form to other
forms of business organizations, including partnerships. The Company, which
serves as a holding company for its radio station subsidiaries, therefore may be
restricted from having more than one-fourth of its stock owned or voted by
aliens, foreign governments or non-U.S. corporations. The Amended and Restated
Articles of Incorporation of the Company contain prohibitions on alien ownership
and control that reflect these prohibitions contained in the Communications Act.
Prior to adoption of the 1996 Act, the FCC's broadcast multiple
ownership rules restricted the number of radio stations one person or entity
could own, operate or control both on a national and on a local level. Effective
March 15, 1996, the rules were changed to remove the national limit on radio
station ownership and to liberalize the local rules to provide as follows:
(i) In a market with forty-five or more commercial radio stations, one
party may own, operate, or control up to eight commercial radio
stations, no more than five of which may be in the same service
(AM or FM). The number of stations in a "market" is determined by
counting the stations having overlapping city grade contours.
(ii) In a radio market having thirty to forty-four commercial radio
stations, the limit is seven stations, no more than four of which
may be in the same service.
(iii) In a radio market having between fifteen and twenty-nine
commercial radio stations, one party may own, operate, or control
up to six commercial radio stations, no more than four of which
may be in the same service.
(iv) In a market with fourteen or fewer commercial radio stations, one
party may own, operate, or control up to five commercial radio
stations, no more than three of which may be in the same service,
but in no event may one party own, operate, or control more than
fifty percent of the stations in the market.
(v) Notwithstanding these numerical limits, a single party may be
permitted to own, operate, or control a radio station if doing so
would increase the number of stations in operation, presumably
when, for example, a silent station is returned to operation by a
new owner.
The FCC's rules also generally restrict the common ownership, operation
or control of a radio broadcast station and a television broadcast station
serving the same local market, as well as of a radio broadcast station and a
daily newspaper serving the same local market. Under these "cross-ownership"
rules, absent waivers from the FCC, the Company would not be permitted to
acquire any daily newspaper or television broadcast station (other than
low-power television) in a local market where it then owned any radio broadcast
station; however, the FCC's rules provide for the liberal grant, if certain
conditions are satisfied, of a waiver of the rule prohibiting common
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ownership of radio and television stations in the same geographic market in the
top 25 television markets. The prohibition on ownership of radio and television
stations in the same market is currently being re-examined in an FCC rulemaking
as a result of directives in the Telecommunications Act, which said the waiver
standard is to be extended to the top 50 markets. The FCC has also initiated an
inquiry to evaluate its radio/newspaper cross-ownership provisions.
In applying the provisions of its multiple ownership rules, the FCC has
determined that interests in stations licensed to corporate licensees will be
deemed to be attributed to (or deemed owned by) the holders of such corporate
interests, and will then be deemed cognizable for purposes of the ownership
rules, pursuant to the following criteria: (a) any voting stock interest
amounting to five percent or more of the outstanding voting stock of a corporate
broadcast licensee will be attributable; (b) no minority voting stock interest
will be attributable if there is a single holder of more than fifty percent of
the outstanding voting stock of the corporate broadcast licensee; and (c)
certain investment companies, insurance companies, and banks holding stock
through their trust departments in trust accounts which exert no control or
influence over a licensee will be considered to have an attributable interest
only if they hold ten percent or more of the outstanding voting stock of a
corporate broadcast licensee. In addition, corporate officers and directors and
general partners and noninsulated limited partners of partnerships may be
personally attributed with the media interests of the corporations or
partnerships of which they are officers, directors, or partners. Debt
instruments, non-voting stock, options and warrants for voting stock that have
not yet been exercised generally do not subject their holders to attribution. In
addition, the FCC has a "cross-interest" policy that under certain circumstances
could prohibit a person or entity with an attributable interest in a broadcast
station or daily newspaper from having a "meaningful" nonattributable interest
in another broadcast station or daily newspaper in the same local market. Among
other things, "meaningful" interests could include significant equity interests
(including non-voting stock, nonattributable voting stock and nonattributable
limited partnership interests) and significant employment positions.
The FCC's attribution rules and cross-interest policy are also being
reexamined in a current FCC rulemaking, and certain of the standards may be made
more or less restrictive as a result. Among the many proposals under
consideration are an increase in the voting stock benchmarks, modification of
the single majority stockholder exemption from attribution, exemption of certain
widely held limited partnership interests from attribution when each individual
interest represents an insignificant percentage of the total partnership equity,
and standards to govern interests in limited liability corporations and other
new forms of business entities. The Telecommunications Act also ordered the FCC
to conduct biennial review of all its broadcast multiple ownership rules.
Because of the current multiple and cross-ownership rules, a purchaser
of the Company's Class A Common Stock who acquires an "attributable" interest in
the Company may violate the FCC's rules if it also has an attributable interest
in other television or radio stations or in daily newspapers in the same market.
Such a purchaser may thus be restricted in respect of the other companies in
which it may invest, to the extent that those investments give rise to an
attributable interest. If an attributable shareholder of the Company violates
any of these ownership rules, the Company may be unable to obtain from the FCC
one or more authorizations needed to conduct its radio station business and may
be unable to obtain FCC consents for certain future acquisitions; however, as
long as the FCC's rules remain unchanged and one person or entity (such as the
Principal Shareholders) holds more than 50% of the combined voting power of the
Company's total Common Stock, a shareholder of the Company generally would not
acquire an attributable interest in the Company. Until modified, the
cross-interest policy may also limit the permissible investments a purchaser of
the Company's Class A common Stock may make or hold.
Local Marketing Agreements. In recent years, a number of radio
stations, including certain of the Company's stations, have entered into what
commonly are referred to as "local marketing agreements" (LMAs) or "time
brokerage agreements" (TBAs). These agreements take various forms.
Separately-owned and licensed stations may agree to function cooperatively in
terms of programming, advertising sales and other matters, subject to compliance
with the antitrust laws and the FCC's rules and policies. The FCC has held that
such radio agreements are permissible as long as the licensee of the station
that is being substantially programmed by another
11
<PAGE>
entity maintains ultimate responsibility for, and control over, operations of
its broadcast station and otherwise ensures compliance with applicable FCC rules
and policies.
A station that brokers more than 15% of the broadcast time, on a weekly
basis, of another local station pursuant to a TBA or an LMA will be considered
to have an attributable interest in the brokered station for purposes of the
FCC's ownership rules discussed above. As a result, the owner of a broadcast
station may not enter into an LMA that allows it to provide such a level of
programming on another local station unless it could own that station under the
FCC's local multiple ownership rules. FCC rules also prohibit a broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM/AM or FM/FM) when the two stations serve
substantially the same geographic area, whether the licensee owns the stations
or owns one and programs the other through an LMA arrangement.
Programming and Operation. The Communications Act requires broadcasters
to serve the "public interest". Since the early 1980s, the FCC gradually has
relaxed or eliminated many of the more formalized procedures it developed to
promote the broadcast of certain types of programming responsive to the needs of
a station's community of license; however, licensees continue to be required to
present programming that is responsive to community problems, needs and
interests, and to maintain certain records demonstrating such responsiveness.
Complaints from listeners concerning a station's programming will be considered
by the FCC at any time and also when it evaluates the licensee's renewal
application. Stations must follow various FCC rules and policies that regulate,
among other things, political advertising, the broadcast of obscene or indecent
programming, sponsorship identification and technical operations (including
limits on radio frequency radiation). In addition, licensees must develop and
implement programs designed to promote equal employment opportunities and must
submit reports to the FCC on these matters annually and in connection with any
renewal application or broadcast acquisition. The broadcast of contests and
lotteries is also regulated by FCC rules.
Proposed Changes. In January 1995, the FCC allocated spectrum for
satellite delivery of digital radio. On March 3, 1997 the agency announced that
on April 1, 1997, it will auction the two satellite radio slots to four pending
applicants. On March 3, 1997, the FCC also announced technical and service rules
for the new service, including requirements that the satellite radio providers
adhere to the FCC's political broadcasting and equal employment opportunity
rules. At the same time, the FCC put the applicants on notice that the agency
may adopt a requirement similar to the four-to-seven-percent channel set-aside
that is imposed on the direct broadcast satellite industry for the provision of
educational programming. Radio industry groups are also conducting trials of
in-band terrestrial delivery of digital audio service.
As noted, the FCC has several pending rulemakings that may affect the
Company, including those implementing the 1996 Act. In addition, the Congress
and the FCC may in the future consider and adopt, new laws, regulations and
policies regarding a wide variety of matters that could, directly or indirectly,
affect the operation, ownership and profitability of the Company's radio
broadcast stations, result in the loss of audience share and advertising
revenues for the Company's radio broadcast stations and affect the ability of
the Company to acquire additional radio broadcast stations or finance such
acquisitions.
ITEM 2. PROPERTIES
The Company owns its corporate headquarters, which are located at 10800
Main Street in Fairfax, Virginia.
The properties used by the Company's radio stations consist of office
and studio facilities, towers and tower and transmitter sites. FM antennas are
located on either Company-owned or leased towers, and AM towers are either owned
or leased. Stations' studio and sales offices are generally located in downtown
or business districts. Transmitter and tower sites are generally located at
sites which provide maximum market coverage.
12
<PAGE>
The Company presently owns: its studio facility and a tower and
transmitter site in Pittsburgh; one office and studio facility and two AM tower
(one of which will be sold with KTRS-AM) and transmitter sites in St. Louis; its
office, studio facility and a tower for its Charlotte stations; its office,
studio and AM tower and transmitter site in Sacramento; one office and studio
facility and a tower and transmitter site in Philadelphia; one FM and two AM
tower and transmitter sites (one of which will be sold with KMPS-AM) in Seattle;
and its AM tower and transmitter site in Kansas City.
The Company owns substantially all of the equipment it uses, including
its transmitting antennas, transmitters, studio equipment and general office
equipment. The Company believes that its properties are in good condition and
suitable for its operations; however, the Company continually reviews
opportunities to upgrade its equipment.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company becomes involved in various claims and
lawsuits that are incidental to its business.
Currently, commercial radio stations are required to file license
renewal applications with the FCC every eight years. Following the filing of
renewal applications, "parties in interest," a term which includes competitors
and community groups, have a specified period of time in which they may file
petitions requesting that the FCC deny the renewal application or designate it
for hearing. In addition, prior to adoption of the Telecommunications Act, if
any party wished to file an application seeking that station's license, the
challenger could do so by filing an application shortly before the expiration of
the license.
In June 1991, Allegheny Communications Group, Inc. ("Allegheny") filed
a competing application and a Petition to Deny against the license renewal
application of EZ Communications, Inc. ("EZ") for station WBZZ-FM in Pittsburgh.
On November 9, 1996, EZ entered into a settlement agreement (the "Settlement
Agreement") with Allegheny, pursuant to which Allegheny agreed to dismiss its
application with prejudice and EZ agreed to purchase the stock of Allegheny for
$4.5 million. On February 21, 1997, the Settlement Agreement was approved by an
administrative law judge of the Federal Communications Commission in an order
that granted the WBZZ-FM renewal application and dismissed the Allegheny
application. The judges decision will become administratively final on April 2,
1997.
On January 31, 1996, EZ New Orleans, Inc. filed an application for the
renewal of the license of WEZB-FM in New Orleans, Louisiana with the FCC. A
petition to deny the application dated April 25, 1996, was filed, alleging,
among other things, that the licensee presented indecent and obscene programming
and improperly maintained the station's public inspection file; and contended
that the licensee is not qualified to do business in Louisiana. The licensee
filed its opposition to the petition to deny on June 17, 1996. The petitioners
filed a reply dated July 11, 1996. Informal objections have also been filed
against the WEZB-FM renewal application, raising allegations similar to those in
the petition. While the Company cannot predict the outcome of these matters
involving WEZB-FM at this time, the Company believes that the challenges will
not have a material adverse effect on the Company. There can be no assurance,
however, that the renewal application will be granted.
On August 6, 1996, each of EZ and American received an informal inquiry
from the Division of Enforcement of the Securities and Exchange Commission
regarding trading activity in the stock of EZ prior to the announcement of the
proposed merger with American discussed below. On September 11, 1996, the
Division of Enforcement informally requested that each of EZ and American
voluntarily provide certain documents in connection with the Division's inquiry.
Such documents were provided to the Division by EZ on September 26, 1996 and by
American on September 27, 1996.
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<PAGE>
On January 2, 1997, the Rainbow-PUSH Coalition filed a petition to deny
the applications for renewal of the licenses of KTRS-AM, KSD-FM and KYKY-FM in
St. Louis, alleging violations of the FCC's EEO rule and policies. On February
18, 1997, the Company and the petitioner filed a joint request for approval of a
settlement agreement, pursuant to which the renewal applications would be
granted and the petition dismissed.
In the opinion of management, resolution of the above described matters
will not have a material effect on the Company's financial position, results of
operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 17, 1996, the Company held a meeting of its shareholders
for purposes of voting on the merger of the Company with American. At that
meeting, the shareholders approved the Company's merger with American. See
"Recent Developments - The Merger".
On December 2, 1996, American distributed a Consent Solicitation
Statement and related materials to each holder of EZ's 9.75% Senior Subordinated
Notes Due 2005 (the "Notes") pursuant to which American sought the consent of
such holders to certain amendments (the "Proposed Amendments") to the EZ
Indenture dated as of November 21, 1995. The purpose of the Proposed Amendments
was to facilitate the merger of EZ and American by permitting a direct merger of
EZ into American rather than into a wholly-owned subsidiary of American. The
Proposed Amendments will also permit the Note Indenture to function effectively
with the indenture under which American's existing 9% Senior Subordinated Notes
due 2006 (the "American Notes") were issued and therefore would allow American
to be the direct obligor of both the Notes and the American Notes. In connection
with this consent solicitation, American agreed to pay to each holder of the
Notes who delivered a valid consent prior to December 10, 1996 (the "Consent
Date") a consent fee in the amount of $5.00 for each $1,000 in principal amount
of the Notes in respect of which such consent was delivered. A majority of the
holders of the Notes consented to the Proposed Amendments prior to the Consent
Date.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Shares of the Company's Class A Common Stock, par value $.01 per share
(the "Class A Shares"), have been quoted on the Nasdaq National Market System
under the symbol EZCIA since the consummation of the Company's initial public
offering in August 1993. The following table sets forth, for the calendar
quarters indicated, the high and low sales prices of the Class A Shares on the
Nasdaq National Market System, as reported in published financial sources. There
is no public trading market for the Company's Class B Common Stock, par value
$.01 per share (the "Class B Shares").
Year High Low
---- ---- ---
1996:
First Quarter 21 3/4 16 1/4
Second Quarter 24 3/4 18 1/2
Third Quarter 45 1/2 23 3/4
Fourth Quarter 44 1/2 32
Year High Low
---- ---- ---
1995:
First Quarter 17 12 1/4
Second Quarter 19 15
Third Quarter 20 3/4 17 3/4
Fourth Quarter 19 1/4 15 1/4
As of March 17, 1997, there were 136 holders of record of the Class A
Shares (which number does not include the number of stockholders whose shares
are held of record by a broker or clearing agency but does include
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<PAGE>
each such brokerage house or clearing agency as one record holder). As of March
17, 1997, there were two holders of record of the Class B Shares.
The Company has not paid dividends on its shares of common stock since
the fiscal year ended March 31, 1991, and the payment of dividends is restricted
by the terms of the Credit Facility and the Indenture. It is not anticipated
that any dividends will be paid on any shares of any class of the Company's
common stock in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Nine Months
Ended Ended Year Ended
March 31, December 31, December 31,
--------------------------------------------------------------------
1993 1993(3) 1994 1995 1996
---- ------- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data (1):
Net broadcasting revenue $47,482 $40,695 $66,013 $83,668 $105,963
Broadcasting expenses 34,779 27,262 42,951 55,652 68,084
-------------------------------------------------------------------
Station operating income before corporate expenses, 12,703 13,433 23,062 28,016 37,879
merger costs and depreciation and amortization
Corporate expenses 2,559 1,963 3,325 3,556 3,808
Merger costs 10,433
Depreciation and amortization 3,652 2,726 5,388 6,757 9,104
-------------------------------------------------------------------
Operating income 6,492 8,744 14,349 17,703 14,534
Other income (expense)
Interest expense (5,526) (2,754) (5,313) (10,799) (20,360)
Gain (loss) on sale of assets, net 547 (1,038) (860)
Other income and expenses, net (553) (251) 316 (685) (450)
-------------------------------------------------------------------
(5,532) (4,043) (5,857) (11,484) (20,810)
-------------------------------------------------------------------
Income (loss) before taxes and extraordinary item 960 4,701 8,492 6,219 (6,276)
Federal and state income tax expense (benefit) 997 1,983 3,670 2,975 (1,590)
-------------------------------------------------------------------
Income (loss) before extraordinary item (37) 2,718 4,822 3,244 (4,686)
Extraordinary gain (loss) less applicable income taxes (550) (1,343) (1,001)
-------------------------------------------------------------------
Net income (loss) $(587) $2,718 $3,479 $2,243 $(4,686)
===================================================================
Income (loss) per common share
Income (loss) before extraordinary item $(0.01) $0.37 $0.54 $0.36 $(0.52)
Extraordinary item (0.09) (0.15) (0.11)
-------------------------------------------------------------------
Net income (loss) per common share $(0.10) $0.37 $0.39 $0.25 $(0.52)
===================================================================
Weighted average common shares outstanding 5,931 7,400 8,969 9,029 9,096
===================================================================
Cash dividends per common share
===================================================================
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
------------------------------------------------------------------
1993 1993 1994 1995 1996
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $3,768 $8,383 $12,144 $47,380 $4,804
Notes receivable (2) 4,500 3,000 3,670 653 637
Net intangible assets 38,384 50,268 110,284 123,114 215,415
Total assets 68,369 90,241 176,588 205,256 284,408
Long-term debt, less current portion 61,313 42,400 124,500 148,833 211,445
Shareholders' equity (deficit) (4,177) 34,421 37,900 41,283 38,148
</TABLE>
- ----------
(1) Year-to-year comparisons are significantly affected by the timing of
acquisitions and dispositions of radio stations. During the year ended
March 31, 1993, the Company acquired an additional station in Charlotte in
a tax-free exchange for its station serving Miami (December 1992) which it
had acquired in 1983, sold its two stations serving Phoenix (June 1992)
which it had acquired in 1986, and completed the sale of its two stations
serving Jacksonville (August 1992). During the nine months ended December
31, 1993, the Company acquired additional AM and FM stations in St. Louis
(which it began operating under an LMA in September 1993) and operated an
additional FM in Sacramento under a JSA (October 1993, which sale closed in
February 1994). During that same period the Company recorded losses of
$600,000 and $438,000 on the sales of station KQBR-FM serving Sacramento
and the Company's Miami building, respectively. During the year ended
December 31, 1994, the Company acquired additional FM stations in
Pittsburgh (which the Company had operated since January 1993), Seattle
(August 1994), Philadelphia (October 1994, which the Company had operated
pursuant to an LMA effective July 1994), and Miami (October 1994, which was
immediately LMA'd to an unrelated party). During that same period the
Company recorded a loss of $860,000 on the sale of the Company's office and
studio building in Sacramento, During the year ended December 31, 1995, the
Company acquired an additional FM and AM station in New Orleans (January
1995 and February 1995). During the year ended December 31, 1996, the
Company acquired additional FM stations in Kansas City, Seattle and St.
Louis (January 1996, May 1996 and July 1996) and one
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<PAGE>
additional AM station in St. Louis (July 1996). The Company also sought FCC
approval to exchange its two FM and AM stations in New Orleans for an
additional AM and FM station in Seattle.
(2) Includes a $3,000,000 note related to the sale of the Company's radio
station serving Las Vegas. The note, including all accrued and unpaid
interest thereon, was paid in full in June 1995.
(3) The Company changed its fiscal year end from March 31 to December 31.
Accordingly, the information provided above only reflects nine months of
operating activities while all other information provided reflects a full
year of operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company desires to take advantage of the new "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. The Company's
Report on Form 10-K contains "forward-looking statements" including
statements concerning projections, plans, objectives, future events or
performance and underlying assumptions and other statements which are
other than statements of historical fact. The Company wishes to caution
readers that the following important factors, among others, may have
affected and could in the future affect the Company's actual results and
could cause the Company's actual results for subsequent periods to differ
materially from those expressed in any forward-looking statement made by
or on behalf of the Company: (a) the Company's ability to meet debt
service requirements; (b) the Company's ability to compete successfully
with other radio broadcasters; (c) the possibility of adverse governmental
action or regulatory restrictions from those administering the Antitrust
laws, the FCC or other governmental authorities; (d) the availability of
funds under its credit agreement to fund acquisitions for the foreseeable
future, or, if such funds are inadequate, the ability of the Company to
obtain new or additional debt or equity financing and the potential
dilutive effect of any such equity financing, and (e) the Company's
ability to successfully operate existing and any subsequently acquired
stations.
General
The Company's financial results are dependent on a number of factors,
including the general strength of the local and national economies, population
growth, ability to provide popular programming, local market competition,
relative efficiency of radio broadcasting compared to other advertising media,
signal strength and government regulation and policies. The primary operating
expenses involved in owning and operating radio stations are employee salaries,
depreciation and amortization, programming expenses, solicitation of advertising
and promotion expenses.
The Company's revenues are affected primarily by the advertising rates
the Company's stations are able to charge. These rates are in large part based
on a station's ability to attract audiences in the demographic groups targeted
by its advertisers, as measured principally by quarterly reports by independent
national rating services. Because audience ratings in the local market are
crucial to a station's financial success, the Company endeavors to develop
strong listener loyalty. The Company believes that the diversification of
formats on its radio stations helps the Company to insulate itself from the
effects of changes in musical tastes of the public on any particular format.
RESULTS OF OPERATIONS
Year Ended December 31, 1996 to Year Ended December 31, 1995
The Company's net broadcasting revenue was $105,963,000 for the year
ended December 31, 1996, an increase of 27% from $83,668,000 for the same period
in 1995. The increase was attributed to the acquisitions of additional radio
stations in Kansas City, Seattle and St. Louis (whose results have been included
in the Company's reported results since January 1996, March 1996 and April 1996,
respectively) and to increased advertising revenue in each of the Company's
markets. In addition, the Company reported excellent growth from stations in
Seattle and its Philadelphia cluster of stations.
16
<PAGE>
Broadcast cash flow was $37,879,000 for the year ended December 31,
1996, an increase of 35% from $28,016,000 for the year ended December 31, 1995.
This increase was partially attributable to the increases in net revenue
described above. In addition, the Company's strategy of operating multiple
station combinations has allowed station consolidation and centralization,
creating certain cost and operational efficiencies. As a result of these expense
reductions, broadcast cash flow as a percentage of net revenue has increased to
36% in 1996 from 33% in 1995.
On a same station basis (pro forma assuming that all acquisitions and
dispositions had occurred at the beginning of 1995), the Company's net revenue
and broadcast cash flow increased 5% and 13%, respectively, for the year ended
December 31, 1996 as compared to 1995.
Corporate expenses were $3,808,000 for the year ended December 31,
1996, an increase of 7% from $3,556,000 in 1995. The increase was primarily
attributed to incentive bonuses paid to executives.
Depreciation and amortization were $9,104,000 for the year ended
December 31, 1996, an increase of 35% from $6,757,000 for the same period in
1995. The change was primarily attributed to the increase in depreciable and
amortizable assets resulting from the recent 1996 acquisitions of radio stations
in Kansas City, Seattle and St. Louis. The depreciable cost of the 1996
acquisitions totaled $102,000,000.
Interest expense was $20,360,000 for the year ended December 31, 1996,
an increase of 89% from $10,799,000 for the year ended December 31, 1995. This
increase was due to an increase in the aggregate amount of long-term debt
outstanding during the respective periods resulting from the acquisitions
previously noted, the issuance of the Notes and a higher weighted average
interest rate in 1996. In addition, certain payments required pursuant to TBAs
in Seattle and St. Louis totaling $1,657,000 were included in interest expense
during 1996.
The Company reported a net loss of $4,686,000 ($0.52 per share) for the
year ended December 31, 1996 compared to net income of $2,243,000 ($0.25 per
share) for the year ended December 31, 1995. The net loss for 1996 was the
result of the Company's recognition of approximately $10,433,000 of costs
associated with its pending merger with American Radio Systems Corporation, as
well as higher depreciation and amortization expense and interest expense from
the Company's station acquisitions in Kansas City, Seattle and St. Louis.
Year Ended December 31, 1995 to Year Ended December 31, 1994
The Company's net broadcasting revenue was $83,668,000 for the year
ended December 31, 1995, an increase of 27% from $66,013,000 for the same period
in 1994. The increase was attributed to the acquisition of stations in
Philadelphia and Seattle (which were acquired in the second half of 1994),
stations in New Orleans (which were acquired in the first half of 1995) and to
increased advertising revenue in each of the Company's markets. The Company also
experienced significant increases in net broadcasting revenue from recent format
changes in Pittsburgh, Charlotte and New Orleans.
Broadcast cash flow was $28,016,000 for the year ended December 31,
1995, an increase of 21% from $23,062,000 for the year ended December 31, 1994.
The increase was attributed to the higher net revenue, the inclusion of the
results of the acquired stations and improved results of the recent format
changes in Charlotte, Pittsburgh and New Orleans. Increases in broadcast cash
flow were mitigated by startup losses attributable to the Company's broadcast of
the NFL's St. Louis Rams. As a result of these startup losses, broadcast cash
flow as a percentage of net broadcast revenue decreased to 33% in 1995 from 35%
in 1994.
On a same station basis (pro forma assuming that all acquisitions and
dispositions had occurred at the beginning of 1994), the Company's net revenue
and broadcast cash flow increased 11% and 8%, respectively, for the year ended
December 31, 1995 as compared to 1994.
Corporate expenses were $3,556,000 for the year ended December 31,
1995, an increase of 7% from $3,325,000 in 1994. The increase was primarily
attributed to increases in insurance and investor relations costs.
17
<PAGE>
Depreciation and amortization were $6,757,000 for the year ended
December 31, 1995, an increase of 25% from $5,388,000 for the same period in
1994. The change was primarily attributed to the increase in depreciable and
amortizable assets resulting from the recent acquisitions of radio stations in
Sacramento, Pittsburgh, Seattle, Philadelphia, New Orleans and Kansas City.
Interest expense was $10,799,000 for the year ended December 31, 1995,
an increase of 103% from $5,313,000 for the year ended December 31, 1994. This
increase was due to an increase in the aggregate amount of long-term debt
outstanding during the respective periods due to the acquisitions previously
noted.
The Company reported net income of $2,243,000 ($0.25 per share) for the
year ended December 31, 1995 compared to net income of $3,479,000 ($0.39 per
share) for the year ended December 31, 1994, representing a decrease of 36%. Net
income reported in 1995 was the result of the items affecting net broadcasting
revenue, broadcast cash flow, depreciation and amortization and interest expense
previously discussed, as well as the loss from the Company's NFL broadcast
rights. Net income for the year ended December 31, 1995 was significantly
impacted by an extraordinary loss, net of tax, of $1,001,000 ($0.11 per share),
resulting from the write-off of capitalized costs from the Company's previous
credit facility. Net income before extraordinary items was $3,244,000 ($0.36 per
share) for the year ended December 31, 1995, as compared to $4,822,000 ($0.54
per share) for the same period in 1994, a decrease of 33% and $0.18 per share.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from its debt service, working
capital and capital expenditure requirements. Historically, the Company has met
its liquidity needs with internally generated funds and has financed the
acquisition of radio broadcasting properties with bank borrowings and proceeds
from the sale of the Company's securities. Cash flow from operating activities
was $6,783,000, $7,139,000, and $9,959,000 for the years ended December 31,
1996, 1995 and 1994. The decrease for the year ended December 31, 1996 was the
result of decreased net income (influenced by higher interest expense and costs
associated with the merger) and higher levels of receivables resulting from
increased net broadcasting revenue caused by the Company's acquisitions. The
decrease for the year ended December 31, 1995 was principally the result of
decreased net income and higher levels of receivables resulting from increased
net broadcasting revenue caused by the 1995 acquisitions.
During the year ended December 31, 1996, the Company made net capital
expenditures totaling $6,999,000 compared to $2,834,000 for the same period in
1995. During 1996, the Company incurred costs of approximately $3,100,000 to
complete the construction of a new office and studio facility and upgrade
broadcast equipment in Sacramento. In addition, the Company purchased its
current headquarters building in December 1996. The building is carried at its
net realizable value of $1,800,000. Additionally during 1996, the Company
incurred costs of approximately $1,200,000 to upgrade one office and studio
facility and expand and refurbish another office and studio facility in
Philadelphia. This project was substantially completed at December 31, 1996. The
Company expects maintenance capital expenditures for its radio station group to
be less than $1,000,000 for the year ended December 31, 1997.
At December 31, 1996, total long-term debt outstanding was
$221,345,000, which consisted of indebtedness related to the Company's 9.75%
Senior Subordinated Notes due 2005, sold to the public in 1995 ($150,000,000)
(the "Notes"), $62,500,000 outstanding under the Credit Facility and $9,900,000
related to a note payable from the purchase of KFKF-FM Kansas City. The Kansas
City Note was retired January 2, 1997. The Company expects that cash flow from
operating activities in fiscal 1997 will be sufficient to fund all debt service
costs and capital expenditure requirements. In addition, the Company's Credit
Facility permits the Company to incur an additional $50,000,000 of debt as long
as the Company remains in compliance with certain covenants after incurring such
debt.
18
<PAGE>
Both the Indenture governing the Notes and the Credit Facility contain
certain financial and operational covenants and other restrictions with which
the Company must comply, including among others, prohibiting the payment of
dividends, limitations on making capital expenditures, incurring additional
indebtedness, redeeming or repurchasing capital stock of the Company,
restrictions on the use of borrowings, requirements to maintain certain
financial ratios and limitations on acquisitions and dispositions of stations in
certain circumstances.
Inflation
The Company does not precisely measure the impact of inflation on its
operations. However, the impact of inflation on the Company's operations has not
been significant to date.
Recent Accounting Pronouncement
In March 1997, the Financial Accounting Standards Board released FAS
No. 128 "Earnings Per Share", which will be effective for fiscal 1997. FAS No.
128 will require the Company to restate amounts previously reported as earnings
per share to comply with the requirements of the new standard; while the Company
is in the process of evaluating the impact of FAS No. 128, it does not expect
that adoption will have a dilutive effect on previously reported earnings per
share.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements are included on Pages F-1 through
F-15 of this Report on Form 10-K.
QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for the years ended December 31, 1996 and
1995 appear below:
<TABLE>
<CAPTION>
March 31, June 30, September 30, December 31,
Quarter Quarter Quarter Quarter Year
--------- -------- ------------ ------------ -----
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
1996
Net broadcasting revenue $19,373 $27,978 $27,922 $30,690 $105,963
Broadcasting expenses 14,360 17,841 17,304 18,579 68,084
Station operating income 5,013 10,137 10,618 12,111 37,879
Operating income 1,958 7,074 7,238 (1,736) 14,534
Net income before
extraordinary item (1,369) 1,530 1,838 (6,685) (4,686)
Net income (loss) (1,369) 1,530 1,838 (6,685) (4,686)
Net income (loss) per share:
Net income before
extraordinary item $(0.15) $0.17 $0.20 $(0.73) $(0.52)
Net income (loss) $(0.15) $0.17 $0.20 $(0.73) $(0.52)
Average number of
common shares 9,057 9,091 9,101 9,135 9,096
1995
Net broadcasting revenue $16,381 $21,983 $21,826 $23,478 $83,668
Broadcasting expenses 12,132 14,026 14,576 14,918 55,652
Station operating income 4,249 7,957 7,250 8,560 28,016
Operating income 1,733 5,376 4,649 5,945 17,703
Net income before
extraordinary item (593) 1,427 1,115 1,295 3,244
Net income (loss) (593) 1,427 1,115 294 2,243
Net income (loss) per share:
Net income before
extraordinary item $(0.07) $0.16 $0.12 $0.14 $0.36
Net income (loss) $(0.07) $0.16 $0.12 $0.03 $0.25
Average number of
common shares 8,983 9,025 9,052 9,056 9,029
</TABLE>
19
<PAGE>
(1) The fourth quarter of 1996 reflects a charge of approximately $10,433,000
related principally to costs of the Company's pending merger.
(2) The fourth quarter of 1995 reflects an extraordinary net loss of $1,001,000
related to the write-off of unamortized debt issuance costs resulting from the
Company's refinancing of the former credit facility.
(3) Earnings per share does not accumulate due to rounding.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
In August 1996, the Company entered into a merger agreement (as amended
in September 1996) with American Radio Systems Corporation ("American") pursuant
to which the Company will be merged directly with and into American with
American continuing as the surviving entity. On January 31, 1997, as a result of
the pending merger, the Company's Board of Directors dismissed Ernst & Young LLP
and engaged the firm of Deloitte & Touche LLP, American's independent auditors,
as its independent auditors. Prior to the change, the firm of Ernst & Young LLP
had been the Company's independent auditors. Ernst & Young did not resign, nor
did they decline to stand for reelection. The independent auditors' report on
the financial statements for the years ended December 31, 1994 and 1995,
respectively, did not contain an adverse opinion or a disclaimer of opinion, or
was qualified or modified as to uncertainty, audit scope, or accounting
principles. There was no disagreement(s) with Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure or any "reportable events" as defined in Item 304(a)(i)(v) of
Regulation S-K during the years ended December 31, 1995 and 1994 and the
subsequent period from December 31, 1995 through January 31, 1997.
PART III
The information required by this Part is incorporated by reference
from the registrant's definitive proxy statement (to be filed pursuant to
Regulation 14A).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements.
2. Financial Statement Schedules.
The financial statements and schedule listed in the index to
the Consolidated Financial Statements of the Company that appears on Page 28 of
this Report on Form 10-K are filed as part of this Report.
(b) Reports on Form 8-K filed in the fourth quarter of 1996.
There were no Reports on Form 8-K filed in the fourth quarter
of 1996.
(c) Exhibits
Exhibit
Number Exhibit Title
- ------- -------------
2.01 -- Asset Purchase Agreement dated February 21, 1992 by and between
Professional Broadcasting, Incorporated, a wholly-owned subsidiary
of the Company ("PBI"), and Sundance Broadcasting of Wisconsin, Inc.
(Phoenix sale)(2)
20
<PAGE>
Exhibit
Number Exhibit Title
- ------- -------------
2.02 -- Asset Purchase Agreement dated April 29, 1992 by and among PBI and
Phalen & Associates, Inc. (Jacksonville sale)(2)
2.03 -- Asset Exchange Agreement dated October 15, 1992 between the Company
and WSOC Radio, Inc. (Miami/Charlotte Exchange)(2)
2.04 -- Asset Sale Agreement dated June 30, 1989 by and between PBI and
Americom Las Vegas (Las Vegas sale)(2)
2.05 -- Asset Purchase and Sale Agreement dated October 27, 1993, by and
between KYLO Radio, Inc., the Company and Syndicated Communications
Venture Partners II, L.P. relating to KQBR-FM, Davis, California
(Sacramento Sale)(8)
3.01 -- The Company's Amended and Restated Articles(2)
3.02 -- The Company's Amended and Restated Bylaws(2)
4.01 -- Revised specimen certificate for Class A Common Stock(2)
4.02 -- Revised specimen certificate for Class B Common Stock(2)
4.03 -- Indenture, dated as of November 1, 1986, between the Company and
Crestar Bank, as successor Trustee(2)
4.04 -- Indenture, dated as of November 21, 1995, between the Company and
State Street Bank and Trust Company, as Trustee(15)
4.05 -- Consent Solicitation Statement dated December 2, 1996, of American
Radio Systems Corporation relating to $150,000,000 9.75% Senior
Subordinated Notes due 2005 of the Company*
10.01 -- 1993 Equity Incentive Plan of the Company(2)
10.02 -- Form of Stock Option Agreement of the Company(3)
10.03 -- Form of Stock Option Exercise Agreement of the Company(3)
10.04 -- The Company's Savings and Security Plan(2)
10.05 -- Credit Agreement, dated as of July 29, 1992, between the Company,
PBI, The Chase Manhattan Bank (National Association), The Bank of
California, N.A. and Society National Bank, as amended (the "1992
Credit Facility")(2)
10.06 -- Stock Purchase Agreement dated October 9, 1992 by and among PBI,
Miklos Benedek and KYLO Radio, Inc. (Sacramento purchase)(9)
10.07 -- Time Brokerage Agreement dated as of January 1, 1993 by and between
the Company, as Time Broker, Pittsburgh Partners, L.P., as Licensee,
and Signature Broadcasting Partners, L.P., as Guarantor, relating to
the broadcast time of WMXP-FM, Pittsburgh, Pennsylvania (Pittsburgh
LMA)(2)
21
<PAGE>
Exhibit
Number Exhibit Title
- ------- -------------
10.08 -- Asset Purchase Agreement dated as of January 1, 1993 by and among
the Company, Pittsburgh Partners, L.P. and Signature Broadcasting
Partners, Ltd (Pittsburgh purchase)(10)
10.10 -- Employment Agreement between the Company and Arthur C. Kellar dated
as of June 8, 1993 (the "Kellar Employment Agreement")(2)
10.11 -- Employment Agreement between the Company and Alan L. Box dated as of
June 8, 1993 (the "Box Employment Agreement)(2)
10.12 -- Form of Indemnity Agreement entered into by the Company with each of
its directors and executive officers(2)
10.13 -- Amendment No. 3, dated as of July 12, 1993, to the 1992 Credit
Facility(2)
10.14 -- Amendment No. 4, dated as of August 10, 1993, to the 1992 Credit
Facility(2)
10.15 -- Asset Purchase Agreement dated September 29, 1993, by and between
PBI and Pacific and Southern Company, Inc. relating to KUSA-AM and
KSD-FM, St. Louis, Missouri (St. Louis purchase)(4)
10.16 -- Local Marketing Agreement dated September 29, 1993, by and between
PBI and Pacific and Southern Company, Inc. relating to KUSA-AM and
KSD-FM, St. Louis, Missouri (St. Louis LMA)(4)
10.17 -- Agreement of Sale dated October 4, 1993, by and between PBI and
Nationwide Communications Inc. relating to KNCI-FM, Sacramento,
California (Sacramento purchase)(4)
10.18 -- Sales and Services Agreement dated October 4, 1993, by and between
PBI and Nationwide Communications Inc. relating to KNCI-FM,
Sacramento, California (Sacramento services agreement)(4)
10.20 -- Time Brokerage Agreement dated November 10, 1993, by and between
KYLO Radio, Inc. and Syndicated Communications Venture Partners II,
L.P. relating to KQBR-FM, Davis, California (Sacramento LMA)(4)
10.21 -- Amendment No. 5, dated as of December 17, 1993, to the 1992 Credit
Facility(5)
10.22 -- Asset Purchase Agreement dated April 7, 1994 by and between PBI and
CLG Media, Inc. of Seattle, and CLG Media, Inc., relating to
KZOK-FM, Seattle, Washington (Seattle purchase)(6)
10.23 -- Amendment No. 6, dated as of April 12, 1994, to the 1992 Credit
Facility(6)
10.24 -- Amendment No. 7, dated as of April 20, 1994, to the 1992 Credit
Facility(6)
10.25 -- Asset purchase agreement dated as of May 6, 1994, by and between PBI
and Tak Communications, Inc. relating to WUSL-FM, Philadelphia,
Pennsylvania, and WTPX-FM, Ft. Lauderdale, Florida(6) Exhibit Number
Exhibit Title
22
<PAGE>
Exhibit
Number Exhibit Title
- ------- -------------
10.26 -- Time Brokerage Agreement dated as of May 6, 1994, by and between
PBI, as Broker, and Tak Communications, Inc., as
Debtor-in-Possession ("Licensee") relating to the broadcast time of
WUSL-FM, Philadelphia, Pennsylvania (Philadelphia LMA)(6)
10.27 -- Time Brokerage Agreement dated as of May 6, 1994, by and between
PBI, as Broker, and Tak Communications, Inc., as
Debtor-in-Possession ("Licensee") relating to the broadcast time of
WTPX-FM, Miami, Florida (Miami LMA)(6)
10.28 -- Asset Purchase Agreement dated as of August 2, 1994, by and between
PBI and the Seventies Broadcasting Corporation relating to WTPX-FM,
Miami/Ft. Lauderdale (Miami/Ft. Lauderdale sale)(1)
10.29 -- Amendment No.8, dated as of August 9, 1994, to the 1992 Credit
Facility(11)
10.30 -- Credit Agreement, dated as of October 11, 1994, between the Company,
the Subsidiary Guarantors and The Chase Manhattan Bank (National
Association), individually and as agent for other banks (the "1994
Credit Facility")(12)
10.31 -- Asset Purchase Agreement dated as of November 28, 1994, by and
between PBI and Radio Vanderbilt, Inc. relating to WBYU-AM, New
Orleans, Louisiana (WBYU purchase)(13)
10.32 -- Amendment No. 1, dated as of December 15, 1994, to the 1994 Credit
Facility(13)
10.33 -- Asset Purchase Agreement dated as of December 19, 1994, by and
between PBI and Radio WRNO-FM, Inc. relating to WRNO-FM, New
Orleans, Louisiana (WRNO purchase)(13)
10.34 -- Local Marketing Agreement dated as of December 19, 1994, by and
between PBI and Radio WRNO-FM, Inc. relating to WRNO-FM, New
Orleans, Louisiana (WRNO LMA)(13)
10.35 -- Asset Purchase Agreement dated as of January 6, 1995, by and among
PBI and Noble Broadcast of Kansas City, Inc. relating to KBEQ AM/FM,
Kansas City, Missouri (KBEQ Purchase)(13)
10.36 -- Option and Asset Purchase Agreement dated as of January 6, 1995, by
and among PBI and the Company, and KFKF Broadcasting, Inc. and
Intracoastal Broadcasting, Inc. relating to KFKF-FM, Kansas City,
Missouri (KFKF purchase)(13)
10.37 -- Time Brokerage Agreement dated as of March 10, 1995, by and between
PBI and KFKF Broadcasting, Inc. relating to KBEQ AM/FM (Kansas City
LMA)(13)
10.38 -- KFKF Option Agreement dated as of January 6, 1995, by and among PBI,
the Company, KFKF Broadcasting, Inc. and Intracoastal Broadcasting,
Inc. as amended (KFKF Option)(14)
10.39 -- Amendment No.1, dated as of June 1, 1995, to the Kellar Employment
Agreement(14)
10.40 -- Amendment No.1, dated as of June 1, 1995, to the Box Employment
Agreement(14) Exhibit Number Exhibit Title
23
<PAGE>
Exhibit
Number Exhibit Title
- ------- -------------
10.41 -- Credit Agreement, dated as of November 20, 1995, between the
Company, the Subsidiary Guarantors and the Chase Manhattan Bank
(National Association), individually and as agent for other banks
(the "1995 Credit Facility")(15)
10.42 -- Asset Purchase Agreement, dated as of February 7, 1996 by and
between PBI and Infinity Broadcasting Corporation of Washington
relating to KYCW-FM (KYCW purchase)(15)
10.43 -- Amended and Restated Asset Purchase Agreement, dated as of March 15,
1996, by and between PBI and Infinity Broadcasting Corporation of
Washington related to KYCW-FM(15)
10.44 -- Asset Exchange Agreement, dates as of March 31, 1996, by and between
PBI and EZ New Orleans, Inc. and Heritage Media, Inc. ("HMI")
relating to WEZB-FM, WRNO-FM, WBYU-AM, KCIN-FM and KRPM-AM (the New
Orleans/Seattle Exchange)(16)
10.45 -- Time Brokerage Agreement, dated as of March 18, 1996, by and between
EZ New Orleans, Inc. and HMI relating to WEZB-FM, WRNO-FM and
WBYU-AM (the New Orleans TBA)(16)
10.46 -- Time Brokerage Agreement, dated as of March 18, 1996, by and between
HMI and PBI relating to KCIN-FM and KRPM-AM (the KCIN/KRPM TBA)(16)
10.47 -- Asset Purchase Agreement, dated as of April 5, 1996, by and among
Par Broadcasting Company, Inc. and PBI, relating to KEZK-FM and
KFNS-AM, St. Louis (KEZK purchase)(16)
10.48 -- Time Brokerage Agreement, dated as April 5, 1996, by and between PBI
and Par Broadcasting Company, Inc., relating to KEZK-FM and KFNS-AM,
St. Louis (KEZK TBA)(16)
10.49 -- Agreement and Plan of Merger dated as of August 5, 1996, and as
amended and restated as of September 27, 1996, by and between the
Company and American Radio Systems Corporation (the "Merger
Agreement")(17)
10.50 -- The EZ Voting Agreement (17)
10.51 -- The American Voting Agreement (17)
10.52 -- Settlement Agreement dated November 9, 1996, by and among EZ
Pittsburgh, Inc., Allegheny Communications Group, Inc. ("AGCI") and
AGCI's officers, directors, and shareholders (18)
10.53 -- Joint Request for Approval of Settlement Agreement, dated November
12, 1996, by EZ Pittsburgh, Inc. and Allegheny Communications Group,
Inc. (18)
10.54 -- Asset Purchase Agreement, dated as of December 12, 1996, by and
between PBI, EZ Seattle, Inc. and Inspiration Media, Inc., relating
to KMPS-AM (KMPS-AM Sale) *
24
<PAGE>
Exhibit
Number Exhibit Title
- ------- -------------
10.55 -- Asset Purchase Agreement, dated as of November 18, 1996, by and
among Charter Communications Radio of St. Louis, L.L.C., PBI and EZ
St. Louis, Inc., related to KSD-AM (KSD-AM Sale) *
10.56 -- Local Marketing Agreement, dated as of January 17, 1997, by and
between PBI, EZ St. Louis, Inc. and KSD-AM, L.L.C., relating to
KSD-AM, St. Louis (KSD LMA) *
10.57 -- Asset Exchange Agreement, dated as of December 5, 1996, by and among
EZ, PBI, EZ Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte, Evergreen Media
Corporation of the East, Evergreen Media Corporation of
Carolinaland, WBAV/WBAV-FM/WPEG License Corp. and WRFX License Corp.
related to WIOQ-FM, WUSL-FM, WBAV-AM, WBAV-FM, WPEG-FM and WRFX-FM
(the Philadelphia/Charlotte Exchange) *
10.58 -- Asset Purchase Agreement, dated as of December 5, 1996, by and among
EZ, PBI, EZ Charlotte, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of the East, and Evergreen
Media Corporation of Carolinaland related to WNKS-FM (WNKS Purchase)
*
10.59 -- Asset Exchange Agreement, dated as of February 25, 1997, by and
between EZ, PBI, EZ Philadelphia, Inc., SFX Broadcasting, Inc. and
SFX Holdings, Inc. relating to WRFX-FM and WDSY-FM (the
Charlotte/Pittsburgh Exchange) *
19.02 -- The Company's 1993 Annual Report to Shareholders(7)
19.03 -- The Company's Proxy Statement dated March 31, 1995 and filed with
the Securities and Exchange Commission on March 31, 1995(13)
19.04 -- The Company's 1994 Annual Report to Shareholders(13)
19.05 -- The Company's Proxy Statement dated March 29, 1996 and filed with
the Securities and Exchange Commission on March 29, 1996(15)
19.06 -- The Company's 1995 Annual Report to Shareholders(15)
23.01 -- Consent of Deloitte & Touche LLP, Independent Auditors*
23.02 -- Consent of Ernst & Young LLP, Independent Auditors*
24.01 -- Powers of Attorney
* Filed herewith.
- ----------
(1) Incorporated by reference to similarly numbered exhibit in the Company's
Registration Statement on Form S-1 (File No. 33-82392) originally filed
with the Securities and Exchange Commission on August 3, 1994.
(2) Incorporated by reference to similarly numbered exhibit in the Company's
Registration Statement on Form S-1 (File No. 33-64226) originally filed
with the Securities and Exchange Commission on June 10, 1993, as amended
("1993 S-1").
25
<PAGE>
(3) Incorporated by reference to similarly numbered exhibit in the Company's
Form 10-Q for the quarterly period ended June 30, 1993 (File No.
0-16265) originally filed with the Securities and Exchange Commission on
September 17, 1993, as amended.
(4) Incorporated by reference to similarly numbered exhibit in the Company's
Form 10-Q for the quarterly period ended September 30, 1993 (File No.
0-16265) originally filed with the Securities and Exchange Commission on
November 15, 1993, as amended.
(5) Incorporated by reference to similarly numbered exhibit in the Company's
Form 8-K as of February 10, 1994 (File No. 0-16265) originally filed
with the Securities and Exchange Commission on February 25, 1994.
(6) Incorporated by reference to similarly numbered exhibit in the Company's
Form 10-Q for the quarterly period ended March 31, 1994 (File No.
0-16265) originally filed with the Securities and Exchange Commission on
May 13, 1994.
(7) Incorporated by reference to similarly numbered exhibit in the Company's
Form 10-K as of December 31, 1993 (File No. 0-16265) originally filed
with the Securities and Exchange Commission on March 31, 1994.
(8) Incorporated by reference to Exhibit 10.19 in the September 30, 1993
Form 10-Q.
(9) Incorporated by reference to Exhibit 2.05 in the 1993 S-1.
(10) Incorporated by reference to Exhibit 2.06 in the 1993 S-1.
(11) Incorporated by reference to similarly numbered exhibit in the Company's
Form 8-K as of August 23, 1994 (File No. 0-16265) originally filed with
the Securities and Exchange Commission on September 2, 1994.
(12) Incorporated by reference to similarly numbered exhibit in the Company's
Form 8-K as of October 12, 1994 (File No. 0-16265) originally filed with
the Securities and Exchange Commission on October 27, 1994.
(13) Incorporated by reference to similarly numbered exhibit in the Company's
Form 10-K as of December 31, 1994 (File No. 0-16265) originally filed
with the Securities and Exchange Commission on March 31, 1995.
(14) Incorporated by reference to Exhibit 2.01 in the Company's Registration
Statement on Form S-3 (File No. 33-98450) originally filed with the
Securities and Exchange Commission on October 20, 1995, as amended
("1995 S-3").
(15) Incorporated by reference to similarly numbered exhibit in the Company's
Form 10-K as of December 31, 1995 (File No. 0-16265) originally filed
with the Securities and Exchange Commission on March 29, 1996.
(16) Incorporated by reference to similarly numbered exhibit in the Company's
Form 10-Q for the quarterly period ended March 31, 1996 (File No.
0-16265) originally filed with the Securities and Exchange Commission on
May 15, 1996.
(17) Incorporated by reference to similarly numbered exhibit in the Company's
Form 10-Q for the quarterly period ended June 30, 1996 (File No.
0-16265) originally filed with the Securities and Exchange Commission on
August 14, 1996.
(18) Incorporated by reference to similarly numbered exhibit in the Company's
Form 10-Q/A for the quarterly period ended September 30, 1996 (File No.
0-16265) originally filed with the Securities and Exchange Commission on
December 9, 1996.
26
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
COVERED BY INDEPENDENT AUDITORS' REPORT
Item 14(a)
(1) Independent Auditors' Reports...........................................F-1
Consolidated balance sheets as of December 31, 1996 and 1995............F-3
Consolidated statements of operations for each of the years in the
three-year period ended December 31, 1996..............................F-4
Consolidated statements of shareholders' equity for each of the years
in the three-year period ended December 31, 1996.......................F-5
Consolidated statements of cash flows for each of the years in the
three-year period ended December 31, 1996..............................F-6
Notes to consolidated financial statements..............................F-7
Financial statement schedule for each of the years in the three-year
period ended December 31, 1996
(2) Valuation and qualifying accounts......................................F-16
All other schedules have been omitted because the required information
either is not applicable or is shown in the financial statements or notes
thereto.
28
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
EZ Communications, Inc.
We have audited the accompanying consolidated balance sheet of EZ
Communications, Inc. and subsidiary as of December 31, 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year then ended. Our audit also included the 1996 financial statement
schedule listed at the Index for Item 14(a). These financial statements and
financial statement schedule are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of EZ Communications, Inc. and
subsidiary at December 31, 1996, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles. Also, in our opinion, such 1996 financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 26, 1997
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
EZ Communications, Inc.
We have audited the accompanying consolidated balance sheet of EZ
Communications, Inc. as of December 31, 1995, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the two years
in the period ended December 31, 1995. Our audits also included the 1994 and
1995 financial statement schedule listed in Item 14(a). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of EZ
Communications, Inc. at December 31, 1995, and the consolidated results of its
operations and its cash flows for the two years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Washington, D.C.
February 9, 1996
F-2
<PAGE>
EZ COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
<TABLE>
<CAPTION>
December 31,
ASSETS 1996 1995
---------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,053 $ 33,275
Accounts receivable, less allowance of $1,029 and $772 at
December 31, 1996 and 1995, respectively 23,659 16,678
Trade receivables - barter 1,465 933
Prepaid expenses and other current assets 3,571 3,674
--------- --------
TOTAL CURRENT ASSETS 31,748 54,560
NOTES RECEIVABLE 637 653
PROPERTY, PLANT AND EQUIPMENT
Land 1,577 1,451
Buildings and improvements 13,380 8,710
Broadcast equipment 23,189 21,032
Furniture and other equipment 7,177 9,936
Construction in progress 841 249
--------- --------
46,164 41,378
Less accumulated depreciation 16,007 21,456
--------- --------
30,157 19,922
INTANGIBLE ASSETS
Goodwill and broadcast licenses 229,029 132,730
Purchased contracts and other 6,497 6,280
--------- --------
235,526 139,010
Less accumulated amortization 20,111 15,896
--------- --------
215,415 123,114
OTHER ASSETS 6,451 7,007
--------- --------
$ 284,408 $205,256
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,249 $ 1,537
Accrued merger costs 8,940
Accrued expenses 2,761 2,797
Accrued interest 2,075 1,643
Deferred income 1,019 1,203
Current portion of long-term debt 9,900
--------- --------
TOTAL CURRENT LIABILITIES 26,944 7,180
LONG-TERM DEBT, LESS CURRENT PORTION 211,445 148,833
DEFERRED INCOME TAXES 7,871 7,944
OTHER LIABILITIES 16
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock, no par value, authorized 1,000,000 shares, no shares
issued and outstanding
Class A Common Stock, par value $.01 per share, authorized 25,000,000
shares, issued and outstanding 6,444,744 shares
at December 31, 1996 and 6,378,824 shares at December 31, 1995 65 64
Class B Common Stock, par value $.01 per share, authorized
5,000,000 shares, issued and outstanding 2,697,897 shares
at December 31, 1996 and 2,677,897 shares at December 31, 1995 27 27
Additional paid-in capital 39,744 38,194
(Accumulated deficit) retained earnings (1,688) 2,998
--------- --------
38,148 41,283
--------- --------
$ 284,408 $205,256
========= ========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
EZ COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Gross broadcasting revenue $ 121,219 $ 95,642 $ 75,793
Less: agency commissions 15,256 11,974 9,780
--------- -------- --------
Net broadcasting revenue 105,963 83,668 66,013
Broadcasting expenses
Program expenses 30,863 26,379 18,861
Selling expenses 26,536 19,110 15,280
General and administrative expenses 7,905 8,084 6,936
Technical expenses 2,780 2,079 1,874
--------- -------- --------
Total broadcasting expenses 68,084 55,652 42,951
Station Operating Income Before Corporate Expenses, Merger Costs,
Depreciation and Amortization 37,879 28,016 23,062
Corporate expenses 3,808 3,556 3,325
Merger costs 10,433
Depreciation and amortization 9,104 6,757 5,388
--------- -------- --------
Operating Income 14,534 17,703 14,349
Other (expenses) income
Interest expense (20,360) (10,799) (5,313)
Loss on sale of building (860)
Other income (expenses), net (450) (685) 316
--------- -------- --------
(20,810) (11,484) (5,857)
(Loss) Income Before Taxes and Extraordinary Item (6,276) 6,219 8,492
Federal and state income tax expense (benefit)
Current (1,517) 1,915 3,441
Deferred (73) 1,060 229
--------- -------- --------
(1,590) 2,975 3,670
(Loss) Income Before Extraordinary Item (4,686) 3,244 4,822
Loss on extinguishment of debt, less applicable
income tax benefit of $918 and $878 (1,001) (1,343)
--------- -------- --------
Net (Loss) Income $ (4,686) $ 2,243 $ 3,479
========= ======== ========
(Loss) income per common share
(Loss) income before extraordinary item $ (0.52) $ 0.36 $ 0.54
Extraordinary item (0.11) (0.15)
--------- -------- --------
Net (Loss) Income Per Common Share $ (0.52) $ 0.25 $ 0.39
========= ======== ========
Weighted average common shares outstanding 9,096 9,029 8,969
========= ======== ========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
EZ COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Class A Class B
Common Common Retained
Stock Stock Additional Earnings
------------------------------- Paid-In (Accumulated
Shares Amount Shares Amount Capital Deficit) Total
------ ------ ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 6,291 $63 2,678 $27 $37,055 $(2,724) $34,421
Net income for year 3,479 3,479
------------------------------------------------------------------------------------
Balance at December 31, 1994 6,291 63 2,678 27 37,055 755 37,900
Net income for year 2,243 2,243
Exercise of employee stock
options 88 1 1,139 1,140
------------------------------------------------------------------------------------
Balance at December 31, 1995 6,379 64 2,678 27 38,194 2,998 41,283
Net loss for year (4,686) (4,686)
Grant of compensatory options 433 433
Transfer of Class A shares
to Class B shares (20) 20
Exercise of employee stock
options 86 1 1,117 1,118
------------------------------------------------------------------------------------
Balance at December 31, 1996 6,445 $65 2,698 $27 $39,744 $(1,688) $38,148
==================================================================================
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
EZ COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net (loss) income $(4,686) $2,243 $3,479
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 9,104 6,757 5,388
Provision for losses on accounts receivable 898 654 382
Provision for deferred income taxes (73) 1,060 229
Extraordinary item-loss on extinguishment of debt 1,919 2,221
Loss on sale of building 860
Other 433
Changes in operating assets and liabilities:
Increase in accounts receivable (7,879) (3,358) (4,472)
Decrease (increase) in refundable income taxes,
prepaids and other current assets 103 (2,055) 483
Increase (decrease) in accounts payable and accrued
liabilities 1,761 (307) 1,835
Accrued merger costs 8,940
Other (1,818) 226 (446)
------------- -------------- ------------------
Net Cash Provided By Operating Activities 6,783 7,139 9,959
Investing Activities
Proceeds from sale of radio stations 21,250 2,500
Purchases of property, plant and equipment (6,999) (2,834) (3,015)
Purchase of radio stations (102,000) (16,250) (86,080)
Proceeds from notes receivable 16 3,017
Increase in note receivable (670)
Other (1,540) (935) (1,040)
------------- -------------- ------------------
Net Cash (Used In) Provided By Investing Activities (110,523) 4,248 (88,305)
Financing Activities
Proceeds from issuance of Senior Subordinated Notes 148,814
Proceeds from long-term debt 86,300 21,000 161,500
Principal payments on debt (13,900) (145,500) (80,369)
Proceeds from exercise of employee stock options 1,118 1,140
Costs associated with the issuance of Senior
Subordinated Notes (4,997)
Costs associated with refinancing (1,292) (2,061)
------------- -------------- ------------------
Net Cash Provided By Financing Activities 73,518 19,165 79,070
------------- -------------- ------------------
(Decrease) Increase In Cash (30,222) 30,552 724
Cash At Beginning of Year 33,275 2,723 1,999
------------- -------------- ------------------
Cash At End of Year $3,053 $33,275 $2,723
============= ============== ==================
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
EZ COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of EZ Communications, Inc. (the "Company") and its wholly-owned
subsidiary, Professional Broadcasting, Incorporated, a radio broadcasting
corporation. Wholly-owned subsidiaries of Professional Broadcasting,
Incorporated include EZ St. Louis, Inc., EZ Pittsburgh, Inc., EZ Charlotte,
Inc., EZ Philadelphia, Inc., EZ New Orleans, Inc. , EZ Sacramento, Inc., EZ
Seattle, Inc. and EZ Kansas City, Inc. (collectively the "license
subsidiaries"), all of which are non-operating corporations whose sole assets
are the licenses granting the Company the right to broadcast in that particular
radio market. All significant intercompany balances and transactions have been
eliminated.
Merger of the Company: In August 1996, the Company entered into a merger
agreement (as amended in September 1996) with American Radio Systems Corporation
("American") pursuant to which the Company will either be merged with and into a
subsidiary of American or the Company will be merged directly with and into
American with American continuing as the surviving entity. Pursuant to the
merger agreement, each holder of the Company's Common Stock will receive (i)
$11.75 in cash and (ii) 0.9 shares of American's Class A Common Stock per share.
Consummation of the merger, which is expected in the second quarter of 1997, is
subject to the consent of the Federal Communications Commission ("FCC"). Costs
expected to be incurred as a result of the merger totaling $10,433,000 have been
provided for in the current period and consist primarily of professional fees,
compensation to employees of the Company and regulatory related costs. Included
in this total is $4,500,000 which will be paid pursuant to a license renewal
proceeding.
Stock-Based Compensation: In October 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("FAS") No. 123
"Accounting for Stock-Based Compensation". The Company adopted FAS 123 during
the year ended December 31, 1996. FAS 123 addresses the financial accounting and
reporting standards for stock-based employee compensation plans. FAS 123 permits
an entity to either record the effects of stock-based employee compensation
plans in its financial statements or present pro forma disclosures in the notes
to the financial statements. The Company has elected to provide the appropriate
disclosures in the notes to the financial statements; therefore, the adoption of
FAS 123 did not impact the Company's results of operations, liquidity or
financial position.
Property, Plant and Equipment: Property, plant and equipment are stated on the
basis of cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets, ranging from three to fifteen
years for broadcasting equipment and for furniture and other equipment, and from
five to twenty years for buildings and improvements. Expenditures for
maintenance and repairs are charged to operations as incurred.
Intangible Assets: Intangible assets are stated on the basis of cost and are
amortized using the straight-line method. Goodwill and broadcast licenses are
amortized over 40 years and purchased contracts are amortized over the lives of
the contracts
Long-Lived Assets: The carrying values for property, plant and equipment,
goodwill, broadcast licenses and other long-lived assets are evaluated annually
to determine whether circumstances warrant their revision in accordance with FAS
No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of".
Trade Receivables--Barter and Deferred Income: In the course of business, the
Company trades air time for goods and services used principally for promotional
sales and other business activities. An asset and a liability (deferred income)
are recorded at the fair market value of the goods or services received. Barter
revenue is recorded and the liability relieved when commercials are broadcast,
and barter expense is recorded and the asset relieved when the goods or services
are received or used.
F-7
<PAGE>
Interest Rate Swap and Cap Agreements: Interest rate swap and cap agreements are
entered into primarily as a hedge against interest exposure on variable rate
debt. The differences to be paid or received on swap and cap agreements are
included in interest expense. The Company does not enter into swap or cap
agreements for trading purposes.
Income Taxes: Deferred taxes are provided to reflect temporary differences in
bases between book and tax assets and liabilities and net operating loss
carryforwards. Deferred tax assets and liabilities are measured using currently
enacted tax rates.
Advertising Expenses: The Company expenses advertising costs as they are
incurred.
Revenue Recognition: Revenue is recognized as commercials are broadcast. The
Company's revenues vary throughout the year. The Company's first calendar
quarter historically produces the lowest revenues for the year, while each of
the other quarters produces roughly equivalent revenues.
Concentration of Credit Risk: The Company extends credit to customers on an
unsecured basis in the normal course of business. No individual industry or
industry segment is significant to the Company's customer base. The Company has
policies governing the extension of credit and collection of amounts due from
customers.
Net Income (Loss) Per Common Share: Net income (loss) per common share is based
on the weighted average number of common shares outstanding during each period.
For 1996, outstanding stock options were anti-dilutive and thus not included in
the calculation of net loss per common share.
Cash and Cash Equivalents: For financial reporting purposes, the Company
considers all highly liquid investments with a maturity of three months or less,
when purchased, to be cash equivalents.
Corporate Expenses: Corporate expenses consist of corporate overhead costs not
specifically allocable to any of the Company's individual business properties.
Significant Estimates: In the process of preparing its financial statements, the
Company estimates the appropriate carrying value of certain assets and
liabilities which are not readily apparent from other sources. The primary
estimates underlying the Company's financial statements include allowances for
potential bad debts on accounts receivable, the useful lives of its assets such
as property and intangibles and the realization of deferred tax assets.
Management bases its estimates on certain assumptions, which they believe are
reasonable in the circumstances, and while actual results could differ from
those estimates, management does not believe that any change in those
assumptions in the near term would have a material effect on financial position
or its results of operations.
Reclassifications: Certain prior year amounts have been reclassified to the 1996
presentation.
2--LONG TERM DEBT
Long-term debt at December 31, 1996 and 1995, consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------------------
(in thousands)
<S> <C> <C>
9.75% Senior Subordinated Notes due 2005, net of unamortized
discount of $1,055,000 and $1,167,000 at December 31, 1996 and
1995, respectively $148,945 $148,833
$125,000,000 Credit Facility, at various amounts over the
LIBOR rate (average rate of 7.91% at December 31, 1996) 62,500
Kansas City Notes at 8.49% 9,900 .
-------- --------
221,345 148,833
Less current portion 9,900 .
$211,445 $148,833
======== ========
</TABLE>
F-8
<PAGE>
In November 1995, the Company sold $150,000,000 of 9.75% Senior Subordinated
Notes due 2005 (the "Notes") to the public. The Notes bear interest at a rate of
9.75% per annum, payable semi-annually on June 1 and December 1 of each year,
commencing June 1, 1996. The Notes are redeemable, in whole or in part, at the
option of the Company at any time on or after December 1, 2000, at a redemption
price of 104.875% of the principal amount, plus accrued and unpaid interest to
the date of the redemption. The redemption price reduces over three years to a
redemption price of 100% of the principal amount in 2003 and thereafter. At any
time prior to December 1, 1998, the Company may redeem up to $50,000,000 of the
original aggregate principal amount of the Notes with the net proceeds of one
public offering of common stock at 109.75% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of redemption, as
long as at least $100,000,000 of the original aggregate amount of the Notes
remain outstanding. Upon a change of control, holders of the Notes will have the
right to require the Company to repurchase their Notes at 101% of the principal
amount, thereof, plus accrued and unpaid interest, if any, to the date of the
purchase. The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future senior debt of the
Company. The Notes are guaranteed on a senior subordinated basis by the
Company's subsidiaries.
Net proceeds from the sale of the Notes were used to repay in full all amounts
outstanding under the Company's $135,000,000 Credit Facility (the "Former Credit
Facility"). Unamortized debt issuance costs of $1,919,000 related to the Former
Credit Facility were written off and are presented as an extraordinary loss of
$1,001,000 (net of a $918,000 income tax benefit) in the year ended December 31,
1995.
Concurrent with the sale of the Notes, the Company entered into a new
$125,000,000 Credit Facility (the "Credit Facility"), of which $62,500,000 was
outstanding as of December 31, 1996. The amount available under the Credit
Facility reduces on a scheduled quarterly basis from March 1998 through the
expiration date of December 2002. Additional reductions are required based on
the Company's excess cash flow and upon the occurrence of certain events (as
defined in the Credit Facility), including sales of assets. If drawn upon,
mandatory principal payments will begin in 1998. The commitment fee is 1/2 of 1%
of the unused portion. Substantially all of the Company's assets are pledged to
secure the performance of the Company under the Credit Facility. At December 31,
1996, the maximum amount available under the Credit Facility was $52,600,000.
The Credit Facility is a direct obligation of the Company, ranks senior to the
Notes and is secured by first priority pledges of all of the stock of the
Company and its subsidiaries and security interests in and liens on
substantially all of the assets of the Company and its subsidiaries.
Both the Indenture governing the Notes and the Credit Facility contain certain
financial and operational covenants and other restrictions with which the
Company must comply, including among others, prohibiting the payment of
dividends, limitations on making capital expenditures, incurring additional
indebtedness, redeeming or repurchasing capital stock of the Company,
restrictions on the use of borrowings, requirements to maintain certain
financial ratios and limitations on acquisitions and dispositions of stations in
certain circumstances.
The Company has entered into interest rate swap and cap agreements. At December
31, 1996, interest rate swaps have fixed LIBOR at 7.77 percent on $20,187,500
notional principal amount of the Credit Facility with reducing principal through
December 1997. Also, interest rate caps limit LIBOR to a maximum of 9.75 percent
through December 31, 1997, on $20,187,500 notional principal amount.
The Company paid interest of $3,935,000, $10,825,000 and $18,271,000 for the
years ended December 31, 1994, 1995 and 1996, respectively. Certain payments
required pursuant to Time Brokerage Agreements ("TBA"s) in Seattle and St. Louis
totaling $1,657,000 were included in interest expense during the year ended
December 31, 1996.
Scheduled maturities of long-term debt are as follows (in thousands):
1997 $ 9,900
1998
1999
2000
F-9
<PAGE>
2001 25,000
Thereafter 187,500
--------
$222,400
========
Proceeds from the Company's Former Credit Facility were used to repay all
amounts outstanding under the Company's then existing $70,000,000 Credit
Facility, consummate the acquisition of WUSL-FM Philadelphia and WTPX-FM, Miami
and pay other costs associated with the transactions. Unamortized debt issuance
costs of $2,221,000 related to the $70,000,000 Credit Facility were written off
and are presented as an extraordinary loss of $1,343,000 (net of a $878,000
income tax benefit) in the year ended December 31, 1994.
3--ACQUISITIONS OF RADIO STATIONS
In February 1995, the Company acquired the assets of station WBYU-AM New Orleans
for approximately $1,100,000.
In March 1995, the Company acquired the assets of stations KBEQ AM/FM Kansas
City, Missouri for approximately $7,650,000. The purchase price of the
acquisition was funded from borrowings under the Company's former Credit
Facility. Concurrently with the execution of the agreement to acquire KBEQ
AM/FM, the Company also entered into an option and asset purchase agreement with
an unrelated party to acquire station KFKF-FM Kansas City (the "Kansas City
Acquisition"). Upon the consummation of the acquisition of KBEQ AM/FM, the
Company entered into a Time Brokerage Agreement ("TBA") with the owner of KFKF
to permit the owner to program and market KBEQ AM/FM. In August 1995, the
Company elected to exercise its option to acquire KFKF-FM. The KFKF-FM option
and asset purchase agreement provided for an aggregate purchase price of
$28,000,000, of which $15,000,000 was paid in connection with the closing of the
Kansas City Acquisition, which occurred in January 1996, and $13,000,000 was
financed through the Company's issuance of two promissory notes to the seller of
the station due in December 1996 and January 1997 (the "Kansas City Notes"). The
Kansas City Notes bear interest at 8.49%.
In April 1995, the Company acquired the assets of station WRNO-FM New Orleans
for $7,500,000. The Company had been programming and marketing the station
pursuant to an LMA effective January 1995.
In March 1996, the Company entered into an agreement to acquire the assets of
station KYCW-FM Seattle for $26,000,000. At the same time, the Company began
programming and marketing the station pursuant to a TBA. The purchase price of
the acquisition, which was consummated in May 1996, was funded from borrowings
under the Company's Credit Facility.
In April 1996, the Company entered into an agreement to acquire the assets of
stations KEZK-FM and KFNS-AM St. Louis for $48,000,000. At the same time, the
Company began programming and marketing the stations pursuant to a TBA. The
purchase price of the acquisition, which was consummated in July 1996, was
funded from borrowings under the Company's Credit Facility.
In March 1996, the Company entered into an asset exchange agreement with an
unrelated party, whereby the Company agreed to exchange stations WEZB-FM,
WRNO-FM and WBYU-AM New Orleans and $7,500,000 in cash for stations KBKS-FM
(formerly KCIN-FM) and KRPM-AM Seattle. At the same time, both parties began
programming and marketing the stations pursuant to separate TBA's. The
consummation of the exchange, which is expected to occur in the second quarter
of 1997, is subject to the consent of the Federal Communications Commission
("FCC") and the expiration or earlier termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act")
and will be accounted for as a non-monetary exchange of similar productive
assets; therefore no gain or loss will be recorded for financial reporting
purposes.
The above acquisitions have been accounted for by the purchase method of
accounting. The purchase price has been preliminarily allocated to the assets
acquired based on their estimated fair values at the date of the acquisition.
F-10
<PAGE>
The excess of the purchase price over the estimated fair values of the net
assets acquired has been recorded as goodwill and broadcast licenses.
The operating results of the above transactions are included in the Company's
consolidated results of operations since the date of the acquisition or the
related LMA or TBA, respectively. The following unaudited pro forma summary
presents the consolidated results of operations as if the transactions had
occurred at the beginning of the periods presented and, after giving effect to
the inclusion of depreciation and amortization of assets acquired and interest
expense on the acquisition debt. These pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of what would have
occurred had the acquisition been made as of those dates or results which may
occur in the future (in thousands, except per share data).
Year Ended December 31,
1996 1995
---- ----
(Unaudited)
Net broadcasting revenues $ 108,031 $ 102,859
Net loss before extraordinary items (5,324) (682)
Net loss (5,324) (1,683)
Loss per common share:
Before extraordinary item $ (0.59) $ (0.08)
Extraordinary item (0.00) (0.11)
----------- -----------
Net loss per common share $ (0.59) $ (0.19)
=========== ===========
4--COMMITMENTS
The Company leases office space and certain broadcast facilities and equipment
under long-term operating leases with options to renew. As of December 31, 1996,
the Company's minimum future commitments, under all non-cancelable lease
agreements with terms in excess of one year and other long-term broadcasting
commitments, consisted of the following (in thousands):
1997 $4,470
1998 4,384
1999 4,299
2000 261
2001 112
Thereafter 534
-------
$14,060
=======
Rent expense and amounts related to certain broadcast commitments charged to
operations for the years ended December 31, 1994, 1995 and 1996 was
approximately $1,005,000, $4,134,000 and $5,043,000, respectively.
The Company has entered into numerous employment contracts. In addition, in June
1995 the Company entered into five-year employment agreements with each of
Arthur Kellar and Alan Box. These agreements provide for the Company's Board of
Directors to annually determine the compensation of each. As of December 31,
1996, the Company's minimum future commitments, under all employment agreements
with terms in excess of one year consisted of the following (in thousands):
1997 $ 5,449
1998 2,801
1999 1,754
2000 1,428
2001 414
--------
$ 11,846
========
F-11
<PAGE>
5--INCOME TAXES
The components of income tax (benefit) expense are as follows (in thousands):
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
Current:
Federal $(1,280) $1,678 $2,852
State (237) 237 589
------- ------ ------
(1,517) 1,915 3,441
Deferred:
Federal (62) 1,042 47
State (11) 18 182
------- ------ ------
$ (73) $1,060 $ 229
======= ====== ======
$(1,590) $2,975 $3,670
======= ====== ======
Income tax (benefit) expense is different from the statutory federal income tax
rate for the following reasons (in thousands):
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
Income tax at statutory rate $(2,197) $2,176 $2,972
State income tax, net of federal tax (247) 307 386
Merger costs 1,651
Goodwill amortization (973) 341 359
Other--net 176 151 (47)
------- ------ ------
Income tax (benefit) expense $(1,590) $2,975 $3.670
======= ====== ======
Significant components of the Company's net deferred tax liability as of
December 31, 1996, 1995 and 1994 are as follows (in thousands):
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
Deferred tax liabilities:
Depreciation and amortization $10,173 $7,946 $6,826
Other 491 468 462
------- ------ ------
Total deferred tax liabilities 10,664 8,414 7,288
Deferred tax assets:
Merger costs 2,332
Miscellaneous allowances and accruals 461 470 404
------- ------ ------
Total deferred tax assets 2,793 470 404
------- ------ ------
Net deferred tax liabilities $ 7,871 $7,944 $6,884
======= ====== ======
The Company made income tax payments of $1,428,000 and $1,003,000 in the years
ended December 31, 1994 and 1995, respectively. The Company made no income tax
payments in the year ended December 31, 1996.
6--CAPITAL STOCK
In August and September 1993, the Company, through an initial public offering
(the "Common Stock IPO") sold 3,038,230 shares of previously unissued Class A
Common Stock resulting in net proceeds to the Company of approximately
$35,880,000. In connection with the Common Stock IPO, in June 1993, the
Shareholders approved Amended and Restated Articles of Incorporation (the
"Amended Articles"). Among other things, the Amended Articles created two new
separate classes of common stock: Class A and Class B and authorized the Company
to issue 25,000,000 shares of Class A Common Stock, par value $.01 per share and
5,000,000 shares of Class B Common Stock, par value $.01 per share. All current
shares of common stock were converted into Class A shares
F-12
<PAGE>
with the exception of those shares owned by the two principal shareholders,
which were converted into Class B shares. The rights of these two classes are
essentially identical except that each share of Class B stock has ten votes on
certain matters. Class B Common Stock is convertible into Class A Common Stock
on a share for share basis.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FAS No. 123, "Accounting
for Stock-Based Compensation," requires the use of option valuation models that
were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of a majority of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. During 1996, the Company granted 20,000
stock options to employees which resulted in the recognition of $433,000 of
compensation expense. This amount has been recorded as an increase to additional
paid in capital.
The Company's 1993 Equity Incentive Plan (the "1993 Plan") provides for the
granting of incentive stock options and non qualified stock options and the
awarding of restricted stock and stock bonuses. All options are all immediately
exercisable and terminate on the earlier of termination of the optionee's
employment by the Company or five years after grant. Changes in stock options
outstanding for the years ended December 31, 1994, 1995 and 1996, were as
follows:
Weighted Average
Exercise Price
Shares Per Share
------ ---------
Options outstanding at December 31, 1993 613,000 $ 13.00
Granted
Exercised
Terminated . . .
------- --------
Options outstanding at December 31, 1994 613,000 $ 13.00
Granted
Exercised (87,667) $ 13.00
Terminated . . .
------- --------
Options outstanding at December 31, 1995 525,333 $ 13.00
Granted 105,000 $ 19.69
Exercised (85,920) $ 13.00
Terminated (30,000) $ 19.50
------- --------
Options outstanding at December 31, 1996 514,413 $ 13.99
======= ========
Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Sholes
option pricing model with the following weighted-average assumptions for 1996:
risk-free interest rate of 6.00%; dividend yield of 0.00%; volatility factor of
the expected market price of the Company's common stock of 0.387; and a
weighted-average expected life of the options of 3 years. There were no employee
stock options granted in 1995.
The Black-Sholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the options' vesting period. The Company's pro forma information
follows (in thousands except per share data):
F-13
<PAGE>
1995 1996
---- ----
Pro forma net income (loss) $2,243 $(5,099)
Pro forma earnings (loss) per share $0.25 $(0.56)
The estimated weighted average fair value of compensatory and non-compensatory
option grants made during 1996 was $25.40 per share and $6.43, respectively.
7--CONTINGENCIES
From time to time, the Company becomes involved in various claims and lawsuits
that are incidental to its business. In the opinion of the Company's management,
there are no material legal proceedings pending against the Company except for a
renewal application pending and a license assignment that are being challenged.
The Company is contesting these challenges vigorously and believes that
ultimately it will prevail and the renewal application will be granted and the
license assignment will be affirmed.
8--RELATED PARTY TRANSACTIONS
Since 1985, the Company has leased a portion of the building in which its
headquarters are located from EZ Limited Partnership. The aggregate monthly
lease payments to EZ Limited Partnership under the Company's lease have been, in
the Company's opinion, no less favorable than rates that could have been
negotiated with unrelated parties in the area. EZ Limited Partnership, of which
the Company owned a 10% partnership interest through November 1996, was formed
in April 1984 to construct and own the Company's headquarters building. The
other limited partners are either directors of the Company, former directors of
the Company, or shareholders of the Company. In November 1996, the Company
bought out the other partners for total cash consideration of $267,000 and the
assumption of the partnership debt of approximately $1,450,000. In December
1996, the Company retired the mortgage associated with the building and reduced
the carrying value of the building to its estimated market value.
9--FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The fair value estimates presented herein
are based on pertinent information available to management as of December 31,
1995 and 1996. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts have not
been comprehensively revalued for purposes of these financial statements since
that date, and current estimates of fair value may differ significantly from the
amounts presented herein.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and cash equivalents, accounts receivable, accounts payable,
accrued expenses and other liabilities -- These carrying amounts
approximate fair value because of the short-term nature of these financial
instruments.
Long-term debt -- The fair value of long-term debt is estimated based
on current market rates and instruments with the same risk and maturities.
The fair value of long-term debt approximated the carrying value at
December 31, 1996.
Interest rate protection agreements -- The fair value of these
agreements are obtained from dealer quotes. These values represent the
estimated amount the Company would receive or pay to terminate the
agreements
F-14
<PAGE>
taking into consideration the current interest rates. The Company could
expect to pay $408,000 to terminate the swap and cap agreements outstanding
at December 31, 1996.
10--SUBSEQUENT EVENTS
In December 1996, the Company entered into an asset exchange agreement with an
unrelated party, whereby the Company will exchange stations WIOQ-FM and WUSL-FM
Philadelphia for stations WRFX-FM, WPEG-FM, WBAV-FM, WBAV-AM, and WFNZ-AM
Charlotte, and an asset purchase agreement to purchase station WNKS-FM Charlotte
for approximately $10 million. Consummation of the asset exchange agreement is
not conditioned on consummation of the asset purchase agreement, although
consummation of the asset purchase agreement is conditioned on consummation of
the asset exchange agreement. In order, among other things, to meet applicable
FCC requirements, the Company is required to place station WRFX-FM Charlotte in
an insulated voting trust or sell the station. In December 1996, the Company
sought authority to place the station in a trust. In February 1997, the Company
entered into an asset exchange agreement with an unrelated party, whereby the
Company will exchange station WRFX-FM Charlotte for station WDSY-FM Pittsburgh
and $20 million cash consideration. Consummation of the exchanges and
acquisition, which are expected in the second or third quarters of 1997, is
subject to the consent of the FCC and the expiration or earlier termination of
the HSR waiting periods.
In December 1996, the Company entered into an agreement to sell the assets of
KMPS-AM Seattle for approximately $2 million. Consummation of the transaction,
which is expected to close in the second quarter of 1997, is subject to the
consent of the FCC.
In November 1996, the Company entered into an agreement to sell the assets of
KTRS-AM, formerly KSD-AM, St. Louis for approximately $10 million. In January
1997, the buyer began programming and marketing the station pursuant to an LMA.
Consummation of the transaction, which is expected to close in the second
quarter of 1997, is subject to certain conditions, including the consent of
certain third parties, and the Federal Communications Commission's approval of
the transfer of the broadcast license.
F-15
<PAGE>
EZ COMMUNICATIONS, INC.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------------------------------
Balance Charged to Balance
at Beginning Costs and at End
Description of Period Expenses Deductions(1) of Period
----------- --------- -------- ------------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended December 31, 1996 $772,000 898,000 (641,000) $1,029,000
Year ended December 31, 1995 $754,000 654,000 (636,000) $772,000
Year ended December 31, 1994 $629,000 382,000 (257,000) $754,000
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
F-16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 31st day of
March, 1997.
EZ COMMUNICATIONS, INC.
By: /s/ Alan Box*
--------------------------
Alan Box
Chief Executive Officer,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C> <C>
/s/ Arthur Kellar* March 31, 1997 /s/ Alan Box* March 31, 1997
- ------------------------------------ -------------- ----------------------------------- --------------
Arthur Kellar Date Alan Box Date
Chairman of the Board Chief Executive Officer,
President and Director
/s/ Ronald H. Peele, Jr.* March 31, 1997 /s/ Woodley A. Allen* March 31, 1997
--------------------------------- -------------- ---------------------------------- --------------
Ronald H. Peele, Jr. Date Woodley A. Allen Date
Vice President, Secretary and Director
Treasurer +
/s/ C. Barrie Cook* March 31, 1997 /s/ George W. Johnson* March 31, 1997
----------------------------------- -------------- ----------------------------------- --------------
C. Barrie Cook Date George W. Johnson Date
Director Director
/s/ John W. King* March 31, 1997 /s/ James R. McKay* March 31, 1997
----------------------------------- -------------- ----------------------------------- --------------
John W. King Date James R. McKay Date
Director Director
/s/ Glenn W. Saunders, Jr.* March 31, 1997
- ------------------------------------ --------------
Glenn W. Saunders, Jr. Date
Director
</TABLE>
* By: /s/ Alan Box
----------------------
Alan Box
Attorney-in-fact
- ----------------
+ Mr. Peele also performs the functions of Chief Financial Officer and Chief
Accounting Officer.
ASSET PURCHASE AGREEMENT
(KMPS, Seattle, Washington)
This AGREEMENT (the "Agreement") is dated as of December 12, 1996 by and
between PROFESSIONAL BROADCASTING INCORPORATED ("PBI"), EZ SEATTLE, INC. ("EZ"
and together with PBI, "Seller") and INSPIRATION MEDIA, INC. ("Buyer").
RECITALS:
1. Seller owns and operates radio station KMPS(AM) licensed to Seattle,
Washington (the "Station"), and holds the licenses and authorizations issued by
the FCC for the operation of the Station (including certain licenses to be
reassociated with radio station KPMS-FM).
2. Buyer desires to acquire substantially all the assets of the Station,
and Seller is willing to convey such assets to Buyer.
3. The acquisition of the Station is subject to prior approval of the FCC.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
Seller and Buyer hereby agree as follows:
ARTICLE 1
TERMINOLOGY
1.1 Act. The Communications Act of 1934, as amended.
1.2 Adjustment Amount. As provided in Section 2.7(b), the amount by which
Buyer's account is to be credited or charged, as reflected on the Adjustment
List.
1.3 Adjustment List. As provided in Section 2.7 (b), an itemized list of
all sums to be credited or charged against the account of Buyer, with a brief
explanation in reasonable detail of the credits or charges.
1.4 Assumed Obligations. Such term shall have the meaning defined in
Section 2.3.
1.5 Business Day. Any calendar day, excluding Saturdays and Sundays, on
which federally chartered banks in the city of Camarillo, California, are
regularly open for business.
1
<PAGE>
1.6 Buyer's Threshold Limitation. As provided in Section 9.3 (b), the
threshold dollar amount for the aggregate of claims, liabilities, damages,
losses, costs and expenses that must be incurred by Buyer before Seller shall be
obligated to indemnify Buyer. The Buyer's Threshold Limitation shall be Ten
Thousand Dollars ($10,000).
1.7 Closing. The closing with respect to the transactions contemplated by
this Agreement.
1.8 Closing Date. The date determined as the Closing Date as provided in
Section 8.1.
1.9 Conditional Payment. The amount of Two Hundred Fifty Thousand Dollars
($250,000).
1.10 Documents. This Agreement and all Exhibits and Schedules hereto, and
each other agreement, certificate, or instrument delivered pursuant to or in
connection with this Agreement, including amendments thereto that are expressly
permitted under the terms of this Agreement.
1.11 Earnest Money. The amount of One Hundred Thousand Dollars ($100,000).
1.12 Environmental Assessment. Such term shall have the meaning defined in
Section 5.10.
1.13 Environmental Laws. The Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Clean Water Act, the Clean Air Act and the Toxic Substances Control Act, each as
amended, and any other applicable federal, state and local laws, statutes, rules
or regulations concerning the treating, producing, handling, storing, releasing,
spilling, leaking, pumping, pouring, emitting or dumping of Hazardous Materials.
1.14 Escrow Agent. Gary Stevens & Co., Incorporated.
1.15 Escrow Agreement. The Escrow Agreement in the form attached as
Exhibit A which Seller, Buyer and the Escrow Agent have entered into
concurrently with the execution of this Agreement relating to the deposit,
holding, investment and disbursement of the Earnest Money.
1.16 Excluded Assets. Such term shall have the meaning defined in Section
2.2.
1.17 FCC. Federal Communications Commission.
2
<PAGE>
1.18 FCC Licenses. The licenses, permits and authorizations of the FCC for
the operation of the Station as listed on Schedule 3.8.
1.19 FCC Order. An action, order or decision of the FCC granting its
consent to the assignment of the FCC Licenses to Buyer.
1.20 Final Action. An action of the FCC that has not been reversed,
stayed, enjoined, set aside, annulled or suspended; with respect to which no
timely petition for reconsideration or administrative or judicial appeal or sua
sponte action of the FCC with comparable effect is pending and as to which the
time for filing any such petition or appeal (administrative or judicial) or for
the taking of any such sua sponte action of the FCC has expired.
1.21 Hazardous Materials. Toxic materials, hazardous wastes, hazardous
substances, pollutants or contaminants, asbestos or asbestos-related products,
PCB's, petroleum, crude oil or any fraction or distillate thereof (as such terms
are defined in any applicable federal, state or local laws, ordinances, rules
and regulations, and including any other terms which are or may be used in any
applicable environmental laws to define prohibited or regulated substances).
1.22 Indemnified Party. Any party described in Section 9.3(a) or 9.4(a)
against which any claim or liability may be asserted by a third party which
would give rise to a claim for indemnification under the provisions of this
Agreement by such party.
1.23 Indemnifying Party. The party to the Agreement (not the Indemnified
Party) that, in the event of a claim or liability asserted by a third party
against the Indemnified Party which would give rise to a claim for
indemnification under the provisions of this Agreement, may at its own expense,
and upon written notice to the Indemnified Party, compromise or defend such
claim.
1.24 Lien. Any mortgage, deed of trust, pledge, hypothecation, security
interest, encumbrance, lien, lease or charge of any kind, whether voluntarily
incurred or arising by operation of law or otherwise, affecting any assets or
property, including any written or oral agreement to give or grant any of the
foregoing, any conditional sale or other title retention agreement, and the
filing of or agreement to give any financing statement with respect to any
assets or property under the Uniform Commercial Code or comparable law of any
jurisdiction.
1.25 Material Adverse Condition. A condition which would materially
restrict, limit, increase the cost or burden of or otherwise adversely affect or
materially impair the right of Buyer to the ownership, use, control, enjoyment
or operation of the Station or the proceeds therefrom; provided, however, that
any condition which requires that the Station be operated in accordance with a
condition similar to those contained in
3
<PAGE>
the present FCC licenses issued for operation of the Station shall not be deemed
a Material Adverse Condition.
1.26 OSHA Laws. The Occupational Safety and Health Act of 1970, as
amended, and all other federal, state or local laws or ordinances, including
orders, rules and regulations thereunder, regulating or otherwise affecting
health and safety of the workplace.
1.27 Permitted Encumbrances. For purposes hereof, "Permitted Encumbrances"
shall mean (i) easements, restrictions, and other similar matters which will not
adversely affect the use of the Real Property in the ordinary course of
business; (ii) liens for taxes not due and payable or, that are being contested
in good faith by appropriate proceedings; (iii) mechanics, materialmen's,
carriers', warehousemen's, landlords' or other similar liens in the ordinary
course of business for sums not yet due or being contested in good faith by
appropriate proceedings; (iv) deposits or pledges to secure the performance of
bids, tenders, contracts (other than for borrowed money), leases, statutory
obligations, surety or appeal bonds or other deposits or pledges for purposes of
a like general nature made or given in the ordinary course of business: and (v)
liens or mortgages that will be released at Closing; (vi) zoning ordinances and
regulations, including statutes and ordinances relating to the liens of streets
and to other municipal improvements, which will not adversely affect the use of
the Real Property in the ordinary course of business.
1.28 Permitted Lien. Any statutory lien which secures a payment not yet
due that arises, and is customarily discharged, in the ordinary course of
Seller's business; any easement, right-of-way or similar imperfection in the
Seller's title to its assets or properties that, individually and in the
aggregate, are not material in character or amount and do not and are not
reasonably expected to materially impair the value or materially interfere with
the use of any asset or property of the Seller material to the operation of its
business as it has been and is now conducted.
1.29 Proceedings. The eminent domain proceedings relative to the Harbor
Island Tower site.
1.30 Purchase Price. The consideration to be paid by Buyer to Seller for
purchase of the Sale Assets in an amount equal to One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000).
1.31 Real Property. Such term shall have the meaning defined in Section
3.7.
1.32 Rules and Regulations. The rules of the FCC as set forth in Volume 47
of the Code of Federal Regulations, as well as such other policies of the
Commission, whether contained in the Code of Federal Regulations, or not, that
apply to the Station.
4
<PAGE>
1.33 Sale Assets. All of the tangible and intangible assets to be
transferred by Seller to Buyer as set forth in Section 2.1.
1.34 Station Agreements. The agreements, commitments, contracts, leases
and other items described in Section 2.1(d) which relate to operation of the
Station.
1.35 Seller's Threshold Limitation. As provided in Section 9.4(b), the
threshold dollar amount for the aggregate of claims, liabilities, damages,
losses, costs and expenses that must be incurred by Seller before Buyer shall be
obligated to indemnify Seller. The Seller's Threshold Limitation shall be Ten
Thousand Dollars ($10,000).
1.36 Survival Period. The term following the Closing Date during which all
representations, warranties, covenants and agreements of the parties under this
Agreement shall survive. The term shall be twelve (12) months.
1.37 Tangible Personal Property. The personal property described in
Section 2.1(a).
ARTICLE II
PURCHASE AND SALE
2.1 Sale Assets. On the Closing Date, Seller will sell, transfer, assign
and convey to Buyer, and Buyer will purchase from Seller, free and clear of all
Liens, except Permitted Liens, all of Seller's right, title and interest, legal
and equitable, in and to all tangible and intangible assets (except Excluded
Assets) used or useful in the operation of the Station as it has been and is now
operated, including the following:
(a) Tangible Personal Property. The tangible personal property
listed on Schedules 3.6, together with such modifications, replacements,
improvements and additional items, and subject to such deletions therefrom, made
or acquired between the date hereof and the Closing Date in accordance with the
terms and provisions of this Agreement;
(b) Real Property. Except as provided on Schedule 3.7, seller's
interests in the Real Property and any other real estate or interests therein
acquired by Seller between the date hereof and the Closing Date in accordance
with the terms and provisions of this Agreement including, without limitation,
all right, title and interest of Seller in and to the Station's transmitting
facilities on Harbor Island, Washington and the Proceedings or any award or
damages arising out of the Proceedings.
(c) Licenses and Permits. The FCC Licenses and all other assignable
or transferable governmental permits, licenses and authorizations (and any
renewals, extensions, amendments or modifications thereof) now held by Seller or
hereafter
5
<PAGE>
obtained by Seller between the date hereof and the Closing Date, to the extent
such other permits, licenses and authorizations pertain to or are used in the
operation of the Station.
(d) Station Agreements. All agreements to which Seller is a party or
by which it is bound and which are listed on Schedule 3.9 as agreements which
Buyer is electing to assume; any renewals, extensions, amendments or
modifications of those agreements being assumed which are made in the ordinary
course of Seller's operation of the Station and in accordance with the terms and
provisions of this Agreement; and any additional such agreements, contracts,
leases, commitments or orders (and any renewals, extensions, amendments or
modifications thereof) made or entered into between the date hereof and the
Closing Date in accordance with the terms and provisions of this Agreement and
which Buyer elects to assume in writing including, without limitation, Seller's
rights to enter into an agreement with Bellevue Radio, Inc. to diplex the
Station with radio station KIXI(AM), Seattle, Washington ("KIXI").
(e) Records. True and complete copies of all of the books, records,
accounts, files, logs, ledgers, reports of engineers and other consultants or
independent contractors, pertaining to or used in the operation of the Station
(other than corporate records).
(f) Miscellaneous Assets. Any other tangible or intangible assets,
properties or rights of any kind or nature not otherwise described above in this
Section 2.1 and now or hereafter owned or used by Seller in the operation of the
Station, including but not limited to all goodwill of the Station.
2.2 Excluded Assets. Notwithstanding any provision of this Agreement to
the contrary, Seller shall not transfer, convey or assign to Buyer, but shall
retain all of its right, title and interest in and to, the following assets
owned or held by it on the Closing Date ("Excluded Assets"):
(a) Any and all cash, cash equivalents, cash deposits to secure
contract obligations (except to the extent Seller receives a credit therefor
under Section 2.7, in which event the deposit shall be included as part of the
Sale Assets), all inter-company receivables from any affiliate of Seller and all
other accounts receivable, bank deposits and securities held by Seller in
respect of the Station at the Closing Date.
(b) Any and all claims of Seller with respect to transactions prior
to the Closing including, without limitation, claims for tax refunds and refunds
of fees paid to the FCC.
(c) All prepaid expenses (except to the extent Seller receives a
credit therefor under Section 2.7, in which event the prepaid expense shall be
included as part of the Sale Assets).
6
<PAGE>
(d) All contracts of insurance and claims against insurers.
(e) All employee benefit plans and the assets thereof and all
employment contracts.
(f) All contracts that are terminated in accordance with the terms
and provisions of this Agreement or have expired prior to the Closing Date in
the ordinary course of business; and all loans and loan agreements.
(g) All tangible personal property disposed of or consumed between
the date hereof and the Closing Date in accordance with the terms and provisions
of this Agreement.
(h) Seller's corporate records except to the extent such records
pertain to or are used in the operation of the Station, in which case Seller
shall deliver accurate copies thereof to Buyer.
(i) All commitments, contracts and agreements not specifically
assumed by Buyer pursuant to Section 2.1(d), above.
(j) Any assets jointly owned by Seller and any other entity not
necessary to the conduct of owning and operating the Station.
2.3 Assumption of Liabilities.
(a) At the Closing, Buyer shall assume and agree to perform, without
duplication of Seller's performance, the following liabilities and obligations
of Seller (the "Assumed Obligations"):
(i) Current liabilities of Seller for which Buyer receives a
credit pursuant to Section 2.7, but not in excess of the amount of such credit.
(ii) Liabilities and obligations arising under the Station
Agreements, if any, assumed by and transferred to Buyer in accordance with this
Agreement, but only to the extent such liabilities and obligations relate to any
period of time after the Closing Date.
(b) Except for the Assumed Obligations, Buyer shall not assume or in
any manner be liable for any duties, responsibilities, obligations or
liabilities of Seller of any kind or nature, whether express or implied, known
or unknown, contingent or absolute, including, without limitation, any
liabilities to or in connection with Seller's employees whether arising in
connection with the transaction contemplated hereunder or otherwise.
7
<PAGE>
2.4 Earnest Money.
(a) Concurrently with the execution of this Agreement, Buyer has
deposited with Escrow Agent under the Escrow Agreement, in immediately available
funds, the Earnest Money. The Escrow Agent shall hold the Earnest Money under
the terms of the Escrow Agreement in trust for the benefit of the parties
hereto. Interest and other earnings on the Earnest Money shall be distributed by
the Escrow Agent to Buyer from time to time upon the request of Buyer.
(b) If Closing does not occur, the Earnest Money shall be delivered
to Seller or returned to Buyer in accordance with Section 10.2, and if Closing
does occur, the Earnest Money shall be applied to payment of the Purchase Price
at Closing as provided in Section 2.5.
2.5 Payments.
(a) The Purchase Price shall be paid by Buyer as follows:
(i) At the Closing, the Earnest Money shall, subject to
execution and delivery of the closing documents described in Section 8.2, become
the property of Seller and shall, pursuant to the Escrow Agreement, be disbursed
to Seller by cashier's check or wire transfer of immediately available funds.
(ii) At the Closing the Purchase Price, less the amount of the
Earnest Money disbursed to Seller, shall be paid to Seller at Closing by wire
transfer of immediately available funds.
(b) In the event Closing occurs and each of the following, within
Twenty Four (24) months of Closing, also occurs: (i) Buyer, in its sole and
absolute discretion, enters into an agreement with Bellevue Radio, Inc., and
(ii) the Station shall have received all necessary approvals of the FCC to so
diplex, and (iii) the Station shall thereafter diplex with KIXI in accordance
with the maximum authorized facilities permitted by the FCC pursuant to the
Station's FCC License then, and only then, shall the conditions precedent to
Buyer's obligation to pay the Conditional Payment be satisfied. Within thirty
(30) days after the satisfaction of the conditions precedent to Buyer's
obligation to pay the Conditional Payment, Buyer shall pay the Conditional
Payment to Seller.
(c) Buyer shall pay to Seller, or Seller shall pay to Buyer, the
Adjustment Amount in accordance with Section 2.7.
2.6 Allocation of the Purchase Price. Prior to Closing, Buyer and Seller
shall agree to an allocation of the Purchase Price. Buyer and Seller shall use
such allocation for all reporting purposes in connection with federal, state and
local income
8
<PAGE>
and, to the extent permitted under applicable law, franchise taxes.
Buyer and Seller agree to report such allocation to the Internal Revenue Service
in the form required by Treasury Regulation ss. 1.1060-1T. Seller and Buyer
acknowledge that the allocation will be the result of arms length bargaining
regarding the fair value of the Sale Assets.
2.7 Adjustment of Purchase Price.
(a) All operating income and operating expenses of the Station shall
be adjusted and allocated between Seller and Buyer, and an adjustment in the
Purchase Price shall be made as provided in this Section, to the extent
necessary to reflect the principle that all such income and expenses
attributable to the operation of the Station on or before the Closing Date shall
be for the account of Seller, and all income and expenses attributable to the
operation of the Station after the closing Date shall be for the account of
Buyer.
(b) To the extent not inconsistent with the express provisions of
this Agreement, the allocations made pursuant to this Section 2.7 shall be made
in accordance with generally accepted accounting principles.
(c) For purposes of making the adjustments pursuant to this Section,
Buyer shall prepare and deliver the Adjustment List to Seller within thirty (30)
days following the Closing Date, or such earlier or later date as shall be
mutually agreed to by Seller and Buyer. The Adjustment List shall set forth the
Adjustment Amount. If the Adjustment Amount is a credit to the account of Buyer,
Seller shall pay such amount to Buyer, and if the Adjustment Amount is a charge
to the account of Buyer, Buyer shall pay such amount to Seller. In the event
Seller disagrees with the Adjustment Amount determined by Buyer or with any
other matter arising out of this subsection, and Buyer and Seller cannot within
sixty (60) days resolve the disagreement themselves, the parties will refer the
disagreement to a firm of independent certified public accountants, mutually
acceptable to Seller and Buyer, whose decision shall be final and whose fees and
expenses shall be allocated between and paid by Seller and Buyer, respectively,
to the extent that such party does not prevail on the disputed matters decided
by the accountants.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
3.1 Organization and Good Standing. Seller is a corporation, validly
existing and in good standing under the laws of the Commonwealth of Virginia,
and is qualified to do business and in good
9
<PAGE>
standing under the laws of the State of Washington and all other jurisdictions
where the failure to be qualified to do business and in good standing would have
a material adverse effect on the Station. Seller has all requisite power to own,
operate and lease its properties and carry on its business as it is now being
conducted and as the same will be conducted until the Closing.
3.2 Authorization and Binding Effect of Documents. The execution and
delivery of, and the performance of its obligations under, this Agreement and
each of the other Documents by Seller, and the consummation by Seller of the
transactions contemplated hereby and thereby, have been duly authorized and
approved by all necessary corporate action on the part of Seller. Seller has the
power and authority to execute, deliver and perform its obligations under this
Agreement and each of the other Documents and to consummate the transactions
hereby and thereby contemplated. This Agreement and each of the other Documents
have been, or at or prior to the Closing will be, duly executed by Seller. This
Agreement constitutes (and each of the other Documents, when so executed and
delivered, will constitute) legal and valid obligations of Seller enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights or remedies generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
3.3 Absence of Conflicts. The execution and delivery of, and the
performance of its obligations under, this Agreement and each of the other
Documents by Seller, and the consummation by Seller of the transactions
contemplated hereby and thereby:
(a) do not in any material respect (with or without the giving of
notice or the passage of time or both) violate (or result in the creation of any
Lien other than a Permitted Lien on any of the Sale Assets under), any provision
of law, rule or regulation or any order, judgment, injunction, decree or ruling
applicable to Seller;
(b) do not (with or without the giving of notice or the passage of
time or both) conflict with or result in a breach or termination of, or
constitute a default or give rise to a right of termination or acceleration
under the Articles of Incorporation or Bylaws of Seller or pursuant to any
lease, agreement, commitment or other instrument which Seller is a party to, or
bound by, or by which any of the Sale Assets may be bound, or result in the
creation of any Lien, other than a Permitted Lien, upon any of the Sale Assets.
3.4 Governmental Consents and Consents of Third Parties. Except as set
forth on Schedule 3.4, Schedule 3.8 and Schedule 3.9, and to Seller's actual
knowledge, the execution and delivery of, and the performance of its obligations
under, this Agreement and each of the other Documents by Seller, and the
consummation by Seller of the transactions contemplated hereby and thereby, do
not require the consent, waiver, approval, permit, license, clearance or
authorization of, or any declaration of filing with,
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any court or public agency or other authority, or the consent of any person
under any agreement, arrangement or commitment of a nature to which Seller is a
party or by which it is bound or by which the Sale Assets are bound or to which
they are subject to, the failure of which to obtain would have a material
adverse effect on the Sale Assets or the operation of the Station.
3.5 Sale Assets. The Sale Assets include all of the assets, properties and
rights of every type and description, real, personal and mixed, tangible and
intangible, that are used to a material extent in the conduct of the business of
owning and operating the Station in the manner in which that business has been
and is now conducted in all material respects, with the exception of the
Excluded Assets.
3.6 Tangible Personal Property. Except for supplies and other incidental
items which in the aggregate are not of material value, the list of Tangible
Personal Property set forth on Schedule 3.6 is a complete and correct list of
all of the items of tangible personal property (other than Excluded Assets) used
to a material extent in the operation of the Station in the manner in which it
has been and is now operated. Except as set forth on Schedule 3.6:
(a) Seller has good, marketable and valid title to all of the items
of Tangible Personal Property free and clear of all Liens except Permitted
Liens, and including the right to transfer same.
(b) The Tangible Personal Property has, subject to the information
contained in Subsection 3.6(e), been maintained in accordance with industry
practices and is in good operating condition subject to ordinary wear and tear.
(c) The Tangible Personal Property complies with applicable rules
and regulations of the FCC and the terms of the FCC Licenses.
(d) Seller has no knowledge of any defect in the condition or
operation of any item of the Tangible Personal Property which is reasonably
likely to have a material adverse effect on the operation of the Station.
(e) The parties acknowledge that the Station's Harbor Island
transmitter facilities were destroyed by fire, including the Station's main and
auxiliary transmitter, commercial power lines, directional antenna phasing
equipment, and remote control and audio processing equipment. The Harbor Island
transmitter facilities are being rebuilt following the fire.
3.7 Real Property.
(a) The real property described on Schedule 3.7 constitutes a
complete and correct summary description in all material respects of all of the
interests in real
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estate (other than any real property leased by Seller pursuant to a lease
described in Schedule 3.9) used to any extent in the operation of the Station in
the manner in which it has been and is now operated. Said real property,
together with all improvements affixed thereto, is herein defined as the "Real
Property."
(b) Seller does not owe any money to any architect, contractor,
subcontractor or materialman for labor or materials performed, rendered or
supplied to or in connection with the Real Property within the past four (4)
months which shall not be paid in full on or before Closing. Except as set forth
on Schedule 3.7, there is no work being done at or materials being supplied to
the Real Property at the date hereof other than routine maintenance projects
having an aggregate cost through completion thereof of no more than Ten Thousand
Dollars ($10,000).
(c) To the best of Seller's knowledge the present use of the Real
Property is in compliance with all applicable zoning codes in effect as of the
date hereof, and Seller has not received any notices of uncorrected violations
of the applicable housing, building, safety or fire ordinances. The Real
Property is served by electricity and water in capacities adequate for the
present use of the Real Property and improvements thereon. Except as set forth
on Section 3.7, Seller has not made any other agreement for the sale or lease
of, or given any other person an option to purchase or lease or a right of first
refusal to purchase or lease, all or any part of the Real Property, and except
as set forth on Schedule 3.7, Seller has not subjected the Real Property to any
liens (other than Permitted Liens), easements, rights, duties, obligations,
convenants, conditions, restrictions, limitations or agreements not of record.
(d) Buyer expressly acknowledges that the tower site of the Station
is subject to condemnation proceedings by the local port authority. Seller makes
no representations or warranties as to the outcome of such proceedings or the
amount to be paid to Buyer as a result of such proceedings.
3.8 FCC Licenses. Seller is the holder of the FCC Licenses listed on
Schedule 3.8, and except as set forth on such Schedule, the FCC Licenses (i) are
valid, in good standing and in full force and effect and constitute all of the
licenses, permits and authorizations required by the Act, the Rules and
Regulations or the FCC for, or used in, the operation of the Station in all
material respects as now operated, and (ii) constitute all the current licenses
and authorizations issued by the FCC to Seller for or in connection with the
current operation of the Station. Seller has no knowledge of any condition
imposed by the FCC as part of any FCC License which is neither set forth on the
face thereof as issued by the FCC nor contained in the Rules and Regulations
applicable generally to stations of the type, nature, class or location of the
Station. Except as disclosed on Schedule 3.8, the Station is being operated at
full authorized power, in accordance with the terms and conditions of the FCC
Licenses applicable to it and in accordance with the Rules and Regulations.
Except as set forth on Schedule 3.8, no proceedings are pending or, to the
knowledge of the Seller, are threatened which may
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result in the revocation, modification, non-renewal or suspension of any of the
FCC Licenses, the denial of any pending applications, the issuance of any cease
and desist order or the imposition of any fines, forfeitures or other
administrative actions by the FCC with respect to the Station or its operation,
other than proceedings affecting the radio broadcasting industry in general.
Seller has complied in all material respects with all requirements to file
reports, applications and other documents with the FCC with respect to the
Station, and all such reports, applications and documents are complete and
correct in all material respects. Seller has no knowledge of any matters (i)
which could reasonably be expected to result in the suspension or revocation of
or the refusal to renew any of the FCC Licenses or the imposition of any fines
or forfeitures by the FCC, or (ii) against Seller which could reasonably be
expected to result in the FCC's refusal to grant approval of the assignment to
Buyer of the FCC Licenses or the imposition of any Material Adverse Condition in
connection with approval of such assignment. There are not any unsatisfied or
otherwise outstanding citations issued by the FCC with respect to the Station or
its operation. Complete and accurate copies of all FCC Licenses are attached as
a part of Schedule 3.8. The "Public Inspection File" of the Station is complete
and in substantial and material compliance with Section 73.3526 of the Rules and
Regulations.
3.9 Station Agreements.
(a) Schedule 3.9 sets forth an accurate and complete list of all
material agreements, contracts, arrangements or commitments in effect as of the
date hereof, including all amendments, modifications and supplements thereto
which the Station or its assets or properties are bound by, except (A) employee
benefit plans and employment contracts, (B) contracts for the sale of time on
the Station, and (C) contracts which are cancelable by Seller or its assignee
without breach or penalty on not more than sixty (60) days' notice. Complete and
correct copies of all such agreements, contracts, arrangements or commitments
that are in writing, including all amendments, modifications and supplements
thereto, have been delivered to Buyer.
(b) Except as set forth in the Schedules, and with respect to all
Station Agreements being assumed by Buyer, (i) all Station Agreements are legal,
valid and enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights generally, and subject, as to enforceability, to general
principles of equity regardless of whether enforcement is sought in any
proceeding at law or in equity; (ii) neither Seller nor, to the knowledge of
Seller, any other party thereto, is in material breach of or in material default
under any Station Agreements; (iii) to the knowledge of Seller, there has not
occurred any event which, after the giving of notice or the lapse of time or
both, would constitute a material default under, or result in the material
breach of, any Station Agreements which are, individually or in the aggregate,
material to the operation of the Station; and (iv) Seller holds the right to
enforce and receive the benefits under all of the Station
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Agreements, free and clear of all Liens (other than Permitted Liens) but subject
to the terms and provision of each such agreement.
(c) Schedule 3.9 indicates, for each Station Agreement listed
thereon which is being assumed by Buyer, whether consent or approval by any
party thereto is required thereunder for consummation of the transactions
contemplated hereby.
3.10 Litigation. There are no claims, investigations or administrative,
arbitration or other proceedings pending or, to the actual knowledge of Seller,
threatened against Seller which would, individually or in the aggregate if
adversely determined, have a material adverse effect on the Sale Assets or the
operation of the Station, or which would give any third party the right to
enjoin the transactions contemplated by this Agreement. To the actual knowledge
of Seller, there is no basis for any such claim, investigation, action, suit or
proceeding which would, individually or in the aggregate if adversely
determined, have a material adverse effect on the Sale Assets or operation of
the Station. There are no existing or, to the actual knowledge of Seller,
pending orders, judgments or decrees of any court or governmental agency
affecting Seller, the Station or any of the Sale Assets.
3.11 Labor Matters.
(a) Seller is not a party to any collective bargaining agreement,
and there is no collective bargaining agreement that determines the terms and
conditions of employment of any employees of Seller.
(b) Except as disclosed on Schedule 3.11:
(i) There is no labor strike, dispute, slow-down or stoppage
pending or, to the knowledge of Seller, threatened against the Station;
(ii) There are neither pending nor, to the actual knowledge of
Seller threatened, any suits, actions, administrative proceedings, union
organizing activities, arbitrations, grievances or other proceedings between
Seller and any employees of the Station or any union representing such
employees; and there are no existing labor or employment or other controversies
or grievances involving employees of the Station which have had or are
reasonably likely to have a material adverse effect on the operation of the
Station;
(iii) With respect to the Station, (A) Seller is in compliance
in all material respects with all laws, rules and regulations relating to the
employment of labor and all employment contractual obligations, including those
relating to wages, hours, collective bargaining, affirmative action,
discrimination, sexual harassment, wrongful discharge and the withholding and
payment of taxes and contributions except for such non-compliance which
individually or in the aggregate would not have a material adverse
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effect on the business or financial condition of the Station; (B) Seller has
withheld all amounts required by law or agreement to be withheld from the wages
or salaries of its employees; and (C) Seller is not liable to any present or
former employees or any governmental authority for damages, arrears of wages or
any tax or penalty for failure to comply with the foregoing except for such
liability which individually or in the aggregate would not have a material
adverse effect on the business or financial condition of the Station;
(iv) Buyer's consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof shall not, as a result of or
in connection with the transactions contemplated hereby, impose upon Buyer the
obligation to pay any severance or termination pay under any agreement, plan or
arrangement binding upon Seller.
3.12 Employee Benefit Plans. Buyer's consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof shall not, as
a result of or in connection with the transactions contemplated hereby, impose
upon Buyer any obligation under any benefit plan, contract or arrangement
(regardless of whether they are written or unwritten and funded or unfunded)
covering employees or former employees of Seller in connection with their
employment by Seller. For purposes of the Agreement, "benefit plans" shall
include without limitation employee benefit plans within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended,
vacation benefits, employment and severance contracts, stock option plans, bonus
programs and plans of deferred compensation.
3.13 Compliance with Law. Except as set forth on Schedule 3.13, the
operation of the Station complies in all material respects with the applicable
rules and regulations of the FCC and all federal, state, local or other laws,
statutes, ordinances, regulations, and any applicable order, writ, injunction or
decree of any court, commission, board, agency or other instrumentality.
3.14 Environmental Matters; OSHA.
(a) Except as set forth on Schedule 3.14, Seller has obtained all
material, environmental, health and safety permits necessary or required for
either the operation of the Station as currently operated or the ownership of
the Real Property and all such permits are in full force and effect and Seller
is in compliance with all material terms and conditions of such permits.
(b) There is no proceeding pending or, to Seller's actual knowledge,
threatened which may result in the reversal, rescission, termination,
modification or suspension of any environmental or health or safety permits
necessary for the operation of the Station as currently conducted or the
ownership of the Real Property.
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(c) With respect to the Station and the ownership of the Real
Property, Seller is in compliance in all material respects with the provisions
of Environmental Laws.
(d) During Seller's occupancy of the Real Property, Seller has not,
and to Seller's actual knowledge, no other person or entity has caused or
permitted materials to be generated, released, stored, treated, recycled,
disposed of on, under or at such parcels, which materials, if known to be
present, would require clean up, removal or other remedial or responsive action
under Environmental Laws (other than normal office, cleaning and maintenance
supplies in reasonable quantities used and /or stored appropriately in the
buildings or improvements on the Real Property). Seller has not caused the
migration of any materials from the Real Property onto or under any property
adjacent to the Real Property which materials, if known to be present, would
require cleanup, removal or other remedial or responsive action under
Environmental Laws. There are no underground storage tanks and no
polychlorinated biphenyls ("PCB") or friable asbestos on such property.
(e) Except as set forth on Schedule 3.14, Seller is not subject to
any judgment, decree, order or citation with respect to the Station or the Real
Property related to or arising out of Environmental Laws, and Seller has not
received notice that it has been named or listed as a potentially responsible
party by any person or governmental body or agency in any matter arising under
Environmental Laws.
(f) Seller has not discharged or disposed of any petroleum product
or solid waste on the Real Property or on the property adjacent to the Real
Property owned by third parties, which, to the best of Seller's knowledge, may
form the basis for any present or future claim based upon the Environmental Laws
in existence on the date hereof or as of the Closing, or any demand or action
seeking clean-up of any site, location, body of water, surface or subsurface,
under any Environmental Laws or otherwise, or which may subject the owner of the
Real Property to claims by third parties (except to the extent third party
liability can be established) for damages.
(g) No portion of the Real Property has ever been used by Seller,
nor, to the best of Seller's knowledge, by any previous occupant of the Real
Property, in material violation of Environmental Laws or as a landfill, dump
site or any other use which involves the disposal or storage of Hazardous
Materials on-site or in any manner which may materially adversely affect the
value of the Real Property.
(h) No pesticides, herbicides, fertilizers or other materials have
been used on, applied to or disposed of by Seller on the Real Property in
material violation of any Environmental Laws (other than normal office, cleaning
and maintenance supplies in reasonable quantities used and/or stored
appropriately in the buildings or improvements on the Real Property).
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(i) With respect to the Station or the Real Property, Seller has
disposed of all waste in full compliance with all Environmental Laws and, to the
best of Seller's knowledge, there is no existing condition that may form the
basis of any present or future claim, demand or action seeking clean up of any
facility, site, location or body of water, surface or subsurface, for which the
Buyer could be liable or responsible solely as a result of the disposal of waste
at such site by a prior owner of the Real Property.
(j) Seller is in material compliance with all OSHA Laws applicable
to the Real Property and the operations of the Station.
3.15 Site Survey. Seller will cooperate with Buyer in obtaining a site
survey of tower coordinates, to be paid for by Buyer.
3.16 Filing of Tax Returns. Seller has filed all Federal, State and local
tax returns which are required to be filed, and has paid all taxes and all
assessments to the extent that such taxes and assessments have become due, other
than such returns, taxes and assessments, the failure to file or pay would not,
individually or in the aggregate, have a material adverse effect on Buyer.
3.17 Absence of Insolvency. No insolvency proceedings of any character
including without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
the Seller or any of the Sale Assets, are pending or, to the best knowledge of
Seller, threatened, and Seller has made no assignment for the benefit of
creditors, nor taken any action with a view to, or which would constitute the
basis for the institution of, any such insolvency proceedings.
3.18 Broker's or Finder's Fees. Except as set forth in Schedule 3.18, no
agent, broker, investment banker or other person or firm acting on behalf of or
under the authority of Seller or any affiliate of Seller is or will be entitled
to any broker's or finder's fee or any other commission or similar fee, directly
or indirectly, in connection with the transactions contemplated by this
Agreement.
3.19 Insurance. There is now in full force and effect with reputable
insurance companies fire and extended coverage insurance with respect to all
material tangible Sale Assets and public liability insurance, all in
commercially reasonable amounts.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
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Washington. Buyer has all requisite corporate power to own, operate and lease
its properties and carry on its business as it is now being conducted and as the
same will be conducted following the Closing.
4.2 Authorization and Binding Effect of Documents. Buyer's execution and
delivery of, and the performance of its obligations under, this Agreement and
each of the other Documents, and the consummation by Buyer of the transactions
contemplated hereby and thereby, have been duly authorized and approved by all
necessary corporate action on the part of Buyer. This Agreement and each of the
other Documents to be executed by Buyer have been, or at or prior to the Closing
will be, duly executed by Buyer. The Documents, when executed and delivered by
the parties hereto, will constitute the valid and legally binding agreement of
Buyer, enforceable against Buyer in accordance with their terms, except as may
be limited by bankruptcy, insolvency, or other similar laws affecting the
enforcement of creditors' rights generally, and except as may be limited by
general principles of equity (regardless of whether such enforceability is
sought in a proceeding in equity or at law).
4.3 Absence of Conflicts. Buyer's execution and delivery of, and the
performance of its obligations under, this Agreement and each of the other
Documents and the consummation by Buyer of the transaction contemplated hereby
and thereby:
(a) Do not in any material respect (with or without the giving of
notice or the passage of time or both) violate (or result in the creation of any
claim, lien, charge or encumbrance on any of the assets or properties of Buyer
under) any provision of law, rule or regulation or any order, judgment,
injunction, decree or ruling applicable to Buyer in any manner which would have
a material adverse effect on the assets, business, operation or financial
condition or results of operations of Buyer;
(b) Do not (with or without the giving of notice or the passage of
time or both) conflict with or result in a breach or termination of, or
constitute a default or give rise to a right of termination or acceleration
under, the articles of incorporation or bylaws of Buyer or any lease, agreement,
commitment, or other instrument which Buyer is a party to, bound by, or by which
any of its assets or properties may be bound.
4.4 Governmental Consents and Consents of Third Parties. Except for the
required consent of the FCC, Buyer's execution and delivery of, and the
performance of its obligations under, this Agreement and each of the other
Documents and the consummation by Buyer of the transaction contemplated hereby
and thereby, do not require the consent, waiver, approval, permit, license,
clearance or authorization of, or any declaration or filing with, any court or
public agency or other authority, or the consent of any person under any
agreement, arrangement or commitment of any nature to which Buyer is a party or
by which it is bound, the failure of which to obtain would have a material
adverse effect on the assets, business, operation or financial condition or
results of operations of Buyer.
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4.5 Qualification.
(a) Buyer has no knowledge after due inquiry of any facts concerning
Buyer or any other person with an attributable interest in Buyer (as such term
is defined under the Rules and Regulations) which, under present law (including
the Act) and the Rules and Regulations, would (i) disqualify Buyer from being
the holder of the FCC Licenses, the owner of the Sale Assets or the operator of
the Station upon consummation of the transactions contemplated by this
Agreement, or (ii) raise a substantial and material question of fact (within the
meaning of Section 309(e) of the Act) respecting Buyer's qualifications.
(b) Without limiting the foregoing Subsection (a), Buyer shall make
the affirmative certifications provided in Section III of FCC Form 314 at the
time of filing of such form with the FCC as contemplated by Section 5.2.
4.6 Broker's or Finder's Fees. Except as set forth in Schedule 3.18, no
agent, broker, investment banker, or other person or firm acting on behalf of or
under the authority or Buyer or any affiliate of Buyer is or will be entitled to
any broker's or finder's fee or any other commission or similar fee, directly or
indirectly, in connection with transactions contemplated by this Agreement.
4.7 Litigation. There are no legal, administrative, arbitration or other
proceedings or governmental investigations pending or, to the knowledge of
Buyer, threatened against Buyer that would give any third party the right to
enjoin the transactions contemplated by this Agreement.
ARTICLE V
TRANSACTIONS PRIOR TO THE CLOSING DATE
5.1 Conduct of the Station's Business Prior to the Closing Date. Seller
covenants and agrees with Buyer that between the date hereof and the Closing
Date, unless the Buyer otherwise agrees in writing (which agreement shall not be
unreasonably withheld), Seller shall:
(a) Use reasonable efforts to operate the Station in substantially
the same manner in which it is currently being operated:
(b) Use reasonable commercial efforts to maintain insurance upon all
of the tangible Sale Assets in such amounts and of such kind comparable to that
in effect on the date hereof with respect to such Sale Assets and with respect
to the operation of the Station, with insurers of substantially the same or
better financial condition;
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(c) Operate the Station and otherwise conduct its business in all
material respects in accordance with the terms or conditions of its FCC
Licenses, the Rules and Regulations, the Act and all other rules and
regulations, statutes, ordinances and orders of all governmental authorities
having jurisdiction over any aspect of the operation of the Station, except
where the failure to so operate the Station would not have a material adverse
effect on the Sale Assets or the operation of the Station or on the ability of
Seller to consummate the transactions contemplated hereby;
(d) Maintain the books and records of the Station in Seller's
customary manner on a basis consistent in all material respects with prior
years;
(e) Comply in all material respects with all Station Agreements now
or hereafter existing which are material, individually or in the aggregate, to
the operation of the Station;
(f) Promptly notify Buyer of any material default by, or claim of
default against, any party under any Station Agreements which are material,
individually or in the aggregate, to the operation of the Station, and any event
or condition which, with notice or lapse of time or both, would constitute an
event of default under such Station Agreements;
(g) Not mortgage, pledge or subject to any Lien other than a
Permitted Lien (except in the ordinary course of business) any of the Sale
Assets;
(h) Not sell, lease or otherwise dispose of, nor agree to sell,
lease or otherwise dispose of, any of the Sale Assets, except for dispositions
in the ordinary course of business;
(i) Not acquire or lease any goods or services or enter into, amend
or terminate any license, lease of real or personal property or any other
Station Agreement, other than in the ordinary course of business;
(j) Not introduce any material change with respect to the operation
of the Station including, without limitation, any material changes in the
broadcast hours of the Station or any other material change in the Station's
programming policies, except such changes as in the sole discretion of Seller,
exercised in good faith after consultation with Buyer, are required by the
public interest;
(k) Notify Buyer of any material litigation pending or threatened
against Station or Seller or any material damage to or destruction of any assets
included or to be included in the Sale Assets of which Seller receives actual
knowledge;
(l) Shall file with the FCC, such applications and other documents
in the name of Buyer and/or Seller as may be necessary or advisable to obtain
any extension,
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assignment or modification of any construction permits, special temporary
authorizations, or any other permits, license or authorizations of the FCC
applicable to the Station ("FCC Authorizations"), reasonably requested by Buyer.
Buyer shall pay the filing fees, if any, of any extension, assignment of
modification of any FCC Authorization. Notwithstanding the foregoing, nothing
contained herein shall be deemed to require Seller to return the Station to the
air in the event of forfeitures of the Harbor Island tower site by eminent
domain proceedings prior to Closing. All proceeds received from any such
proceedings shall be the property of Buyer and Buyer shall bear sole
responsibility, with the reasonable cooperation of Seller, for relocating the
tower.
(m) Promptly notify Buyer of any communication or action by any
entity or person relating to the Proceedings. Seller shall take no action or
make no communication relating to the Proceedings with any entity or person
except as authorized in advance by Buyer or Buyer's representatives.
5.2 Governmental Consents. Seller and Buyer shall file with the FCC,
within five (5) business days after the execution of this Agreement, such
applications and other documents in the name of Seller or Buyer, as appropriate,
as may be necessary or advisable to obtain the FCC Order. Seller and Buyer shall
take all commercially reasonable steps necessary to prosecute such filings with
diligence and shall diligently oppose any objections to, appeals from or
petitions to reconsider such approval of the FCC, to the end that the FCC Order
and a Final Action with respect thereto may be obtained as soon as practicable;
provided, however, that in the event the application for assignment of the FCC
Licenses has been designated for hearing, either Buyer or Seller may elect to
terminate this Agreement pursuant to Section 10.1(c). Buyer shall not knowingly
take, and Seller covenants that Seller shall not knowingly take, any action that
party knows or has reason to know would materially and adversely affect or
materially delay issuance of the FCC Order or materially and adversely affect or
materially delay its becoming a Final Action without a Material Adverse
Condition, unless such action is requested or required by the FCC, its staff or
the Rules and Regulations. Should Buyer or Seller become aware of any facts
which could reasonably be expected to materially and adversely affect or
materially delay issuance of the FCC Order without a Material Adverse Condition
(including but not limited to, in the case of Buyer, any facts which would
reasonably be expected to disqualify Buyer from controlling the Station), such
party shall promptly notify the other party thereof in writing and both parties
shall cooperate to take all steps necessary or desirable to resolve the matter
expeditiously and to obtain the FCC's approval of matters pending before it.
5.3 Other Consents. Seller shall use its reasonable best efforts to obtain
the consent or waivers to the transactions contemplated by this Agreement
required under any assumed Station Agreements; provided that Seller shall not be
required to pay or grant any material consideration in order to obtain any such
consent or waiver.
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5.4 Tax Returns and Payments.
(a) All tax returns, estimates, and reports required to be filed by
Seller prior to the Closing Date or relating to periods prior to the Closing
Date will be timely filed with the appropriate governmental agencies unless
valid extensions therefor shall have been obtained.
(b) All taxes pertaining to ownership of the Sale Assets or
operation of the Station prior to the Closing Date will be timely paid; provided
that Seller shall not be required to pay any such tax so long as the validity
thereof shall be contested in good faith by appropriate proceedings and Seller
shall have set aside adequate reserves with respect to any such tax.
5.5 Access Prior to the Closing Date. Prior to the Closing, Buyer and its
representatives may make such reasonable investigation of the assets and
business of Seller as it may desire; and Seller shall give to Buyer, its
engineers, counsel, accountants and other representatives reasonable access
during normal business hours throughout the period prior to the Closing to
personnel and all of the assets, books, records and files of or pertaining to
the Station, provided that (i) Buyer shall give Seller reasonable advance notice
of each date on which Buyer or any such other person or entity desires such
access, (ii) each person (other than an officer of Buyer) shall, if requested by
Seller, be accompanied by an officer or their representative of Buyer approved
by Seller, which approval shall not be unreasonably withheld, (iii) the
investigations at the offices of Seller shall be reasonable in number and
frequency, and (iv) all investigations shall be conducted in such a manner as
not to physically damage any property or constitute a disruption of the
operation of the Station or Seller. Seller shall furnish to Buyer during such
period all documents and copies of documents and information concerning the
business and affairs of Seller and the Station as Buyer may reasonably request.
5.6 Confidentiality; Press Release. All information, data and materials
furnished or to be furnished to either party with respect to the other party in
connection with this transaction or pursuant to this Agreement are confidential.
Each party agrees that prior to Closing (a) it shall not disclose or otherwise
make available, at any time, any such information, data or material to any
person who does not have a confidential relationship with such party; (b) it
shall protect such information, data and material with a high degree of care to
prevent the disclosure thereof; and (c) if, for any reason, this transaction is
not consummated, all information, data or material concerning the other party
obtained by such party, and all copies thereof, will be returned to the other
party. After Closing, neither party will disclose or otherwise make available to
any person any of such information, data or material concerning the other party,
except as may be necessary or appropriate in connection with the operation of
the Station by Buyer. Each party shall use its reasonable efforts to prevent the
violation of any of the foregoing confidentiality provisions by its respective
representatives. Notwithstanding the foregoing, nothing contained herein shall
prohibit Buyer or Seller from:
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(i) using such information, data and materials in connection
with any action or proceeding brought or any claim asserted by Buyer or Seller
in respect of any breach by the other of any representation, warranty or
covenant made in or pursuant to this Agreement; or
(ii) supplying or filing such information, data or materials
to or with the FCC or any other valid governmental or court authority to the
extent reasonably necessary to obtain any consent, waiver, amendment,
modification, approval, authorization, permit or license which may be necessary
to effectuate this Agreement, and to consummate the transaction contemplated
herein.
In the event that either party determines in good faith that a press release or
other public announcement is desirable under any circumstances, the parties
shall consult with each other to determine the appropriate timing, form and
content of such release or announcement and thereafter may make such release or
announcement.
5.7 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use its reasonable best efforts to
take all action and to do all things necessary, proper or advisable to satisfy
any condition to the parties' obligations hereunder in its power to satisfy and
to consummate and make effective as soon as practicable the transactions
contemplated by this Agreement.
5.8 FCC Reports. Seller shall continue to file, on a current basis until
the Closing Date, all reports and documents required to be filed with the FCC
with respect to the Station. Seller shall provide Buyer with copies of all such
filings within five business days of the filing with the FCC.
5.9 Conveyance Free and Clear of Liens. At or prior to the Closing, Seller
shall obtain executed releases, in suitable form for filing and otherwise in
form and substance reasonably satisfactory to Buyer, of any security interests
granted in the Sale Assets and properties as security for payment of loans and
other obligations or judgments and of any other Liens on the Sale Assets. At the
closing, Seller shall transfer and convey to Buyer all of the Sale Assets free
and clear of all Liens except Permitted Liens.
5.10 Environmental Assessment. Not later than forty-five (45) days after
execution of this Agreement, Buyer may obtain a Phase I ("the Phase I")
environmental assessment of the Real Property by an environmental engineer
selected by Buyer. Within fourteen (14) days after Buyer's receipt of the Phase
I, Buyer shall be entitled to obtain a Phase II ("the Phase II") environmental
assessment of the Real Property, or any portion thereof. (The Phase I and the
Phase II, if obtained, shall be referred to herein as the "Environmental
Assessment"). Buyer shall commission and pay the cost of such Environmental
Assessment and shall provide a copy to Seller. The Environmental Assessment
shall be subject to the confidentiality provisions of Section 5.6. If after
appropriate inquiry into the previous ownership of and uses of the Real Property
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consistent with good commercial or customary practice, the engineer concludes
that environmental conditions exist on, under or affecting such properties that
would constitute a violation or breach of Seller's representations and
warranties contained in Section 3.14 of this Agreement or cause the condition
contained in Section 6.9 to not be satisfied, then notwithstanding any other
provisions of this Agreement to the contrary Seller shall reimburse Buyer for
the cost of the Phase II, and, subject to the following sentence, Seller shall
at its sole cost and expense (up to a maximum amount of Fifty Thousand Dollars
($50,000)) remove, correct or remedy any condition or conditions which
constitute a violation or breach of Seller's representations and warranties
contained in Section 3.14 prior to the Closing Date and provide to Buyer at
Closing a certificate from an environmental abatement firm reasonably acceptable
to Buyer that such removal, correction or remedy has been completed so that
Seller's representations and warranties contained in Section 3.14 will be true
as of the Closing Date and the condition contained in Section 6.9 will be
satisfied as of the Closing Date. In the event the cost of removal, correction
or remedy of the environmental conditions exceeds Fifty Thousand Dollars
($50,000), Buyer may elect to proceed with the Closing but shall not be
obligated to close under any circumstances which would require Buyer to assume
ownership of the Station under conditions where there exist any uncured
violations of warranties, representations or covenants with respect to
environmental matters.
If Seller is required under this Section 5.10 to remedy any violation at a
site for which a person other than Seller, such as the tenant or any other
occupant of any real property is primarily responsible under applicable law,
Buyer and Seller shall cooperate in seeking to enforce any right of contribution
or other remedy they may have against such person. Seller shall not be obligated
under this Section 5.10 to undertake any remediation unless Buyer shall have
notified Seller of the existence of the condition requiring remediation within
30 days after Buyer's receipt of the Environmental Assessment in its final form.
ARTICLE VI
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF BUYER TO CLOSE
Buyer's obligation to close the transaction contemplated by this Agreement
is subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions, unless waived by Buyer in writing:
6.1 Accuracy of Representations and Warranties; Closing Certificate.
(a) The representations and warranties of Seller contained in this
Agreement or in any other Document shall be complete and correct in all material
respects on the date hereof and at the Closing Date with same effect as though
made at
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such time except for changes that are not materially adverse to the Station or
the Sale Assets taken as a whole, and except as follows:
(i) as to Section 3.14(d), (f), (g), (h) or (i) the accuracy
or inaccuracy of this representation as of the date of this Agreement or as of
the Closing Date shall not be a condition to Closing if (A) the item is removed
on or before Closing, all costs associated with such removal, clean up or other
action have been paid in full by Seller and all required certificates of removal
or completion or other certificates demonstrating that all required action under
Section 5.10 has been completed have been received from applicable regulatory
authorities, or (B) to the extent removal, clean up or other action cannot be
completed and/or governmental or regulatory certificates obtained prior to
Closing (which Closing may be delayed by Seller by not more than thirty (30)
days if Seller reasonably determines that any necessary action can be completed
during such delay period), a portion of the Purchase Price equal to the
estimated costs of completion and/or certification (to be determined by an
independent consulting engineer) is escrowed under an agreement negotiated in
good faith by the parties and the amount so escrowed is used to pay all costs of
completion; provided, however, that in no event shall Buyer be required to
consummate the Agreement if the removal, clean up or other action would likely
result in a disruption of Buyer's ability to broadcast at substantially full
power from its transmitter site for material periods of time;
(ii) as to Section 3.14(j), the accuracy or inaccuracy of this
representation shall not be a condition to Closing if the noncompliance is cured
on or before Closing or if the Seller remains liable for the noncompliance after
the Closing; and
(iii) as to Sections 3.6 and 3.7, the accuracy or inaccuracy
of the representations(s) shall not be a condition to Closing if the amount to
cure or repair the matter is reasonably estimated at less than Fifty Thousand
Dollars ($50,000) in the aggregate and the Purchase Price is reduced accordingly
(if the amount can be accurately determined) or a reasonable reserve is placed
into escrow pending cure or repair or Buyer and Seller make other arrangements
which are reasonable under the circumstances. In addition, Seller may elect to
delay Closing for a period not to exceed thirty (30) days if Seller reasonably
determines that any action necessary to cure or repair can be completed during
such delay period; provided that the reduction or escrow described in the
preceding sentence shall apply to the extent any cure or repair is not completed
within such delay period.
(b) Seller shall have delivered to Buyer on the Closing Date a
certificate that (i) the condition specified in Section 6.1(a) is satisfied as
of the Closing Date, and (ii) except as set forth in such certificate (none of
which exceptions shall be materially adverse to the Station, the Sale Assets or
Seller's ability to consummate the transaction contemplated hereby), the
condition specified in Section 6.2 is satisfied as of the Closing Date, and
further except that as to Section 6.2, non-satisfaction of the condition(s)
shall not be a condition to Closing if the amount to cure or repair the matter
is reasonably
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estimated at less than Fifty Thousand Dollars ($50,000) in the aggregate and the
Purchase Price is reduced accordingly (if the amount can be accurately
determined) or a reasonable reserve is placed into escrow pending cure or repair
or Buyer and Seller make other arrangements which are reasonable under the
circumstances. In addition, Seller may elect to delay Closing for a period not
to exceed thirty (30) days if Seller reasonably determines that any action
necessary to cure or repair can be completed during such delay period; provided
that the reduction or escrow described in the preceding sentence shall apply to
the extent any cure or repair is not completed within such delay period.
6.2 Performance of Agreements. Seller shall have performed in all material
respects all of its covenants, agreements and obligations required by this
Agreement and each of the other Documents to be performed or complied with by it
prior to or upon the Closing Date.
6.3 FCC and Other Consents.
(a) The FCC Order shall have been issued by the FCC and shall have
become a Final Action without any Material Adverse Condition.
(b) Conditions which the FCC Order or any order, ruling or decree of
any judicial or administrative body relating thereto or in connection therewith
specifies and requires to be satisfied by Seller prior to transfer of the FCC
Licenses to Buyer shall have been satisfied by Seller.
(c) All other authorizations, consents, approvals and clearances of
federal, state or local governmental agencies required to permit the
consummation by Buyer of the transactions contemplated by this Agreement
including, without limitation, the assignment of any FCC Authorization requested
by Buyer, shall have been obtained; all statutory and regulatory requirements
for such consummation shall have been fulfilled; and no such authorizations,
consents, approvals or clearances shall contain any conditions that individually
or in the aggregate would have a material adverse effect on the operations of
the Station.
(d) The parties acknowledge that the Station was granted a
construction permit ("CP") to move its transmitter and antenna site, and
acknowledge the possibility that assignment of the CP will not be approved by
the FCC.
6.4 Adverse Proceedings. Neither Buyer nor any affiliate of Buyer shall be
subject to any ruling, decree, order or injunction restraining, imposing
material limitations on or prohibiting (i) the consummation of the transactions
contemplated hereby or (ii) its participation in the operation, management,
ownership or control of the Station; and no litigation, proceeding or other
action seeking to obtain any such ruling, decree, order or injunction shall be
pending or shall have been threatened in writing. No governmental authority
having jurisdiction shall have notified any party to this
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Agreement that consummation of the transaction contemplated hereby would
constitute a violation of the laws of the United States or of any state or
political subdivision or that it intends to commence proceedings to restrain
such consummation or to force divestiture, unless such governmental authority
shall have withdrawn such notice. No governmental authority having jurisdiction
shall have commenced any such proceeding.
6.5 Opinion of Seller's FCC Counsel. Buyer shall have received from
Seller's FCC counsel an opinion, dated the Closing Date, in form and substance
reasonably satisfactory to Buyer's FCC counsel, to the effect that:
(a) With the exception of the auxiliary licenses, which are not
being sold, the FCC Licenses listed on Schedule 3.8 are valid, in good standing
and in full force and effect and include all licenses, permits and
authorizations which are necessary under the Rules and Regulations for Seller to
operate the Station in the manner in which the Station is currently being
operated.
(b) To counsel's knowledge, no condition has been imposed by the FCC
as part of any FCC License which is not set forth on the face thereof as issued
by the FCC or contained in the Rules and Regulations applicable generally to
stations of the type, nature, class or location of the Station.
(c) Except as set forth herein or in the schedules hereto, no
proceedings are pending or, to counsel's knowledge, are threatened which may
result in the revocation, modification, non-renewal of, suspension of, or the
imposition of a Material Adverse Condition upon, any of the FCC Licenses, the
denial of any pending applications, the issuance of any cease and desist order
or the imposition of any fines, forfeitures or other administrative actions by
the FCC with respect to the Station or its operation, other than proceedings
affecting the radio broadcasting industry in general.
In rendering such opinion, counsel shall be entitled to rely upon Seller's
representations and warranties in this Agreement and to limit its inquiry to its
files and such FCC files and records as are available to it as of 10:00 o'clock
A.M. Eastern time the business day immediately preceding the Closing Date.
Counsel may state that, as to any factual matters embodied in, or forming a
basis for any legal opinion expressed in, such opinion, counsel's knowledge is
based solely on such inquiry.
6.6 Other Consents. Seller shall have obtained in writing and provided to
Buyer on or before the Closing Date, without any condition materially adverse to
Buyer or the Station, the consents or waivers to the transactions contemplated
by this Agreement required under those Station Agreements which Buyer has
elected to assume.
6.7 Delivery of Closing Documents. Seller shall have delivered or caused
to be delivered to Buyer on the Closing Date each of the Documents required to
be delivered pursuant to Section 8.2.
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6.8 No Cessation of Broadcasting.
(a) Between the date hereof and the Closing Date, the Station shall
not have for a period of more than ten (10) days in the aggregate (i) ceased
broadcasting on its authorized frequency, (ii) lost substantially all of its
normal broadcasting capability. Between the date of the grant of any license
application filed to cover any technical changes made as a result of the repairs
to the Harbor Island tower site and the Closing Date, the Station shall not
have, for a period of more than ten (10) days in the aggregate, been
broadcasting at a power level of 50% or less of its FCC authorized level. Seller
shall promptly notify Buyer of the occurrence of any one or more of the
foregoing events or conditions, and the non-fulfillment of the condition
precedent set forth in this Subsection caused by the occurrence of the events
specified in Seller's notice shall be deemed waived by Buyer unless, within
fifteen (15) days after Buyer's receipt of Seller's written notice, Buyer
notifies Seller in writing to the contrary.
(b) In addition, during the five (5) days immediately preceding the
Closing Date, the Station shall have been operating continuously with
substantially all of its normal broadcasting capability except for cessation or
reductions for insignificant periods of time resulting from occurrences (such as
lightning strikes) over which Seller has no control. Seller shall have the right
to delay Closing for a period not to exceed thirty (30) days if Seller
reasonably determines that any action to restore the Station substantially all
of its normal broadcasting capability can be completed during such delay period.
6.9 Environmental Conditions. The Environmental Assessment obtained by
Buyer pursuant to Section 5.10 hereof shall not have disclosed any material
violation of any Environmental Law at the Real Property which is not removed or
cured by Seller prior to Closing.
6.10 Title Insurance Commitment. Title to the Real Property shall be in
fee simple, good and marketable and insurable at regular rates by any title
insurance company selected by Buyer, licensed in the State of Washington
pursuant to the standard stipulations and conditions of the ALTA policy of
owner's title insurance prescribed by the applicable regulatory authorities for
the State of Washington, free and clear of all liens and encumbrances except
Permitted Encumbrances. All costs associated with obtaining the standard ALTA
policy of title insurance shall be paid by Seller.
6.11 Survey. Within ten (10) business days after execution of this
Agreement, Seller shall provide Buyer with the originals or readable copies of
any surveys of the Real Property in Seller's possession. All costs associated
with updating such survey or preparing new surveys shall be paid by Buyer.
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ARTICLE VII
CONDITIONS PRECEDENT OF THE
OBLIGATION OF SELLER TO CLOSE
The obligation of Seller to close the transaction contemplated by this
Agreement is subject to the satisfaction, on or prior to the closing Date, of
each of the following conditions, unless waived by Seller in writing:
7.1 Accuracy of Representations and Warranties.
(a) The representations and warranties of Buyer contained in this
Agreement shall be complete and correct in all material respects on the date
hereof and at the Closing Date with the same effect as though made at such time
except for changes that are not materially adverse to Seller.
(b) Buyer shall have delivered to Seller on the Closing Date a
certificate that (i) the condition specified in Section 7.1(a) is satisfied as
of the Closing Date, and (ii) except as set forth in such certificate (none of
which exceptions shall be materially adverse to Buyer's ability to consummate
the transaction contemplated hereby), the conditions specified in Section 7.2
are satisfied as of the Closing Date.
7.2 Performance of Agreements. Buyer shall have performed in all material
respects all of its covenants, agreements and obligations required by this
Agreement and each of the other Documents to be performed or complied with by it
prior to or upon the Closing Date.
7.3. FCC and Other Consents.
(a) The FCC Order shall have been issued by the FCC and shall have
become effective under the rules of the FCC.
(b) Conditions which the FCC Order or any order, ruling or decree of
any judicial or administrative body relating thereto or in connection therewith
specifies and requires to be satisfied by Buyer prior to transfer of the FCC
Licenses to Buyer shall have been satisfied by Buyer.
(c) All other authorizations, consents, approvals and clearances of
all federal, state and local governmental agencies required to permit the
consummation by Seller of the transactions contemplated by this Agreement shall
have been obtained; all statutory and regulatory requirements for such
consummation shall have been fulfilled; and no such authorizations, consents,
approvals or clearances shall contain any conditions that individually or in the
aggregate would have any material adverse effect on Seller.
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7.4 Adverse Proceedings. Seller shall not be subject to any ruling,
decree, order or injunction restraining, imposing material limitations on or
prohibiting the consummation of the transactions contemplated hereby. No
governmental authority having jurisdiction shall have notified any party to this
Agreement that consummation of the transactions contemplated hereby would
constitute a violation of the laws of the United States or of any state or
political subdivision or that it intends to commence proceedings to restrain
such consummation or to force divestiture, unless such governmental authority
shall have withdrawn such notice. No governmental authority having jurisdiction
shall have commenced any such proceeding.
7.5 Delivery of Closing Documents and Purchase Price. Buyer shall have
delivered or caused to be delivered to Seller on the Closing Date each of the
Documents required to be delivered pursuant to Section 8.3, and Seller shall
have received payment of the Purchase Price with the form of payment set forth
in Section 2.5.
ARTICLE VIII
CLOSING
8.1 Time and Place. Unless otherwise agreed to in advance by the parties,
Closing shall take place in person or via facsimile at the offices of Buyer's
counsel in Camarillo, California, or at such other place as the parties agree,
at 10:00 A.M. Pacific Time on the date (the "Closing Date") that is the later of
(i) the fifth Business Day after the Applicable Date or (ii) the date as soon as
practicable following satisfaction or waiver of the conditions precedent
hereunder. The Applicable Date shall be the date on which issuance of the FCC
Order without any Material Adverse Condition has become a Final Action.
8.2 Documents to be Delivered to Buyer by Seller. At the Closing, Seller
shall deliver or cause to be delivered to Buyer the following:
(a) Certified resolutions of Seller's Board of Directors (and
shareholders, if required by applicable law) approving the execution and
delivery of this Agreement and each of the other documents and authorizing the
consummation of the transactions contemplated hereby and thereby.
(b) The certificate required by Section 6.1(b).
(c) A bill of sale and other instruments of transfer and conveyance
transferring to Buyer the Tangible Personal Property.
(d) Executed releases, in suitable form for filing and otherwise in
form and substance reasonably satisfactory to Buyer, of any security interests
granted in the
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Sale Assets as security for payment of loans and other
obligations and of any other Liens (other than Permitted Liens).
(e) General Warranty deeds and any other required instruments of
transfer and conveyance transferring to Buyer the Real Property.
(f) Executed mortgage satisfactions and any other documents required
by the title insurance company under Section 6.10 as a condition to issuing the
title insurance policy in the form required by Section 6.10.
(g) An instrument or instruments assigning to Buyer all right, title
and interest of Seller in and to all Station Agreements being assumed by Buyer.
(h) An instrument assigning to Buyer all right, title and interest
of Seller in the FCC Licenses, all pending applications relating to the station
before the FCC, and any remaining Sale Assets not otherwise conveyed.
(i) The opinion of Seller's FCC counsel, dated the Closing Date, to
the effect set forth in Section 6.5.
(j) Such additional information and materials as Buyer shall have
reasonably requested, including without limitation, evidence that all consents
and approvals required as a condition to Buyer's obligation to close hereunder
have been obtained.
8.3 Documents to be Delivered to Seller by Buyer. At the Closing, Buyer
shall deliver or cause to be delivered to Seller the following:
(a) Certified resolutions of Buyer's Board of Directors approving
the execution and delivery of this Agreement and each of the other Documents and
authorizing the consummation of the transaction contemplated hereby and thereby.
(b) The Purchase Price as set forth in Section 2.5.
(c) The agreement of Buyer assuming the obligations under any
Station Agreements being assumed by Buyer.
(d) The certificate required under Section 7.1(b).
(e) Such additional information and materials as Seller shall have
reasonably requested.
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ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
9.1 Survival of Representation and Warranties. All representations,
warranties, covenants and agreements contained in this Agreement or in any other
Document shall survive the Closing for the Survival Period and the Closing shall
not be deemed a waiver by either party of the representations, warranties,
covenants or agreements of the other party contained herein or in any other
Document. No claim may be brought under this Agreement or any other Document
unless written notice describing in reasonable detail the nature and basis of
such claim is given on or prior to the last day of the Survival Period; except
for claims by Buyer for any amounts owed by Seller to Buyer under Section
9.3(a)(v), which claims may be made at any time. In the event such a notice is
so given, the right to indemnification with respect thereto under this Article
shall survive the Survival Period until such claim is finally resolved and any
obligations with respect thereto are fully satisfied. Notwithstanding the
foregoing, the provisions for survival and the making of claims shall not apply
to the agreements whereby Buyer assumes the obligations under Subsection 8.3(c),
each of which agreements shall be governed by its own terms.
9.2 Indemnification in General. Buyer and Seller agree that the rights to
indemnification and to be held harmless set forth in this Agreement shall, as
between the parties hereto and their respective successors and assigns, be
exclusive of all rights to indemnification and to be held harmless that such
party (or its successors or assigns) would otherwise have by statute, common law
or otherwise.
9.3 Indemnification by Seller.
(a) Subject to the provisions of Subsection (b) below and Section
10.2 below, Seller shall indemnify and hold harmless Buyer and any officer,
director, agent, employee and affiliate thereof with respect to any and all
demands, claims, actions, suits, proceedings, assessments, judgments, costs,
losses, damages, liabilities and expenses (including reasonable attorneys' fees)
relating to or arising out of:
(i) Any breach or non-performance by Seller of any of its
representations, warranties, covenants or agreements set forth in this Agreement
or any other Documents; or
(ii) The ownership or operation by Seller of the Station or
the Sale Assets on or prior to the Closing Date; or
(iii) All other liabilities and obligations of Seller other
than the Assumed Obligations; or
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(iv) Noncompliance by Seller with the provisions of the Bulk
Sales Act, if applicable, in connection with the transaction contemplated
hereby; or
(v) Any violation of any Environmental Laws by Seller or the
existence of any Hazardous Materials on the Real Property on or before Closing.
(b) Except for any amounts owed by Seller to Buyer under Section
9.3(a) (iv), Section 9.3(a)(v) and Section 2.7, if Closing occurs, Seller shall
not be obligated (a) until the aggregate amount of such claims, liabilities,
damages, losses, costs and expenses exceeds Buyer's Threshold Limitation, in
which case Buyer shall then be entitled to indemnification of the entire
aggregate amount, or (b) for any amounts in excess of the Purchase Price.
9.4 Indemnification by Buyer.
(a) Subject to the provisions of Subsection (b) below and Section
10.2 below, Buyer shall indemnify and hold harmless Seller and any officer,
director, agent, employee and affiliate thereof with respect to any and all
demands, claims, actions, suits, proceedings, assessments, judgments, costs,
losses, damages, liabilities and expenses (including reasonable attorneys' fees)
relating to or arising out of:
(i) Any breach or non-performance by Buyer of any of its
representations, warranties, covenants or agreements set forth in this Agreement
or any other Document; or
(ii) The ownership or operation of the Station after the
Closing Date; or
(iii) All other liabilities or obligations of Buyer.
(b) Except for any amounts owed by Buyer to Seller under Section
2.7, if Closing occurs, Buyer shall not be obligated (a) until the aggregate
amount of such claims, liabilities, damages, losses, costs and expenses exceeds
Seller's Threshold Limitation, in which case Seller shall then be entitled to
indemnification of the entire aggregate amount, or (b) for any amount in excess
of the Purchase Price.
9.5 Indemnification Procedures. In the event that an Indemnified Party may
be entitled to indemnification hereunder with respect to any asserted claim of,
or obligation or liability to, any third party, such party shall notify the
Indemnifying Party thereof, describing the matters involved in reasonable
detail, and the Indemnifying Party shall be entitled to assume the defense
thereof upon written notice to the Indemnified Party with counsel reasonably
satisfactory to the Indemnified Party; provided, that once the defense thereof
is assumed by the Indemnifying Party, the Indemnifying Party shall keep the
Indemnified Party advised of all developments in the defense thereof and any
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related litigation, and the Indemnified Party shall be entitled at all times to
participate in the defense thereof at its own expense. If the Indemnifying Party
fails to notify the Indemnified Party of its election to defend or contest its
obligation to indemnify under this Article IX, the Indemnified Party may pay,
compromise, or defend such a claim without prejudice to any right it may have
hereunder.
ARTICLE X
TERMINATION; LIQUIDATED DAMAGES
10.1 Termination. If Closing shall not have previously occurred, this
Agreement shall terminate upon the earliest of:
(a) the giving of written notice from Seller to Buyer, or from Buyer
to Seller, if:
(i) Seller gives such termination notice and is not at such
time in material default hereunder, or Buyer gives such termination notice and
Buyer is not at such time in material default hereunder; and
(ii) Either:
(A) any of the representations or warranties contained
herein of Buyer (if such termination notice is given by Seller), or of Seller
(if such termination notice is given by Buyer), are inaccurate in any respect
and materially adverse to the party giving such termination notice unless the
inaccuracy has been induced by or is the result of actions or omissions of the
party giving such termination notice; or
(B) Any material obligation to be performed by Buyer (if
such termination notice is given by Seller) or by Seller (if such termination
notice is given by Buyer) is not timely performed in any material respect unless
the lack of timely performance has been induced by or is the result of actions
or omissions of the party giving such termination notice; or
(C) Any condition (other than those referred to in
foregoing Clauses (A) and (B)) to the obligation to close the transaction
contemplated herein of the party giving such termination notice has not been
timely satisfied; and any such inaccuracy, failure to perform or
non-satisfaction of a condition neither has been cured nor satisfied within
twenty (20) days after written notice thereof from the party giving such
termination notice nor waived in writing by the party giving such termination
notice.
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(b) Written notice from Seller to Buyer, or from Buyer to Seller, at
any time after June 30, 1997 provided that termination shall not occur upon the
giving of such termination notice by Seller if Seller is at such time in
material default hereunder or upon the giving of such termination notice by
Buyer if Buyer is at such time in material default hereunder.
(c) Written notice from Seller to Buyer, or from Buyer to Seller, at
any time following a determination by the FCC that the application for consent
to assignment of the FCC Licenses has been designated for hearing; provided that
the party which is the subject of the hearing (or whose alleged actions or
omissions resulted in the designation for hearing) may not elect to terminate
under this subsection (c).
(d) The written election by Buyer under Article XI.
10.2 Obligations Upon Termination.
(a) In the event this Agreement is terminated pursuant to Section
10.1(a)(ii)(A) or (B), the aggregate liability of Buyer for breach hereunder
shall be limited as provided in Subsections (c) and (e), below and the aggregate
liability for Seller for breach hereunder shall be limited as provided in
Subsections (d) and (e), below. In the event this Agreement is terminated for
any other reason, neither party shall have any liability hereunder.
(b) Upon termination of this Agreement, Buyer shall be entitled to
the return of the Earnest Money from the Escrow Agent under the Escrow Agreement
(i) if such termination is effected by Buyer's giving of valid written notice to
Seller pursuant to Subsections 10.1(a), (b) (c) or (d) , or (ii) if such
termination is effected by Seller's giving of valid written notice to Buyer
pursuant to Subsections 10.1(a)(ii)(C), 10.1(b) or 10.1(c). If Buyer is entitled
to the return of the Earnest Money, Seller shall cooperate with Buyer in taking
such action as is required under the Escrow Agreement in order to effect such
return from the Escrow Agent.
(c) If this Agreement is terminated by Seller's giving of valid
written notice to Buyer pursuant to Subsection 10.1(a)(ii)(A) or (B), Buyer
agrees that Seller shall be entitled to receive upon such termination, as
liquidated damages and not as a penalty, the Earnest Money ("Liquidated Damages
Amount"). SELLER'S RECEIPT OF THE EARNEST MONEY SHALL CONSTITUTE PAYMENT OF
LIQUIDATED DAMAGES HEREUNDER AND NOT A PENALTY, AND SHALL BE SELLER'S SOLE
REMEDY AT LAW OR IN EQUITY FOR BUYER'S BREACH HEREUNDER IF CLOSING DOES NOT
OCCUR. BUYER AND SELLER EACH ACKNOWLEDGE AND AGREE THAT THE LIQUIDATED DAMAGE
AMOUNT IS REASONABLE IN LIGHT OF THE ANTICIPATED HARM WHICH WILL BE CAUSED BY
BUYER'S BREACH OF THIS AGREEMENT, THE DIFFICULTY OF PROOF OF LOSS, THE
INCONVENIENCE AND NON-FEASIBILITY OF OTHERWISE OBTAINING AN
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ADEQUATE REMEDY, AND THE VALUE OF THE TRANSACTION TO BE CONSUMMATED HEREUNDER.
(d) Notwithstanding any provision of this Agreement to the contrary,
but subject to the provisions of the following sentences, if this Agreement is
terminated by Buyer's giving of written notice to Seller pursuant to Subsection
10.1(a), Buyer shall not be entitled to damages or indemnification from Seller.
Subject to the following sentence, if Seller attempts to terminate this
Agreement under circumstances where it is not entitled to do so, or if Seller,
by its own action, causes a breach of warranty or fails to satisfy a condition
(including without limitation a refusal to consummate the transaction after
Buyer has satisfied all conditions to Seller's obligation to close and Buyer has
demonstrated its willingness and ability to close on the terms set forth in this
Agreement and Buyer is not in default hereunder) with the intent of creating a
situation whereby Buyer elects to terminate under Section 10.1(a) and Buyer does
so elect to terminate, the monetary damages, if any, to which Buyer shall be
entitled shall be limited to direct and actual damages and shall in no event
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. If a
circumstance described in the preceding sentence should arise and if Buyer
establishes that the action of Seller described therein was taken intentionally
in order to allow Seller to sell or enter into negotiations to sell the Station
to another party, the damages to which Buyer shall be entitled shall not be
limited to direct and actual damages.
(e) In any dispute between Buyer and Seller as to which party is
entitled to all or a portion of the Earnest Money, the prevailing party shall
receive, in addition to that portion of the Earnest Money to which it is
entitled, an amount equal to interest on that portion at the rate of 10% per
annum, calculated from the date the prevailing party's demand for all or a
portion of the Earnest Money is received by the Escrow Agent.
10.3 Termination Notice. Each notice given by a party pursuant to Section
10.1 to terminate this Agreement shall specify the Subsection (and clause or
clauses thereof) of Section 10.1 pursuant to which such notice is given.
ARTICLE XI
CASUALTY
Upon the occurrence of any casualty loss, damage or destruction material
to the operation of the Station prior to the Closing, Seller shall promptly give
Buyer written notice setting forth in detail the extent of such loss, damage or
destruction and the cause thereof if known. Seller shall use its reasonable
efforts to promptly commence and thereafter to diligently proceed to repair or
replace any such lost, damaged or destroyed property. In the event that such
repair or replacement is not fully completed prior to the Closing Date, Buyer
may elect to postpone the Closing until Seller's repairs have been fully
completed or to consummate the transactions contemplated hereby on the Closing
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Date, in which event Seller shall assign to Buyer the portion of the insurance
proceeds (less all reasonable costs and expenses, including without limitation
attorney's fees, expenses and court costs incurred by Seller to collect such
amounts), if any, not previously expended by Seller to repair or replace the
damaged or destroyed property (such assignment of proceeds to take place
regardless of whether the parties close on the scheduled or deferred Closing
Date) and Buyer shall accept the damaged Sale Assets in their damaged condition.
In the event the loss, damage or destruction causes or will cause the Station to
be off the air for more than seven (7) consecutive days or fifteen (15) total
days, whether or not consecutive, then Buyer may elect either (i) to consummate
the transactions contemplated hereby on the Closing Date, in which event Seller
shall assign to Buyer the portion of the insurance proceeds (less all reasonable
costs and expenses, including without limitation attorney's fees, expenses and
court costs, incurred by Seller to collect such amounts), if any, not previously
expended by Seller to repair or replace the damaged or destroyed property, and
Buyer shall accept the damaged Sale Assets in their damaged condition, or (ii)
to terminate this Agreement.
ARTICLE XII
CONTROL OF STATION
Between the date of this Agreement and the Closing Date, Buyer shall not
control, manage or supervise the operation of the Station or conduct of its
business, all of which shall remain the sole responsibility and under the
control of Seller, subject to Seller's compliance with this Agreement.
ARTICLE XIII
MISCELLANEOUS
13.1 Further Actions. From time to time before, at and after the Closing,
each party, at its expense and without further consideration, will execute and
deliver such documents to the other party as the other party may reasonably
request in order more effectively to consummate the transactions contemplated
hereby.
13.2 Access After the Closing Date. After the Closing and for a period of
twelve (12) months, Buyer shall provide Seller, Seller's counsel, accountants
and other representatives with reasonable access during normal business hours to
the books, records, property, personnel, contracts, commitments and documents of
the Station pertaining to transactions occurring prior to the Closing Date when
requested by Seller, and Buyer shall retain such books and records for the
normal document retention period of Buyer. At the request and expense of Seller,
Buyer shall deliver copies of any such books and records to Seller.
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13.3 Payment of Expenses.
(a) Any fees assessed by the FCC in connection with the filings
contemplated by Section 5.2(a) or consummation of the transactions contemplated
hereby shall be shared equally between Seller and Buyer.
(b) All state or local sales or use, stamp or transfer, grant and
other similar taxes payable in connection with consummation of the transactions
contemplated hereby shall be paid by the party primarily liable under applicable
law to pay such tax.
(c) Except as otherwise expressly provided in this Agreement, each
of the parties shall bear its own expenses, including the fees of any attorneys
and accountants engaged by such party, in connection with this Agreement and the
consummation of the transactions contemplated herein.
13.4 Specific Performance. Seller acknowledges that the Station is of a
special, unique, and extraordinary character, and that any breach of this
Agreement by Seller could not be compensated for by damages. Accordingly, if
Seller shall breach its obligations under this Agreement, Buyer shall be
entitled, in addition to any of the remedies that it may have, to enforcement of
this Agreement (subject to obtaining any required approval of the FCC) by decree
of specific performance or injunctive relief requiring Seller to fulfill its
obligations under this Agreement. In any action by Buyer to equitably enforce
the provisions of this Agreement, Seller shall waive the defense that there is
an adequate remedy at law or equity and agrees that Buyer shall have the right
to obtain specific performance of the terms of this Agreement without being
required to prove actual damages, post bond or furnish other security.
13.5 Notices. All notices, demands or other communications given hereunder
shall be in writing and shall be sufficiently given if delivered by courier or
sent by registered or certified mail, first class, postage prepaid, or by telex,
cable, telegram, facsimile machine or similar written means of communication,
addressed as follows:
(a) if to Seller, to:
EZ Communications, Inc.
10800 Main Street
Fairfax, VA 22030
Attn: Alan Box
President
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Copy to:
Joseph Conroy, Esq.
Hunton & Williams
1751 Pinnacle Drive, Suite 1700
McLean, VA 22102
(b) if to Buyer, to:
Salem Communications Corporation
4880 Santa Rosa Road, Suite 300
Camarillo, California 93012
Facsimile No.: (805) 482-7290
Attention: Jonathan L. Block, Esq.
Corporate Counsel
or such other address with respect to any party hereto as such party may from
time to time notify (as provided above) to the other party hereto. Any such
notice, demand or communication shall be deemed to have been given (i) if so
mailed, as of the close of the third (3rd) business day following the date
mailed, and (ii) if personally delivered or otherwise sent as provided above, on
the date received.
13.6 Entire Agreement. This Agreement, the Schedules and Exhibits hereto,
and the other Documents constitute the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersede any prior negotiations, agreements, understandings or arrangements
between the parties with respect to the subject matter hereof.
13.7 Binding Effect; Benefits. Except as otherwise provided herein, this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors or assigns. Except to the extent specified
herein, nothing in this Agreement, express or implied, shall confer on any
person other than the parties hereto and their respective successors or assigns
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
13.8 Assignment. This Agreement and any rights hereunder shall not be
assignable by either party hereto without the prior written consent of the other
party; provided, however, that Buyer may, at its own expense, without Seller's
prior written consent, assign its rights and obligations to acquire the Real
Property to Edward G. Atsinger III and Stuart W. Epperson, or trusts created for
their benefit and/or the benefit of their spouses and their issue so long as (i)
no delay in the Closing Date results, (ii) no extra expense results to Seller,
and (iii) Buyer remains liable for indemnification of Seller in respect of all
Assumed Obligations in respect of the Real Property. The parties acknowledge
that American Radio Systems Corporation ("ARSC") may become the
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successor in interest of Seller prior to the closing Date and agree that all
rights and obligations of Seller hereunder shall inure to ARSC without the
requirements of consent by or notice to Buyer; provided ARSC shall first assume
the obligations of Seller hereunder.
13.9 Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the laws of the State of Washington, including
all matters of construction, validity and performance.
13.10 Bulk Sales. Buyer hereby waives compliance by Seller with the
provisions of the Bulk Sales Act and similar laws of any state or jurisdiction,
if applicable. Seller shall, in accordance with Article IX, indemnify and hold
Buyer harmless from and against any and all claims made against Buyer by reason
of such non-compliance.
13.11 Amendments and Waivers. No term or provision of this Agreement may
be amended, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against whom the enforcement of such amendment,
waiver, discharge or termination is sought. Any waiver shall be effective only
in accordance with its express terms and conditions.
13.12 Severability. Any provision of this Agreement which is unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such unenforceability without invalidating the remaining provisions hereof,
and any such unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto hereby waive any provision of law now or
hereafter in effect which renders any provision hereof unenforceable in any
respect.
13.13 Headings. The captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
13.14 Counterparts. This Agreement may be executed in any number of
counterparts, and by either party on separate counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
13.15 References. All references in this Agreement to Articles and
Sections are to Articles and Sections contained in this Agreement unless a
different document is expressly specified.
13.16 Schedules and Exhibits. Unless otherwise specified herein, each
Schedule and Exhibit referred to in this Agreement is attached hereto, and each
such Schedule and Exhibit is hereby incorporated by reference and made a part
hereof as if fully set forth herein.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written.
"SELLER" "BUYER "
PROFESSIONAL BROADCASTING INSPIRATION MEDIA, INC.
INCORPORATED
By: /s/ Alan Box By: /s/ Eric H. Halvorson
-------------------------------- --------------------------------
Alan Box Eric H. Halvorson
President Executive Vice President
EZ SEATTLE, INC.
By: /s/ Alan Box
--------------------------------
Alan Box
President
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LIST OF SCHEDULES
Schedule 3.4 List of required consents of any
court, public agency, authority or
any person to the consummation of
the transactions contemplated by
Asset Purchase Agreement.
Schedule 3.6 List of Tangible Personal Property.
Schedule 3.7 Description of Real Property.
Schedule 3.8 List of FCC Licenses.
Schedule 3.9 List of Station Agreements.
Schedule 3.11 Labor Matters.
Schedule 3.13 Legal Matters.
Schedule 3.14 Environmental Matters.
Schedule 3.18 Identification of brokerage
agreements.
<PAGE>
SCHEDULE 3.18
Buyer and Seller acknowledge that Gary Stevens & Co., Inc. acted as the sole and
exclusive broker with respect to the instant transaction. All fees due Gary
Stevens & Co., Inc. arising out of the instant transaction shall be paid in full
by Seller at Closing
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is made and entered into as of November 18,
1996 by and among The Dorsey Group, Ltd., a Missouri corporation, or its assigns
("Buyer"), EZ Communications, Inc. ("EZCI"), a Virginia corporation,
Professional Broadcasting, Incorporated ("Professional"), a Virginia
corporation, and EZ St. Louis, Inc., a Virginia corporation ("EZ," and EZ,
together with EZCI and Professional, individually a "Seller" and collectively
the "Sellers").
PREMISES:
A. EZ holds a license from the Federal Communications Commission (the
"FCC") to operate AM radio broadcast station KSD in St. Louis, Missouri (the
"Station").
B. EZ is a wholly owned subsidiary of Professional, and Professional owns
many of the other assets used or useful in the operation of the Station.
C. Professional is a wholly owned subsidiary of EZCI.
D. Sellers desire to sell, and Buyer wishes to buy, certain of Sellers'
assets used or useful in the operation of the Station for the price and on the
terms and conditions hereafter set forth.
AGREEMENTS:
In consideration of the above premises and the covenants and agreements
contained herein, Buyer and Sellers agree as follows:
<PAGE>
Article 1
DEFINED TERMS
The following terms shall have the following meanings in this Agreement:
1.1 "Accounts Receivable" means the rights of Sellers to payment for the
sale of advertising time or talent on the Station for cash by Sellers prior to
the LMA Date as reflected on the billing records of Sellers relating to the
Station.
1.2 "Assets" means the specific tangible and intangible assets owned and
used or useful in connection with the conduct of the business or the operations
of the Station, which assets are being sold, transferred, or otherwise conveyed
to Buyer hereunder, as specified in detail in Section 2.1.
1.3 "Assumed Contracts" means (i) all Contracts listed in Schedule 3.7
hereto, and (ii) any Contracts entered into by Sellers in the ordinary course of
business between the date hereof and the Closing Date which would have been
listed on Schedule 3.7 had they been in existence on the date hereof and which
Buyer agrees in writing to assume.
1.4 "Closing" means the consummation of the transaction contemplated by
this Agreement in accordance with the provisions of Article 8 hereof.
1.5 "Closing Date" means the date of the Closing specified in Section 8.1
hereof.
1.6 "Consents" means all of the consents, permits, or approvals of
government authorities and other third parties necessary in order to transfer
the Assets to Buyer or otherwise to consummate the transaction contemplated
hereby, including without limitation the consents of the parties to those
Contracts designated in Schedule 3.7 hereto with an asterisk.
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1.7 "Contracts" means all material contracts, agreements, and leases,
written or oral (including any amendments and other modifications thereto) to
which any Seller is a party or which are binding upon any Seller and relate to
the assets or the business or the operations of the Station, and (i) which are
in effect on the date hereof, or (ii) which are entered into by any Seller in
the ordinary course of business between the date hereof and the Closing Date.
1.8 "Escrow Deposit" shall mean the sum of Five Hundred Thousand Dollars
($500,000.00) held by Gary Stevens as Escrow Agent pursuant to an Escrow
Agreement of even date herewith by and among Buyer, Sellers, and Escrow Agent in
the form of Schedule 1.8 hereto.
1.9 "Excluded Assets" shall mean those assets described or set forth in
Section 2.2 hereof and on Schedule 2.2 hereto.
1.10 "FCC Consent" means action by the FCC granting its consent to the
assignment of the FCC licenses to Buyer as contemplated by this Agreement.
1.11 "FCC Licenses" means all of the licenses, permits, and other
authorizations issued by the FCC to Sellers in connection with the conduct of
the business or the operations of the Station.
1.12 "Final Order" means a written action, order, or public notice issued
by the FCC setting forth the FCC Consent (a) which shall not have been reversed,
stayed, enjoined, set aside, annulled, or suspended, and (b) with respect to
which (i) no request shall have been filed for administrative or judicial
review, reconsideration, rehearing, appeal, or stay, and with respect to which
the time for filing any such requests and for the FCC to have reviewed the
action on its own motion shall have expired, or (ii) in the event of review,
reconsideration,
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rehearing, or appeal that does not result in the FCC consent being reversed,
stayed, enjoined, set aside, annulled, or suspended, the time for further
review, reconsideration, rehearing, or appeal shall have expired.
1.13 "LMA Date" means the date of commencement of effectiveness of the
Local Marketing Agreement.
1.14 "Local Marketing Agreement" means the Local Marketing Agreement
entered into by and between Sellers and Buyer in substantially the form set
forth in Schedule 6.4 hereto.
1.15 "Licenses" means all of the licenses, permits, and other
authorizations, including the FCC Licenses, issued by the FCC, the Federal
Aviation Administration (the "FAA"), and any other federal, state, or local
governmental authorities to Sellers in connection with the conduct of the
business or the operations of the Station.
1.16 "Knowledge" in the case of any Seller for purposes of this Agreement,
the Schedules attached hereto, and the representations and warranties made
herein, means the actual knowledge of such Seller's officers, directors,
principals or agents after having made a good faith effort to ascertain the
fact(s) in question by inquiry to such officers or employees of such Seller as
would be reasonably likely to have the information relating to the fact(s) in
question.
1.17 "Personal Property" means all of the machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, spare
parts, and other tangible personal property which are owned or leased by any of
the Sellers and used or useful as of the date hereof in the conduct of the
business or the operations of the Station, and are identified on
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Schedule 3.6, plus such additions thereto and deletions therefrom arising in the
ordinary course of business between the date hereof and the Closing Date.
1.18 "Purchase Price" means the purchase price specified in Section 2.3
hereof.
1.19 "Real Property" means all of the fee estates and buildings and other
improvements thereon, leasehold interest, easements, licenses, rights to access,
rights-of-way, and other real property interests owned by any of the Sellers and
identified on Schedule 3.5 hereto, plus such additions thereto and deletions
therefrom arising in the ordinary course of business between the date hereof and
the Closing Date.
Article 2
SALE AND PURCHASE OF ASSETS
2.1 Agreement to Sell and Buy. Subject to the terms and conditions set
forth in this Agreement, Sellers hereby agree to transfer and deliver to Buyer
on the Closing Date, and Buyer agrees to purchase, all of the Assets, free and
clear of any claims, liabilities, mortgages, liens, pledges, conditions, charges
or encumbrances of any nature whatsoever (except for those permitted in
accordance with Sections 2.5, 3.5, or 3.6 hereof), more specifically described
as follows:
(a) The Personal Property;
(b) The Real Property;
(c) The Licenses;
(d) The Assumed Contracts;
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(e) All trademarks, trade names, service marks, and all other
intellectual property and similar intangible assets relating to the
Station, listed in Schedule 3.9 hereto;
(f) All of Sellers' proprietary information which relates to the
Station, including without limitation, technical information and data,
machinery and equipment warranties, maps, computer discs and tapes, plans,
diagrams, blueprints, schematics, and filings with the FCC which relate to
the Station, if any;
(g) All choses in action and rights under warranties of Sellers
relating to the Station or the Assets, if any;
(h) All books and records relating to the business or the operations
of the Station, including executed copies of the Assumed Contracts, and
all records required by the FCC to be kept, subject to the right of
Sellers to have such books and records made available to Sellers for a
reasonable period, not to exceed three (3) years after the Closing; and
(i) All intangible assets of Sellers relating to the Station not
specifically described above.
2.2 Excluded Assets. The Assets shall exclude the following assets, in
addition to those listed on Schedule 2.2 hereto:
(a) Sellers' cash on hand as of the Closing Date and all other cash
in any of Sellers' bank or savings accounts; any and all insurance
policies, letters of credit, or other similar items, and any cash
surrender value in regard thereto; and any stocks, bonds, certificates of
deposit, and similar investments.
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(b) Any Contracts other than the Assumed Contracts;
(c) All books and records of Sellers, other than those provided for
in Section 2.1(h) hereof, subject to the right of Buyer to have reasonable
access thereto during normal business hours and to copy therefrom for a
period of three (3) years from the Closing Date, and Sellers' corporate
records and other books and records related to internal corporate matters
of Sellers and financial relationships with Sellers' lenders;
(d) Any claims, rights, and interests in and to any refund of
federal, state, or local franchise, income, or other taxes or fees of any
nature whatsoever for periods prior to the Closing Date;
(e) Any pension, profit-sharing, or employee benefit plans, and any
employment or collective bargaining agreement, except to the extent that
any of the same shall be specifically assumed by Buyer pursuant to
Sections 2.4, 2.5, or 6.10 hereof;
(f) The Accounts Receivable;
(g) The call letters KSD.
(h) Any other asset of Sellers not located at either the studios and
offices or at the transmitter site of Sellers.
2.3 Purchase Price. The Purchase Price shall be Ten Million Dollars
($10,000,000.00) in cash or in immediately available funds. The Purchase Price
shall be adjusted to reflect any adjustments or prorations made and agreed to as
of the LMA Date as provided in Section 2.4 hereof.
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2.4 Adjustments and Prorations.
(a) Except to the extent that revenues and expenses at the Station are
allocated pursuant to the Local Marketing Agreement, all revenues arising from
the business and the operations of the Station up until midnight on the day
prior to the Closing Date, and all expenses arising from the business and the
operations of the Station up until midnight on the day prior to the Closing
Date, including business and licenses fees (including any retroactive
adjustments thereto), utility charges, real and personal property taxes and
assessments levied against the Assets, accrued employee benefits such as
vacation time and sick leave, property and equipment rentals, applicable
copyright or other fees, sales and service charges, taxes (except for taxes
arising from the transfer of the Assets hereunder), deposits, and similar
prepaid and deferred items, shall be prorated between Buyer and Sellers in
accordance with the principle that Sellers shall receive all revenues, all
refunds, and all returns of deposits held by third parties, and Sellers shall be
responsible for all expenses, costs, and liabilities allocable to the conduct of
the business or the operations of the Station for the period prior to the
Closing Date, and Buyer shall receive all revenues and shall be responsible for
all expenses, costs, and obligations allocable to the conduct of the business or
the operations of the Station on the Closing Date and for the period thereafter.
Buyer shall receive credit to the extent of the value (as calculated in Sellers'
financial statements consistent with past practice) of any and all advertising
time to be broadcasted following the Closing Date for which consideration in
cash, goods, or services shall have been received by Sellers prior to the
Closing Date.
(b) Notwithstanding the foregoing, there shall be no adjustment for, and
Sellers shall remain solely liable with respect to, any Contracts not included
in the Assumed
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Contracts, any and all employee benefits including, without limitation, vacation
time and sick leave, and any other obligation or liability not being expressly
assumed by Buyer in accordance with Section 2.5 hereof.
(c) Any adjustment or prorations will be determined and paid in accordance
with the procedures set forth in Section 2.4 (d) hereof.
(d) Within sixty (60) days after the Closing Date, Buyer shall deliver to
Sellers a certificate (the "Adjustment Certificate"), signed by a senior officer
of Buyer after due inquiry by such officer, but without any personal liability
on the part of such officer, providing a compilation of the adjustments and
prorations to be made pursuant to this Section 2.4, including any adjustments
and prorations made at the Closing Date, together with a copy of any working
papers relating to such Adjustment Certificate and such other supporting
evidence as Sellers may reasonably request. If Sellers shall conclude that the
Adjustment Certificate does not accurately reflect the adjustments and
prorations to be made pursuant to this Section 2.4, Sellers shall, within thirty
(30) days after its receipt of the Adjustment Certificate, provide to Buyer its
written statement of any discrepancies believed to exist (the "Sellers'
Discrepancy Statement"). Timothy C. Dorsey on behalf of Buyer, and Ronald Peele
on behalf of Sellers, or their respective designees, shall attempt jointly to
resolve the discrepancies within fifteen (15) days after Buyer's receipt of
Sellers' Discrepancy Statement, which resolution, if achieved, shall be binding
upon all parties to this Agreement and not subject to dispute or review. If the
above-named representatives or their designees shall not have resolved the
discrepancies in the Sellers' Discrepancy Statement to their common satisfaction
within such fifteen (15) day period, Buyer and Sellers shall, within the
following ten (10) days, jointly
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designate a nationally known independent public accounting firm to be retained
in order to review the Adjustment Certificate together with Sellers' Discrepancy
Statement and any other relevant documents. The cost of retaining such
independent public accounting firm shall be borne equally by Buyer and Sellers.
Such independent public account firm shall report its conclusions as to
adjustments pursuant to this Section 2.4, which report shall be conclusive on
all parties to this Agreement and not subject to dispute or review. If, after
adjustment as appropriate with respect to the amount of the aforesaid
adjustments paid or credited at the Closing Date, Buyer shall be determined to
owe an amount to Sellers, Buyer shall pay such amount to Sellers forthwith in
cash, and if Sellers shall be determined to owe an amount to Buyer, Sellers
shall pay such amount to Buyer forthwith in cash.
2.5 Assumption of Liabilities and Obligations. Except to the extent
otherwise allocated pursuant to the Local Marketing Agreement, as of the Closing
Date, Buyer shall pay, discharge, and perform (i) all of the obligations and
liabilities of Sellers under the Licenses and the Assumed Contracts insofar as
they relate to the time period on and after the Closing Date, and arising out of
events occurring on or after the Closing Date, (ii) all obligations and
liabilities arising out of events occurring on or after the Closing Date related
to Buyer's ownership of the Assets or its conduct of the business or the
operations of the Station on or after the Closing Date, and (iii) all
obligations and liabilities for which Buyer receives a proration adjustment
hereunder. All other obligations and liabilities of Sellers, including (i) any
obligations under any Contract not included in the Assumed Contract, (ii) any
obligations under the Assumed Contracts relating to the time period prior to the
Closing Date, (iii) any claims or pending litigation or proceedings relating to
the business or the operations of the
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Station prior to the Closing Date, and (iv) any claims or pending litigation or
proceedings related to employees as set forth in Section 6.9 hereof, shall
remain and shall be the obligations and liabilities solely of Sellers.
Article 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers jointly and severally represent and warrant to Buyer as
follows:
3.1 Organization, Standing and Authority.
(a) Professional is a corporation duly incorporated, validly existing, and
in good standing under the laws of the Commonwealth of Virginia, and is duly
qualified to conduct its business in the States of Missouri and Illinois, which
are the only jurisdictions where the conduct of the business or the operations
of the Station require such qualification. Professional has all requisite
corporate power and authority (i) to own, lease, and use the Assets as presently
owned, leased, and used, and (ii) to conduct the business or the operations of
the Station as presently conducted. Professional has all requisite corporate
power and authority to execute and deliver this Agreement and the documents and
instruments contemplated hereby, and to perform and comply with all of the
terms, covenants, and conditions to be performed and complied with by
Professional hereunder and thereunder. Professional is not a participant in any
joint venture or partnership with any other person or entity with respect to any
part of the Station's business or operations or with respect to the Assets.
(b) EZ is a corporation duly incorporated, validly existing, and in good
standing under the laws of the Commonwealth of Virginia, and is duly qualified
to conduct its business in the States of Missouri and Illinois, which are the
only jurisdictions where the conduct of the
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business or the operations of the Station require such qualification. EZ has all
requisite corporate power and authority (i) to own, lease, and use the Assets as
presently owned, leased, and used, and (ii) to conduct the business or the
operations of the Station as presently conducted. EZ has all requisite corporate
power and authority to execute and deliver this Agreement and the documents and
instruments contemplated hereby, and to perform and comply with all of the
terms, covenants, and conditions to be performed and complied with by EZ
hereunder and thereunder. EZ is not a participant in any joint venture or
partnership with any other person or entity with respect to any part of the
Station's business or operations or with respect to the Assets.
(c) EZCI is a corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Virginia. EZCI has all requisite
corporate power and authority (i) to own, lease, and use the Assets as presently
owned, leased, and used, and (ii) to conduct the business or the operations of
the Station as presently conducted. EZCI has all requisite corporate power and
authority to execute and deliver this Agreement and the documents and
instruments contemplated hereby, and to perform and comply with all of the
terms, covenants, and conditions to be performed and complied with by EZCI
hereunder and thereunder. EZCI is not a participant in any joint venture or
partnership with any other person or entity with respect to any part of the
Station's business or operations or with respect to the Assets.
3.2 Authorization and Binding Obligation. The execution, delivery, and
performance of this Agreement by each Seller has been duly authorized by all
necessary corporate action on the part of each Seller. This Agreement has been
duly executed and delivered by each Seller and constitutes the legal, valid, and
binding obligation of each Seller,
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enforceable against each Seller in accordance with its terms, except to the
extent that the enforceability hereof may be affected by bankruptcy, insolvency,
or similar laws affecting creditors' rights generally, or by court-applied
equitable principles.
3.3 Absence of Conflicting Agreements. Except as set forth in Schedule
3.3, subject to obtaining the Consents, the execution, delivery, and performance
of this Agreement and of the instruments and documents contemplated hereby by
Sellers (with or without the giving of notice, the lapse of time, or both): (i)
do not require the consent of any third party; (ii) will not conflict with any
provision of the Articles of Incorporation or By-Laws of any Seller; (iii) will
not conflict with, result in a breach of, or constitute a default under, any
law, judgment, order, ordinance, decree, rule, regulation, or ruling of any
court or governmental instrumentality which is applicable to any Seller; (iv)
will not conflict with, constitute grounds for termination of, result in a
breach of, constitute a default under, or accelerate or permit the acceleration
of any performance required by the terms of, any material agreement, instrument,
license, or permit to which any Seller is a party or by which any Seller or any
substantial portion of any Seller's property may be bound; or (iv) will not
create any claim, liability, mortgage, lien, pledge, condition, charge or,
encumbrance of any nature whatsoever upon the Assets.
3.4 Licenses. Schedule 3.4 hereto include a true and complete list of the
Licenses. Sellers shall deliver to Buyer true and complete copies of the
Licenses (including any and all amendments and other modifications thereto). The
Licenses were validly issued, with Sellers being the authorized legal holder
thereof. The Licenses comprise all of the licenses, permits, and other
authorizations required from any governmental or regulatory authority for the
lawful conduct of the business or the operations of the Station as presently
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operated. EZ filed an application for renewal of the Station's Licenses on
October 1, 1996 (the "Renewal Application"). On the Renewal Application, EZ
stated that the fencing around the base of the Station's tower was inadequate to
allow EZ to certify that the grant of the Renewal Application would not have a
significant environmental impact under the FCC's rules. Sellers are installing
new fencing and, upon completion of the project, Sellers have no reason to
believe that the Renewal Application will not be granted by the FCC or by any
other granting authority in the ordinary course.
3.5 Title to and Condition of Real Property. Schedule 3.5 hereto
identifies all of the Real Property (including the location of all improvements
thereon), which comprises all real property interests necessary in order to
conduct the business or the operations of the Station as now and heretofore
conducted. All towers, guy anchors, buildings, and other improvements included
in the Assets are located entirely on the Real Property identified in Schedule
3.5. Sellers have identified on Schedule 3.5 and have delivered to Buyer true
and complete copies of all leases or other material instruments pertaining to
the Real Property (including any and all amendments and other modifications to
such instruments), all of which instruments are valid, binding, and enforceable
in accordance with their terms. Sellers are not in material breach, nor to the
knowledge of any Seller is any other party in material breach, of the terms of
any of such leases or other instruments. All Real Property (including the
improvements thereon) (i) is in good condition and repair, consistent with its
present use, reasonable wear and tear excepted, (ii) is available for immediate
use in the conduct of the business or the operations of the Station, and (iii)
materially complies with all applicable building, electrical, and zoning
ordinances and codes and all regulations of any governmental
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authority having jurisdiction over the Real Property. Sellers have full legal
and practical access to the Real Property.
3.6 Title to and Condition of Personal Property. Schedule 3.6 hereto
identifies all of the Personal Property, which comprises all personal property
necessary to conduct the business or the operations of the Station as now and
heretofore conducted. Sellers own and have good title to all Personal Property.
None of the Personal Property owned by Sellers is subject to any security
interest, mortgage, pledge, conditional sales agreement, or other lien or
encumbrance, except for (i) liens for current taxes not yet due and payable, and
(ii) any other claims or encumbrances described in Schedule 3.6 that will be
removed prior to or at Closing. Except as shown in Schedule 3.6, the Personal
Property is in good operating condition and repair in all material respects
(ordinary wear and tear excepted) and is available for immediate use in the
business or the operations of the Station, and the transmitting and studio
equipment included in the Personal Property (i) has been maintained in all
material respects consistent with FCC rules and regulations, and (ii) will
permit the Station and any auxiliary broadcasting facilities associated with the
Station to operate in accordance with the terms of the FCC Licenses and the
rules and regulations of the FCC, and with all other applicable federal, state,
and local statutes, ordinances, rules, and regulations.
3.7 Contracts. Schedule 3.7 identifies all the Contracts, including
Contracts separately identified as the Assumed Contracts, except (i) contracts
with advertisers for the sale of advertising the time or talent on the Station
for cash and substantially at Sellers' established rates for the sale of such
time or talent, which are not prepaid, and which may be canceled by the Station
without penalty upon not more than thirty (30) days notice, (ii) employment
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contracts and miscellaneous service contracts terminable at will without
penalty, and (iii) other contracts not involving either aggregate liabilities
under all such contracts exceeding Five Thousand Dollars ($5,000.00) or any
material non-monetary obligation. Sellers shall deliver to Buyer true and
complete copies of all written Contracts and true and complete memoranda of all
oral Contracts (including any and all amendments and other modifications to such
Contracts). Other than the Assumed Contracts, the Sellers require no contract or
agreement to enable Sellers to carry on the business or operations of the
Station in all material respects as presently and heretofore conducted. All of
the Assumed Contracts are in full force and effect, and are valid, binding, and
enforceable in accordance with their terms, except to the extent that the
enforceability thereof may be affected by bankruptcy, insolvency, or similar
laws affecting creditors' rights generally or by court-applied equitable
principles. Sellers are not in material breach, nor to the knowledge of any
Seller is any other party in material breach, of the terms of any such Assumed
Contracts. Except as expressly set forth in Schedule 3.7, no Seller is aware of
any intention by any party to any Assumed Contract (i) to terminate such
contract or amend the terms thereof, (ii) to refuse to renew the same upon
expiration of its term, or (iii) to renew the same upon expiration only on terms
and conditions which are more onerous than those pertaining to such existing
contract. Except for the Consents, Sellers have full legal power and authority
to assign their respective rights under the Assumed Contracts to Buyer in
accordance with this Agreement, and such assignment will not affect the
validity, enforceability, and continuation of any of the Assumed Contracts.
3.8 Consents. Except for the FCC Consent provided for in Section 6.1
hereof and the other Consents described in Schedules 3.7 or 3.8 hereto, no
consent, approval, permit,
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or authorization of, or declaration to or filing with, any governmental or
regulatory authority or any other third party is required in order (i) for
Sellers to consummate this Agreement and the transaction contemplated hereby, or
(ii) to permit Sellers to assign or transfer the Assets to Buyer.
3.9 Trademarks, Trade Names, and Copyrights. Schedule 3.9 hereto
identifies all material copyrights, trademarks, trade names, licenses, patents,
permits, jingles, privileges, and other similar intangible property rights and
interests (exclusive of those required to be listed in Schedule 3.4 hereto)
applied for, issued to, or owned by Sellers, or under which Sellers are licensed
or franchised, and used or useful in the conduct of the business or the
operations of the Station, all of which are valid and in good standing and
uncontested. Sellers shall deliver to Buyer copies of all documents establishing
such rights, licenses, or other authority. To the knowledge of each Seller, no
Seller is infringing upon or otherwise acting adversely to any trademarks, trade
names, copyrights, patents, patent applications, know-how, methods, or processes
owned by any other person or persons, and there is no claim or action pending,
or to the knowledge of any Seller, threatened, with respect thereto.
3.10 Financial Statements. Attached hereto as Schedule 3.10 are the
following financial statements (collectively the "Financial Statements"): (i)
unaudited consolidated and consolidating balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for the fiscal
year ended December 31, 1995 for each of the Sellers; and (ii) unaudited
consolidated and consolidating balance sheets and statements of income, changes
in stockholders' equity, and cash flow as of and for the month ended June 30,
1996 for each of
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the Sellers. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of each Seller
as of such dates and the results of operations of each Seller for such periods,
are correct and complete, and are consistent with the books and records of each
Seller (which books and records are correct and complete).
3.11 Insurance. All of the tangible property included in the Assets is
insured against loss or damage in amounts generally customary in the broadcast
industry. Schedule 3.11 hereto identifies all insurance policies of Sellers
which insure any part of the Assets. All policies of insurance listed in
Schedule 3.11 are in full force and effect. During the three-year period ending
on the date hereof, no insurance policy of any Seller covering the Assets or the
Station has been canceled by the insurer, and no application on the part of any
Seller for insurance relating to the Assets or the Station has been rejected by
any insurer.
3.12 Reports. All returns, reports, and statements which any Seller is
currently required to file in connection with the business or the operations of
the Station, with the FCC or with any other governmental agency have been filed,
and all reporting requirements of the FCC and other governmental authorities
having jurisdiction over Sellers, the Station, or the Assets have been
materially complied with; all of such reports, returns, and statements are
substantially complete and correct as filed; and the Station's public inspection
file is located in its community of license and is in material compliance with
the FCC's rules and regulations.
3.13 Employee Benefit Plans. Schedules 3.7 or 3.13 hereto identifies all
employee benefit plans or arrangements applicable to the employees of Sellers at
the Station, and all material fixed or contingent liabilities or obligations of
Sellers with respect to any
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person now or formerly employed by Sellers at the Station, including pension or
thrift plans, individual or supplemental pension or accrued compensation
arrangements, contributions to hospitalization or other health or life insurance
programs, incentive plans, bonus arrangements, and vacation, sick leave,
disability, and termination arrangements or policies, including workers'
compensation policies. Sellers shall furnish or make available to Buyer true and
complete copies of all written documents or information with respect to employee
matters and arrangements at the Station, including without limitation all
employee handbooks, rules, policies, plan documents, trust agreements,
employment agreements, summary plan descriptions, and descriptions of any
unwritten plans identified in Schedule 3.13. Any employee benefits and welfare
plans or arrangements identified in Schedule 3.13 were established and have been
executed, managed, and administered without material exception in accordance
with all applicable requirements of the Internal Revenue Code of 1986, as
amended, and the Employee Retirement Income Security Act of 1974, as amended,
and other applicable laws. There is no governmental audit or examination of any
of such plans or arrangements pending, nor, to the knowledge of any Seller,
threatened. There exists no action, suit, or claim (other than routine claims
for benefits) with respect to any of such plans or arrangements pending, or, to
the knowledge of any Seller, threatened, against any of such plans or
arrangements, and no Seller knows of any facts which could give rise to any such
action, suit, or claim.
3.14 Labor Relations. No Seller is a party to or subject to any collective
bargaining agreement with respect to the Station. No Seller has any written or
oral contracts of employment with any employee of the Station, other than those
listed in Schedule 3.7.
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Sellers shall provide Buyer with true and complete copies of all such written
contracts of employment and true and complete memoranda of any such oral
contracts. Each Seller, in the operation of the Station, has complied in all
material respects with all applicable laws, rules, and regulations relating to
the employment of labor, including those related to wages, hours, collective
bargaining, occupational safety, discrimination, and the payment of social
security and other payroll-related taxes, and no Seller has received any notice
alleging that it has failed to comply in any material respect with any such
laws, rules, us regulations. No material controversies, disputes, or proceedings
are pending, or, to the best of each Seller's knowledge, threatened, involving
any employee or the employees (collectively) of the Station. No labor union or
other collective bargaining unit represents any of the employees of the Station.
To the best of each Seller's knowledge there is no union campaign being
conducted to solicit cards from employees in order to authorize a union to
request a National Labor Relations Board certification election with respect to
any employees of any Seller at the Station.
3.15 Taxes. Except where the failure to do so would not have a material
adverse effect on the business or operations of the Station, each Seller has
filed or caused to be filed all federal income tax returns and all other
federal, state, county, local, or city tax returns which are required to be
filed, and each Seller has paid or caused to be paid all taxes shown on said
returns or on any tax assessment received by such Seller to the extent that such
taxes have become due, or has set aside on its books reserves (segregated to the
extent required by sound accounting practice) that are adequate with respect
thereto. No events have occurred which could impose upon Buyer any transferee
liability for any taxes, penalties, or interest due or to become due from any
Seller.
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3.16 Claims, Legal Actions. Except as set forth in Schedule 3.16 hereto,
and except for any investigations and rule making proceedings generally
affecting the broadcasting industry, there is no claim, legal action,
counterclaim, suit, arbitration, governmental investigation, or other legal,
administrative, or tax proceeding, nor any order, decree, or judgment, in
progress or pending, or, to the knowledge of any Seller, threatened, against or
relating to any Seller, the Assets, or the business or the operations of the
Station, nor does any Seller know of any basis for the same. In particular,
except as set forth in Schedule 3.16, but without limiting the generality of the
foregoing, there are no applications, complaints, or proceedings pending, or, to
the best of each Seller's knowledge, threatened, (i) before the FCC relating to
the business or the operations of the Station, other than applications,
complaints, or proceedings which affect the broadcasting industry generally,
(ii) before any federal or state agency involving charges of illegal
discrimination by the Station under any federal, state, or other employment laws
or regulations, or (iii) against any Seller or the Station before any federal,
state, or local agency involving environmental or zoning laws or regulations.
3.17 Compliance with Laws. Each Seller has complied in all material
respects with (i) the Licenses, and (ii) all applicable federal, state, and
local laws, rules, regulations, and ordinances relating to the Station. Neither
the ownership or use, nor the conduct of the business or the operations of the
Station conflicts with the rights of any other person, firm, or corporation in
any material respect.
3.18 Environmental Matters.
(a) During Sellers' period of ownership of the Station, and, to the best
knowledge of each Seller, during those periods of ownership of the Station by
Sellers' predecessors, there
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has been no production, storage, treatment, recycling, disposal, use,
generation, discharge, release, or other handling or disposition of any kind by
any Seller or any such predecessor (collectively, "Handling") of any material
amount of any toxic or hazardous wastes, substances, products, pollutants, or
materials of any kind, including, without limitation, petroleum and
petroleum-derived products, friable asbestos, polychlorinated biphenyls, or any
other wastes, substances, products, pollutants, or material regulated under any
Environmental Laws (as defined below) (collectively, "Hazardous Materials") at,
in, on, from, or under the Real Property or any structure or improvement on the
Real Property which in any event is in material violation of Environmental Laws.
The operations of Sellers with respect to the Station and the Assets and, to
each Seller's knowledge, those of Sellers' predecessors as the owners of the
Station are and have been conducted, as the case may be, in material compliance
with all applicable Environmental Laws. There are no pending or, to the best of
each Seller's knowledge, threatened actions, suits, claims, demands, legal
proceedings, administrative proceedings, requests for information, or other
notices, proceedings, or requests (collectively, "Claims") against or upon any
Seller based on or relating to any Pre-Closing Environmental Matters (as defined
below), and no Seller has any knowledge that any such Claims will be asserted.
"Environmental Laws" means any and all federal, state, or local laws, statutes,
rules, regulations, plans, ordinances, codes, licenses or other restrictions
relating to health, safety, or the environment, including without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act, the
Clean Air Act, the Safe Drinking Water Act, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, and the Occupational Safety and
Health Act. "Pre-Closing Environmental Matters" means (i) the
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Handling of any Hazardous Materials on, at, in, from, or under the Real
Property prior to the Closing Date, including without limitation, the effects of
any Handling of Hazardous Materials within or outside the boundaries of the Real
Property, the presence of any Hazardous Materials at, on, or under the Real
Property or any improvements or structures thereon, regardless of how such
Hazardous Materials came to rest there, (ii) the failure of any Seller to be in
compliance with any Environmental Laws, or (iii) any other act, omission, event,
circumstance, or condition which could give rise to liability or potential
liability under any Environmental Laws with respect to the Real Property or the
present or prior business of Seller.
(b) Without in any manner limiting the representations and warranties of
Sellers continued in Section 3.18(a) hereof, Buyer shall be entitled to order
and to have undertaken on its behalf, but at Sellers' cost, prior to Closing a
Phase I Environmental Assessment (the "Environmental Assessment") of the Real
Property, and shall be granted all cooperation and access by Sellers reasonably
necessary in order to complete such Environmental Assessment. If the report of
such Environmental Assessment demonstrates a material breach on the part of any
Seller with respect to such Seller's warranties and representations in Section
3.18(a) hereof, or recommends remediation in order to cause the Real Property to
come into compliance with Environmental Laws, Seller shall immediately undertake
to arrange, at their own expense, such remediation prior to the Closing.
Notwithstanding the foregoing, in the event such remediation costs or is
estimated to cost in excess of Two Hundred Thousand Dollars ($200,000.00),
Seller shall not be obligated to expend such excess, but in such event Buyer may
thereafter, at its option, (i) accept the condition of the Real Property at
Closing as so
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remediated, or (ii) terminate Buyer's obligations to purchase the Station under
this Agreement without liability in which event Buyer's Escrow Deposit plus all
interest or other proceeds from the investment thereof shall be immediately
returned to Buyer. If Sellers are required under this Section 3.18(b) to remedy
any environmental hazard at a site for which a person other than any Seller,
such as the owner or any other occupant of any real property, is primarily
responsible under applicable law, Buyer and Seller shall cooperate in seeking to
enforce any right of contribution or other remedy they may have against such
person. However, nothing in this section regarding Buyer's agreement to
cooperate with Sellers in seeking to enforce any right of contribution or other
remedy shall relieve Sellers of their obligation to remedy the environmental
hazard. Sellers shall have no obligation under this Section 3.18 (b) to
undertake any remediation of any environmental hazard disclosed in the
Environmental Assessment unless Buyer shall have notified Seller of the
existence of the environmental hazard within fifteen (15) days after Buyer
receives the Environmental Assessment.
3.19 Conduct of Business in Ordinary Course. Since the date of the most
recent Financial Statements for the period ended June 30, 1996, Sellers have
conducted the business and the operations of the Station only in the ordinary
course and have not:
(a) Suffered any material adverse change in the business assets or
properties or condition (financial or otherwise) of Sellers or of the
Station, including without limitation any damage, destruction, or loss
affecting the Assets and any material decreases in operating cash flow;
(b) Made any material increase in compensation payable or to become
payable to any of the employees of any Seller, or any bonus payment made
or promised to any employee of any Seller, or any material change in
personnel policies, employee benefits, or other compensation arrangements
affecting the employees of any Seller; or
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(c) Made any sale, assignment, lease, or other transfer of any of
the properties of any Seller relating to the Station, other than in the
normal and usual course of business with suitable replacements being
obtained therefor.
3.20 Full Disclosure. No representation or warranty made by any Seller
herein, nor in any certificate, document, or other instrument furnished or to be
furnished by any Seller pursuant hereto, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
known to any Seller and required to make the statements herein or therein not
misleading.
Article 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization, Standing and Authority. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Missouri and shall be, at Closing, qualified to conduct business in the State of
Missouri and Illinois. Buyer has all requisite power and authority to execute
and deliver this Agreement and the documents and instruments contemplated
hereby, and to perform and comply with all of the terms, covenants, and
conditions to be performed and complied with by Buyer hereunder and thereunder.
4.2 Authorization and Binding Obligation. The execution, delivery, and
performance of this Agreement by Buyer have been duly authorized by all
necessary action on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer and constitutes the legal, valid, binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except to the
extent that the enforceability hereof may be affected by
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bankruptcy, insolvency, or similar laws affecting creditors' rights generally,
or by court-applied equitable principles.
4.3 Absence of Conflicting Agreements. Except as set forth on Schedule
4.3, subject to obtaining the Consents, the execution, delivery, and performance
of this Agreement and the documents and instruments contemplated hereby by Buyer
(with or without the giving of notice, the lapse of time, or both): (i) does not
require the consent of any third party; (ii) will not conflict with the
organizational documents of Buyer; (iii) to the best of Buyer's knowledge will
not conflict with, result in a breach of, or constitute a default under, any
law, judgment, order, ordinance, decree, rule or regulation, or ruling of any
court or governmental instrumentality which is applicable to Buyer; will not
conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under or accelerate or permit the acceleration of any
performance required by the terms of, any material agreement, instrument,
license, or permit to which Buyer is a party or by which Buyer may be bound.
4.4 FCC Qualification. Buyer has no knowledge of any facts which would,
under present law (including the Communications Act of 1934, as amended) and the
present rules, regulations, and policies of the FCC, disqualify Buyer as an
assignee of the FCC Licenses listed on Schedule 3.4 hereto, or as an owner and
operator of the Station's Assets, and Buyer will not take, nor unreasonably fail
to take, any action which Buyer knows or has reason to know would cause such
disqualification (it being understood that Buyer has an active duty to attempt
to ascertain what would cause such disqualification). Should Buyer become aware
of any such facts, it will promptly notify Sellers in writing thereof and use
its best efforts to prevent or remove any such disqualification, as the case may
be. Buyer further represents and
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warrants that it is financially qualified to meet all terms, conditions, and
undertakings contemplated by this Agreement.
Article 5
COVENANTS OF SELLERS
5.1 Pre-Closing Covenants. Except as contemplated by this Agreement or
with the prior written consent of Buyer, which consent may be withheld in
Buyer's sole discretion, between the date hereof and the Closing Date, Sellers
shall, subject to the terms of the Local Marketing Agreement, operate the
Station in the ordinary course of business in material accordance with Sellers'
past practices (except where such would conflict with the following covenants or
with Sellers' other express obligations hereunder), and shall abide by the
following negative and affirmative covenants:
A. Negative Covenants. No Seller shall do any of the following:
(1) Compensation. Increase the compensation, bonuses, or other
benefits payable or to be payable to any person employed in connection
with the conduct of the business or the operations of the Station, except
in accordance with past practices;
(2) Contracts. Enter into any new Contracts, except in the ordinary
course of business and in accordance with past practices, or with prior
notice to Buyer;
(3) Disposition of Assets. Sell, assign, lease, or otherwise
transfer or dispose of any of the Assets, except (i) for assets consumed
or disposed of in the ordinary course of business, or (ii) where such
assets are no longer used or useful in the business or the operations of
the Station, and, in the event of either (i) or (ii), in connection with
the acquisition by Sellers of replacement property of equivalent kind and
value; provided, however, that nothing contained herein shall be deemed to
prohibit the planned merger of EZCI into American Radio Systems
Corporation.
(4) Encumbrances. Create, assume, or permit to exist any claim,
liability, mortgage, lien, pledge, condition, charge, or encumbrance of
any nature whatsoever upon the Assets, except for (i) those in existence
on the date of this
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Agreement disclosed in Schedules 3.5 and 3.6 hereto, (ii) those permitted
by Sections 2.5, 3.5, or 3.6 hereof, and (iii) mechanics' liens and other
similar liens which will be removed prior to the Closing Date;
(5) Licenses. Do any act or fail to do any act which might result in
the expiration, revocation, suspension, or adverse modification of any of
the Licenses, or fail to prosecute with due diligence any applications to
any governmental authority in connection with the operation of the
Station;
(6) Rights. Waive any material right relating to the Station or the
Assets; or
(7) No Inconsistent Action. Take any action which is inconsistent
with any Seller's obligations hereunder or which could hinder or delay the
consummation of the transaction contemplated by this Agreement.
B. Affirmative Covenants. Sellers shall do the following:
(1) Access to Information. Upon prior notice, allow Buyer and its
authorized representatives reasonable access at mutually agreeable times
at Buyer's expense during normal business hours to the Assets and to all
other properties, equipment, books, records, Contracts, and documents
relating to the Station for the purpose of audit and inspection, and
furnish or cause to be furnished to Buyer or to its authorized
representatives all information with respect to the affairs and business
of the Station as Buyer may reasonably request, it being understood that
the rights of Buyer hereunder shall not be exercised in such a manner as
to interfere with the operations of the business of Sellers; provided that
neither the furnishing of such information to Buyer or its
representatives, nor any investigation made heretofore or hereafter by
Buyer, shall affect Buyer's rights to rely on any representation or
warranty made by any Seller in this Agreement, each of which shall survive
any furnishing of information or any investigation;
(2) Maintenance of Assets. Maintain all of the Assets or
replacements thereof and improvements thereon in their current condition
(ordinary wear and tear excepted), and use, operate, and maintain all of
the Assets in a reasonable manner, with inventories of spare parts and
expendable supplies being maintained at levels consistent with past
practices;
(3) Insurance. Maintain the existing insurance policies on the
Station and the Assets;
(4) Consents. Use its best efforts to obtain the Consents;
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(5) Notification. Promptly notify Buyer in writing of any unusual or
material developments with respect to the Assets or the Station, and of
any material change in any of the information contained in Sellers'
representations and warranties contained in Article 3 hereof or in the
schedules hereto, provided that such notification shall not relieve
Sellers of any obligations hereunder;
(6) Contracts. Prior to the Closing Date, deliver to Buyer a list of
all Contracts entered into between the date hereof and the Closing Date of
the type required to be listed is Schedule 3.7 hereto, together with the
copies of such Contracts;
(7) Compliance with Laws. Comply in all material respects with all
rules and regulations of the FCC, and all other laws, rules, and
regulations to which any Seller, the Station, and the Assets are subject;
(8) Real Property Title Insurance Commitment. Within 45 days of the
date hereof, obtain and deliver to Buyer, at Sellers' expense, with
respect to each parcel of Real Property identified in Schedule 3.5 hereto
for which a fee estate is to be conveyed by Sellers to Buyer hereunder, an
owner's preliminary report on title, issued by a reputable real estate
title insurance company reasonably acceptable to Buyer that is regularly
engaged in the business of insuring title to commercial real estate in the
States of Missouri and Illinois and (the "Title Company"). Within 60 days
of the date of this Agreement, Sellers will deliver to Buyer, at Sellers'
expense, the commitment of the Title Company to issue an owner's title
insurance policy insuring the fee simple title of Buyer in all such
parcels of real estate in the aggregate amount not to exceed the assessed
value of the real estate, subject only to (i) the standard exceptions to
title insurance that are customarily contained in such title insurance
policies, (ii) liens for current state and local property taxes which are
not yet delinquent nor subject to penalty, (iii) such other matters as are
disclosed in Schedule 5.1(B)(8) hereto, and (iv) any such other
imperfection of title, encroachment, easement, covenant, restriction,
zoning designation, or violation of existing zoning or building code,
ordinance, or law, as the case may be, as would not materially or
adversely affect, impair, or interfere with the use of any property
affected thereby as heretofore used by Sellers or by the Station.
(9) Real Property Survey. Within 60 days of the date of this
Agreement, obtain and deliver to Buyer, at Sellers' expense, with respect
to each parcel of Real Property identified in Schedule 3.5 hereto for
which a fee estate is to be conveyed by Sellers to Buyer hereunder, a
survey certified by a registered land surveyor, showing with respect to
each such parcel (i) the legal description of such parcel, (ii) any and
all buildings, structures, and other improvements located on such parcel
and all "setback" lines and other restrictions in respect thereof which
are of record or which have been established by any law, statute, code,
ordinance, rule, or regulation, (iii) any and all easements and
rights-of-way with respect to such parcel, and (iv) all entrances to and
exits from such parcel from public roads and highways.
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5.2 Post-Closing Covenants. After the Closing, Sellers will take such
actions, and execute and deliver to Buyer such further deeds, bills of sale, or
other transfer documents as, in the reasonable opinion of counsel for Buyer, may
be necessary to ensure, complete, and evidence the full and effective transfer
of the Assets to Buyer pursuant to this Agreement.
Article 6
SPECIAL COVENANTS AND AGREEMENTS
6.1 FCC Consent.
(a) The assignment of the FCC Licenses as contemplated by this Agreement
is subject to the prior consent and approval of the FCC. Within twenty (20)
business days after the execution of this Agreement, Buyer and Sellers shall
file with the FCC an appropriate application for the FCC Consent approving the
assignment of the FCC Licenses from Sellers or from American Radio Systems
Corporation or its subsidiary to Buyer. The parties shall prosecute said
application with all reasonable diligence and otherwise use their best efforts
to obtain the grant of such application by the FCC as expeditiously as
practicable. If the FCC Consent shall impose any condition on any party hereto,
such party shall use its best efforts to comply with such condition, unless
compliance would be unduly burdensome or would have a material adverse effect
upon such party. If reconsideration or judicial review is sought with respect to
the FCC Consent, Buyer and Sellers shall oppose such reconsideration or judicial
review (but nothing herein shall be construed to limit any party's right to
terminate this Agreement pursuant to Article 9 of this Agreement).
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(b) The transfer of the Assets hereunder is expressly conditioned upon (i)
the grant of the FCC Consent without any materially adverse conditions on
Sellers or Buyer, (ii) compliance by the parties hereto with the conditions (if
any) imposed in the FCC Consent, and (iii) the FCC Consent, through the passage
of time or otherwise, having become a Final Order; provided, however, that the
condition that the FCC Consent shall have become a Final Order may be waived by
Buyer, in its sole discretion.
6.2 Taxes, Fees, and Expenses. Sellers, on the one hand, and Buyer, on the
other, shall each pay one-half of all sales, transfer, documentary, recording,
and similar taxes and fees, if any, arising out of the transfer of the Assets
pursuant to this Agreement. All filing fees required by the FCC shall be paid
one-half by Sellers, on the one hand, and one-half by Buyer, on the other.
Except as otherwise provided in this Agreement, each party shall pay its own
expenses incurred in connection with the authorization, preparation, execution,
and performance of this Agreement, including all fees and expenses of counsel,
accountants, agents, and other representatives.
6.3 Brokers. Buyer, on the one hand, and Sellers, on the other, each
represents and warrants to the other that neither such warrantor, nor any person
or entity acting on its behalf, has incurred any liability for any finders' or
brokers' fees or commissions in connection with the transaction contemplated by
this Agreement, except for Gary Stevens, whose fee shall be solely the
responsibility of Buyer.
6.4 Local Marketing Agreement. Buyer and Sellers shall enter into a Local
Marketing Agreement substantially in the form set forth in Schedule 6.4 hereto,
to be effective
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as of a date to be determined by Buyer, which date shall be no sooner than
January 2, 1997 and no later than January 31, 1997.
6.5. Reserved.
6.6 Confidentiality. Except as necessary for the consummation of the
transaction contemplated hereby, including Buyer's obtaining financing in any
form or means of its choosing related hereto, each party hereto will keep
confidential any information which is obtained from the other party in
connection with the transaction contemplated hereby and which is not readily
available to members of the general public, and will not use such information
for any purpose other than in furtherance of the transactions contemplated
hereby, and will not divulge such information to any third party, except
pursuant to subpoena and thereupon only after providing written notice to the
other party and allowing the other party seven (7) business days to quash the
subpoena or obtain other appropriate judicial remedy. In the event that this
Agreement shall be terminated and the purchase and sale contemplated hereby
shall be abandoned, each party will return to the other party all documents,
work papers, and other written material obtained by it in connection with the
transaction contemplated hereby.
6.7 Cooperation. Buyer and Sellers shall cooperate fully with each other
and with their respective counsel and accountants in connection with any actions
required to be taken as a part of their respective obligations under this
Agreement, and Buyer and Sellers shall execute such other documents and
instruments as may be necessary and desirable to the implementation and
consummation of the transaction contemplated in this Agreement, and shall
otherwise use their best efforts to consummate the transaction contemplated
hereby and to fulfill their
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obligations hereunder. Notwithstanding the foregoing, except as otherwise set
forth herein, Buyer shall have no obligation (i) to expend funds in order to
obtain the Consents, or (ii) to agree to any adverse change in any License or
Assumed Contract in order to obtain a Consent required with respect thereto.
6.8 Risk of Loss.
(a) Except as set forth in the Local Marketing Agreement, the risk
of loss, damage, impairment, confiscation, or condemnation of any of the Assets
from any cause whatsoever shall be borne by Sellers at all times prior to the
completion of the Closing.
(b) In the event that any damage or destruction of the Assets or any
other event shall occur which shall prevent signal transmission by the Station
in the normal and usual manner, and if Sellers shall not have restored or
replaced the Assets so damaged or destroyed such that the condition of damage
and destruction shall have been cured and the normal and usual signal
transmission by the Station shall have been resumed prior to the Closing Date,
the Closing Date shall be postponed for a period of up to one hundred and twenty
(120) days, in order to permit the repair or replacement of the damage or loss
and the restoration of the normal and usual signal transmission by the Station.
(c) In the event of any damage or destruction of the Assets
described above, if such Assets shall not have been restored or replaced and the
Station's normal and usual signal transmission resumed within the one hundred
and twenty (120) day period specified above, Buyer may terminate this Agreement
forthwith without any further obligation hereunder (except for liability for any
pre-termination breaches of this Agreement on the part of Buyer), by delivering
written notice thereof to Sellers, in which event the Escrow Deposit plus all
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interest or other proceeds from the investment thereof shall be immediately
returned to Buyer. Alternatively, Buyer may, at its option, proceed to close the
transaction contemplated by this Agreement and complete the restoration and
replacement of such damaged Assets after the Closing Date, in which event
Sellers shall deliver to Buyer all insurance proceeds received by any Seller in
connection with such damage or destruction, to the extent not already expended
by Sellers toward such restoration and replacement.
(d) Notwithstanding the foregoing, Buyer may terminate this
Agreement forthwith without any further obligation hereunder, except for
liability for any pre-termination breaches of this Agreement on the part of
Buyer, by delivering written notice thereof to Sellers, if any event occurs
which shall prevent signal transmission by the Station in a manner generally
equivalent to the Station's current signal transmission for a consecutive period
of five (5) days or for a cumulative period of fourteen (14) days after the date
hereof, in which event the Escrow Deposit plus all interest or other proceeds
from the investment thereof shall be immediately returned to Buyer.
6.9 Employee Matters.
(a) Sellers shall provide to Buyer an accurate list of all current
employees of the Station, together with a description of the terms and
conditions of their employment (including salary, bonus, and other benefit
arrangements) and their duties as of the date of this Agreement. Sellers shall
promptly notify Buyer of any material changes that occur prior to Closing with
respect to such information.
(b) Nothing contained in this Agreement shall confer upon any
employee of any Seller any right with respect to continued employment by Buyer,
nor shall anything herein
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interfere with any right the Buyer may have after the LMA Date or after the
Closing Date to (i) terminate the employment of any of the employees of any
Seller at the Station at any time, with or without cause, or (ii) establish or
modify any of the terms and conditions of the employment of the employees of
Sellers at the Station, in the exercise of Buyer's independent business
judgment.
(c) Except as otherwise set forth herein, Buyer will not incur any
liability on account of any Seller's employees in connection with the
transaction contemplated by this Agreement, including without limitation, any
liability on account of unemployment insurance contributions, termination
payments, retirement, pension, profit-sharing, bonus, severance pay, disability,
health, accrued vacation, accrued sick leave or other employee benefit plans,
practices, agreements, or understandings. It is hereby expressly agreed and
understood that Sellers shall be solely responsible for payments to their
respective employees relating to vacation and sick leave and that there shall be
no pro-rated adjustment with respect to such items.
6.10 Accounts Receivable. At the LMA Date, Sellers shall assign to
Buyer, for collection purposes only, all Accounts Receivable. Sellers shall
deliver to Buyer on or as soon as practicable after the LMA Date a complete and
detailed statement showing the name, amount, and age of each Account Receivable.
Subject to and limited by the following, collections of the Accounts Receivable
by Buyer following the LMA Date will be for the account of Sellers. Buyer shall
endeavor in the ordinary course of business to collect the Accounts Receivable
for a period ending upon the later of (i) ninety (90) days after the LMA Date,
or (ii) the Closing Date (the "Collection Period"). Any payment received by
Buyer
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during the Collection Period from any customer with an account which is an
Account Receivable shall first be applied in reduction of the Account
Receivable, unless the customer otherwise directs in writing. During the
Collection Period, on a monthly basis, Buyer shall furnish Sellers with a list
of, and shall pay over to Sellers, the amounts collected during the preceding
month with respect to the Accounts Receivable. Buyer shall provide Sellers with
a final accounting on or before the fifteenth (15th) day following the end of
the Collection Period. Upon the request of either party at and after such time,
Buyer and Sellers shall meet to analyze in good faith any uncollected Account
Receivable in order to determine if the same, in their reasonable business
judgment, is deemed to be collectible and if Buyer desires to retain a business
relationship with the customer carrying such Account Receivable. As to each such
customer carrying an Account Receivable with whom Buyer, in its sole discretion,
elects to retain a business relationship, Buyer and Sellers shall negotiate a
good-faith value of the Account Receivable, which Buyer shall pay to Sellers.
Sellers shall retain the right to collect any Account Receivable as to which the
parties are unable to reach agreement as to a good-faith value, and Buyer agrees
to turn over to Sellers any payments received against any such Account
Receivable. As Sellers' agent, Buyer shall not be obligated to use any
extraordinary efforts or expend any sums to collect any of the Accounts
Receivable assigned to it for collection hereunder or to refer any of such
Accounts Receivable to a collection agency or to any attorney for collection,
and Buyer shall not make any such referral, nor compromise, settle, or adjust
the amount of any such Account Receivable, except with the approval of Sellers.
Buyer shall incur no liability to Sellers for any uncollected Account
Receivable, unless Buyer shall have engaged in willful misconduct or gross
negligence in the collection of
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such Account Receivable. During and after the Collection Period, without
specific agreement with Buyer to the contrary, no Seller nor any agent of any
Seller shall make any direct contact for purposes of collection with any
customer carrying an Account Receivable, except for Accounts Receivable retained
by any Seller after the Collection Period.
6.11 Audit Cooperation. Sellers agree to cooperate fully, and to use
reasonable efforts to cause its accounting firm to cooperate fully, with Buyer
and at Buyer's expense, to the extent required for Buyer to prepare audited
financial statements for the Station for the period of Sellers' ownership
thereof.
6.12 Allocation of Purchase Price. On or before the Closing, Buyer and
Sellers will endeavor in good faith to agree to an allocation of the Purchase
Price paid by Buyer to Sellers for the Assets, in accordance with Section 1060
of the Internal Revenue Code of 1986, as amended by Temporary Treasury
Regulation Section 1.1060-1T. Buyer and Sellers further agree to file with their
respective Federal income tax returns an initial asset acquisition statement and
any supplemental statement on Internal Revenue Service Form 8594 required by
Temporary Treasury Regulation Section 1.1060-1T, all in accordance with and
accurately reflecting any agreed upon allocation of the Purchase Price as
described above.
Article 7
CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS
7.1 Conditions to Obligations of Buyer. All obligations of Buyer at the
Closing hereunder are subject to the fulfillment as of the Closing Date of each
of the following conditions, any of which may be waived by Buyer in whole or in
part in its sole discretion in writing:
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A. Representations and Warranties. The representations and
warranties of each Seller in this Agreement shall be true and complete in all
material respects at and as of the Closing Date, except for changes contemplated
by this Agreement or as contemplated by the Local Marketing Agreement, as though
such representations and warranties were made at and as of the Closing Date.
B. Covenants and Conditions. Each Seller shall have in all material
respects performed and complied with the covenants, agreements, and conditions
required by this Agreement or by the Local Marketing Agreement to have been
performed or complied with by such Seller prior to or on the Closing Date.
C. Consents. Each of the Consents marked as "material" on Schedule
3.7 hereto shall have been duly obtained and delivered to Buyer, with no
material adverse change to the terms of the License or Assumed Contract with
respect to which such Consent shall have been obtained.
D. Licenses. Sellers shall be the holder of the Licenses, and there
shall not have been any modification of any of such Licenses which shall have a
material adverse effect on the Station or on the conduct of its business or its
operations. No proceeding shall be pending, the effect of which would be to
revoke, cancel, fail to renew, suspend, or modify adversely any of the Licenses.
E. Deliveries. Sellers shall have made, or shall stand ready,
willing, and able to make, all of the deliveries to Buyer set forth in Section
8.2 hereof.
F. Approval of Documents. Sellers shall have delivered to Buyer for
inspection all documents, statements and information required to be delivered
pursuant to
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Sections 3.4, 3.5, 3.7, 3.9, 3.13, 3.14 and 6.9 hereof, and Buyer shall have
approved in form and content such documents, statements and information, which
approval shall not be unreasonably withheld.
G. No Material Change. No material adverse change shall have
occurred (whether or not covered by insurance) in the assets, financial
condition or prospects of the business and operations of the Station.
H. No Suit. No suit, action or other proceeding or investigation
shall, to the knowledge of any party to this Agreement, be threatened or pending
before or by any governmental agency or by any third party questioning the
legality of this Agreement or the consummation of the transactions contemplated
hereby in whole or in part.
7.2 Conditions to Obligations of Sellers. The obligations of Sellers
at the Closing hereunder are subject to the fulfillment as of the Closing Date
of each of the following conditions, any of which may be waived by Sellers in
whole or in part in their sole discretion in writing:
A. Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date, except for changes
contemplated by this Agreement or contemplated by the Local Marketing Agreement,
as though such representations and warranties were made at and as of the Closing
Date.
B. Covenants and Conditions. Buyer shall have in all material
respects performed and complied with the covenants, agreements, and conditions
required by this
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Agreement or by the Local Marketing Agreement to have been performed or complied
with by Buyer prior to or on the Closing Date.
C. Deliveries. Buyer shall have made, or shall stand ready, willing,
and able to make, all of the deliveries set forth in Section 8.3 hereof.
Article 8
CLOSING AND CLOSING DELIVERIES
8.1 Closing. The Closing shall take place on a date to be set by Buyer,
upon five (5) days' advance written notice to Sellers, no later than ten (10)
days following the date upon which the FCC Consent shall have become a Final
Order (the "Closing Date"); provided, however, that Buyer may waive the
requirement for a Final Order and may schedule the Closing Date, upon five (5)
days' advance written notice to Sellers, at any time after the receipt of the
FCC Consent. Closing shall be conducted by facsimile and wire transmission, and
shall be coordinated from the offices of Sellers' attorneys at 1751 Pinnacle
Drive, McLean, Virginia 22102, or from such other place as shall be agreed to by
Buyer and Sellers.
8.2 Deliveries By Sellers. On the Closing Date, Sellers shall deliver to
Buyer the following, in form and substance reasonably satisfactory to Buyer and
its counsel:
(a) Transfer Documents. Duly executed general warranty deeds, bills
of sale, motor vehicle titles, assignments, and other transfer documents
which shall be sufficient to vest good and marketable title to the Assets
in the name of Buyer or its permitted assigns, free and clear of any
claims, liabilities, mortgages, liens, pledges, conditions, charges, or
encumbrances of any nature whatsoever (except for those permitted in
accordance with Sections 2.5, 3.5, or 3.6 hereof);
(b) Consents. The original of each Consent marked as "material" on
Schedule 3 7 hereto;
(c) Officer's Certificate. A certificate, dated as of the Closing
Date, executed by a duly authorized officer of each Seller, certifying:
(i) that the representations and warranties of such Seller contained in
this Agreement are true and
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complete in all material respects as of the Closing Date, except for
changes contemplated by this Agreement or by the Local Marketing
Agreement, as though made on and as of such date, and (ii) that such
Seller has, in all material respects, performed its obligations and
complied with its covenants set forth in this Agreement to have been
performed and complied with prior to or on the Closing Date;
(d) Secretary's Certificate. A certificate, dated as of the Closing
Date, executed by each Seller's Secretary: (i) certifying that the
resolutions, as attached to such certificate, were duly adopted by such
Seller's Board of Directors and shareholders, authorizing, ratifying, and
approving the execution and delivery of this Agreement by such Seller and
the consummation of the transaction contemplated hereby, and that such
resolutions remain in full force and effect, and (ii) providing, as
attachments thereto, a certificate of good standing certified by an
appropriate state official of the state of such Seller's incorporation, as
of a date not more than fifteen (15) days prior to the Closing Date, and
further certified by such Seller's Secretary as of the Closing Date, and a
copy of such Seller's Articles and By-Laws as in effect on the date
thereof, certified by such Seller's Secretary as of the Closing Date;
(e) Tax, Lien, and Judgment Searches. A report on the results of a
search for Uniform Commercial Code financing statements, tax liens,
judgment liens, and similar filings in the Secretary of State's records
for the States of Missouri and Illinois, and in the records of those
jurisdictions where the Assets are located, such searches having been made
no earlier than fifteen (15) days prior to the Closing Date;
(f) Licenses, Contracts. Business Records Etc. Copies of all
Licenses, Assumed Contracts, blueprints, schematics, working drawings,
plans, projections, statistics, engineering records, and all material
files and records used by Sellers in connection with the business and the
operations of the Station;
(g) Reserved
(h) Opinions of Counsel. Opinions of Sellers' counsel and of
Sellers' special federal communications legal and regulatory counsel,
dated as of the Closing Date, addressed to Buyer and, at Buyer's
directions, to Buyer's lenders, substantially in the form of Schedule
8.2(h) hereto;
(i) Escrow Instructions. Joint instructions with Buyer to Escrow
Agent with respect to the payment of the Escrow Deposit to Sellers as a
portion of the Purchase Price;
(j) Reserved
(k) Real Property Title Insurance Policy. At Seller's expense, an
owner's real estate title insurance policy dated as of the Closing Date
with respect to each parcel of the Real Property identified in Schedule
3.5 hereto for which a fee estate
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is to be conveyed by Seller to Buyer hereunder, issued by the Title
Company and insuring the fee-simple estate of Buyer in all such parcels in
the aggregate amount set forth in Section 5.1(B)(8), and subject only to
the conditions and exceptions described in Section 5.1(B)(8).
8.3 Deliveries by Buyer. Prior to or on the Closing Date, Buyer shall
deliver to Sellers the following, in form and substance reasonably satisfactory
to Sellers and their counsel:
(a) Purchase Price. The Purchase Price as provided in Section 2.3
hereof, reduced by the amount of the Escrow Deposit, by wire transfer of
same day funds to an account designated in writing by Sellers.
(b) Assumption Agreement. An Assumption Agreement, pursuant to which
Buyer shall assume and undertake to perform Sellers' obligations under the
Licenses and the Assumed Contracts arising on or after the Closing Date;
(c) Officer's Certificate. A certificate, dated as of the Closing
Date, executed by Buyer's Secretary, (i) certifying that the
representations and warranties of Buyer contained in this Agreement are
true and complete in all material respects as of the Closing Date, except
for changes contemplated by this Agreement or by the Local Marketing
Agreement, as though made on and as of such date, (ii) certifying that
Buyer has, in all material respects, performed its obligations and
complied with its covenants set forth in this Agreement to have been
performed or complied with on or prior to the Closing Date, (iii)
certifying that the resolution, as attached to such certificate, was duly
adopted by Buyer's Board of Directors authorizing, ratifying, and
approving the execution and delivery of this Agreement and the
consummation of the transaction contemplated hereby, and that such
resolution remains in full force and effect, and (iv) providing a copy of
the Articles of Incorporation and By-Laws of Buyer as in effect on the
date thereof, certified as of the Closing Date;
(d) Opinion of Counsel. An opinion of Buyer's counsel dated as of
the Closing Date, substantially in the form of Schedule 8.3(d) hereto;
(e) Reserved; and
(f) Escrow Instructions. Joint instructions with Sellers to Escrow
Agent with respect to the payment of the Escrow Deposit to Sellers as a
portion of the Purchase Price.
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Article 9
RIGHTS OF BUYER AND SELLERS UPON TERMINATION OR BREACH
9.1 Termination Right
A. This Agreement may be terminated by either Buyer or Sellers, if
the terminating party is not then in breach of any material provision of this
Agreement, upon written notice to the other party, upon the occurrence of any of
the following:
(a) If on the Closing Date, (i) any of the conditions precedent to
the obligations of the terminating party set forth in Article 7 of this
Agreement shall not have been materially satisfied, and (ii) satisfaction
of such condition(s) shall not have been waived by the terminating party;
(b) If the application for the FCC Consent shall be designated for
an evidentiary hearing by the FCC for any reason;
(c) If the Closing shall not have occurred on or before October 31,
1997;
(d) If the non-terminating party shall have breached its obligations
under the Local Marketing Agreement, and the terminating party shall have
exercised its right to terminate the Local Marketing Agreement as a result
of such breach; or
(e) If the non-terminating party shall have breached any of its
representations or warranties, or shall have defaulted with respect to its
or their covenants, obligations, or required undertakings set forth in
this Agreement, and if such non-terminating party shall have failed to
cure such breach or default within fifteen (15) days after having received
notice of such breach or default from the terminating party.
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B. Upon termination: (i) if neither party hereto shall be in breach of any
material provision of this Agreement, the parties hereto shall not have any
further liability to each other, except as set forth in Sections 6.2 and 6.6
hereof; (ii) if any Seller shall be in breach of any material provision of this
Agreement or the Local Marketing Agreement, Buyer shall have the rights and
remedies provided in Section 9.3 hereof; and (iii) if Buyer shall be in breach
of any material provision of this Agreement or the Local Marketing Agreement,
Sellers shall be entitled only to liquidated damages as provided in Section 9.2
hereof. If, upon termination, Buyer shall not be in breach of any material
provision of this Agreement, the Escrow Deposit, plus all interest or other
proceeds from the investment thereof shall be paid to Buyer.
9.2 Liquidated Damages. In the event that this Agreement shall be
terminated by Sellers due to a material breach by Buyer of its representations,
warranties, covenants, or other obligations under this Agreement or the Local
Marketing Agreement, then the Escrow Deposit shall be paid to Sellers as
liquidated damages and as Sellers' sole and exclusive remedy for such breach, it
being agreed that actual damages to Sellers on account of such breach would be
difficult if not impossible to ascertain and that the amount of the Escrow
Deposit is a fair and equitable amount to reimburse Sellers for any injury
sustained by Sellers due to Buyer's breach of its obligations under this
Agreement. All interest or other proceeds from the investment of the Escrow
Deposit shall be paid to Sellers.
9.3 Specific Performance. The parties recognize that in the event that
Sellers should breach or refuse to perform its material obligations under the
provisions of this Agreement, monetary damages alone would not be adequate to
compensate Buyer for Buyer's injury sustained as a result of such breach or
refusal, inasmuch as the Assets and the Station
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are unique and there are no readily available substitutes for such Assets and
for such Station that Buyer could purchase on the open market. Buyer shall
therefore be entitled, in addition to any other remedies which may be available
by statute, at law, or in equity, to obtain a decree of specific performance of
the terms of this Agreement from a court of competent jurisdiction. In the event
of any action to enforce this Agreement, Sellers hereby waive the defense that
there is an adequate remedy at law.
9.4 Expenses Upon Default. In the event of a default by a party hereto
(the "Defaulting Party") which results in the filing of a lawsuit for damages,
specific performance, or other remedy, the other party (the "Nondefaulting
Party") shall be entitled to reimbursement by the Defaulting Party of any and
all reasonable legal fees and expenses incurred by the Nondefaulting Party in
the event that the Nondefaulting Party shall prevail in such lawsuit.
Article 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES,
AND INDEMNIFICATION
10.1 Representations and Warranties. All representations and warranties
contained in this Agreement shall be deemed continuing representations and
warranties, and together with the covenants contained herein, shall survive the
Closing Date for a period of eighteen (18) months after the Closing Date (the
"Survival Period"). No claim for indemnification may be made under this Article
10 (except for claims under Section 10.3(b)) after the expiration of the
Survival Period. Any investigations by or on behalf of a party hereto shall not
constitute a waiver of such party's right to enforce any representation or
warranty by
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the other party contained herein, unless a party shall have actual knowledge of
any misrepresentation or breach of warranty at the Closing on the part of the
other party, and such knowledge shall be documented in writing at the Closing,
in which case the party having such knowledge shall be deemed to have waived
such misrepresentation or breach.
10.2 Indemnification by Sellers. Sellers, jointly and severally, shall
indemnify and hold Buyer harmless against and with respect to, and shall
reimburse Buyer for:
(a) Any and all losses, liabilities, or damages resulting from any
untrue representation, breach of warranty, or nonfulfillment of any
covenants by any Seller contained herein or in any certificate delivered
to Buyer hereunder;
(b) Any and all obligations of any Seller not assumed by Buyer
pursuant to the terms hereof;
(c) Any and all losses, liabilities, or damages resulting from
Sellers' operation or ownership of the Station prior to the LMA Date,
including any and all liabilities arising under the Licenses or the
Assumed Contracts which relate to events occurring or conditions existing
prior to the LMA Date; and
(d) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, and reasonable costs and expenses incident to any
of the foregoing or incurred in investigating or attempting to avoid the
same or to oppose the imposition thereof.
10.3 Indemnification by Buyer. Buyer shall indemnify and hold Sellers
harmless against and with respect to, and shall reimburse Sellers for:
(a) Any and all losses, liabilities, or damages resulting from any
untrue representation, breach of warranty, or nonfulfillment of any
covenants by Buyer contained herein or in any certificate delivered to
Sellers hereunder;
(b) Any and all losses, liabilities, or damages resulting from
Buyer's operation or ownership of the Station on or after the LMA Date,
including any and all liabilities or obligations arising under the
Licenses or the Assumed Contracts which relate to events occurring or
conditions existing on or after the LMA Date or otherwise assumed by Buyer
under this Agreement; and
(c) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, and reasonable costs and expenses, including
reasonable legal fees and
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expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof.
10.4 Procedures for Indemnification. The procedures for indemnification
shall be as follows:
(a) The party claiming the indemnification (the "Indemnified Party")
shall promptly give notice to the party from whom the indemnification is claimed
(the "Indemnifying Party") of any claim, whether between the parties or brought
by a third party against the Indemnified Party, specifying (i) the factual basis
for such claim, and (ii) the amount of the claim. If the claim relates to an
action, suit, or proceeding filed by a third party against the Indemnified Party
such notice shall be given by the Indemnified Party to the Indemnifying Party
within five (5) days after written notice of such action, suit, or proceeding
shall have been given to the Indemnified Party.
(b) Following receipt of notice from the Indemnified Party of a
claim, the Indemnifying Party shall have thirty (30) days in which to make such
investigation of the claim as the Indemnifying Party shall deem necessary or
desirable. For the purposes of such investigation, the Indemnified Party agrees
to make available to the Indemnifying Party and/or its authorized
representative(s) the information relied upon by the Indemnified Party to
substantiate the claim. If the Indemnified Party and the Indemnifying Party
agree at or prior to the expiration of said thirty (30) day period (or any
agreed upon extension thereof) to the validity and amount of such claim, or if
the Indemnifying Party does not respond to such notice, the Indemnifying Party
shall immediately pay to the Indemnified Party the full amount of the claim.
Buyer shall be entitled to apply any or all of the Accounts Receivable collected
on behalf of Sellers to a claim as to which Buyer is entitled to indemnification
hereunder. If the
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Indemnified Party and the Indemnifying Party do not agree within said period (or
within any agreed-upon extension thereof), the Indemnified Party may seek
appropriate legal remedy.
(c) With respect to any claim by a third party as to which the
Indemnified Party is entitled to indemnification hereunder, the Indemnifying
Party shall have the right at its own expense to participate in or to assume
control of the defense of such claim, and the Indemnified Party shall cooperate
fully with the Indemnifying Party, subject to reimbursement for reasonable
actual out-of-pocket expense incurred by the Indemnified Party as the result of
a request by the Indemnifying Party to so cooperate. If the Indemnifying Party
elects to assume control of the defense of any third-party claim, the
Indemnified Party shall have the right to participate in the defense of such
claim at its own expense.
(d) If a claim, whether between the parties or by a third party,
requires immediate action, the parties will make all reasonable efforts to reach
a decision with respect thereto as expeditiously as possible.
(e) If the Indemnifying Party does not elect to assume control or
otherwise participate in the defense of any third-party claim, the Indemnifying
Party shall be bound by the results obtained in good faith by the Indemnified
Party with respect to such claim.
(f) The indemnification rights provided in Sections 10.2 and 10.3
hereof shall extend to the shareholders, directors, officers, members, partners,
agents, employees, and representatives of the Indemnified Party, although for
the purpose of the procedures set forth in this Section 10.4, any
indemnification claims by such parties shall be made by and through the
Indemnified Party.
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10.5 Limitation on Indemnification. Notwithstanding the foregoing, no
Indemnifying Party shall have any indemnification payment obligations hereunder
unless and until all such obligations exceed Fifty Thousand Dollars ($50,000.00)
in the aggregate, at which point all amounts to be paid hereunder shall be due
and owing. Each Indemnifying Party's indemnification obligations hereunder shall
be limited to in the aggregate, Five Million Dollars ($5,000,000.00). The
foregoing limitation shall not apply to indemnification obligations arising from
fraudulent or willful misrepresentations.
Article 11
MISCELLANEOUS
11.1 Notices. All notices, demands, and requests required or permitted to
be given under the provisions of this Agreement shall be (i) in writing, (ii)
delivered by personal delivery, or sent by a nationally recognized commercial
delivery service, or by registered or certified U.S. mail, return receipt
requested, or by facsimile transmission, with receipt confirmation, (iii) deemed
to have been given on the date of personal delivery, the date set forth in the
records of the delivery service for delivery to the addressee, the date set
forth on the return receipt, or the date set forth on the facsimile transmission
confirmation, and (iv) addressed as follows:
If to Sellers: c/o Professional Broadcasting, Incorporated
10800 Main Street
Fairfax, VA 22030
Attention: Alan Box, President
Fax: (703) 934-1200
with a copy to (which shall not constitute notice to Sellers):
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Joseph W. Conroy, Esq.
Hunton & Williams
Suite 1700
1751 Pinnacle Drive
McLean, VA 22102
Fax: (703) 714-7410
If to Buyer: The Dorsey Group, Ltd.
Attn: Timothy C. Dorsey
c/o William T. Dowd
100 N. Broadway, Suite 1580
St. Louis, MO 63102
Fax: (314) 621-2503
with a copy to (which shall not constitute notice to Buyer):
William Dowd, Esq.
Dowd & Dowd, P.C.
100 N. Broadway, Suite 1580
St. Louis, MO 63102
Fax: (314) 621-2503
or to such other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
11.1.
11.2 Benefit and Binding Effect. Neither party hereto may assign its
rights or delegate its duties under this Agreement without the prior written
consent of the other party hereto, except that Buyer may assign its rights and
delegate its duties under this Agreement to any affiliated or unaffiliated
entity; provided, however, that following such assignment, Buyer shall remain
liable to Sellers for all of Buyer's obligations hereunder; and provided
further, that no such assignment shall cause a material delay in the Closing
Date. Upon such assignment, Buyer shall give notice thereof in writing to
Sellers, and Buyer's assignee shall provide to Sellers a certificate in writing
of such assignee, acknowledging such assignee's receipt of true, correct, and
complete copies of this Agreement, the Local Marketing
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Agreement, all Schedules, Exhibits, and Appendices hereto and thereto, and
agreeing to be bound hereby and thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. The parties acknowledge that American Radio
Systems Corporation ("ARSC") may become the successor in interest of Sellers
prior to the Closing Date, and agree that all rights and obligations of Sellers
hereunder shall inure to ARSC without the requirements of consent by or notice
to Buyer.
11.3 Governing Law. This Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Missouri with respect to
contracts made in, and to be performed entirely within, such State, without
reference to the choice-of-law principles of such State.
11.4 Headings. The headings herein are included for ease of reference only
and shall not control or affect the meaning or construction of the provisions of
this Agreement.
11.5 Gender and Number. Words used herein, regardless of the gender and
number specifically used, shall be deemed and construed to include any other
gender, masculine, feminine, or neuter, and any other number, singular or
plural, as the context may require.
11.6 Entire Agreement. This Agreement, the Local Marketing Agreement, all
Schedules, Exhibits, and Appendices hereto and thereto, and all documents and
certificates specifically referred to herein and therein collectively represent
the entire understanding and agreement between Buyer and Sellers with respect to
the subject matter hereof and thereof. All Schedules, Exhibits, and Appendices
attached to this Agreement shall be deemed to be a part of this Agreement and
shall be deemed to be incorporated herein as if fully set forth herein.
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This Agreement supersedes all prior negotiations between Buyer and Sellers, and
all letters of intent and other writings related to such negotiations, and
cannot be amended, supplemented, augmented, or modified except by an instrument
in writing which makes specific reference to this Agreement and which is signed
by the party against whom enforcement of any such amendment, supplement,
augmentation, or modification is sought.
11.7 Waiver of Compliance: Consents. Except as otherwise provided in this
Agreement, any failure on the part of any party at any time to comply with any
obligation, representation, warranty, covenant, agreement, or condition herein
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver shall not
operate as a waiver of, or an estoppel with respect to, any subsequent or other
failure on the part of the other party. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 11.7.
11.8 Counterparts. This Agreement may be executed by the parties hereto in
any number of counterparts, with the same effect as if the execution of each
such counterpart were upon the same instrument. If this Agreement is executed
and transmitted by facsimile, the original signature page shall thereupon be
provided to all parties by regular mail.
IN WITNESS WHEREOF, this Agreement has been executed by Buyer and Sellers
as of the date first above written.
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SELLERS: PROFESSIONAL BROADCASTING, INCORPORATED
By: /s/ Alan Box
--------------------------------
Print Name: Alan Box
Title: President
EZ ST. LOUIS, INC.
By: /s/ Alan Box
--------------------------------
Print Name: Alan Box
Title: President
EZ COMMUNICATIONS, INC.
By: /s/ Alan Box
--------------------------------
Print Name: Alan Box
Title: President
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BUYER: THE DORSEY GROUP, LTD.
By: /s/ Timothy C. Dorsey
--------------------------------------
Print Name: TIMOTHY C. DORSEY
Title: PRESIDENT
LOCAL MARKETING AGREEMENT
This Local Marketing Agreement, dated as of January 17, 1997 (the
"Agreement"), is made by and among Professional Broadcasting Incorporated, a
Virginia corporation ("Professional"), EZ St. Louis, Inc., a Virginia
corporation ("Licensee"), the licensee of commercial radio broadcasting station
KSD (AM) serving the St. Louis, Missouri market (the "Station"), and KSD-AM,
L.L.C., a Missouri limited liability company ("Broker").
WITNESSETH:
WHEREAS, Licensee is authorized by the Federal Communications Commission
(the "Commission") to operate the Station; and
WHEREAS, Licensee has available broadcasting time and is engaged in the
business of radio broadcasting on the Station; and
WHEREAS, Broker desires to avail itself of the Station's broadcast time
for the presentation of programming service, including the sale of advertising
time; and
WHEREAS, Professional, Broker and Licensee have entered into an Asset
Purchase Agreement (the "Asset Purchase Agreement"), dated as of November 18,
1996, pursuant to which Licensee has agreed to sell certain of the assets
associated with the Station to Broker, upon receipt of Commission approval, and
Broker and Licensee have elected to execute and deliver this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, the parties hereto have agreed and do agree as follows:
1. Facilities. Licensee agrees to make broadcasting transmission
facilities available to Broker and to broadcast on the Station, or cause to be
broadcast, Broker's program which will originate from Licensee's studios, except
as otherwise set forth herein.
2. Payments. Broker hereby agrees to pay Licensee for the Broadcast
of the programs hereunder a fee of $56,750 per month, commencing on the date
specified in Section 3. The failure of Licensee to demand or insist upon prompt
payment in accordance herewith shall not constitute a waiver of its right to do
so. If Broker shall have produced and made available programming to air on the
Station as provided herein and such programming does not air due to Licensee
preempting such programming in accordance with Section 11 or 12 below, or if for
any reason Licensee is unable to broadcast such programming through no fault of
Broker (including Licensee's scheduling of any maintenance work affecting the
operation of the Station at full power, other than regularly scheduled
maintenance at times mutually agreed to by the parties), or if this Agreement is
terminated for any reason (other than a breach of this Agreement by Broker)
prior to end of a month, then Broker shall receive a payment credit to be
determined by multiplying the monthly payment by the ratio of the amount of time
not aired to the total number of broadcast hours
<PAGE>
allotted to Broker each month pursuant to Section 5(a) below; provided, however,
that in the case of operation of the Station at less than full power, Broker
shall received only such portion of the payment credit as is equal to 100% minus
the percentage of full power that the Station operated.
3. Term. This Agreement shall be effective and the rights and
obligations of the parties hereto shall commence as of 12:01 a.m. on January 27,
1997 (the "LMA Date"). This Agreement shall continue until the earlier of (1)
October 31, 1997; (2) the closing of the Asset Purchase Agreement; or (3) the
termination of this Agreement pursuant to Section 18a hereof.
4. Programs. Broker shall furnish or cause to be furnished the
artistic personnel and material for the programs as provided by this Agreement
and all programs shall be in accordance in all material respects with the
Communications Act of 1934, as amended or as replaced by successor legislation
(the "Communications Act"), and the rules, regulations and policies of the
Commission. All programming shall be prepared and presented in conformity with
the regulations prescribed by the Commission. All advertising spots and
promotional material or announcements shall comply in all material respects with
all applicable federal, state and local regulations and shall be produced in
accordance with quality standards established by Broker.
5. Station Facilities.
a. Operation of Station. Throughout the term of this
Agreement, Licensee shall make all of the Station's facilities available to the
Broker for operation 24 hours a day, seven days a week, except for (1) at least
one hour each Sunday morning between the hours of 6:00 a.m. and 10:00 a.m. to
the extent that Licensee desires to utilize all or a portion of such time period
for public interest programming and (2) downtime occasioned by routine
maintenance not to exceed two hours each Sunday morning between the hours of 12
Midnight and 6:00 a.m. If possible, any maintenance work affecting the operation
of the Station at full power shall be scheduled upon at least 24 hours' prior
notice to the Broker. It is further understood and agreed that Licensee shall
continue to retain full authority and control over operation of the Station
during the course of this Agreement; to be responsible for assessment of the
significant issues in, and the needs and interests of the community and the
Station's service areas; and to determine that the programs presented are
responsive to such issues, needs and interests, and that all programming
continues to meet all Federal, state and local laws, including those that govern
political broadcast time, presentation of lottery material, proper sponsor
identification, and other programming in the public interest. Licensee shall
also continue to be responsible for maintenance of the Station's public file in
good order as required by the Commission, including timely placement of a copy
of this Agreement in that file; to prepare and timely file in such file the
quarterly issues/programs list as required by the Commission's rules; to timely
file with the Commission all required reports or other records as required by
the Commission; and to otherwise comply in all respects with the Commission
rules and regulations, including those
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rules and regulations regarding requests for political advertising. Broker
agrees to cooperate fully in the gathering, compilation and completion of all
such reports as may be required by Licensee. Licensee shall be solely
responsible for maintenance of the Station's public inspection file. Licensee
shall regularly communicate to Broker the Licensee's ongoing assessment of
issues, needs and interests of the Station's community of license and service
areas. The parties agree that, in addition to the public interest, issue
responsive programming produced by Licensee pursuant to this Section 5(a),
Broker's programming will include a minimum of three hours per week of programs
scheduled for broadcast between the hours of 6:00 a.m. and 12 midnight that
shall similarly respond to ascertained community issues, needs and interests.
Broker agrees to provide to Licensee, no later than the fifth day following the
end of each quarter, a list of the non-entertainment programming that Broker
provided in response to the needs of the community's listeners.
b. Interruption of Normal Operations. If the Station suffers
loss or damage of any nature to its transmission facilities which results in the
interruption of service or the inability of the Station to operate with its
authorized facilities and such loss or damage is not due to a negligent, gross
negligent or willful act or omission of Broker, Licensee shall immediately
notify Broker, and shall undertake such repairs as necessary to restore the
full-time operation of the Station with its authorized facilities as soon as
practicable.
c. Studio Location. Licensee and Broker acknowledge that the
Station's present transmitting facilities allow Licensee to establish the main
studio for the Station at the location of the main studio of AM radio broadcast
station WIBV in Belleville, Illinois ("WIBV"), in compliance with the
Commission's rules, regulations and policies. The parties acknowledge that upon
the LMA date, the Station's main studio will be moved to the location of WIBV's
main studio, and that Licensee shall promptly notify the Commission of such
move.
6. Political File and Political Advertising. Broker agrees to
cooperate fully with Licensee in the maintenance of the Political File and
adherence in all material respects to the Commission's rules and regulations
that govern sale and placement of political advertising and agrees to secure and
provide to Licensee a properly completed written contract consistent with
Sections 312 and 315 of the Communications Act, as well as all applicable rules
and regulations of the Commission which apply to or govern the sale or placement
of such political advertising, prior to broadcast presentation of any such
programming. At least 90 days before any general election and 45 days before any
primary, Broker will clear with Licensee the rates Broker will charge for time
sold to legally qualified candidates and provide Licensee with a copy of
Broker's political disclosure statement; provided, however, if execution of this
Agreement shall fall within such 90 or 45 day period, Broker shall have five
business days after execution to provide such information.
7. Responsibility for Employees and Expenses. Broker shall employ
and be responsible for the salaries, taxes, insurance and related costs for all
personnel used
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in the production of its programming (including without limitation sales people,
traffic personnel, board operators and programming staff). Licensee shall employ
and be responsible for the salaries, taxes, insurance and related costs for the
personnel specified in Section 19 (c) hereof and for the rent, utilities,
property taxes and insurance associated with the Licensee's use of its studio
facilities and with the transmitter facilities. Broker shall pay for all
telephone calls associated with program production (including advertising) and
listener responses, for all fees to ASCAP, BMI and SESAC and for any other
copyright fees attributable to its programming broadcast on the Station.
8. Advertising and Programming Revenues. Broker shall retain all
revenues for the sale of advertising time on the programs it delivers to the
Station and may sell such advertising in combination with the sale of
advertising on any other broadcasting station of its choosing.
9. Accounts Receivable.
As of the LMA Date, Licensee shall assign to Broker as Licensee's
agent for the purposes of collection only all of the accounts receivable
relating to the operation of the Station prior to the LMA Date. Broker shall use
such efforts as are reasonable and in the ordinary course of business to collect
the accounts receivable for 90 days following the LMA Date ("Broker Collection
Period"); provided, however, that Broker's obligation to use its best efforts
shall not extend to the institution of litigation, employment of counsel, or any
other extraordinary means of collection. So long as the accounts receivable are
in Broker's possession, neither Licensee nor its agents shall make any
solicitation for collection purposes nor institute litigation for the collection
of any amounts due thereunder, except for such accounts receivable which Broker
has consented to Licensee's collection thereof prior to the expiration of the
Broker Collection Period which consent will not be unreasonably withheld. All
payments received by Broker during the Broker Collection Period from any person
obligated with respect to any of the accounts receivable shall be applied first
to Licensee's account and only after full satisfaction thereof to Broker's
account. Broker shall not incur or cause to be incurred any collateral or
outside fees, costs or charges in connection with its efforts to collect the
account receivables without first having obtained the authorization in writing
of Licensee. Broker shall separately account for all amounts collected on
Licensee's behalf and remit to Licensee such amounts every two weeks in arrears
during the Broker Collection Period. Broker shall send to Licensee monthly in
arrears during the Broker Collection Period an aging report with respect to such
accounts receivable. Any of the accounts receivable that are not collected
during the Broker Collection Period shall be reassigned to Licensee at the end
of the Broker Collection Period, after which Broker shall have no further
obligation to Licensee with respect to the accounts receivable. Broker shall not
have the right to compromise, settle or adjust the amount of any of the accounts
receivable without Licensee's prior written consent, or to withhold any proceeds
of the accounts receivable or to retain any uncollected account receivable or
payment on account thereof after the expiration of the Broker Collection Period
for any reason whatsoever.
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10. Assignment and Assumption of Contracts. Concurrently with the
execution and delivery hereof, Professional, Broker and Licensee have executed
and delivered to each other an Assignment and Assumption of Contracts (the
"Assignment Agreement") in the form attached hereto, pursuant to which
Professional and Licensee have assigned their rights, and Broker has assumed
Licensee's and Professional's obligations under certain agreements to which
Licensee or Professional is a party (the "Assigned Contracts").
11. Control of Station. Licensee shall have full authority, control
and power over the facilities and operation of the Station during the period of
this Agreement, including specifically control and authority over the Station's
finances, programming and personnel. Licensee shall provide and pay at a minimum
for a management level employee and another employee, who shall report solely to
and be accountable solely to Licensee and who shall direct and maintain the
day-to-day operation of the Station. Licensee shall retain control over the
policies, programming and operations of the Station, including, without
limitation, the right to decide whether to accept or reject any programming or
advertisements, the right to refuse to broadcast any program or a part of a
program not deemed by Licensee to be in the public interest and to interrupt or
preempt any programs at any time in order to broadcast a program deemed by
Licensee to be of greater national, regional, local or public interest, and the
right to take any other actions necessary for compliance with the laws of the
United States; the State of Missouri; the rules, regulations and policies of the
Commission (including the prohibition on unauthorized transfers of control); and
the rules, regulations and policies of other federal governmental authorities,
including the Federal Trade Commission and the Department of Justice. Licensee
shall at all times be solely responsible for meeting all of the Commission's
staffing requirements at the main studio and for other recordkeeping and
operational matters required by the Commission. From time to time as requested
by Licensee, Broker shall provide Licensee with information to enable Licensee
to prepare records, reports and logs required by the Commission or other local,
state or federal governmental agencies, including such information as may be
necessary or appropriate to prepare the Station's quarterly issues/programs
lists.
12. Special Events. Licensee reserves the right, in its discretion,
to preempt any of the Broker's broadcasts, and to use any part of the time
contracted for herein by Broker for the broadcast of events of special
importance. In all such cases, Licensee will use its best efforts (to the extent
possible under the circumstances) to give Broker reasonable notice of its
intention to preempt such broadcast or broadcasts, and, in the event of such
preemption, Broker shall receive a payment credit for the broadcasts so omitted.
13. Force Majeure. Any failure or impairment of the Station
facilities or any delay or interruption in broadcasting programs, or the failure
at any time to furnish facilities, in whole or in part, for broadcasting, due to
acts of God, strikes, or threats thereof, force majeure, or to causes beyond the
control of Licensee, shall not constitute a breach of this Agreement, and
Licensee will not be liable to Broker.
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14. Right to Use Call Letters. Licensee shall retain the right to
the Station call letters throughout the term of this Agreement and hereby grants
Broker a revocable license to use such call letters in its programs, excluding
call letters KSD. In all contracts and in general, Broker shall not hold itself
out as licensee of the Station.
15. Payola. Broker agrees that it will not accept any compensation
or any kind of gift or gratuity of any kind whatsoever, regardless of its value
or form, including, but not limited to, a commission, discount, bonus,
materials, supplies or other merchandise, services or labor, whether or not
pursuant to written contracts or agreements between Broker and merchants or
advertisers, unless the payer is identified in the program as having paid for or
furnished such consideration in accordance with FCC requirements.
16. Compliance with Law. Broker agrees that, throughout the term of
this Agreement, Broker will comply with all laws and regulations applicable in
the conduct of Licensee's business and Broker acknowledges that Licensee has not
urged, counseled, or advised the use of any unfair business practice. In the
event that any new law or regulation is adopted which results in a material
change in the terms of this arrangement (for example, but not limited to, a
restriction on the number of hours which may be brokered), the parties agree to
negotiate in good faith to modify this Agreement to conform as closely as
possible to the interests of both Broker and Licensee and, in the event of their
inability to so modify the Agreement, Broker or Licensee may without penalty
terminate the Agreement on 60 days' notice to the other.
17. Indemnification. Broker shall indemnify and hold harmless
Licensee from and against any and all claims, losses, costs, liabilities,
damages and expenses arising out of Broker's broadcasts and sale of advertising
time under this Agreement to the extent permitted by law, including damages to
the Station's facilities caused by the negligence, gross negligence or willful
misconduct of Broker. Licensee shall indemnify and hold harmless Broker from and
against any and all claims, losses, costs, liabilities, damages and expenses
arising out of Licensee's broadcasts to the extent permitted by law, including
damages to the Station's facilities caused by the negligence, gross negligence
or willful misconduct of Licensee. Broker's and Licensee's obligation to hold
each other harmless against the liabilities specified above shall survive any
termination of this Agreement until the expiration of all applicable statutes of
limitation. Unless an indemnifying party assumes the defense of a claim for
which indemnity is sought hereunder on behalf of the indemnified party, the
indemnified party shall have the right to employ its own counsel to conduct such
defense (which shall be at the expense of the indemnifying party). The
indemnified party shall render to the indemnifying party and its counsel such
assistance as they may reasonably require in order to ensure the proper and
adequate defense of any claim for which indemnity is sought hereunder. Neither
party will settle any claim for which indemnity is sought or owed under this
Section 17 in a manner which imposes any cost or penalty on the other party
without the other party's prior written consent.
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18. Termination.
a. Termination of Agreement. This Agreement may be terminated:
(1) by either party, by written notice to the other, if
either (i) this Agreement has been declared invalid or illegal in whole or
in substantial part by an order or decree of an administrative agency or
court of competent jurisdiction and the applicability of such order or
decree has not been stayed pending further administrative or judicial
review, or (ii) there has been a change in the Communications Act or the
Commission's rules, regulations or policies that causes this Agreement to
be in violation thereof and the applicability of such change has not been
stayed pending appeal or further administrative review.
(2) by either party, by written notice to the other, if
the terminating party is not then in material default under this Agreement
and the other party is in material default under this Agreement and has
failed to cure such default within 10 days after receiving notice of
breach from the terminating party. In the event Licensee remains in
material default following the 10 day cure period and Broker elects to
terminate this Agreement in accordance with this Section 18a(2), Broker
shall be entitled to a refund of a pro rata portion of all payments made
by Broker for the month during which such termination occurs equivalent to
the percentage of such month remaining following the date of such
termination.
(3) by mutual agreement of Licensee and Broker.
(4) automatically upon the purchase of the Station
pursuant to the Asset Purchase Agreement.
b. Events Upon Termination or Expiration.
(1) Upon any termination or expiration hereof, (i)
Licensee shall be under no further obligation to make available to Broker
any further broadcast time or broadcast transmission facilities and all
amounts accrued or payable to Licensee up to the date of termination which
have not been paid shall immediately become due and payable by Broker,
(ii) Broker shall be responsible for debts and obligations of Broker
resulting from the use of air time and transmission facilities including,
without limitation, accounts payable and net barter balances, but not for
Licensee's federal, state, local and other tax liabilities associated with
Broker's payments hereunder or for other payments to Licensee, (iii)
Licensee and Broker will cooperate to allow Licensee within 30 days to
resume Station programming, billing and related operations, and (iv) in
the event that this Agreement or the Asset Purchase Agreement is
terminated prior to the Closing under the Asset Purchase Agreement,
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Broker shall assign to Licensee and Licensee shall assume the Assigned
Contracts (as defined in Section 10) that remain in effect (or that have
been renewed, extended or replaced on substantially similar terms) on the
date of such termination or expiration together (provided that Broker has
procured the necessary consents to such reassignment) with all agreements
between Broker and others for the sale of broadcast time on the Station
for cash at reasonable market rates in effect on such date. With respect
to any contract assigned to Licensee pursuant to this Section 18(b), all
expenses and income arising under such contracts shall be prorated between
Licensee and Broker as of the date on which such contracts are assigned to
Licensee (the "Proration Date") in the manner such that the operation of
the Station on and before the Proration Date shall be for the account of
Broker and thereafter for the account of Licensee.
(2) No expiration or termination hereof shall limit or
impair any party's rights to receive payments due and owing hereunder on
or before the effective date of such termination.
(3) Notwithstanding any termination hereof, the parties
shall continue to be bound by their respective obligations under the Asset
Purchase Agreement.
c. Upon any termination of this Agreement prior to the Closing
under the Asset Purchase Agreement, the following provisions shall apply:
(1) On the effective date of termination (the "Termination
Date"), Broker will assign and turn over to Licensee, for collection
only, all accounts receivable owing to Broker as of the Termination
Date from or related to the operation of the Station (the
"Receivables"). Such assignment shall be accompanied by a schedule
of all such Receivables. Licensee shall use such efforts as are
reasonable and in the ordinary course of business (but without
responsibility to institute legal or collection proceedings) to
collect such Receivables during the one hundred twenty (120) day
period following the Termination Date (the "Collection Period").
Licensee shall hold the proceeds collected from such Receivables in
trust for Broker and shall remit to Broker all Receivables actually
collected, together with a schedule thereof, on the first and
fifteenth of each month during the Collection Period, commencing
with the month during which the Termination Date occurs. Within five
(5) days after the end of the Collection Period, Licensee shall
reassign and turn back over to Broker any Receivable which shall not
have been collected by Licensee during the Collection Period.
(2) In the event Licensee is advised by an account debtor that
such account-debtor refuses or declines to pay a Receivable because
the account debtor contends that the amount is not owed or is
incorrect (a "Disputed
8
<PAGE>
Account"), Licensee shall promptly so notify Broker. Licensee may
then, at its option, either (a) re-assign and turn such Disputed
Account back over to Broker, in which case Licensee shall have no
further responsibility therefor, or (b) with Broker's consultation
and written approval, cancel, adjust or re-bill and seek collection
of the Disputed Account in accordance with the procedures set forth
in this Section 18.
(3) Except with respect to a Disputed Account which has been
reassigned to Broker, Broker shall make no effort to collect any
Receivable during the Collection Period.
(4) During the Collection Period, if Licensee receives a
payment from an advertiser who (a) has placed advertising on the
Station both prior to and after the Termination Date, and (b) has
been invoiced both as a Receivable and as an account receivable of
Licensee (a "Common Account"), such payment shall be applied to the
oldest outstanding balance due from that advertiser. Following
expiration of the Collection Period, if such payment is directed to
a Receivable, Licensee shall forward the proceeds of such payment
directly to Broker.
19. Representations and Warranties.
a. Corporate Authority. Each of Licensee and Broker represents
to the other that it is legally qualified, empowered, and able to enter into
this Agreement, and that the execution, delivery and performance hereof shall
not constitute a breach or violation of any agreement, contract or other
obligation to which it is subject or by which it is bound.
b. LMA Challenge. If this Agreement is challenged at the
Commission, Licensee and Broker will jointly defend this Agreement, and the
expense thereof will be shared equally. If portions of this Agreement do not
thereafter receive the approval of the Commission staff, the parties shall
reform this Agreement, or at Broker's option and expense, seek reversal of the
staff decision and approval from the full Commission on appeal.
c. Employees. Licensee shall employ at least one (1) full-time
management-level employee at the main studio of the Station and at least one
staff-level employee at the main studio of the Station, in accordance with the
Commission's policies. These employees shall be Licensee's employees, and shall
not be compensated by or accountable to Broker in any manner whatsoever. The
duties of these employees shall be determined exclusively by Licensee.
20. Modification and Waiver. No modification or waiver of any
provision of this Agreement shall in any event be effected unless the same shall
be in writing
9
<PAGE>
and signed by the party adversely affected by the waiver or modification, and
then such waiver and consent shall be effective only in the specific instance
and for the purpose for which given.
21. No Waiver; Remedies Cumulative. No failure or delay on the part
of Licensee or Broker in exercising any right or power hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of steps to enforce such a right
or power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of Licensee and Broker herein
provided are cumulative and are not exclusive of any right or remedies which it
may otherwise have.
22. Construction. This Agreement shall be construed in accordance
with the laws of the State of Missouri, and the obligations of the parties
hereto are subject to all federal, state or municipal laws or regulations now or
hereafter in force and to the regulations of the Commission and all other
governmental bodies or authorities presently or hereafter to be constituted.
23. Headings. The headings contained in this Agreement are included
for convenience only and no such heading shall in any way alter the meaning of
any provision.
24. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including, without limitation, any assignee of the Commission license for the
Station.
25. Counterpart Signatures. This Agreement may be signed in one or
more counterparts, each of which shall be deemed a duplicate original, binding
on the parties hereto notwithstanding that the parties are not signatory to the
original or the same counterpart. This Agreement shall be effective as of the
date on which the executed counterparts are exchanged by the parties.
26. Notices. Any notice required hereunder shall be in writing and
any payment, notice or other communications shall be deemed given when delivered
personally, or mailed by certified mail or Federal Express, postage prepaid,
with return receipt requested, and addressed as set forth in the Asset Purchase
Agreement.
27. Entire Agreement. This Agreement embodies the entire agreement
between the parties and there are no other agreements, representations,
warranties, or understandings, oral or written, between them with respect to the
subject matter hereof. No alterations, modification or change of this Agreement
shall be valid unless by like written instrument.
28. Severability. The event that any of the provisions contained in
this Agreement is held to be invalid, illegal or unenforceable shall not affect
any other provision
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<PAGE>
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provisions had not been contained herein.
29. Licensee's Certificate. Licensee agrees to execute concurrently
with the execution of this Agreement that certain Certificate, a form of which
is attached hereto as Annex I, to be filed with the Commission in accordance
with its rules and regulations.
30. Broker's Verification. Broker agrees to execute concurrently
with the execution of this Agreement that certain Verification, a form of which
is attached as Annex II, to be filed with the Commission in accordance with its
rules and regulations.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
EZ ST. LOUIS, INC.
By: /s/ Alan Box
------------------------------
Alan Box
President
PROFESSIONAL BROADCASTING
INCORPORATED
By: /s/ Alan Box
------------------------------
Alan Box
President
KSD-AM, L.L.C.
By: /s/ Timothy C. Dorsey
------------------------------
Timothy C. Dorsey
President
11
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ANNEX I
CERTIFICATION
EZ St. Louis, Inc., licensee of Station KSD(AM), hereby certifies pursuant
to Section 73.3555(a)(3)(ii) of the Rules and Regulations of the Federal
Communications Commission, 47 C.F.R. ss. 73.3555(a)(3)(ii) (1996), that it has
and will continue to maintain ultimate control over the facilities of Station
KSD(AM) in connection with the implementation of the Local Marketing Agreement
dated as of January 17, 1997, including specifically with respect to control
over station finances, personnel and programming.
EZ St. Louis, Inc.
By: __________________________
Alan Box
President
12
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ANNEX II
VERIFICATION
KSD-AM, L.L.C., hereby verifies that the Local Marketing Agreement dated
January 17, 1997, by and between KSD_AM, L.L.C., Professional Broadcasting
Incorporated and EZ St. Louis, Inc., the licensee of Radio Station KSD(AM),
complies with the provisions of paragraph (a)(1), the radio contour overlap rule
of Section 73.3555, the multiple ownership rule, of the FCC's rules.
KSD-AM, L.L.C.
By: ______________________________
Timothy C. Dorsey
President
13
ASSET EXCHANGE AGREEMENT
By and Among
EZ COMMUNICATIONS, INC.
PROFESSIONAL BROADCASTING INCORPORATED
EZ PHILADELPHIA, INC.
EVERGREEN MEDIA CORPORATION OF LOS ANGELES
EVERGREEN MEDIA CORPORATION OF CHARLOTTE
EVERGREEN MEDIA CORPORATION OF THE EAST
EVERGREEN MEDIA CORPORATION OF CAROLINALAND
WBAV/WBAV-FM/WPEG LICENSE CORP.
and
WRFX LICENSE CORP.
Dated as of
December 5, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINED TERMS........................................................ 2
ARTICLE 2 EXCHANGE OF LICENSES AND STATIONS.................................... 2
2.1 Agreement to Exchange Licenses and Stations.......................... 2
2.2 Appraisals; Tax Reporting............................................ 2
2.3 Assumption of Liabilities and Obligations............................ 3
2.4 Closing Date......................................................... 6
2.5 Accounts Receivable.................................................. 7
2.6 Like-Kind Exchange................................................... 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE EVERGREEN PARTIES 8
3.1 Organization and Business; Power and Authority; Effect of Transaction. 8
3.2 Financial and Other Information...................................... 9
3.3 Changes in Condition................................................. 9
3.4 Materiality.......................................................... 9
3.5 Title to Properties; Leases.......................................... 10
3.6 Compliance with Private Authorizations............................... 11
3.7 Compliance with Governmental Authorizations and Applicable Law....... 11
3.8 Intangible Assets.................................................... 13
3.9 Related Transactions................................................. 13
3.10 Insurance............................................................ 13
3.11 Tax Matters.......................................................... 14
3.12 Employee Retirement Income Security Act of 1974...................... 14
3.13 Absence of Sensitive Payments........................................ 15
3.14 Inapplicability of Specified Statutes................................ 15
3.15 Employment Arrangements.............................................. 16
3.16 Material Agreements.................................................. 16
3.17 Ordinary Course of Business.......................................... 17
3.18 Broker or Finder..................................................... 18
3.19 Solvency............................................................. 18
3.20 Environmental Matters................................................ 18
3.21 Trade or Barter...................................................... 18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE EZ PARTIES..................... 19
4.1 Organization and Business; Power and Authority; Effect of Transaction. 19
4.2 Financial and Other Information...................................... 20
4.3 Changes in Condition................................................. 20
4.4 Materiality.......................................................... 20
4.5 Title to Properties; Leases.......................................... 20
4.6 Compliance with Private Authorizations............................... 21
4.7 Compliance with Governmental Authorizations and Applicable Law....... 21
4.8 Intangible Assets.................................................... 23
4.9 Related Transactions................................................. 23
4.10 Insurance............................................................ 24
<PAGE>
4.11 Tax Matters.......................................................... 24
4.12 Employee Retirement Income Security Act of 1974...................... 24
4.13 Absence of Sensitive Payments........................................ 25
4.14 Inapplicability of Specified Statutes................................ 25
4.15 Employment Arrangements.............................................. 26
4.16 Material Agreements.................................................. 26
4.17 Ordinary Course of Business.......................................... 27
4.18 Broker or Finder..................................................... 28
4.19 Solvency............................................................. 28
4.20 Environmental Matters................................................ 28
4.21 Trade or Barter...................................................... 28
ARTICLE 5 COVENANTS............................................................ 29
5.1 Access to Information; Confidentiality............................... 29
5.2 Agreement to Cooperate............................................... 30
5.3 Public Announcements................................................. 32
5.4 Notification of Certain Matters...................................... 33
5.5 No Solicitation...................................................... 33
5.6 Conduct of Business by Evergreen Pending the Closing................. 33
5.7 Conduct of Business by EZ Pending the Closing........................ 35
5.8 Building of EZ Stations.............................................. 36
5.9 FCC Application; Divesture Commitment................................ 36
ARTICLE 6 CLOSING CONDITIONS................................................... 38
6.1 Conditions to Obligations of Each Party to Effect the Exchange....... 38
6.2 Conditions to Obligations of EZ...................................... 38
6.3 Conditions to Obligations of Evergreen............................... 40
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER.................................... 41
7.1 Termination.......................................................... 41
7.2 Effect of Termination................................................ 42
ARTICLE 8 INDEMNIFICATION...................................................... 42
8.1 Survival............................................................. 43
8.2 Indemnification...................................................... 43
8.3 Limitation of Liability.............................................. 43
8.4 Notice of Claims..................................................... 44
8.5 Defense of Third Party Claims........................................ 44
8.6 Exclusive Remedy..................................................... 44
ARTICLE 9 GENERAL PROVISIONS 45
9.1 Amendment............................................................ 45
9.2 Waiver............................................................... 45
9.3 Fees, Expenses and Other Payments.................................... 45
9.4 Notices.............................................................. 45
9.5 Specific Performance; Other Rights and Remedies...................... 46
</TABLE>
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<TABLE>
<S> <C> <C>
9.6 Severability......................................................... 47
9.7 Counterparts......................................................... 47
9.8 Section Headings..................................................... 47
9.9 Governing Law........................................................ 47
9.10 Further Acts......................................................... 47
9.11 Entire Agreement..................................................... 48
9.12 Assignment........................................................... 48
9.13 Parties in Interest.................................................. 48
9.14 Mutual Drafting...................................................... 48
9.15 EZ Agent for Other EZ Parties........................................ 48
9.16 Evergreen Parent Agent for Other Evergreen Parties................... 48
</TABLE>
APPENDIX A: Definitions
iv
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ASSET EXCHANGE AGREEMENT
This Asset Exchange Agreement (this "Agreement") is dated as of December
5, 1996, by and among EZ Communications, Inc., a Virginia corporation ("EZ"),
Professional Broadcasting Incorporated, a Virginia corporation ("PBI") and EZ
Philadelphia, Inc., a Virginia corporation ("EZP" and, collectively with EZ and
PBI, sometimes collectively referred to individually as an "EZ Party" and
collectively as the "EZ Parties"), on the one hand, and Evergreen Media
Corporation of Los Angeles, a Delaware corporation ("Evergreen"or "Evergreen
Parent"), Evergreen Media Corporation of Charlotte ("EMC Charlotte"), Evergreen
Media Corporation of the East ("EMC East"), Evergreen Media Corporation of
Carolinaland ("EMC Carolinaland), WBAV/WBAV-FM/WPEG License Corp. ("EMC-BAV")
and WRFX(FM) License Corp. ("EMC-RFX"), each a Delaware corporation and an
indirect wholly owned subsidiary of Evergreen Parent (including Evergreen
Parent, individually an "Evergreen Party" and collectively the "Evergreen
Parties"), on the other hand.
WHEREAS, an Evergreen Party is the owner, operator and licensee of radio
stations WRFX(FM), Kannapolis, North Carolina, WPEG(FM), Concord, North
Carolina, WBAV(AM) and WFNZ(AM), Charlotte, North Carolina and WBAV-FM,
Gastonia, North Carolina (individually, an "Evergreen Station" and collectively,
the "Evergreen Stations") pursuant to licenses issued by the FCC (the "Evergreen
FCC Licenses");
WHEREAS, PBI, a wholly-owned subsidiary of EZ, operates, and EZP, a
wholly-owned subsidiary of PBI, is the licensee of, radio stations WIOQ(FM) and
WUSL(FM) (individually, an "EZ Station" and collectively, the "EZ Stations")
pursuant to licenses issued to EZP by the FCC (the "EZ FCC Licenses");
WHEREAS, the EZ Parties and the Evergreen Parties desire to exchange
certain property and assets used in, held for use in connection with or
necessary for the conduct of the business or operations of the Evergreen
Stations and the EZ Stations on the terms and conditions hereinafter set forth
(the "Exchange");
WHEREAS, the parties hereto intend the Exchange to qualify as a Like-Kind
Exchange; and
WHEREAS, EZ is party to an agreement and plan of merger (the "EZ Merger
Agreement"), dated as of August 5, 1996, as amended and restated as of September
27, 1996, with American Radio Systems Corporation, a Delaware corporation
("American"), pursuant to which EZ will be merged into American or a
wholly-owned subsidiary of American (the "American-EZ Merger"), and American
desires to consent to the Exchange and the other transactions contemplated by
this Agreement;
NOW, THEREFORE, in consideration of the above premises and the covenants
and agreements contained herein, the EZ Parties and the Evergreen Parties,
intending to be legally bound, do hereby covenant and agree as follows:
ARTICLE 1
DEFINED TERMS
As used herein, unless the context otherwise requires, the terms defined
in Appendix A shall have the respective meanings set forth therein. Terms
defined in the singular shall have a comparable meaning when used in the plural,
and vice versa, and the reference to any gender shall be deemed to include all
genders. Unless otherwise defined or the context otherwise clearly requires,
terms for which meanings are provided in this Agreement shall have such meanings
when used in either Disclosure Schedule and each Collateral Document executed or
required to be executed pursuant hereto or thereto or otherwise delivered, from
time to time, pursuant hereto or thereto. References to "hereof", "herein" or
similar terms are intended to refer to this Agreement as a whole and not a
particular section, and references to "this Section" are intended to refer to
the entire section and not a particular subsection thereof. The term "either
party" shall, unless the context otherwise requires, refer to Evergreen Parent
and EZ, and shall include, any Subsidiary of either thereof which is a party to
this Agreement.
ARTICLE 2
EXCHANGE OF LICENSES AND STATIONS
2.1 Agreement to Exchange Licenses and Stations. Subject to the terms and
conditions set forth in this Agreement, the Evergreen Parties and the EZ Parties
hereby agree to exchange, transfer and deliver at the Closing, the Evergreen
Assets and the EZ Assets, not previously transferred by the parties pursuant to
the applicable TBA, free and clear of any Liens of any nature whatsoever except
Permitted Liens, on the terms and conditions of this Agreement.
2.2 Appraisals; Tax Reporting.
(a) The Evergreen Parties and the EZ Parties agree that the fair market
value of each asset included in the Evergreen Assets and the EZ Assets will be
determined on the basis of the appraisals (the "Appraisals"), prepared by the
firm of Bond & Pecaro, whose fee and expenses shall be equally borne by
Evergreen and EZ. The parties shall direct Bond & Pecaro to deliver Appraisals
within thirty (30) days from the Closing and to set forth in the Appraisals the
fair market value of each asset included in the Evergreen Assets and the EZ
Assets.
(b) Within thirty (30) days of the receipt of the Appraisals, each party
shall prepare a draft schedule that sets forth the "exchange groups" and
"residual group" (each within the meaning of Treas. Reg. section 1.1031(j)-1)
together with each asset included in the Evergreen Assets and the EZ Assets that
belongs to the relevant exchange group or residual group, and send the schedule
to the other for approval, which approval shall not be unreasonably conditioned,
withheld or delayed. If the draft schedules do not contain any differences, they
shall form the basis for the final schedule (the "Section 1031 Schedule"). If
the draft schedules contain any differences, the parties shall negotiate in good
faith to reconcile the draft and produce a uniform schedule which shall
constitute the Section 1031 Schedule.
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(c) Each of Evergreen and EZ shall cause to be prepared in a timely
fashion a draft of IRS Forms 8824 for itself on the basis of the Appraisals and
the Section 1031 Schedule. Each of Evergreen and EZ shall deliver drafts of
their respective IRS Forms 8824 to the other for approval, which approval shall
not be unreasonably conditioned, withheld or delayed.
(d) Each of Evergreen and EZ shall cause to be prepared in a timely
fashion a draft of IRS Form 8594 for itself in a manner consistent with the
Section 1031 Schedule and IRS Forms 8824 prepared in accordance with paragraphs
(b) and (c) above, reflecting (i) the allocation of consideration exchanged by
it among the assets acquired based on the respective fair market values of the
relevant assets as set forth in the Appraisals and in accordance with section
1060 of the Code and (ii) such other information as required by Section 1060 of
the Code and IRS Form 8594. Each of Evergreen and EZ shall deliver drafts of
their respective IRS Forms 8594 to the other for approval, which approval shall
not be unreasonably conditioned, withheld or delayed.
(e) Each of Evergreen and EZ shall report the transactions contemplated
hereby as a "like-kind exchange" to the maximum extent permissible under Section
1031 of the Code, consistent with the Appraisals, the Section 1031 Schedule, and
IRS Forms 8594 and 8824 prepared in accordance with paragraphs (c) and (d)
above, and shall not take, and shall cause their respective Affiliates,
representatives, successors and assigns not to take, any position on any
federal, state or local Tax Return or report, inconsistent with such reporting
position, the Appraisals, the Section 1031 Schedule or such IRS Form 8594 or
8824. Each of Evergreen and EZ shall promptly give the other notice of any
disallowance of or challenge to such reporting by any Taxing Authority.
(f) Each of Evergreen and EZ shall cooperate with the other, including
without limitation in preparing the Section 1031 Schedule, the IRS Forms 8594
and 8824 and executing all necessary agreements and documents, to the extent
necessary for each of Evergreen and EZ to treat the exchange of the Evergreen
Assets for the EZ Assets as a Like-Kind Exchange pursuant to Section 1031 of the
Code.
(g) Notwithstanding the provisions of this Section 2.2, the parties to
this Agreement will rely solely on their own advisors in determining the tax
consequences of the transactions contemplated by this Agreement and each party
is not relying, and will not rely, on any representations or assurances of any
other party regarding such consequences other than the representations,
warranties, covenants and agreements set forth in writing in this Agreement or
furnished pursuant to the provisions hereof. Notwithstanding anything in this
Agreement to the contrary, the obligations of the parties set forth in this
Section 2.2 shall survive the Closing.
2.3 Assumption of Liabilities and Obligations.
(a) Except as expressly provided in this Agreement, the Evergreen Parties
shall not assume or become obligated to perform any debt, liability or
obligation of any EZ Party or relating to any EZ Station whatsoever, including
without limitation (i) any obligations or liabilities arising under any
contract, lease or agreement, other than those arising under the EZ Assumable
Agreements; (ii) any obligations or liabilities under the EZ Assumable
Agreements relating to the period prior to the Cut-off Date; (iii) any Claims or
pending or threatened Legal Actions to which
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<PAGE>
any EZ Party is a party or to which any of the EZ Assets or either of the EZ
Stations is subject relating to the ownership or operation of the EZ Assets or
the conduct of the business of the EZ Stations prior to the Closing (other than
as provided in the EZ Stations TBA); (iv) any insurance policies of the EZ
Parties; (v) any obligations or liabilities arising under any financing
arrangement, capitalized lease or other agreement relating to Indebtedness for
Borrowed Money; (vi) any obligations or liabilities of any EZ Party under any EZ
Employment Arrangement (including under any EZ Employee Plan), including any
obligation to any EZ Station Employee for severance benefits, vacation time or
sick leave; (vii) any liability for any Taxes attributable to the ownership or
operation of the EZ Assets or the EZ Stations on or prior to the Cut-off Date;
or (viii) any obligations or liabilities caused by, arising out of, or resulting
from any action or omission of any EZ Party prior to the Closing. All such
obligations and liabilities (the "EZ Nonassumed Liabilities") shall remain and
be the obligations and liabilities solely of the EZ Parties.
(b) Except as expressly provided in this Agreement, the EZ Parties shall
not assume or become obligated to perform any debt, liability or obligation of
any Evergreen Party whatsoever, including without limitation (i) any obligations
or liabilities arising under any contract, lease or agreement, other than those
arising under the Evergreen Assumable Agreements, (ii) any obligations or
liabilities under the Evergreen Assumable Agreements relating to the period
prior to the Cut-off Date; (iii) any Claims or pending or threatened Legal
Action to which any Evergreen Party is a party or to which any of the Evergreen
Assets or any of the Evergreen Stations is subject relating to the ownership or
operation of the Evergreen Assets or the conduct of the business of the
Evergreen Stations prior to the Closing (other than as provided in the Evergreen
Stations TBA); (iv) any insurance policies of the Evergreen Parties; (v) any
obligations or liabilities arising under any financing arrangement, capitalized
lease or other agreement relating to Indebtedness for Borrowed Money; (vi) any
obligations or liabilities of any Evergreen Party under any Evergreen Employment
Arrangement (including under any Evergreen Employee Plan), including any
obligation to any Evergreen Stations Employee for severance benefits, vacation
time, or sick leave; (vii) any liability for any Taxes attributable to the
ownership or operation of the Evergreen Assets or the Evergreen Stations on or
prior to the Cut-off Date; or (viii) any obligations or liabilities caused by,
arising out of, or resulting from any action or omission of any Evergreen Party
prior to the Closing. All such obligations and liabilities (the "Evergreen
Nonassumed Liabilities") shall remain and be the obligations and liabilities
solely of the Evergreen Parties.
(c) Notwithstanding anything contained in this Agreement to the contrary
and except as otherwise provided in the Evergreen Stations TBA or the EZ
Stations TBA, as the case may be, (i) all items of income and expense (including
without limitation with respect to rent, utilities, Pro Ratable Taxes and wages,
salaries and accrued but unused vacation for employees) arising from the conduct
of the business of the Evergreen Stations and EZ Stations (the conduct of such
business, in each case, to be in the ordinary course consistent with past
practice) shall be prorated between the Evergreen Parties and EZ Parties in
accordance with GAAP applied consistently with past practice as of 12:01 a.m.,
Eastern time, on the Cut-off Date, with the transferring party responsible for
any such items prior to the Cut-off Date and the transferee party responsible
for any such items relating to any subsequent period, and (ii) obligations and
liabilities under the Evergreen Trade Agreements shall be prorated to the extent
and in the manner set forth in Section 2.3(g). For these purposes, Pro Ratable
Taxes attributable to a period that begins before and ends after the Cut-off
Date shall be treated on a "closing of the books" basis as two partial periods,
one ending at the close of the day
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immediately preceding the Cut-off Date and the other beginning on the Cut-off
Date, except that Pro Ratable Taxes (such as property Taxes) imposed on a
periodic basis shall be allocated on a daily basis.
(d) Within sixty (60) days of the Closing Date, EZ shall deliver to
Evergreen Parent a schedule of its proposed prorations, including without
limitation any with respect to the Evergreen Trade Agreements pursuant to the
provisions of Section 2.3(g), which shall set forth in reasonable detail the
basis for those determinations (the "Charlotte Proration Schedule"). The
Charlotte Proration Schedule shall be conclusive and binding upon the Evergreen
Parties unless Evergreen Parent provides EZ with written notice of objection
(the "Notice of Disagreement") within thirty (30) days after Evergreen's receipt
of the Charlotte Proration Schedule, which notice shall state the prorations
proposed by Evergreen Parent (the "Evergreen Proration Schedule"). EZ shall have
fifteen (15) days from receipt of a Notice of Disagreement to accept or reject
the Evergreen Proration Schedule. If EZ rejects the Evergreen Proration
Schedule, and the amount in dispute exceeds Five Thousand Dollars ($5,000), the
dispute shall be submitted within ten (10) days of such rejection to the
Chicago, Illinois office of Arthur Andersen & Co., LLP (the "Referee") for
resolution, such resolution to be made within thirty (30) days after submission
to the Referee and to be final, conclusive and binding on the EZ Parties and the
Evergreen Parties. Evergreen Parent and EZ agree to share equally the cost and
expenses of the Referee, but each party shall bear its own legal and other
expenses, if any. If the amount in dispute is equal to or less than Five
Thousand Dollars ($5,000), such amount shall be divided equally between
Evergreen Parent and EZ. Payment by Evergreen Parent or EZ, as the case may be,
of the proration amounts determined pursuant to this Section 2.3(d) shall be due
fifteen (15) days after the last to occur of (i) Evergreen Parent's acceptance
of the Charlotte Proration Schedule or failure to give EZ a timely Notice of
Disagreement; (ii) EZ's acceptance of the Evergreen Proration Schedule or
failure to reject the Evergreen Proration Schedule within fifteen (15) days of
receipt of a timely Notice of Disagreement; (iii) EZ's rejection of the
Evergreen Proration Schedule in the event the amount in dispute equals or is
less than Five Thousand Dollars ($5,000); and (iv) notice to EZ and Evergreen
Parent of the resolution of the disputed amount by the Referee in the event that
the amount in dispute exceeds Five Thousand Dollars ($5,000).
(e) Within sixty (60) days of the Closing Date, Evergreen Parent shall
deliver to EZ a schedule of its proposed prorations, including without
limitation any with respect to the EZ Trade Agreements pursuant to the
provisions of Section 2.3(g), which shall set forth in reasonable detail the
basis for those determinations (the "Philadelphia Proration Schedule"). The
Philadelphia Proration Schedule shall be conclusive and binding upon the EZ
Parties unless EZ provides Evergreen Parent with a Notice of Disagreement within
thirty (30) days after EZ's receipt of the Philadelphia Proration Schedule,
which notice shall state the prorations proposed by EZ (the "EZ Proration
Schedule"). Evergreen Parent shall have fifteen (15) days from receipt of a
Notice of Disagreement to accept or reject the EZ Proration Schedule. If
Evergreen Parent rejects the EZ Proration Schedule and the amount in dispute
exceed Five Thousand Dollars
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($5,000), the dispute shall be submitted within ten (10) days of such rejection
to the Referee for resolution, such resolution to be made within thirty (30)
days after submission to the Referee and to be final, conclusive and binding on
the Evergreen Parties and the EZ Parties. EZ and Evergreen Parent agree to share
equally the cost and expenses of the Referee, but each party shall bear its own
legal and other expenses, if any. If the amount in dispute is equal to or less
than Five Thousand Dollars ($5,000), such amount shall be divided equally
between EZ and Evergreen Parent. Payment by EZ or Evergreen Parent, as the case
may be, of the proration amounts determined pursuant to this Section 2.3(e)
shall be due fifteen (15) days after the last to occur of (i) EZ's acceptance of
the Philadelphia Proration Schedule or failure to give Evergreen Parent a timely
Notice of Disagreement; (ii) Evergreen Parent's acceptance of the EZ Proration
Schedule or failure to reject the EZ Proration Schedule within fifteen (15) days
of receipt of a timely Notice of Disagreement; (iii) Evergreen Parent's
rejection of the EZ Proration Schedule in the event the amount in dispute equal
or is less than Five Thousand Dollars ($5,000); and (iv) notice to Evergreen
Parent and EZ of the resolution of the disputed amount by the Referee in the
event that the amount in dispute exceeds Five Thousand Dollars ($5,000).
(f) Any payment required by EZ to Evergreen Parent or by Evergreen Parent
to EZ, as the case may be, under Section 2.3(d), 2.3(e) or 2.3(g) shall be paid
by wire transfer of immediately available funds to the account of the payee with
a financial institution in the United States as designated by such party in the
Philadelphia Proration Schedule or the Charlotte Proration Schedule, as the case
may be, or the Notice of Disagreement (or by separate notice in the event a
Notice of Disagreement is not sent). If either EZ or Evergreen Parent fails to
pay when due any amount under Section 2.3(d), 2.3(e) or 2.3(g), interest on such
amount will accrue from the date payment was due to the date such payment is
made at a per annum rate equal to the "prime rate" as published daily in the
Money Rates column of the Wall Street Journal (or the average of such rates if
more than one rate indicated) plus two percent (2%), and such interest shall be
payable upon demand.
(g) Obligations and liabilities under Trade Agreements shall be prorated
in favor of the party assuming the same only to the extent that the aggregate
obligations and liabilities (determined in accordance with GAAP) for unperformed
air time under all such agreement as of 12:01 a.m. on the applicable Cut-off
Date exceed by One Hundred Twenty-Five Thousand Dollars ($125,000) in the case
of the EZ Stations, and by One Hundred Fifteen Thousand ($115,000) in the case
of the Evergreen Stations, the fair market value of the property (determined in
accordance with GAAP) to be received by the Assuming Party under such Trade
Agreements after 12:01 a.m. on the applicable Cut-off Date under all such Trade
Agreements. Additionally, the aggregate obligations and liabilities for
unperformed air time under all Evergreen Trade Agreements and under all EZ Trade
Agreements on the applicable Cut-off Date which are required to be prorated (any
excess being part of the applicable Nonassumed Liabilities) shall not exceed
Five Hundred Thousand Dollars ($500,000) and Six Hundred Thousand Dollars
($600,000), respectively. There shall be no proration in favor of the assigning
party with respect to the Trade Agreements, notwithstanding the fact that the
excess, if any, of the obligations and liabilities under the Trade Agreements
over the fair market value of the property to be received under such Trade
Agreements after 12:01 a.m. on the applicable Cut-off Date is less than the
amounts specified in the first sentence of this paragraph.
(h) Nothing contained in this Section 2.3 is intended or shall be deemed
to amend or modify the indemnification provisions of Article 8 nor to reallocate
responsibility for the matters set forth therein.
2.4 Closing Date. The closing of the Exchange (the "Closing") shall take
place at Hunton & Williams, 1751 Pinnacle Drive, Suite 1700, McLean, Virginia
22102, at 10:00 a.m., local time, on the later of (a) the earlier of (i) the
second (2nd) business day following the effectiveness of the
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American-EZ Merger, and (ii) June 30, 1997, and (b) the tenth (10th) business
day after the satisfaction or waiver by Evergreen Parent and EZ of the
conditions set forth in Section 6.1, or such other place or on such other date,
prior to the Termination Date, as the parties may agree (the "Closing Date"). At
the Closing, each of the parties shall deliver such bills of sale, assignments,
assumptions of liabilities, opinions and other instruments and documents as are
described in this Agreement or as may be otherwise reasonably requested by the
parties and their respective counsel. Prior to Closing, Evergreen Parent shall
identify for EZ the appropriate Evergreen Party to which the EZ Assets (or any
portion of them) shall be assigned.
2.5 Accounts Receivable. Upon the earlier to occur of Closing or the
commencement of the effectiveness of the applicable TBA, the Evergreen Parties
shall appoint PBI their agent and the EZ Parties shall appoint Evergreen Parent
their agent for the purpose of collecting all Accounts Receivable relating to
the Evergreen Stations and the EZ Stations, respectively. Each party shall
deliver to the other on or as soon as practicable after the applicable TBA Date
(but, in any event, within ten (10) days after such TBA Date) a complete and
detailed statement showing the name, amount and age of each Account Receivable
of its Stations. Subject to and limited by the following, revenues relating to
the Evergreen Accounts Receivable and the EZ Accounts Receivable will be for the
account of Evergreen and the EZ Parties, respectively. Each agent shall use its
best efforts to collect the Accounts Receivable with respect to which it is
acting as agent for a period of ninety (90) days after the applicable Cut-off
Date (the "Collection Period"). Any payment received by either party during the
Collection Period from any customer with an account which is an Account
Receivable with respect to which it is acting as agent shall first be applied in
reduction of such Account Receivable, unless the customer indicates otherwise in
writing. During the Collection Period, each agent shall furnish the other with a
list of, and pay over to the other, the amounts collected with respect to the
Accounts Receivable with respect to which it is acting as agent on a bi-weekly
basis. Each agent shall provide the other with a final accounting on or before
the fifteenth (15th) day following the end of the Collection Period. Upon the
request of either agent at and after such time, the parties shall meet to
mutually and in good faith analyze any uncollected Accounts Receivable to
determine if the same, in their reasonable business judgment, are deemed to be
collectable and if the party which acted as agent with respect thereto desires
to retain such Accounts Receivable in the interest of maintaining an advertising
relationship. As to each such Accounts Receivable, the parties shall negotiate a
good faith value of such Accounts Receivable, which the purchasing party shall
pay to the other if the purchasing party, in its sole discretion, chooses to
retain such Accounts Receivable. Each party shall retain the right to collect
any of its Accounts Receivable as to which the parties are unable to reach
agreement as to a good faith value, and each party agrees to turn over to the
other any payments received against any such Accounts Receivable. Neither agent
shall be obligated to use any extraordinary efforts to collect any of the
Accounts Receivable assigned to it for collection hereunder or to refer any of
such Accounts Receivable to a collection agency or to any attorney for
collection, and neither party shall make any such referral or compromise, nor
settle or adjust the amount of any such Accounts Receivable, except with the
approval of the other agent. Neither agent shall incur any liability to any
other party for any uncollected account unless such agent shall have engaged in
willful misconduct or gross negligence in the performance of its obligations set
forth in this Section. During and after the Collection Period, without specific
agreement with the agent with respect thereto to the contrary, none of the
assigning parties nor its agents shall make any direct solicitation of the
Accounts Receivable for collection purposes, except for Accounts Receivable
retained by the assigning party after the Collection Period.
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2.6 Like-Kind Exchange. The EZ Parties may elect to effect the transfer
and conveyance of the Evergreen Assets relating to WRFX(FM) as part of an
exchange under Section 1031 of the Code, in lieu of selling such assets
hereafter. If the EZ Parties so elect, they shall provide notice to Evergreen of
their election, and thereafter (i) may at any time at or prior to Closing assign
their rights (but such assignment shall not relieve them of their obligations)
under this Agreement with respect to such Evergreen Assets to a "qualified
intermediary" as defined in Treas. Reg. ss.1.1031(k)-1(g)(4), subject to all
rights and obligations hereunder of the Evergreen Parties and (ii) shall
promptly provide written notice of such assignment to all Evergreen Parties. The
Evergreen Parties shall cooperate with all reasonable requests of the EZ Parties
and the "qualified intermediary" in arranging and effecting the transfer of such
Evergreen Assets to the "qualified intermediary". Without limiting the
generality of the foregoing, if the EZ Parties have given notice of their
intention to effect the acquisition of such Evergreen Assets as part of a
tax-deferred exchange, the Evergreen Parties shall (i) promptly provide the EZ
Parties with written acknowledgment of such notice and (ii) at Closing, deliver
such Evergreen Assets to the "qualified intermediary" rather than to the EZ
Parties (which deliver shall discharge the obligation of the Evergreen Parties
to make delivery of such Evergreen Assets hereunder).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE EVERGREEN PARTIES
Each Evergreen Party hereby, jointly and severally, represents, warrants
and covenants to, and agrees with, the EZ Parties as follows:
3.1 Organization and Business; Power and Authority; Effect of Transaction.
(a) Each Evergreen Party is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, has all
requisite corporate power and authority to own or hold under lease its
properties and to conduct its business as now conducted.
(b) Each Evergreen Party has all requisite corporate power and authority
necessary to enable it to execute and deliver, and to perform its obligations
under, this Agreement and each Collateral Document executed or required to be
executed by it pursuant hereto or thereto or to consummate the Exchange and the
other Transactions; and the execution, delivery and performance of this
Agreement and each Collateral Document executed or required to be executed by it
pursuant hereto or thereto have been duly authorized by all requisite corporate
action on the part of each Evergreen Party. This Agreement has been duly
executed and delivered by each Evergreen Party and constitutes, and each
Collateral Document to which any Evergreen Party becomes a party will, when
executed and delivered by such Evergreen Party, constitute, the legally valid
and binding obligation of such Evergreen Party, enforceable against such
Evergreen Party in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, moratorium, insolvency and similar
laws affecting the rights and remedies of creditors and obligations of debtors
generally and by general principles of equity.
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(c) Except as set forth in Section 3.1(c) of the Evergreen Disclosure
Schedule, neither the execution and delivery by each Evergreen Party of this
Agreement or any Collateral Document executed or required to be executed by it
pursuant hereto or thereto, nor the consummation by each Evergreen Party of the
Exchange and the other Transactions, nor compliance with the terms, conditions
and provisions hereof or thereof by each Evergreen Party:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of any Evergreen
Party or any Applicable Law on the part of any Evergreen Party, or
will conflict with, or result in a breach or violation of, or
constitute a default under, or permit the acceleration of any
obligation or liability in, or but for any requirement of giving of
notice or passage of time or both would constitute such a conflict
with, breach or violation of, or default under, or permit any such
acceleration in, any Evergreen Material Agreement; or
(ii) will require any Evergreen Party to make or obtain any
Governmental Authorization, Governmental Filing or Private
Authorization, except for the FCC Consents, filings under the
Hart-Scott-Rodino Act and Private Authorizations the failure of which
to be obtained or maintained would not, individually or in the
aggregate, have a Material Adverse Effect on Evergreen.
(d) Evergreen Parent does not have any direct or indirect Subsidiaries or
other Affiliates which own or have any interest in any of the Evergreen Stations
or any of the Evergreen Assets other than the other Evergreen Parties.
3.2 Financial and Other Information. Evergreen has heretofore furnished to
EZ copies of the unaudited financial data of the Evergreen Stations listed in
Section 3.2 of the Evergreen Disclosure Schedule (the "Evergreen Financial
Data"). Except as set forth in Section 3.2 of the Evergreen Disclosure Schedule
(which schedule reflects the inclusion of "barter" transactions and the effects
thereof), and except for normal year-end audit adjustments and accruals, if any,
the Evergreen Financial Data have been prepared in accordance with GAAP applied
on a basis consistent with past practices and are a true, accurate and fair
presentation of the operating revenues and operating expenses of the Evergreen
Stations for the periods indicated.
3.3 Changes in Condition. Since June 30, 1996, except to the extent
specifically described in Section 3.3 of the Evergreen Disclosure Schedule,
there has been no Material Adverse Change in Evergreen. There is no Event known
to Evergreen which Materially Adversely Affects, or (so far as any Evergreen
Party can now reasonably foresee) is likely to Materially Adversely Affect,
Evergreen, except to the extent specifically described in Section 3.3 of the
Evergreen Disclosure Schedule.
3.4 Materiality. The representations and warranties set forth in this
Article would in the aggregate be true and correct even without the materiality
exceptions or qualifications contained therein or set forth in the Evergreen
Disclosure Schedule, except for such exceptions and qualifications including
without limitation those set forth in the Evergreen Disclosure Schedule
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which, in the aggregate for all such representations and warranties, are not and
could not reasonably be expected to be Materially Adverse to Evergreen.
3.5 Title to Properties; Leases.
(a) Section 3.5(a) of the Evergreen Disclosure Schedule lists all Real
Property and describes all Leases of Real Property (the "Evergreen Leases") used
or held for use in the operation of the Evergreen Stations (the "Evergreen Real
Property"). One of the Evergreen Parties has good and marketable title, or valid
and subsisting leasehold interests (as shown on Section 3.5(a) of the Evergreen
Disclosure Schedule), to all Evergreen Real Property, in each case free and
clear of all Liens, except (i) Permitted Liens and (ii) Liens set forth on
Section 3.5(a) of the Evergreen Disclosure Schedule (which Liens shall be
released prior to Closing). Except as otherwise set forth in Schedule 3.5(a) of
the Evergreen Disclosure Schedule, each Evergreen Lease included in the
Evergreen Real Property has been duly authorized, executed and delivered by the
appropriate Evergreen Party and, to Evergreen's knowledge, information and
belief, each of the other parties thereto, and is a legally valid and binding
obligation of the appropriate Evergreen Party, and, to Evergreen's knowledge,
information and belief, each of the other parties thereto, enforceable in
accordance with its terms. The appropriate Evergreen Party has a valid leasehold
interest in and enjoys peaceful and undisturbed possession under all Evergreen
Leases pursuant to which it holds any Evergreen Real Property. All Evergreen
Leases are valid and subsisting and in full force and effect; neither any
Evergreen Party nor, to Evergreen's knowledge, information and belief, any other
party thereto, is in default in the performance, observance or fulfillment of
any obligation, covenant or condition contained in any Evergreen Lease. Except
as disclosed in Section 3.5(a) of the Evergreen Disclosure Schedule, all
improvements on the Evergreen Real Property are in compliance with applicable
zoning and land use laws, ordinances and regulations in all respects necessary
to conduct the operation of the Evergreen Stations operating thereon as
presently conducted, except for any instances of non-compliance which do not and
will not individually or in the aggregate have a Material Adverse Effect on the
owner or lessee, as the case may be, of such Evergreen Real Property. Except as
disclosed in Section 3.5(a) of the Evergreen Disclosure Statement, and except
for the Evergreen AM Stations (as to which no representation or warranty is made
hereby), all such improvements are in good working condition and repair
(ordinary wear and tear excepted), are insurable at standard rates, and comply
in all Material aspects with FCC rules and regulations. Except as disclosed in
Section 3.5(a) of the Evergreen Disclosure Statement, and except for the
Evergreen AM Stations (as to which no representation or warranty is made
hereby), all of the transmitting towers, ground radials, guy anchors,
transmitting buildings and related improvements located on the Evergreen Real
Property are located entirely on the Evergreen Real Property. Evergreen has no
knowledge of any pending, threatened or contemplated action to take by eminent
domain or otherwise to condemn any part of the Evergreen Real Property.
(b) Section 3.5(b) of the Evergreen Disclosure Schedule contains a true,
accurate and complete description of all Material items of Evergreen Personal
Property. None of the Evergreen Personal Property is subject to any Lien, except
(i) Permitted Liens, and (ii) Liens set forth on Section 3.5(b) of the Evergreen
Disclosure Schedule (which Liens shall be released prior to Closing). Except as
set forth in Section 3.5(b) of the Evergreen Disclosure Schedule, including
without limitation the fact that the office and studio facilities of the
Evergreen Stations (the "Evergreen Studio Facilities") require significant
improvement (including without limitation the
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necessity of repair, renovation or relocation), all Material items of Evergreen
Personal Property (other than the Evergreen Studio Facilities and the Evergreen
Personal Property used solely in connection with the Evergreen AM Stations, as
to which no representation or warranty is made hereby) are in a state of good
repair and maintenance and are in good operating condition, normal wear and tear
excepted, have been maintained in a manner consistent with generally accepted
standards of good engineering practice and currently permit the Evergreen
Stations to be operated in accordance with the terms and conditions of the
Evergreen FCC Licenses and all Applicable Laws. EZ acknowledges and agrees that
Evergreen shall not be required to perform any facility improvements to the
Evergreen Studio Facilities.
3.6 Compliance with Private Authorizations. Section 3.6 of the Evergreen
Disclosure Schedule sets forth a true, accurate and complete list and
description of each Evergreen Private Authorization which individually or when
taken together with other substantially similar Evergreen Private Authorizations
is Material to the Evergreen Assets or any of the Evergreen Stations, all of
which are in full force and effect. The Evergreen Private Authorizations are all
Private Authorizations that are necessary for the ownership and operation by
Evergreen of the Evergreen Assets and the Evergreen Stations and the conduct of
business thereof as now conducted or as presently proposed to be conducted or
which, if not obtained and maintained, could, individually or in the aggregate,
Materially Adversely Affect Evergreen. No Evergreen Party is in breach or
violation of, or in default in the performance, observance or fulfillment of,
any Evergreen Private Authorization, and no Event exists or has occurred, which
constitutes, or but for any requirement of giving of notice or passage of time
or both would constitute, such a breach, violation or default, under any
Evergreen Private Authorization, except for such defaults, breaches or
violations as do not and will not have in the aggregate any Material Adverse
Effect on Evergreen. No Evergreen Private Authorization is the subject of any
pending or, to Evergreen's knowledge, information or belief, threatened attack,
revocation or termination.
3.7 Compliance with Governmental Authorizations and Applicable Law.
(a) Section 3.7(a) of the Evergreen Disclosure Schedule contains a
description of:
(i) all Legal Actions pending or, to Evergreen's knowledge,
information and belief, is threatened against any Evergreen Party with
respect to the operation or ownership of any of the Evergreen Assets or
the conduct of the business of any of the Evergreen Stations;
(ii) all Claims and Legal Actions pending or, to Evergreen's
knowledge, information and belief, threatened against any Evergreen Party
with respect to the operation or ownership of any of the Evergreen Assets
or the conduct of the business of any of the Evergreen Stations which,
individually or in the aggregate, are reasonably likely to result in the
revocation or termination of any of the Evergreen FCC Licenses or the
imposition of any restriction of such a nature as would Adversely affect
the ownership or operations of any of the
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Evergreen Stations; in particular, but without limiting the generality of
the foregoing, there are no applications, complaints or Legal Actions
pending or, to Evergreen's knowledge, information and belief, threatened
(x) before the FCC relating to the ownership or operations of any of the
Evergreen Assets or the conduct of the business of any of the Evergreen
Stations other than applications, complaints or Legal Actions which
affect the radio broadcasting industry generally, or (y) before any
Authority involving charges of illegal discrimination by any of the
Evergreen Stations under any federal or state employment Laws; and
(iii) each Governmental Authorization (including without
limitation all FCC Licenses) required under Applicable Laws (x) to own
and operate each of the Evergreen Stations, as currently conducted or
proposed to be conducted on or prior to the Closing Date, all of which
are in full force and effect or (y) that are necessary to permit each
Evergreen Party to execute and deliver this Agreement and to perform its
obligations hereunder (the "Evergreen Governmental Authorizations").
The Evergreen Parties have delivered to the EZ Parties true and complete copies
of the Evergreen Governmental Authorizations (including any and all amendments
and other modifications thereto.)
(b) The appropriate Evergreen Party is the authorized legal holder of the
Evergreen FCC Licenses listed in Section 3.7(a) of the Evergreen Disclosure
Schedule, none of which is subject to any restriction or condition which would
limit in any respect the operations of any of the Evergreen Stations as
currently conducted or proposed to be conducted on or prior to the Closing Date.
The Evergreen FCC Licenses are valid and in good standing, are in full force and
effect and are not impaired in any Material respect by any act or omission of
any Evergreen Party or its officers, directors, employees or agents, and the
operation of each of the Evergreen Stations is in accordance in all Material
respects with the Evergreen FCC Licenses. The Evergreen Stations are operating
in accordance with the Evergreen FCC Licenses, all underlying construction
permits and the FCA. Except as disclosed in Section 3.7 of the Evergreen
Disclosure Schedule, no application, action or proceeding is pending for the
renewal or modification of any Evergreen FCC Licenses and, to Evergreen's
knowledge, information and belief, there is not as of the date of this Agreement
issued or outstanding any investigation or material complaint against any
Evergreen Party at the FCC relating to any Evergreen Station. Except as
disclosed in Section 3.7 of the Evergreen Disclosure Schedule, as of the date of
this Agreement, there is no proceeding pending at or outstanding notice of
violation from the FCC relating to any Evergreen Station. All fees payable to
Authorities pursuant to the FCC Licenses, including FCC annual regulatory fees
have been paid and no event has occurred which, individually or in the
aggregate, and without the giving of notice or the lapse of time or both, would
constitute grounds for revocation thereof or would have a Material Adverse
Effect on Evergreen. All Material reports, forms and statements required to be
filed by each Evergreen Party with the FCC with respect to each of the Evergreen
Stations have been filed and are true, complete and accurate in all Material
respects. To the knowledge, information and belief of Evergreen, under the FCA,
there are no facts that would disqualify it as the transferee of the control of
the EZ Stations. No renewal of any Evergreen FCC License would constitute a
major environmental action (as defined in the FCC rules and regulations).
The Evergreen Governmental Authorizations comprise all Governmental
Authorizations which are necessary for the lawful ownership or operation of the
Evergreen Assets or the lawful conduct of the business of each of the Evergreen
Stations as now conducted or as presently proposed to be conducted, except for
Governmental Authorizations, the failure of which to obtain and maintain, would
not individually or in the aggregate, have any Material Adverse Effect on
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Evergreen. No Evergreen Governmental Authorization is the subject of any pending
or, to Evergreen's knowledge, information and belief, threatened challenge or
proceeding to revoke or terminate any Evergreen Governmental Authorization.
Evergreen has no reason to believe that any Evergreen Governmental Authorization
would not be renewed in the name of Evergreen by the granting Authority in the
ordinary course.
(c) With respect to matters, if any, of a nature referred to in Section
3.7(a) or 3.7(b) of the Evergreen Disclosure Schedule, except as otherwise
specifically described in Section 3.7(c) of the Evergreen Disclosure Schedule,
all such information and matters set forth in the Evergreen Disclosure Schedule,
if adversely determined against Evergreen, will not, in the aggregate,
Materially Adversely Affect Evergreen.
3.8 Intangible Assets. Section 3.8 of the Evergreen Disclosure Schedule
sets forth a true, accurate and complete description of all Intangible Assets
held or used by Evergreen (other than the Evergreen Governmental Authorizations
and the Evergreen Private Authorizations) relating to the ownership and
operation of the Evergreen Assets or the conduct of the business of any of the
Evergreen Stations (the "Evergreen Intangible Assets"), including without
limitation the nature of Evergreen's interest in each and the extent to which
the same have been duly registered in the offices as indicated therein. One of
the Evergreen Parties owns or possesses or otherwise has the right to use all
Evergreen Intangible Assets necessary in order to operate the Evergreen Assets
in the manner currently being operated by the Evergreen Parties. Except as set
forth in Section 3.8 of the Evergreen Disclosure Schedule, no Intangible Assets
(except for the Evergreen Governmental Authorizations and the Evergreen Private
Authorizations and the Evergreen Intangible Assets so set forth) are required
for the ownership or operation of the Evergreen Assets or the conduct of the
business of any of the Evergreen Stations as currently owned, operated and
conducted or proposed to be owned, operated and conducted on or prior to the
Closing Date.
3.9 Related Transactions. No Evergreen Party is a party or subject to any
Contract relating to the ownership and operation of the Evergreen Assets or the
conduct of the business of any of the Evergreen Stations between any Evergreen
Party and any of its officers, directors, stockholders, employees or, to the
knowledge, information and belief of Evergreen, any Affiliate of any thereof
(other than another Evergreen Party), including without limitation any Contract
providing for the furnishing of services to or by, providing for rental of
property, real, personal or mixed, to or from, or providing for the lending or
borrowing of money to or from or otherwise requiring payments to or from, any
such Person, other than (i) Evergreen Employment Arrangements listed or
described in Section 3.12 of the Evergreen Disclosure Schedule and (ii)
Contracts between Evergreen and officers which constitute Evergreen Excluded
Assets and obligations of Evergreen not being assumed by EZ.
3.10 Insurance. One of the Evergreen Parties maintains, with respect to
the Evergreen Assets and the Evergreen Stations, policies of fire and extended
coverage and casualty, liability and other forms of insurance in such amounts
and against such risks and losses as are in Evergreen Parent's reasonable
business judgment prudent (a true, complete and accurate description of which is
set forth in Section 3.10 of the Evergreen Disclosure Schedule) and shall use
reasonable business efforts to keep such insurance or comparable insurance in
full force and effect through the Closing Date, except to the extent otherwise
provided in the Evergreen Stations TBA.
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3.11 Tax Matters. Each Evergreen Party has in respect of the Evergreen
Assets and the Evergreen Stations filed all Material Tax Returns which are
required to be filed, and has paid, or made adequate provision for the payment
of, all Taxes which have or may become due and payable pursuant to said Tax
Returns and all other governmental charges and assessments received to date
other than those Taxes being contested in good faith. There are no unpaid Taxes
which are due and payable, or alleged to be due and payable by any Taxing
Authority, the non-payment of which is or could become a Lien on any of the
Evergreen Assets or any of the Evergreen Stations. All Taxes in respect of the
Evergreen Assets and the Evergreen Stations which Evergreen is required by law
to withhold and collect have been duly withheld and collected, and have been
paid over, in a timely manner, to the proper Authorities to the extent due and
payable. Except as set forth in Section 3.11 of the Evergreen Disclosure
Schedule, no Evergreen Party has executed any waiver to extend, or otherwise
taken or failed to take any action that would have the effect of extending, the
applicable statute of limitations in respect of any Tax associated with the
Evergreen Assets or the Evergreen Stations for the fiscal years prior to and
including the most recent fiscal year.
3.12 Employee Retirement Income Security Act of 1974.
(a) Section 3.12(a) of the Evergreen Disclosure Schedule contains a true,
accurate and complete list of all Evergreen employees employed in the ownership
or operation of any of the Evergreen Assets or the conduct of the business of
any of the Evergreen Stations (the "Evergreen Station Employees"), together with
each such employee's title or the capacity in which he or she is employed and
all Employment Arrangements with respect to such employee (each, an "Evergreen
Employment Arrangement"). All of the Evergreen Employee Plans and all other
Evergreen Employment Arrangements are listed in Section 3.12(a) of the Evergreen
Disclosure Schedule and true, complete and accurate copies of all such written
Evergreen Employee Plans and Evergreen Employment Arrangements (or related
insurance policies) have been furnished to EZ, along with copies of any employee
handbooks or similar documents describing such Evergreen Employee Plans or any
other Evergreen Employment Arrangements. Section 3.12(a) of the Evergreen
Disclosure Schedule also contains a true, complete and accurate description of
any unwritten Evergreen Employee Plan or other unwritten Evergreen Employment
Arrangement.
(b) Each Evergreen Employment Arrangement has been administered in
compliance with its own terms and in Material compliance with the provisions of
ERISA, the Code, the Age Discrimination in Employment Act and any other
applicable federal or state Laws. Evergreen is not aware of any pending audit or
examination of any Evergreen Employee Plan or any other Evergreen Employment
Arrangement by any Authority or of any facts which would lead it to believe that
any such audit or examination is threatened. There exists no Claim or Legal
Action (other than routine claims for benefits) with respect to any Evergreen
Employee Plan or any other Evergreen Employment Arrangement pending or, to
Evergreen's knowledge, information and belief, threatened against any Evergreen
Employee Plan or any other Evergreen Employment Arrangement, and no Evergreen
Party possesses any knowledge of any facts which could give rise to any such
Legal Action or Claim.
(c) No Evergreen Party contributes to or is required to contribute to any
Multiemployer Plan with respect to any of the Evergreen Station Employees and
neither any Evergreen Party nor
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any other trade or business under common control with any Evergreen Party
(within the meaning of Section 414(b), (c), (m) or (o) of the Code) has incurred
or reasonably expects to incur any "withdrawal liability," as defined under
Section 4201 et seq. of ERISA.
(d) Except as described in Section 3.12(d) of the Evergreen Disclosure
Statement, neither any Evergreen Party nor any other trade or business under
common control with any Evergreen Party (within the meaning of Sections 414(b),
(c), (m) or (o) of the Code) sponsors, maintains or contributes to any Evergreen
Employee Plan or any other Evergreen Employment Arrangement that provides
retiree medical or retiree life insurance coverage to any Evergreen Station
Employee upon his/her retirement.
(e) Except as described in Section 3.12(e) of the Evergreen Disclosure
Statement with respect to each Evergreen Employee Plan and, to the extent
applicable, any other compensation comprising an Evergreen Employment
Arrangement: (i) each such Evergreen Employee Plan that is intended to be
tax-qualified, and each amendment thereto, is the subject of a favorable
determination letter, and no plan amendment that is not the subject of a
favorable determination letter would affect the validity of an Evergreen
Employee Plan's letter; (ii) no prohibited transaction, within the definition of
Section 4975 of the Code or Title 1, Part 4 of ERISA, has occurred which would
subject any Evergreen Party to any liability that could become a liability of
EZ; and (iii) all contributions premiums or payments accrued, in whole or in
part, under each such Evergreen Employee Plan or other Evergreen Employment
Arrangement or with respect thereto as of the Closing will be paid by the
appropriate Evergreen Party prior to the Closing.
(f) For purposes of this Section, the term "Evergreen Employee Plan" shall
mean any pension, profit-sharing, deferred compensation, vacation, bonus,
incentive, medical, vision, dental, disability, life insurance or any other
employee benefit plan as defined in Section 3(3) of ERISA to which any Evergreen
Party (under the terms of Section 414(b), (c), (m) or (o) of the Code) sponsors,
maintains or otherwise is bound which provides benefits to any person employed
or previously employed at any of the Evergreen Stations.
3.13 Absence of Sensitive Payments. Neither any Evergreen Party nor, to
Evergreen's knowledge, information and belief, any of its officers, directors,
employees, agents or other representatives, has with respect to the Evergreen
Assets or the Evergreen Stations (a) made any contributions, payments or gifts
to or for the private use of any governmental official, employee or agent where
either the payment or the purpose of such contribution, payment or gift is
illegal under the laws of the United States or the jurisdiction in which made or
(b) established or maintained any unrecorded fund or asset for any purpose or
made any false or artificial entries on its books.
3.14 Inapplicability of Specified Statutes. Evergreen Parent is not a
"holding company", or a "subsidiary company" or an "affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, or an "investment company" or a company "controlled" by or
acting on behalf of an "investment company", as defined in the Investment
Company Act of 1940, as amended, or a "carrier" or a person which is in control
of a "carrier", as defined in section 11301 of Title 49, U.S.C.
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3.15 Employment Arrangements. Except as described in Section 3.15 of the
Evergreen Disclosure Schedule, with respect to any Evergreen Station, (i) none
of the Evergreen Station Employees is now, or, to Evergreen's knowledge,
information and belief, since the date on which the appropriate Evergreen Party
acquired such Evergreen Station, has been, represented by any labor union or
other employee collective bargaining organization, and no Evergreen Party is, or
has ever been, a party to any labor or other collective bargaining agreement
with respect to the Evergreen Station Employees, (ii) there are no pending
grievances, disputes or controversies with any union or any other employee or
collective bargaining organization of such employees, or threats of strikes,
work stoppages or slowdowns or any pending demands for collective bargaining by
any such union or other organization, and (iii) neither any Evergreen Party nor
any of such employees is now, or, to Evergreen's knowledge, information and
belief, since the date on which the appropriate Evergreen Party acquired such
Evergreen Station, has been, subject to or involved in or, to Evergreen's
knowledge, information and belief, threatened with, any union elections,
petitions therefore or other organizational or recruiting activities, in each
case with respect to any Evergreen Station Employees. Each Evergreen Party has
performed in all Material respects all obligations required to be performed
under each Evergreen Employee Plan and each other Evergreen Employment
Arrangement and is not in Material breach or violation of or in Material default
or arrears under any of the terms, provisions or conditions thereof.
3.16 Material Agreements. Listed on Section 3.16 of the Evergreen
Disclosure Schedule are all Material Agreements relating to the ownership or
operation of the Evergreen Assets or the conduct of the business of any of the
Evergreen Stations or to which any of the Evergreen Assets is subject (the
"Evergreen Material Agreements"). True, accurate and complete copies of each
Evergreen Material Agreement have been made available by Evergreen to EZ and
Evergreen has provided EZ with photocopies of all Evergreen Material Agreements
requested by EZ (or true, accurate and complete descriptions thereof have been
set forth in Section 3.16 of the Evergreen Disclosure Schedule, if any such
Material Agreements are oral). All of the Evergreen Material Agreements are
valid, binding and legally enforceable obligations of an Evergreen Party and, to
Evergreen's knowledge, information and belief, all other parties thereto (except
to the extent that the invalidity or non-binding nature of any Evergreen
Material Agreements, individually or in the aggregate would not have a Material
Adverse Effect on Evergreen). Each Evergreen Party has duly complied with all of
the Material terms and conditions of each Evergreen Material Agreement to which
it is a party and has not done or performed, or failed to do or perform (and
there is no pending or, to the knowledge, information and belief of Evergreen,
threatened Claim that any Evergreen Party has not so complied, done and
performed or failed to do and perform) any act which would invalidate or provide
grounds for the other party thereto to terminate (with or without notice,
passage of time or both) any Evergreen Material Agreement or impair the rights
or benefits, or increase the costs, of any Evergreen Party under any Evergreen
Material Agreement. No Evergreen Party has granted any Material waivers or
forbearance under any Evergreen Material Agreement and, to Evergreen's
knowledge, information and belief, no third party is in material default in the
performance of any of its obligations under any Evergreen Material Agreement.
Except for those consents or approvals listed in Section 3.16 of the Evergreen
Disclosure Schedule, no consents or approvals of any third party are necessary
to permit the assignment by the Evergreen Parties of the Evergreen Material
Agreements to the EZ Parties and such assignment will not affect the validity or
enforceability of any Evergreen Material Agreement or cause any Material change
in the substantive terms of any of them.
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3.17 Ordinary Course of Business. Each Evergreen Party, from the end of
its most recent fiscal quarter to the date hereof, except (i) as may be
described on Section 3.17 of the Evergreen Disclosure Schedule, or (ii) as may
be required or expressly contemplated by the terms of this Agreement, with
respect to the Evergreen Assets and each of the Evergreen Stations:
(a) has operated its business in the normal, usual and customary
manner in the ordinary and regular course of business, consistent with
prior practice;
(b) has not sold or otherwise disposed of or contracted to sell or
otherwise dispose of any Evergreen Asset having a value in excess of
$50,000, other than in the ordinary course of business;
(c) except in each case in the ordinary course of business,
consistent with prior practice:
(i) has not incurred any obligations or liabilities (fixed,
contingent or other) having a value in excess of $50,000;
(ii) has not entered into any commitments having a value in
excess of $50,000; and
(iii) has not canceled any debts or claims;
(d) has not made or committed to make any additions to its property
or any purchases of equipment, except for normal maintenance and
replacements;
(e) except as described in Section 3.17(e) of the Evergreen
Disclosure Schedule, has not increased the compensation payable or to
become payable to any of the Evergreen Station Employees other than in the
ordinary course of business or otherwise altered, modified or changed the
terms of their employment;
(f) has not suffered any Material damage, destruction or loss
(whether or not covered by insurance) or any acquisition or taking of
property by any Authority;
(g) has not waived any rights of Material value without fair and
adequate consideration;
(h) has not experienced any work stoppage; and
(i) except in the ordinary course of business, has not entered into,
amended or terminated any Evergreen Lease, Evergreen Governmental
Authorization, Evergreen Private Authorization, Evergreen Material
Agreement, Evergreen Employment Arrangement or Contract, or any
transaction, agreement or arrangement with any Affiliate of Evergreen.
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3.18 Broker or Finder. No Person assisted in or brought about the
negotiation of this Agreement or the Exchange in the capacity of broker, agent
or finder or in any similar capacity on behalf of any Evergreen Party other than
Star Media Group whose fee will be paid by Evergreen.
3.19 Solvency. As of the execution and delivery of this Agreement, each
Evergreen Party is, and immediately prior to giving effect to the consummation
of the Exchange and the other Transactions will be, solvent.
3.20 Environmental Matters. Except as set forth in Section 3.20 of the
Evergreen Disclosure Schedule, with respect to the Evergreen Assets, each
Evergreen Party:
(a) to the knowledge, information and belief of Evergreen, has not
been notified that it is potentially liable under, has not received any
request for information or other correspondence concerning its potential
liability with respect to any site or facility under, and is not a
"potentially responsible party" under, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation Recovery Act, as amended, or any similar state law;
(b) has not entered into or received any consent decree, compliance
order or administrative order issued pursuant to any Environmental Law;
(c) is not a party in interest or in default under any judgment,
order, writ, injunction or decree of any final order issued pursuant to
any Environmental Law;
(d) is, to the knowledge, information and belief of Evergreen, in
substantial compliance in all Material respects with all Environmental
Laws, has, to Evergreen's knowledge, information and belief, obtained all
Environmental Permits required under Environmental Laws, and is not the
subject of or, to Evergreen's knowledge, information and belief,
threatened with any Legal Action involving a demand for damages or other
potential liability including any Lien with respect to Material violations
or Material breaches of any Environmental Law; and
(e) has no knowledge of any past or present Event related to any of
the Evergreen Stations or any of the Evergreen Assets which Event,
individually or in the aggregate, will interfere with or prevent continued
Material compliance with all Environmental Laws, or which, individually or
in the aggregate, will form the basis of any Material Claim for the
release or threatened release into the environment, of any Hazardous
Material.
3.21 Trade or Barter. Section 3.21 of the Evergreen Disclosure Schedule
sets forth a true, complete and accurate description (including obligations and
liabilities remaining thereunder) of all Evergreen Trade Agreements that
individually involve or may involve, valued in accordance with GAAP, more than
$500 in obligations remaining thereunder as of the date of this Agreement in
money, property or services or a remaining term in excess of two months.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE EZ PARTIES
Each EZ Party hereby, jointly and severally, represents, warrants and
covenants to, and agrees with, the Evergreen Parties as follows:
4.1 Organization and Business; Power and Authority; Effect of
Transaction.
(a) Each EZ Party is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization, has all
requisite corporate power and authority to own or hold under lease its
properties and to conduct its business as now conducted.
(b) Each EZ Party has all requisite corporate power and authority
necessary to enable it to execute and deliver, and to perform its obligations
under, this Agreement and each Collateral Document executed or required to be
executed by it pursuant hereto or thereto or to consummate the Exchange and the
other Transactions; and the execution, delivery and performance of this
Agreement and each Collateral Document executed or required to be executed by it
pursuant hereto or thereto have been duly authorized by all requisite corporate
action on the part of each EZ Party. This Agreement has been duly executed and
delivered by each EZ Party and constitutes, and each Collateral Document to
which any EZ Party becomes a party will, when executed and delivered by such EZ
Party, constitute, the legally valid and binding obligation of such EZ Party,
enforceable against such EZ Party in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, moratorium,
insolvency and similar laws affecting the rights and remedies of creditors and
obligations of debtors generally and by general principles of equity.
(c) Except as set forth in Section 4.1(c) of the EZ Disclosure Schedule,
neither the execution and delivery by any EZ Party of this Agreement or any
Collateral Document executed or required to be executed by it pursuant hereto or
thereto, nor the consummation by each EZ Party of the Exchange and the other
Transactions, nor compliance with the terms, conditions and provisions hereof or
thereof by each EZ Party:
(i) will conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of any EZ Party or any
Applicable Law on the part of any EZ Party, or will conflict with, or
result in a breach or violation of, or constitute a default under, or
permit the acceleration of any obligation or liability in, or but for any
requirement of giving of notice or passage of time or both would
constitute such a conflict with, breach or violation of, or default under,
or permit any such acceleration in, any EZ Material Agreement; or
(ii) will require any EZ Party to make or obtain any Governmental
Authorization, Governmental Filing or Private Authorization, except for
the FCC Consents, filings under the Hart-Scott-Rodino Act and Private
Authorizations the failure of which to be obtained or maintained would
not, individually or in the aggregate, have a Material Adverse Effect on
EZ.
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(d) EZ Parent does not have any direct or indirect Subsidiaries or other
Affiliates which own or have any interest in any of the EZ Stations or any of
the EZ Assets other than the other EZ Parties.
4.2 Financial and Other Information. EZ has heretofore furnished to
Evergreen copies of the unaudited financial data of the EZ Stations listed in
Section 4.2 of the EZ Disclosure Schedule (the "EZ Financial Data"). Except as
set forth in Section 4.2 of the EZ Disclosure Schedule (which schedule reflects
the inclusion of "barter" transactions and the effects thereof), and except for
normal year-end audit adjustments and accruals, if any, the EZ Financial Data
have been prepared in accordance with GAAP applied on a basis consistent with
past practices and are a true, accurate and fair presentation of the operating
revenues and operating expenses of the EZ Stations for the periods indicated.
4.3 Changes in Condition. Since June 30, 1996, except to the extent
specifically described in Section 4.3 of the EZ Disclosure Schedule, there has
been no Material Adverse Change in EZ. There is no Event known to EZ which
Materially Adversely Affects, or (so far as any EZ Party can now reasonably
foresee) is likely to Materially Adversely Affect, EZ, except to the extent
specifically described in Section 4.3 of the EZ Disclosure Schedule.
4.4 Materiality. The representations and warranties set forth in this
Article would in the aggregate be true and correct even without the materiality
exceptions or qualifications contained therein or set forth in the EZ Disclosure
Schedule, except for such exceptions and qualifications including without
limitation those set forth in the EZ Disclosure Schedule which, in the aggregate
for all such representations and warranties, are not and could not reasonably be
expected to be Materially Adverse to EZ.
4.5 Title to Properties; Leases.
(a) Section 4.5(a) of the EZ Disclosure Schedule lists all Real Property
and describes all Leases of Real Property (the "EZ Leases") used or held for use
in the operation of the EZ Stations (the "EZ Real Property"). One of the EZ
Parties has good and marketable title, or valid and subsisting leasehold
interests (as shown on Section 4.5(a) of the EZ Disclosure Schedule), to all EZ
Real Property, in each case free and clear of all Liens, except (i) Permitted
Liens and (ii) Liens set forth on Section 4.5(a) of the EZ Disclosure Schedule
(which Liens shall be released prior to Closing). Except as otherwise set forth
in Schedule 3.5(a) of the EZ Disclosure Schedule, each EZ Lease included in the
EZ Real Property has been duly authorized, executed and delivered by the
appropriate EZ Party and, to EZ's knowledge, information and belief, each of the
other parties thereto, and is a legally valid and binding obligation of the
appropriate EZ Party, and, to EZ's knowledge, information and belief, each of
the other parties thereto, enforceable in accordance with its terms. The
appropriate EZ Party has a valid leasehold interest in and enjoys peaceful and
undisturbed possession under all EZ Leases pursuant to which it holds any EZ
Real Property. All EZ Leases are valid and subsisting and in full force and
effect; neither any EZ Party nor, to EZ's knowledge, information and belief, any
other party thereto, is in default in the performance, observance or fulfillment
of any obligation, covenant or condition contained in any EZ Lease. Except as
disclosed in Section 4.5(a) of the EZ Disclosure Schedule, all improvements on
the EZ Real Property are in compliance with applicable zoning and land use laws,
ordinances and
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regulations in all respects necessary to conduct the operation of the EZ
Stations operating thereon as presently conducted, except for any instances of
non-compliance which do not and will not individually or in the aggregate have a
Material Adverse Effect on the owner or lessee, as the case may be, of such EZ
Real Property. Except as disclosed in Section 4.5(a) of the EZ Disclosure
Statement, all such improvements are in good working condition and repair
(ordinary wear and tear excepted), are insurable at standard rates, and comply
in all Material aspects with FCC rules and regulations. Except as disclosed in
Section 4.5(a) of the EZ Disclosure Statement, all of the transmitting towers,
ground radials, guy anchors, transmitting buildings and related improvements
located on the EZ Real Property are located entirely on the EZ Real Property. EZ
has no knowledge of any pending, threatened or contemplated action to take by
eminent domain or otherwise to condemn any part of the EZ Real Property.
(b) Section 4.5(b) of the EZ Disclosure Schedule contains a true, accurate
and complete description of all Material items of EZ Personal Property. None of
the EZ Personal Property is subject to any Lien, except (i) Permitted Liens and
(ii) Liens set forth on Section 4.5(b) of the EZ Disclosure Schedule (which
Liens shall be released prior to Closing). Except as set forth in Section 4.5(b)
of the EZ Disclosure Schedule, all Material items of EZ Personal Property are in
a state of good repair and maintenance and are in good operating condition,
normal wear and tear excepted, have been maintained in a manner consistent with
generally accepted standards of good engineering practice and currently permit
the EZ Stations to be operated in accordance with the terms and conditions of
their respective EZ FCC Licenses and all Applicable Laws. Without limiting the
generality of the foregoing, EZ acknowledges and agrees that it shall be
responsible for the substantial completion of construction of the tenant
improvements currently underway at the studio building for the EZ Stations as
more fully described in Section 4.5(b) of the EZ Disclosure Schedule and Section
5.8 of this Agreement.
4.6 Compliance with Private Authorizations. Section 4.6 of the EZ
Disclosure Schedule sets forth a true, accurate and complete list and
description of each EZ Private Authorization which individually or when taken
together with other substantially similar EZ Private Authorizations is Material
to the EZ Assets or either of the EZ Stations, all of which are in full force
and effect. The EZ Private Authorizations are all Private Authorizations that
are necessary for the ownership and operation by EZ of the EZ Assets and the EZ
Stations and the conduct of business thereof as now conducted or as presently
proposed to be conducted or which, if not obtained and maintained, could,
individually or in the aggregate, Materially Adversely Affect EZ. No EZ Party is
in breach or violation of, or in default in the performance, observance or
fulfillment of, any EZ Private Authorization, and no Event exists or has
occurred, which constitutes, or but for any requirement of giving of notice or
passage of time or both would constitute, such a breach, violation or default,
under any EZ Private Authorization, except for such defaults, breaches or
violations as do not and will not have in the aggregate any Material Adverse
Effect on EZ. No EZ Private Authorization is the subject of any pending or, to
EZ's knowledge, information or belief, threatened attack, revocation or
termination.
4.7 Compliance with Governmental Authorizations and Applicable Law.
(a) Section 4.7(a) of the EZ Disclosure Schedule contains a description
of:
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(i) all Legal Actions pending or, to EZ's knowledge, information and
belief, is threatened against any EZ Party with respect to the operation
or ownership of any of the EZ Assets or the conduct of the business of
either of the EZ Stations;
(ii) all Claims and Legal Actions pending or, to EZ's knowledge,
information and belief, threatened against any EZ Party with respect to
the operation or ownership of any of the EZ Assets or the conduct of the
business of either of the EZ Stations which, individually or in the
aggregate, are reasonably likely to result in the revocation or
termination of any of the EZ FCC Licenses or the imposition of any
restriction of such a nature as would Adversely affect the ownership or
operations of either of the EZ Stations; in particular, but without
limiting the generality of the foregoing, there are no applications,
complaints or Legal Actions pending or, to EZ's knowledge, information and
belief, threatened (x) before the FCC relating to the ownership or
operations of any of the EZ Assets or the conduct of business of either of
the EZ Stations other than applications, complaints or Legal Actions which
affect the radio broadcasting industry generally, or (y) before any
Authority involving charges of illegal discrimination by any of the EZ
Stations under any federal or state employment Laws; and
(iii) each Governmental Authorization (including without limitation
all FCC Licenses) required under Applicable Laws (x) to own and operate
each of the EZ Stations, as currently conducted or proposed to be
conducted on or prior to the Closing Date, all of which are in full force
and effect or (y) that are necessary to permit each EZ Party to execute
and deliver this Agreement and to perform its obligations hereunder (the
"EZ Governmental Authorizations").
The EZ Parties have delivered to the EZ Parties true and complete copies of the
EZ Governmental Authorizations (including any and all amendments and other
modifications thereto.)
(b) The appropriate EZ Party is the authorized legal holder of the EZ FCC
Licenses listed in Section 4.7(a) of the EZ Disclosure Schedule, none of which
is subject to any restriction or condition which would limit in any respect the
operations of any of the EZ Stations as currently conducted or proposed to be
conducted on or prior to the Closing Date. The EZ FCC Licenses are valid and in
good standing, are in full force and effect and are not impaired in any Material
respect by any act or omission of any EZ Party or its officers, directors,
employees or agents, and the operation of each of the EZ Stations is in
accordance in all Material respects with the EZ FCC Licenses. The EZ Stations
are operating in accordance with the EZ FCC Licenses, all underlying
construction permits and the FCA. Except as disclosed in Section 4.7 of the EZ
Disclosure Schedule, no application, action or proceeding is pending for the
renewal or modification of any EZ FCC Licenses and, to EZ's knowledge,
information and belief, there is not as of the date of this Agreement issued or
outstanding any investigation or material complaint against any EZ Party at the
FCC relating to either EZ Station. Except as disclosed in Section 4.7 of the EZ
Disclosure Schedule, as of the date of this Agreement, there is no proceeding
pending at or outstanding notice of violation from the FCC relating to either EZ
Station. All fees payable to Authorities pursuant to the FCC Licenses, including
FCC annual regulatory fees, have been paid and no event has occurred which,
individually or in the aggregate, and without the giving of notice or the lapse
of time or both, would constitute grounds for revocation thereof or would have a
Material Adverse Effect on EZ.
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All Material reports, forms and statements required to be filed by any EZ Party
with the FCC with respect to each of the EZ Stations have been filed and are
true, complete and accurate in all Material respects. To the knowledge,
information and belief of EZ, under the FCA, there are no facts that would
disqualify it as the transferee of the control of the Evergreen Stations. No
renewal of any EZ FCC License would constitute a major environmental action (as
defined in the FCC rules and regulations).
The EZ Governmental Authorizations comprise all Governmental
Authorizations which are necessary for the lawful ownership or operations of the
EZ Assets or the lawful conduct of the business of each of the EZ Stations as
now conducted or as presently proposed to be conducted, except for Governmental
Authorizations, the failure of which to obtain and maintain, would not
individually or in the aggregate, have any Material Adverse Effect on EZ. No EZ
Governmental Authorization is the subject of any pending or, to EZ's knowledge,
information and belief, threatened challenge or proceeding to revoke or
terminate any EZ Governmental Authorization. EZ has no reason to believe that
any EZ Governmental Authorization would not be renewed in the name of EZ by the
granting Authority in the ordinary course.
(c) With respect to matters, if any, of a nature referred to in Section
4.7(a) or 4.7(b) of the EZ Disclosure Schedule, except as otherwise specifically
described in Section 4.7(c) of the EZ Disclosure Schedule, all such information
and matters set forth in the EZ Disclosure Schedule, if adversely determined
against EZ, will not, in the aggregate, Materially Adversely Affect EZ.
4.8 Intangible Assets. Section 4.8 of the EZ Disclosure Schedule sets
forth a true, accurate and complete description of all Intangible Assets held or
used by EZ (other than the EZ Governmental Authorizations and the EZ Private
Authorizations) relating to the ownership and operation of the EZ Assets or the
conduct of the business of any of the EZ Stations (the "EZ Intangible Assets"),
including without limitation the nature of EZ's interest in each and the extent
to which the same have been duly registered in the offices as indicated therein.
One of the EZ Parties owns or possesses or otherwise has the right to use all EZ
Intangible Assets necessary in order to operate the EZ Assets in the manner
currently being operated by the EZ Parties. Except as set forth in Section 4.8
of the EZ Disclosure Schedule, no Intangible Assets (except for the EZ
Governmental Authorizations and the EZ Private Authorizations and the EZ
Intangible Assets so set forth) are required for the ownership or operation of
the EZ Assets or the conduct of the business of any of the EZ Stations as
currently owned, operated and conducted or proposed to be owned, operated and
conducted on or prior to the Closing Date.
4.9 Related Transactions. No EZ Party is a party or subject to any
Contract relating to the ownership and operation of the EZ Assets or the conduct
of the business of any of the EZ Stations between any EZ Party and any of its
officers, directors, stockholders, employees or, to the knowledge, information
and belief of EZ, any Affiliate of any thereof (other than another EZ Party),
including without limitation any Contract providing for the furnishing of
services to or by, providing for rental of property, real, personal or mixed, to
or from, or providing for the lending or borrowing of money to or from or
otherwise requiring payments to or from, any such Person, other than (i) EZ
Employment Arrangements listed or described in Section 4.12 of the EZ Disclosure
Schedule and (ii) Contracts between EZ and officers which constitute EZ Excluded
Assets and obligations of EZ not being assumed by Evergreen.
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4.10 Insurance. One of the EZ Parties maintains, with respect to the EZ
Assets and the EZ Stations, policies of fire and extended coverage and casualty,
liability and other forms of insurance in such amounts and against such risks
and losses as are in EZ's reasonable business judgment prudent (a true, complete
and accurate description of which is set forth in Section 4.10 of the EZ
Disclosure Schedule) and shall use reasonable business efforts to keep such
insurance or comparable insurance in full force and effect through the Closing
Date, except to the extent otherwise provided in the EZ Stations TBA.
4.11 Tax Matters. Each EZ Party has in respect of the EZ Assets and the
EZ Stations filed all Material Tax Returns which are required to be filed, and
has paid, or made adequate provision for the payment of, all Taxes which have or
may become due and payable pursuant to said Tax Returns and all other
governmental charges and assessments received to date other than those Taxes
being contested in good faith. There are no unpaid Taxes which are due and
payable, or alleged to be due and payable by any Taxing Authority, the
non-payment of which is or could become a Lien on any of the EZ Assets or any of
the EZ Stations. All Taxes in respect of the EZ Assets and the EZ Stations which
EZ is required by law to withhold and collect have been duly withheld and
collected, and have been paid over, in a timely manner, to the proper
Authorities to the extent due and payable. Except as set forth in Section 4.11
of the EZ Disclosure Schedule, no EZ Party has executed any waiver to extend, or
otherwise taken or failed to take any action that would have the effect of
extending, the applicable statute of limitations in respect of any Tax
associated with the EZ Assets or the EZ Stations for the fiscal years prior to
and including the most recent fiscal year.
4.12 Employee Retirement Income Security Act of 1974.
(a) Section 4.12(a) of the EZ Disclosure Schedule contains a true,
accurate and complete list of all EZ employees employed in the ownership or
operation of any of the EZ Assets or the conduct of the business of either of
the EZ Stations (the "EZ Station Employees"), together with each such employee's
title or the capacity in which he or she is employed and all Employment
Arrangements with respect to such employee (each, an "EZ Employment
Arrangement"). All of the EZ Employee Plans and all other EZ Employment
Arrangements are listed in Section 4.12(a) of the Evergreen Disclosure Schedule
and true, complete and accurate copies of all such written EZ Employee Plans and
EZ Employment Arrangements (or related insurance policies) have been furnished
to EZ, along with copies of any employee handbooks or similar documents
describing such EZ Employee Plans or any other EZ Employment Arrangements.
Section 4.12(a) of the Evergreen Disclosure Schedule also contains a true,
complete and accurate description of any unwritten EZ Employee Plan or other
unwritten EZ Employment Arrangement.
(b) Each EZ Employment Arrangement has been administered in compliance
with its own terms and in Material compliance with the provisions of ERISA, the
Code, the Age Discrimination in Employment Act and any other applicable federal
or state Laws. EZ is not aware of any pending audit or examination of any EZ
Employee Plan or any other EZ Employment Arrangement by any Authority or of any
facts which would lead it to believe that any such audit or examination is
threatened. There exists no Claim or Legal Action (other than routine claims for
benefits) with respect to any EZ Employee Plan or any
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other EZ Employment Arrangement pending or, to EZ's knowledge, information and
belief, threatened against any EZ Employee Plan or any other EZ Employment
Arrangement, and no EZ Party possesses any knowledge of any facts which could
give rise to any such Legal Action or Claim.
(c) No EZ Party contributes to or is required to contribute to any
Multiemployer Plan with respect to any of the EZ Station Employees and neither
any EZ Party nor any other trade or business under common control with any EZ
Party (within the meaning of Sections 414(b), (c), (m) or (o) of the Code) has
incurred or reasonably expects to incur any "withdrawal liability," as defined
under Section 4201 et seq. of ERISA.
(d) Except as described in Section 4.12(d) of the EZ Disclosure Statement,
neither any EZ Party nor any other trade or business under common control with
any EZ Party (within the meaning of Sections 414(b), (c), (m) or (o) of the
Code) sponsors, maintains or contributes to any EZ Employee Plan or any other EZ
Employment Arrangement that provides retiree medical or retiree life insurance
coverage to any EZ Station Employee upon his/her retirement.
(e) Except as described in Section 4.12(e) of the EZ Disclosure Statement
with respect to each Employee Plan and, to the extent applicable, any other
compensation arrangement comprising an EZ Employment Arrangement: (i) each such
EZ Employee Plan that is intended to be tax-qualified, and each amendment
thereto, is the subject of a favorable determination letter, and no plan
amendment that is not the subject of a favorable determination letter would
affect the validity of an EZ Employee Plan's letter; (ii) no prohibited
transaction, within the definition of Section 4975 of the Code or Title 1, Part
4 of ERISA, has occurred which would subject any EZ Party to any liability that
could become a liability of Evergreen; and (iii) all contributions premiums or
payments accrued, in whole or in part, under each such EZ Employee Plan or other
EZ Employment Arrangement or with respect thereto as of the Closing will be paid
by the appropriate EZ Party prior to the Closing.
(f) For purposes of this Section, the term "EZ Employee Plan" shall mean
any pension, profit-sharing, deferred compensation, vacation, bonus, incentive,
medical, vision, dental, disability, life insurance or any other employee
benefit plan as defined in Section 3(3) of ERISA to which any Evergreen Party
(under the terms of Section 414(b), (c), (m) or (o) of the Code) sponsors,
maintains or otherwise is bound which provides benefits to any person employed
or previously employed at either of the EZ Stations.
4.13 Absence of Sensitive Payments. Neither any EZ Party nor, to EZ's
knowledge, information and belief, any of its officers, directors, employees,
agents or other representatives, has with respect to the EZ Assets or the EZ
Stations (a) made any contributions, payments or gifts to or for the private use
of any governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift is illegal under the laws of the
United States or the jurisdiction in which made or (b) established or maintained
any unrecorded fund or asset for any purpose or made any false or artificial
entries on its books.
4.14 Inapplicability of Specified Statutes. EZ is not a "holding
company", or a "subsidiary company" or an "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or an "investment company" or a company "controlled" by or acting on
behalf of an "investment company", as defined in the Investment Company Act of
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1940, as amended, or a "carrier" or a person which is in control of a "carrier",
as defined in section 11301 of Title 49, U.S.C.
4.15 Employment Arrangements. Except as described in Section 4.15 of the
EZ Disclosure Schedule, with respect to either EZ Station, (i) none of the EZ
Station Employees is now, or, to EZ's knowledge, information and belief, since
the later of the date on which an EZ Party acquired such EZ Station or January
1, 1993, has been, represented by any labor union or other employee collective
bargaining organization, and no EZ Party is, or has ever been, a party to any
labor or other collective bargaining agreement with respect to the EZ Station
Employees, (ii) there are no pending grievances, disputes or controversies with
any union or any other employee or collective bargaining organization of such
employees, or threats of strikes, work stoppages or slowdowns or any pending
demands for collective bargaining by any such union or other organization, and
(iii) neither any EZ Party nor any of such employees is now, or, to EZ's
knowledge, information and belief, since the later of the date on which an EZ
Party acquired such EZ Station or January 1, 1993 has been, subject to or
involved in or, to EZ's knowledge, information and belief, threatened with, any
union elections, petitions therefore or other organizational or recruiting
activities, in each case with respect to any EZ Station Employees. Each EZ Party
has performed in all Material respects all obligations required to be performed
under each EZ Employment Plan and each other EZ Employment Arrangements and is
not in Material breach or violation of or in Material default or arrears under
any of the terms, provisions or conditions thereof.
4.16 Material Agreements. Listed on Section 4.16 of the EZ Disclosure
Schedule are all Material Agreements relating to the ownership or operation of
the EZ Assets or the conduct of the business of any of the EZ Stations or to
which any of the EZ Assets is subject (the "EZ Material Agreements"). True,
accurate and complete copies of each EZ Material Agreement have been made
available by EZ to Evergreen and EZ has provided Evergreen with photocopies of
all EZ Material Agreements requested by Evergreen (or true, accurate and
complete descriptions thereof have been set forth in Section 4.16 of the EZ
Disclosure Schedule, if any such Material Agreements are oral). All of the EZ
Material Agreements are valid, binding and legally enforceable obligations of an
EZ Party and, to EZ's knowledge, information and belief, all other parties
thereto (except to the extent that the invalidity or non-binding nature of any
EZ Material Contract would not have a Material Adverse Effect on EZ). Each EZ
Party has duly complied with all of the Material terms and conditions of each EZ
Material Agreement to which it is a party and has not done or performed, or
failed to do or perform (and there is no pending or, to the knowledge,
information and belief of EZ, threatened Claim that any EZ Party has not so
complied, done and performed or failed to do and perform) any act which would
invalidate or provide grounds for the other party thereto to terminate (with or
without notice, passage of time or both) any EZ Material Agreement or impair the
rights or benefits, or increase the costs, of any EZ Party under any EZ Material
Agreement. No EZ Party has granted any Material waivers or forbearance under any
EZ Material Agreement and, to EZ's knowledge, information and belief, no third
party is in material default in the performance of any of its obligations under
any EZ Material Agreement. Except for those consents or approvals listed in
Section 4.16 of the EZ Disclosure Schedule, no consents or approvals of any
third party are necessary to permit the assignment by the EZ Parties of the EZ
Material Agreements to the Evergreen Parties and such assignment will not affect
the validity or enforceability of any EZ Material Agreement or cause any
Material change in the substantive terms of any of them.
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4.17 Ordinary Course of Business. Each EZ Party, from the end of its most
recent fiscal quarter to the date hereof, except (i) as may be described on
Section 4.17 of the EZ Disclosure Schedule, or (ii) as may be required or
expressly contemplated by the terms of this Agreement, with respect to the EZ
Assets and each of the EZ Stations:
(a) has operated its business in the normal, usual and customary
manner in the ordinary and regular course of business, consistent with
prior practice;
(b) has not sold or otherwise disposed of or contracted to sell or
otherwise dispose of any EZ Asset having a value in excess of $50,000,
other than in the ordinary course of business;
(c) except in each case in the ordinary course of business,
consistent with prior practice:
(i) has not incurred any obligations or liabilities
(fixed, contingent or other) having a value in excess of $50,000;
(ii) has not entered into any commitments having a value
in excess of $50,000; and
(iii) has not canceled any debts or claims;
(d) has not made or committed to make any additions to its property
or any purchases of equipment, except for normal maintenance and
replacements;
(e) except as described in Section 4.17(e) of the EZ Disclosure
Schedule, has not increased the compensation payable or to become payable
to any of the EZ Station Employees other than in the ordinary course of
business or otherwise altered, modified or changed the terms of their
employment;
(f) has not suffered any Material damage, destruction or loss
(whether or not covered by insurance) or any acquisition or taking of
property by any Authority;
(g) has not waived any rights of Material value without fair and
adequate consideration;
(h) has not experienced any work stoppage; and
(i) except in the ordinary course of business, has not entered into,
amended or terminated any EZ Lease, EZ Governmental Authorization, EZ
Private Authorization, EZ Material Agreement, EZ Employment Arrangement or
Contract, or any transaction, agreement or arrangement with any Affiliate
of EZ.
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4.18 Broker or Finder. No Person assisted in or brought about the
negotiation of this Agreement or the Exchange in the capacity of broker, agent
or finder or in any similar capacity on behalf of any EZ Party other than Star
Media Group which EZ understands was retained by, and whose fee will be paid by,
Evergreen.
4.19 Solvency. As of the execution and delivery of this Agreement, each
EZ Party is, and immediately prior to giving effect to the consummation of the
Exchange and the other Transactions will be, solvent.
4.20 Environmental Matters. Except as set forth in Section 4.20 of the EZ
Disclosure Schedule, with respect to the EZ Assets, each EZ Party:
(a) to the knowledge, information and belief of EZ, has not been
notified that it is potentially liable under, has not received any request
for information or other correspondence concerning its potential liability
with respect to any site or facility under, and is not a "potentially
responsible party" under, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource
Conservation Recovery Act, as amended, or any similar state law;
(b) has not entered into or received any consent decree, compliance
order or administrative order issued pursuant to any Environmental Law;
(c) is not a party in interest or in default under any judgment,
order, writ, injunction or decree of any final order issued pursuant to
any Environmental Law;
(d) is, to the knowledge, information and belief of EZ, in
substantial compliance in all Material respects with all Environmental
Laws, has, to EZ's knowledge, information and belief, obtained all
Environmental Permits required under Environmental Laws, and is not the
subject of or, to EZ's knowledge, information and belief, threatened with
any Legal Action involving a demand for damages or other potential
liability including any Lien with respect to Material violations or
Material breaches of any Environmental Law; and
(e) has no knowledge of any past or present Event related to either
of the EZ Stations or any of the EZ Assets which Event, individually or in
the aggregate, will interfere with or prevent continued Material
compliance with all Environmental Laws, or which, individually or in the
aggregate, will form the basis of any Material Claim for the release or
threatened release into the environment, of any Hazardous Material.
4.21 Trade or Barter. Section 4.21 of the EZ Disclosure Schedule sets
forth a true, complete and accurate description (including obligations and
liabilities remaining thereunder) of all of the Trade Agreements currently in
effect that relate to the business or operation of the EZ Stations that
individually involve or may involve, valued in accordance with GAAP, more than
$500 in obligations remaining thereunder as of the date of this Agreement in
money, property or services or a remaining term in excess of two months.
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ARTICLE 5
COVENANTS
5.1 Access to Information; Confidentiality.
(a) Each party shall afford to the other party (including, in the case of
EZ, to American) and its accountants, counsel, financial advisors and other
representatives (the "Representatives") full access during normal business hours
throughout the period prior to the Closing Date to all of its (and its
Subsidiaries') properties, books, contracts, commitments and records (including
without limitation Tax Returns) relating to the Assets and the Stations and,
during such period, shall furnish promptly upon request (i) a copy of each
report, schedule and other document filed or received by any of them pursuant to
the requirements of any Applicable Law (including without limitation the FCA) or
filed by it or any of its Subsidiaries with any Authority in connection with the
Exchange and other Transactions or any other report, schedule or document which
may have a Material Effect on their respective Assets or Stations or their
businesses, operations, properties, prospects, personnel, condition, (financial
or other), or results of operations thereof, (ii) to the extent not provided for
pursuant to the preceding clause, all financial records, ledgers, work papers
and other sources of financial information possessed or controlled by (x)
Evergreen or its accountants deemed by EZ or its Representatives necessary or
useful for the purpose of performing an audit of the business of the Evergreen
Stations and certifying financial statements and financial information, and (y)
EZ or its accountants deemed by Evergreen or its Representatives necessary or
useful for the purpose of performing an audit of the business of the EZ Stations
and certifying financial statements and financial information, and (iii) such
other information concerning any of the foregoing as EZ or Evergreen shall
reasonably request. All non-public information furnished pursuant to the
provisions of this Agreement, including without limitation this Section, will be
kept confidential and, except as required by Applicable Law (including without
limitation in connection with any registration statement or similar document
filed pursuant to any federal or state securities Law) shall not, without the
prior written consent of the party disclosing such information, be disclosed by
the other party in any manner whatsoever, in whole or in part, and shall not be
used for any purposes, other than in connection with the Exchange and the other
Transactions. In no event shall either party (or, in the case of EZ, American)
or any of its Representatives use such information to the detriment of the other
party. Except as otherwise herein provided, each party (and, in the case of EZ,
American) agrees to reveal such information only to those of its Representatives
or other Persons who need to know such the information for the purpose of
evaluating the Exchange and the other Transactions, who are informed of the
confidential nature of such information and who shall undertake in writing (a
copy of which, if requested, will be furnished to the disclosing party) to act
in accordance with the terms and conditions of this Agreement. From and after
the Closing, each of the parties shall not, without the prior written consent of
the other party, disclose any information remaining in its possession with
respect to the Assets or the Stations conveyed by it pursuant to the Exchange,
and no such information shall be used for any purposes, other than in connection
with the Exchange and the other Transactions or to the extent required by
Applicable Law.
(b) Subject to the terms and conditions of Section 5.1(a), each party (and
American) may disclose such information as may be necessary in connection with
seeking all Governmental Authorizations and Private Authorizations or that is
required by Applicable Law to be disclosed,
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including without limitation in any registration statement or other document
required to be filed under any federal or state securities Law. In the event
that this Agreement is terminated in accordance with its terms, each party (and,
in the case of EZ, American) shall promptly redeliver all non-public written
material provided pursuant to this Section or any other provision of this
Agreement or otherwise in connection with the Exchange and the other
Transactions and shall not retain any copies, extracts or other reproductions in
whole or in part of such written material other than one copy thereof which
shall be delivered to independent counsel for such party.
(c) No investigation pursuant to this Section or otherwise shall affect
any representation or warranty in this Agreement of either party or any
condition to the obligations of the parties hereto.
5.2 Agreement to Cooperate.
(a) Each of the parties hereto shall use reasonable business efforts (x)
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under Applicable Law to consummate the
Exchange and make effective the other Transactions, and (y) to refrain from
taking, or cause to be taken, any action and to refrain from doing or causing to
be done, any thing which could impede or impair the consummation of the Exchange
or the making effective of the other Transactions, including, in all cases,
without limitation using its reasonable business efforts (i) to prepare and file
with the applicable Authorities as promptly as practicable after the execution
of this Agreement all requisite applications and amendments thereto, together
with related information, data and exhibits, necessary to request issuance of
orders approving the Exchange and the other Transactions by all such applicable
Authorities, each of which must be obtained or become final in order to satisfy
the condition applicable to it set forth in Section 6.1(b), (ii) to obtain all
necessary or appropriate waivers, consents and approvals, (iii) to effect all
necessary registrations, filings and submissions (including without limitation
filings under the Hart-Scott-Rodino Act and all filings necessary for EZ and
Evergreen to own and operate the Evergreen Stations and the EZ Stations,
respectively), (iv) to lift any injunction or other legal bar to the Exchange or
any of the other Transactions (and, in such case, to proceed with the Exchange
and the other Transactions as expeditiously as possible), and (v) to obtain the
satisfaction of the conditions specified in Article 6, including without
limitation the truth and correctness as of the Closing Date as if made on and as
of the Closing Date of the representations and warranties of such party and the
performance and satisfaction as of the Closing Date of all agreements and
conditions to be performed or satisfied by such party. Without limiting the
generality of the foregoing, the parties acknowledge and agree that the
assignment of the FCC Licenses as contemplated by this Agreement is subject to
the prior consent and approval of the FCC. Within twenty (20) days following the
execution and delivery of this Agreement, Evergreen and EZ shall file with the
FCC appropriate applications for FCC Consents, which applications shall not
contain any request for waiver of the FCC's multiple ownership rules; provided,
however, that (i) EZ may file a separate application with the FCC seeking
reassignment of the Extra Charlotte Station from the Charlotte Trustee to any EZ
Party or Affiliate of an EZ Party (or, if not theretofore assigned, seeking
retention of such Station) which application may request a waiver of the
Commission's multiple ownership rules and (ii) Evergreen may file a separate
application with the FCC seeking reassignment of the Extra Philadelphia Station
from the Philadelphia Trustee to any Evergreen Party or Affiliate of an
Evergreen Party (or, if not theretofore assigned, seeking retention of such
Station) which application may request a waiver of the Commission's multiple
ownership rules; provided further, however, that
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no such application shall be filed or prosecuted in a manner that materially
delays the grant of the applications seeking the FCC Consents. The parties shall
prosecute said applications with all reasonable diligence and otherwise use
reasonable business efforts to obtain the grant of FCC Consents to such
applications as expeditiously as practicable. If the FCC Consents, or any of
them, imposes any condition on either party hereto (or, in the case of EZ,
American or any of its Subsidiaries), such party shall use reasonable business
efforts to comply with such condition unless compliance would have a Material
Adverse Effect upon it. If reconsideration or judicial review is sought with
respect to any FCC Consent, Evergreen and EZ shall oppose such efforts to obtain
reconsideration or judicial review (but nothing herein shall be construed to
limit any party's right to terminate this Agreement pursuant to the provisions
of Section 7.1). Notwithstanding anything in this Agreement to the contrary, the
Exchange is expressly conditioned upon the grant of the Final Order as to the
FCC Consents for the transfer of the FCC Licenses for the Stations without any
condition which would have a Materially Adverse Effect upon the party acquiring
such Stations, it being understood that the imposition of any condition
requiring (a) any Evergreen Party (or any Affiliate thereof) to divest its
interest in any radio station in the Philadelphia, Pennsylvania market or to
otherwise take any action to comply with Section 73.3555(a) of the FCC rules
shall not be deemed to have a Materially Adverse Effect upon the Evergreen
Parties, or (b) any EZ Party (including American and its Subsidiaries) to divest
their interest in any radio station in the Charlotte, North Carolina market or
to otherwise take any action to comply with Section 73.3555(a) of the FCC rules
shall not be deemed to have a Materially Adverse Effect upon the EZ Parties.
Notwithstanding the foregoing, nothing in this Agreement shall be construed to
require any EZ Party or any Evergreen Party to divest any asset to obtain
termination of the Hart-Scott-Rodino Act waiting period or to avoid or settle
litigation initiated by any antitrust enforcement Authority seeking to block the
transactions contemplated by this Agreement (unless such divesture is necessary
to comply with the multiple ownership rules or policies of the FCC).
(b) The parties shall cooperate with one another in the preparation,
execution and filing of all Returns, questionnaires, applications, or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the Exchange and the other Transactions that are required or
permitted to be filed on or before the Closing Date.
(c) Evergreen shall cooperate and use its reasonable business efforts to
cause its independent accountants to reasonably cooperate with EZ, and at EZ's
expense, in order to enable EZ to have Evergreen and EZ's or Evergreen's
independent accountants prepare audited financial statements for the Evergreen
Stations described in Section 6.2(f). Evergreen represents and warrants that
such financial statements will have been prepared in accordance with GAAP
applied on a basis consistent with past practices, will be true, correct and
complete, and will present fairly the financial condition and results of
operation of the Evergreen Stations described in Section 6.2(f). Without
limiting the generality of the foregoing, Evergreen agrees that it will (i)
consent to the use of such audited financial statements in any registration
statement or other document filed by EZ (or American or any of either of their
Affiliates) under the Securities Act or the Exchange Act and (ii) execute and
deliver, and cause its officers to execute and deliver, such "representation"
letters as are customarily delivered in connection with audits and as EZ's or
Evergreen's independent accountants may reasonably request under the
circumstances. EZ shall cooperate and use its reasonable business
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efforts to cause its independent accountants to reasonably cooperate with
Evergreen, and at Evergreen's expense, in order to enable Evergreen to have EZ
and Evergreen's or EZ's independent accountants prepare audited and unaudited
financial statements for the EZ Stations described in Section 6.3(f). EZ
represents and warrants that such financial statements will have been prepared
in accordance with GAAP applied on a basis consistent with past practices, will
be true, correct and complete, and will present fairly the financial condition
and results of operation of the EZ Stations described in Section 6.3(f),
subject, in the case of the unaudited financial statements, to normal year-end
adjustments and accruals. Without limiting the generality of the foregoing, EZ
agrees that it will (i) consent to the use of such financial statements in any
registration statement or other document filed by Evergreen (or any of its
Affiliates) under the Securities Act or the Exchange Act and (ii) execute and
deliver, and cause its officers to execute and deliver, such "representation"
letters as are customarily delivered in connection with audits and as
Evergreen's or EZ's independent accountants may reasonably request under the
circumstances.
(d) The parties acknowledge and agree that the parties intend, if
appropriate at the time the Hart-Scott-Rodino Act waiting period has expired or
been terminated, to execute and deliver a time brokerage agreement with respect
to (i) each of the EZ Stations substantially on the terms contemplated by that
certain letter of intent, dated August 27, 1996 between EZ and Evergreen Parent
(the "Letter of Intent") (the "EZ Stations TBA"), and (ii) each of the Evergreen
Stations substantially on the terms contemplated by the Letter of Intent (the
"Evergreen Stations TBA"). Anything in this Agreement to the contrary
notwithstanding, including without limitation any provision of Articles 3 and 4
and Sections 6.2 and 6.3, (i) Evergreen shall not be liable in any respect to
the extent any of the representations and warranties contained in Article 3, and
none of the EZ Parties shall be liable in any respect to the extent any of the
representations and warranties contained in Article 4, are not true and correct
in any Material respect on and as of the Closing Date due solely to the
existence and operation of the Evergreen Stations TBA (in the case of the
Evergreen Parties) and the EZ Stations TBA (in the case of the EZ Parties),
respectively, (ii) the conditions set forth in Sections 6.2(c), 6.2(e), 6.3(c)
and 6.3(e) shall not be deemed to be not satisfied as a result of any action or
failure to act of any EZ Party pursuant to the provisions of the Evergreen
Stations TBA, and of any Evergreen Party pursuant to the provisions of the EZ
Stations TBA, respectively, and (iii) the certificates to be delivered to EZ and
Evergreen pursuant to the provisions of Section 6.2(c) and 6.3(c), respectively,
shall not be required to address any of such representations and warranties that
are not true and correct in any material respect on and as of the Closing Date
due to the existence and operation of such agreements.
5.3 Public Announcements. Until the Closing, or in the event of
termination of this Agreement, Evergreen and EZ shall consult with the other
before issuing any press release or otherwise making any public statements with
respect to this Agreement, the Exchange or any other Transaction and shall not
issue any such press release or make any such public statement without the prior
consent of the other. Notwithstanding the foregoing, each party acknowledges and
agrees that Evergreen and EZ may, without its prior consent, issue such press
releases or make such public statements as may be required by Applicable Law, in
which case, to the extent practicable, the party proposing to make such press
release or public statement will consult with the other regarding the nature,
extent and form of such press release or public statement.
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5.4 Notification of Certain Matters. Evergreen Parent and EZ shall give
prompt notice to the other, of the occurrence or non-occurrence of any Event the
occurrence or non-occurrence of which would be likely to cause (i) any
representation or warranty made by it or any of its Subsidiaries contained in
this Agreement to be untrue or inaccurate in any respect such that one or more
of the conditions of Closing might not be satisfied, or (ii) any covenant,
condition or agreement made by it or any of its Subsidiaries contained in this
Agreement not to be complied with or satisfied, or (iii) any change to be made
in the Evergreen Disclosure Schedule or the EZ Disclosure Schedule, as the case
may be, in any respect such that one or more of the conditions of Closing might
not be satisfied, and any failure made by it to comply with or satisfy, or be
able to comply with or satisfy, any covenant, condition or agreement to be
complied with or satisfied by it hereunder in any respect such that one or more
of the conditions of Closing might not be satisfied; provided, however, that the
delivery of any notice pursuant to this Section shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
5.5 No Solicitation. Neither Evergreen Parent nor EZ shall, nor shall it
permit any Subsidiary, or any of its Representatives (including, without
limitation, any investment banker, broker, finder, attorney or accountant
retained by it or, in the case of EZ, American) to, initiate, solicit or
facilitate, directly or indirectly, any inquiries or the making of any proposal
with respect to any Alternative Transaction, engage in any discussions or
negotiations concerning, or provide to any other Person any information or data
relating to, it or any Subsidiary for the purposes of, or otherwise cooperate in
any way with or assist or participate in, or facilitate any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, a proposal to seek or effect any Alternative Transaction, or agree to or
endorse any Alternative Transaction. "Alternative Transaction" means a
transaction or series of related transactions (other than the Exchange and the
other Transactions) resulting in (i) any merger or consolidation of either,
regardless of whether it is the surviving Entity unless the surviving Entity
remains obligated under this Agreement to the same extent as it was, or (ii) any
sale or other disposition of all or any substantial part of the Assets owned by
it or any of the Stations owned by it. The provisions of this Section shall
apply to each of Evergreen's Subsidiaries and EZ's Subsidiaries.
5.6 Conduct of Business by Evergreen Pending the Closing. Except as
otherwise contemplated by this Agreement, and subject to the commencement of the
EZ Stations TBA as set forth in Section 5.2(d), after the date hereof and prior
to the Closing Date or earlier termination of this Agreement, unless EZ shall
otherwise agree in writing, Evergreen Parent shall, and shall cause its
Subsidiaries, to the extent relating to any of the Evergreen Stations or the
Evergreen Assets, to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) use all reasonable business efforts to preserve intact their
respective business organizations and goodwill, keep available the
services of their respective present general managers, on-air
personalities and other key employees, and preserve the goodwill and
business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to Adversely Affect the transactions
contemplated by this Agreement;
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(c) maintain with financially responsible insurance companies
insurance on their respective tangible assets and their respective
businesses in such amounts and against such risks and losses as are
consistent with past practice;
(d) maintain levels of advertising, marketing and promotion efforts
and expenditures at levels no less than those currently budgeted in the
1996 business plan, a true, correct and complete in all material respects
description of which is set forth in Section 5.6(d) of the Evergreen
Disclosure Schedule;
(e) (i) to operate each of the Evergreen Stations in conformity with
the Evergreen FCC Licenses on a basis consistent with past practice and
any special temporary authority or program test authority issued
thereunder, the FCA and the rules and regulations of any other Authority
with jurisdiction over any Evergreen Station, and (ii) take all actions
necessary to maintain the Evergreen FCC Licenses;
(f) prior to the effectiveness of the Evergreen Stations TBA,
refrain from changing the frequency or format of any Evergreen Station or
making any material changes in any Evergreen Station's studio or other
structures, except to the extent required by the FCA or the rules and
regulation of the FCC;
(g) prior to the effectiveness of the Evergreen Stations TBA, not
make any material changes in the broadcast hours or in the percentage or
types of programming broadcast by the Evergreen Stations, or make any
other Material changes in any Evergreen Station's programming policies,
except such changes as in the good faith judgment of Evergreen are
required by the public interest;
(h) not (i) dispose of any of the Evergreen Assets owned by
Evergreen or used in the operation of any Evergreen Station (other than
for the disposition in the ordinary course of business of immaterial
assets that are of no further use to such Station or disposition of
Evergreen Assets to another Evergreen Party or any Affiliate of an
Evergreen Party who is or becomes a party to this Agreement) or (ii)
modify, change in any Material respect or enter into any Material
Agreement relating to the business of any Evergreen Station;
(i) notify EZ promptly if any Evergreen Station's normal broadcast
transmissions are interrupted or impaired for (i) thirty (30) minutes or
more for a period of five (5) consecutive days or for seven (7) days
within any thirty (30) day period (except for normal maintenance) or (ii)
a period of six (6) continuous hours or more;
(j) not create, assume or permit to exist any Lien upon any of the
Evergreen Assets or any of the Evergreen Stations, except for (i)
Permitted Liens and (ii) other Liens, if any, set forth on Section 3.5(a)
of the Evergreen Disclosure Schedule (which Liens shall be released prior
to Closing); and
(k) not waive any Material right relating to the Evergreen Stations.
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5.7 Conduct of Business by EZ Pending the Closing. Except as otherwise
contemplated by this Agreement, and subject to the commencement of the Evergreen
Stations TBA as set forth in Section 5.2(d), after the date hereof and prior to
the Closing Date or earlier termination of this Agreement, unless Evergreen
shall otherwise agree in writing, EZ shall, and shall cause its Subsidiaries, to
the extent relating to either of the EZ Stations or the EZ Assets, to:
(a) conduct their respective businesses in the ordinary and
usual course of business and consistent with past practice;
(b) use all reasonable business efforts to preserve intact their
respective business organizations and goodwill, keep available the
services of their respective present general managers, on-air
personalities and other key employees, and preserve the goodwill and
business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to Adversely Affect the transactions
contemplated by this Agreement;
(c) maintain with financially responsible insurance companies
insurance on their respective tangible assets and their respective
businesses in such amounts and against such risks and losses as are
consistent with past practice;
(d) maintain levels of advertising, marketing and promotion efforts
and expenditures at levels no less than those currently budgeted in the
1996 business plan, a true, correct and complete in all material respects
description of which is set forth in Section 5.7(d) of the EZ Disclosure
Schedule;
(e) (i) to operate each of the EZ Stations in conformity with the EZ
FCC Licenses on a basis consistent with past practice and any special
temporary authority or program test authority issued thereunder, the FCA
and the rules and regulations of any other Authority with jurisdiction
over either EZ Station and (ii) take all actions necessary to maintain the
EZ FCC Licenses;
(f) prior to the effectiveness of the EZ Stations TBA, refrain from
changing the frequency or format of any EZ Station or making any material
changes in any EZ Station's studio or other structures, except to the
extent required by the FCA or the rules and regulation of the FCC;
(g) prior to the effectiveness of the EZ Stations TBA, not make any
material changes in the broadcast hours or in the percentage or types of
programming broadcast by the EZ Stations, or make any other Material
changes in either EZ Station's programming policies, except such changes
as in the good faith judgment of EZ are required by the public interest;
(h) not (i) dispose of any of the EZ Assets owned by EZ or used in
the operation of either EZ Station (other than for the disposition in the
ordinary course of business of immaterial assets that are of no further
use to such Station or disposition of EZ Assets to another EZ Party or any
Affiliate of an EZ Party who is or becomes a party to this
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Agreement) or (ii) modify, change in any Material respect or enter
into any Material Agreement relating to the business of either EZ Station;
(i) notify Evergreen promptly if either EZ Station's normal
broadcast transmissions are interrupted or impaired for (i) thirty (30)
minutes or more for a period of five (5) consecutive days or for seven (7)
days within any thirty (30) day period (except for normal maintenance) or
(ii) a period of six (6) continuous hours or more;
(j) not create, assume or permit to exist any Lien upon any of the
EZ Assets or either of the Evergreen Stations, except for (i) Permitted
Liens and (ii) other Liens, if any, set forth on Section 4.5(a) or 4.5(b)
of the EZ Disclosure Schedule (which Liens shall be released prior to
Closing); and
(k) not waive any material rights relating to the EZ Stations.
5.8 Building of EZ Stations. EZ shall, prior to the Closing, complete (or
place in escrow funds necessary to complete) all tenant improvements at the
studio building for the EZ Stations (including all costs for construction,
equipment and furniture) substantially in accordance with the plans,
specifications, standards and budget for such improvements described in Section
4.5(b) of the EZ Disclosure Schedule. On the Closing Date, Evergreen shall
reimburse EZ in an amount equal to the lesser of (a) any such costs in excess of
$1,200,000 incurred by EZ or which it is obligated to pay with respect to such
construction, equipment and furniture and (b) $400,000. EZ shall be responsible
for and have the right to direct the completion of such improvements,
notwithstanding the effectiveness of the EZ Stations TBA. In the event that on
the Closing Date, such improvements are not completed, EZ shall have the right,
in its sole discretion, but not the obligation, to continue to be responsible
for and to direct the completion of such improvements, unless Evergreen shall
agree to bear all of such costs (and not only up to $400,000 thereof) in excess
of $1,200,000, in which event Evergreen shall have the right to assume
responsibility for and to direct the completion of such improvements. Anything
in this Agreement to the contrary notwithstanding, in the event the costs of
such construction, equipment and furniture exceed $1,600,000, the parties shall
negotiate in good faith in an attempt to agree as to how such excess costs shall
be borne as between the parties.
5.9 FCC Application; Divesture Commitment.
(a) The parties acknowledge that (i) Affiliates of Evergreen have entered
into agreements to acquire a number of radio stations serving the Philadelphia,
Pennsylvania area, that, when combined with the radio stations now licensed to
Affiliates of Evergreen and the EZ Stations, would cause the Evergreen Parties
to be in violation of Section 73.3555 of the FCC's rules (absent a waiver of
those rules) and (ii) the EZ Parties own a number of radio stations in the
Charlotte, North Carolina area that, when combined with the Evergreen Stations
(and the Evergreen Station (as defined in the Asset Purchase Agreement)), would
cause the EZ Parties or their Affiliates to be in violation of Section 73.3555
of the FCC's rules (absent a waiver of those rules). The parties further
acknowledge that the FCC Consents with respect to the transfer of the EZ
Stations to the Evergreen Parties may contain a condition requiring the
Evergreen Parties to divest their interest in one or more FM radio stations in
the Philadelphia market (the "Extra Philadelphia FM") prior to the Closing and
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the FCC Consents to transfer of the Evergreen Stations to the EZ Parties may
contain a condition requiring the EZ Parties to divest their interest in one or
more FM radio stations in the Charlotte market (the "Extra Charlotte FM") prior
to Closing. In order to ensure that the Evergreen Parties and the EZ Parties can
each meet such a condition, prior to the filing of the applications for FCC
Consent, the Evergreen Parties shall agree to assign the Extra Philadelphia FM
to a trustee (the "Philadelphia Trustee") and the EZ Parties shall agree to
assign the Extra Charlotte FM to a trustee (the "Charlotte Trustee") pursuant to
a trust agreement in each case that satisfies the FCC's multiple ownership rules
and policies, including the cross-interest policy, then in effect. In the event
that the acquisition of the EZ Stations would not comply with the FCC's multiple
ownership rules and policies, including the cross-interest policy, on or prior
to the Closing Date, unless the FCC Consents permit retention of the Extra
Philadelphia FM, the Evergreen Parties shall assign, subject to receipt of the
FCC's grant of the Philadelphia Trustee Application, the Extra Philadelphia FM
to the Philadelphia Trustee on the Closing Date in order to effectuate the
Closing under this Agreement. In the event that the acquisition of the Evergreen
Stations would not comply with the FCC's multiple ownership rules and policies,
including the cross-interest policy, on or prior to the Closing Date, unless the
FCC Consents permit retention of the Extra Charlotte FM, the EZ Parties shall
assign, subject to receipt of the FCC's grant of the Charlotte Trustee
Application, the Extra Charlotte FM to the Trustee on the Closing Date in order
to effectuate the Closing under this Agreement.
(b) Within twenty (20) business days after the date of this Agreement, the
Evergreen Parties shall file an application with the FCC requesting the consent
to the assignment of the FCC authorizations for the Extra Philadelphia FM to the
Philadelphia Trustee (the "Philadelphia Trustee Application") and the EZ Parties
shall file an application with the FCC requesting the consent to the assignment
of the FCC licenses for the Extra Charlotte FM to the Charlotte Trustee (the
"Charlotte Trustee Application"). The parties shall cooperate with each other in
the preparation and filing of the aforementioned FCC applications, and the
parties shall prosecute such applications in good faith and with due diligence.
(c) Anything in this Section to the contrary notwithstanding, the
Evergreen Parties and the EZ Parties may, in the event such parties (or their
Affiliates) enter into a binding agreement with respect to the sale, exchange or
other disposition of the Extra Philadelphia FM or the Extra Charlotte FM, as the
case may be, with a third party, file an application with the FCC requesting the
consent to the assignments of the FCC authorizations for such station to such
third party, either directly to such third party or indirectly to such third
party through the Philadelphia Trustee or the Charlotte Trustee, as the case may
be, and, in such event, the Evergreen Parties and/or the EZ Parties, as the case
may be, need not transfer the Extra Philadelphia FM or the Extra Charlotte FM,
as the case may be, to the Philadelphia Trustee or the Charlotte Trustee, as the
case may be, pursuant to the provisions of paragraph (a) of this Section 5.9 so
long as the application with respect to such binding agreement is pending or has
been granted, except in the event such application relates solely to an indirect
transfer through the Philadelphia Trustee or the Charlotte Trustee, as the case
may be. Notwithstanding the foregoing, the parties agree to leave the applicable
trusts and trust applications in effect until such time as any such third party
sale has been consummated.
ARTICLE 6
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CLOSING CONDITIONS
6.1 Conditions to Obligations of Each Party to Effect the Exchange. The
respective obligations of each party to effect the Exchange shall, except as
hereinafter provided in this Section, be subject to the satisfaction at or prior
to the Closing Date of the following conditions, any or all of which may be
waived, in whole or in part, to the extent permitted by Applicable Law:
(a) As of the Closing Date, no Legal Action shall be pending before
or threatened in writing by any Authority seeking to enjoin, restrain,
prohibit or make illegal or to impose any Materially Adverse conditions in
connection with, the consummation of the Exchange, or which might, in the
reasonable business judgment of EZ or Evergreen, based upon the advice of
counsel, have a Material Adverse Effect on the Assets and Stations to be
acquired by it, it being understood and agreed that a written request by
any Authority for information with respect to any Evergreen Party, any EZ
Party or American or the Exchange or any other Transaction, which
information could be used in connection with such Legal Action, shall not
be deemed to be a threat of any such Legal Action; and
(b) All authorizations, consents, waivers, orders or approvals
required to be obtained from all Authorities, and all Governmental Filings
required to be made by any EZ Party or any Evergreen Party with any
Authority, prior to the consummation of the Exchange, shall have been
obtained from, and made with, the FCC and all other required Authorities,
except for such authorizations, consents, waivers, orders, approvals,
filings, registrations, notices or declarations the failure to obtain or
make would not, in the reasonable business judgment of each of the
parties, have a Material Adverse Effect on the Assets and Stations being
acquired by such party. Without limiting the generality of the foregoing,
the FCC shall have issued the FCC Consents, the same shall have become
Final Orders, and any conditions precedent to the effectiveness of such
Final Orders which are specified therein shall have been satisfied;
provided, however, that any condition requiring any party hereto (or, in
the case of EZ, American or any of its Subsidiaries) to divest its
interest in any radio station in the Charlotte, North Carolina market (in
the case of EZ) or in the Philadelphia, Pennsylvania market (in the case
of Evergreen) or to otherwise take any action to comply with Section
73.3555 of the FCC's rules in such markets shall not be a condition of
such party's obligation to effect the Exchange; provided further, however,
that notwithstanding anything in this Section or elsewhere in this
Agreement, including without limitation Section 5.2(a) or 5.9, to the
contrary, if such Final Orders impose such a condition (i) as a condition
precedent to the effectiveness of the FCC Consents, or as a condition
which must be complied with within less than six (6) months subsequent to
consummation of the Exchange, the party on whom such condition is imposed
shall have the right, prior to the Termination Date, to attempt to comply
with such condition, or (ii) as a condition which can be complied with
within six (6) months or more following consummation of the Exchange, the
party on whom such condition is imposed shall be obligated to proceed with
the consummation of the Exchange.
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6.2 Conditions to Obligations of EZ. The obligation of the EZ Parties to
effect the Exchange shall be subject to the satisfaction of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:
(a) Evergreen shall have delivered or cause to be delivered to EZ
all of the Collateral Documents required to be delivered by the Evergreen
Parties to the EZ Parties at or prior to the Closing pursuant to the terms
of this Agreement; such Collateral Documents shall be reasonably
satisfactory in form, scope and substance to EZ and its counsel and
American and its counsel; and EZ and its counsel and American and its
counsel shall have received all information and copies of all documents,
including records of corporate proceedings, which they may reasonably
request in connection therewith, such documents where appropriate to be
certified by proper corporate officers;
(b) Evergreen shall have furnished EZ and, at EZ's request, any bank
or other financial institution providing credit to EZ or American or any
Subsidiary of EZ or American, with a favorable opinion, dated the Closing
Date of Latham & Watkins, counsel and FCC counsel for the Evergreen
Parties, with respect to the matters set forth in Sections 3.1(a), (b) and
(c) (other than as to Private Authorizations), 3.7(a) (limited to its
knowledge and to Legal Actions), and 3.14 and with respect to FCC related
matters of a nature and scope customary in comparable transactions
(including without limitation with respect to the grant of all necessary
FCC Consents and their being Final Orders, that all FCC Licenses are
valid, binding and in good standing and in full force and effect, the
absence of Legal Actions which could Materially Adversely Affect the FCC
Licenses and the FCC Consents, and the filing of all Material reports and
the payment of all fees) and with respect to such other matters arising
after the date of this Agreement incident to the Exchange and the other
Transactions, as EZ or its counsel or American or its counsel may
reasonably request or which may be reasonably requested by any such bank
or financial institution or their respective counsel;
(c) The representations and warranties of each Evergreen Party
contained in this Agreement shall be true and correct in all Material
respects at and as of the Closing Date with the same force and effect as
though made on and as of such date except those which speak as of a
certain date which shall continue to be true and correct in all Material
respects as of such date on the Closing Date; each and all of the
covenants, agreements and conditions to be performed or satisfied by each
Evergreen Party hereunder at or prior to the Closing Date shall have been
duly performed or satisfied in all Material respects; and each Evergreen
Party shall have furnished EZ with such certificates and other documents
evidencing the truth of such representations and warranties and the
performance or satisfaction of the covenants, agreements and conditions as
EZ or its counsel shall have reasonably requested;
(d) All authorizations, consents, waivers, orders or approvals
marked with an asterisk as "material" on Section 3.6 or 3.16 of the
Evergreen Disclosure Statement shall have been obtained, without the
imposition, individually or in the aggregate, of any condition or
requirement which could Materially Adversely Affect EZ;
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(e) Between the date of this Agreement and the Closing Date, there
shall not have occurred and be continuing any Material Adverse Change in
the Evergreen Parties; as of the Closing Date, the Evergreen FCC Licenses
shall not have been Materially and Adversely Affected by any act, or
failure to act, of any Evergreen Party; and
(f) EZ shall have received from its or Evergreen's independent
accountants an unqualified report (as to the scope of the audit, access to
the books and records and the cooperation of management) on the financial
statements of the Evergreen Stations and the Evergreen Station (as defined
in the Asset Purchase Agreement) presented on a combined basis (consisting
of balance sheets at December 31, 1995 and September 30, 1996 and
statements of operations and cash flow for the year ended December 31,
1995 and the nine month period ended September 30, 1996), which financial
statements shall have been prepared in conformity with GAAP and Regulation
S-X under the Securities Act.
6.3 Conditions to Obligations of Evergreen. The obligation of the
Evergreen Parties to effect the Exchange shall be subject to the satisfaction of
the following conditions, any or all of which may be waived, in whole or in
part, to the extent permitted by Applicable Law:
(a) EZ shall have delivered or cause to be delivered to Evergreen
Parent all of the Collateral Documents required to be delivered by the EZ
Parties to the Evergreen Parties at or prior to the Closing pursuant to
the terms of this Agreement; such Collateral Documents shall be reasonably
satisfactory in form, scope and substance to Evergreen and its counsel;
and Evergreen and its counsel shall have received all information and
copies of all documents, including records of corporate proceedings, which
they may reasonably request in connection therewith, such documents where
appropriate to be certified by proper corporate officers;
(b) EZ shall have furnished Evergreen and, at Evergreen's request,
any bank or other financial institution providing credit to Evergreen or
any Subsidiary, with favorable opinions, dated the Closing Date of Hunton
& Williams, special counsel for the EZ Parties, with respect to the
matters set forth in Sections 4.1(a), (b) and (c) (other than as to
Private Authorizations), 4.7(a) (limited to its knowledge and to Legal
Actions), and 4.14, of Sullivan & Worcester LLP, counsel for American,
with respect to the effectiveness of the Merger and that this Agreement is
enforceable against American (subject to customary qualifications), and of
Koteen & Naftalin, LPP, FCC counsel for the EZ Parties, with respect to
FCC related matters of a nature and scope customary in comparable
transactions (including without limitation with respect to the grant of
all necessary FCC Consents and their being Final Orders, that all FCC
Licenses are valid, binding and in good standing and in full force and
effect, the absence of Legal Actions which could Materially Adversely
Affect the FCC Licenses and the FCC Consents, and the filing of all
Material reports and the payment of all fees) and, in each case, with
respect to such other matters arising after the date of this Agreement
incident to the Exchange and the other Transactions, as Evergreen or its
counsel may reasonably request or which may be reasonably requested by any
such bank or financial institution or their respective counsel;
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(c) The representations and warranties of each EZ Party contained in
this Agreement shall be true and correct in all Material respects at and
as of the Closing Date with the same force and effect as though made on
and as of such date except those which speak as of a certain date which
shall continue to be true and correct in all Material respects as of such
date on the Closing Date; each and all of the covenants, agreements and
conditions to be performed or satisfied by each EZ Party hereunder at or
prior to the Closing Date shall have been duly performed or satisfied in
all Material respects; and each EZ Party shall have furnished Evergreen
Parent with such certificates and other documents evidencing the truth of
such representations and warranties and the performance or satisfaction of
the covenants, agreements and conditions as Evergreen or its counsel shall
have reasonably requested;
(d) All authorizations, consents, waivers, orders or approvals
marked with an asterisk as "material" on Section 4.6 or 4.16 of the EZ
Disclosure Statement shall have been obtained, without the imposition,
individually or in the aggregate, of any condition or requirement which
could Materially Adversely Affect Evergreen;
(e) Between the date of this Agreement and the Closing Date, there
shall not have occurred and be continuing any Material Adverse Change in
the EZ Parties from that reflected in the most recent EZ Financial
Statements; as of the Closing Date, the EZ FCC Licenses shall not have
been Materially and Adversely Affected by any act, or failure to act, of
the EZ Party; and
(f) Evergreen Parent shall have received from its or EZ's
independent accountants an unqualified report (as to the scope of the
audit, access to the books and records and the cooperation of management)
on the financial statements of the EZ Stations presented on a combined
basis (consisting of a balance sheet at December 31, 1995 and statements
of operations and cash flow for the year ended December 31, 1995) and
unaudited financial statements as of and for any subsequent period (ending
not less than forty-five (45) days prior to the Closing Date) reasonably
requested by Evergreen Parent which financial statements shall have been
prepared in conformity with GAAP and Regulation S-X under the Securities
Act.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual consent of Evergreen Parent and EZ;
(b) by either EZ or Evergreen Parent if any permanent injunction,
decree or judgment by any Authority preventing the consummation of the
Exchange shall have become final and nonappealable; or
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(c) by Evergreen Parent in the event no Evergreen Party is in
Material breach of this Agreement and none of its representations or
warranties shall have become and continue to be untrue in any Material
respect, and either (i) the Exchange has not been consummated prior to the
Termination Date, or (ii) one or more EZ Parties is in Material breach of
this Agreement or any of its representations or warranties shall have
become and continue to be untrue in any Material respect and such breach
or untruth exists and is not cured within the cure period specified in
this Section; or
(d) by EZ in the event no EZ Party is in Material breach of this
Agreement and none of its representations or warranties shall have become
and continue to be untrue in any Material respect, and either (i) the
Exchange has not been consummated prior to the Termination Date, or (ii)
one or more Evergreen Parties is in Material breach of this Agreement or
any of its representations or warranties shall have become and continue to
be untrue in any Material respect and such breach or untruth exists and is
not cured within the cure period specified in this Section.
Neither party shall have the right to terminate this Agreement as a result of
the other party's breach or default unless the terminating party shall have
given the defaulting party thirty (30) business days to cure the default (or
such longer period not in excess of an additional thirty (30) business days as
is, in the reasonable business judgment of the parties, reasonably necessary to
effect such cure so long as the defaulting party is proceeding with due
diligence and best efforts to effect such cure); provided, however, that such
cure period shall not extend the Termination Date.
The term "Termination Date" shall mean December 31, 1997 or such other
date as the parties may, from time to time, mutually agree.
The right of EZ or Evergreen Parent to terminate this Agreement pursuant
to this Section shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of either party, any Person
controlling any such party or any of their respective Representatives whether
prior to or after the execution of this Agreement.
7.2 Effect of Termination. Except as provided in Sections 5.1 (with
respect to confidentiality), 5.3 and 9.3 and this Section, in the event of the
termination of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void, there shall be no liability on the part of either party,
or any of their respective Affiliates (including stockholders, officers or
directors), to the other and all rights and obligations of either party shall
cease; provided, however, that such termination shall not relieve either party
from liability for any misrepresentation or breach of any of its warranties,
covenants or agreements set forth in this Agreement.
ARTICLE 8
INDEMNIFICATION
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8.1 Survival. Except as otherwise provided in Section 2.2(g) to the effect
that the provisions of Section 2.2 shall survive the Closing without limitation,
and except with respect to obligations and liabilities assumed pursuant to the
Evergreen Assumable Agreements and the EZ Assumable Agreements, the
representations, warranties, covenants and agreements of the parties contained
in or made pursuant to this Agreement or any Collateral Document shall survive
the Closing and shall remain operative and in full force and effect for a period
of (a) one (1) year after the Closing Date or (b) the applicable statute of
limitations in the case of matters of a nature referred to in Sections 3.1(b),
3.11, 3.12, 4.1(b), 4.11 and 4.12 (the "Indemnity Period"), regardless of any
investigation or statement as to the results thereof made by or on behalf of any
party hereto. No claim for indemnification, other than with respect to fraud,
may be asserted after the expiration of the Indemnity Period. Notwithstanding
anything herein to the contrary, any representation, warranty, covenant and
agreement which is the subject of a Claim which is asserted in writing prior to
the expiration of the Indemnity Period shall survive with respect to such Claim
or any dispute with respect thereto until the final resolution thereof.
8.2 Indemnification. Each of Evergreen Parent and EZ (the "indemnifying
party") agrees that on and after the Closing it shall indemnify and hold
harmless the other (which shall include its Affiliates, Subsidiaries, officers,
directors, employees, agents and other representatives) (the "indemnified
party") from and against any and all damages, claims, losses, expenses, costs,
obligations and liabilities, including without limitation liabilities for all
reasonable attorneys', accountants' and experts' fees and expenses including
those incurred to enforce the terms of this Agreement or any Collateral Document
(collectively, "Loss and Expense"), suffered, directly or indirectly, by the
indemnified party by reason of, or arising out of:
(a) any breach of representation or warranty made by the
indemnifying party pursuant to this Agreement or any Collateral Document
or any failure by the indemnifying party to perform or fulfill any of its
respective covenants or agreements set forth in this Agreement or any
Collateral Document; or
(b) any Legal Action or other Claim by any third party relating to
the indemnifying party or the ownership or operations of any of its Assets
or the conduct of the business of its Stations to the extent such Legal
Action or other Claim has also resulted in a breach of representation or
warranty by the indemnifying party pursuant to this Agreement or any
Collateral Document; or
(c) the Evergreen Nonassumed Liabilities (in the case of Evergreen)
and the EZ Nonassumed Liabilities (in the case of EZ), including without
limitation any Legal Action or other Claim brought or asserted by any
third party; or
(d) the failure to comply with the Bulk Sales law of the State of
North Carolina (in the case of Evergreen) or the Commonwealth of
Pennsylvania (in the case of EZ).
8.3 Limitation of Liability. Notwithstanding the provisions of Section
8.2, after the Closing, (i) each indemnified party shall be entitled to recover
its Loss and Expense in respect of any Claim only in the event that the
aggregate Loss and Expense for all Claims and all Claims under the Asset
Purchase Agreement exceeds, in the aggregate, $50,000, in which event the
indemnified
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party shall be entitled to recover all such Loss and Expense (including such
$50,000), and (ii) in no event shall the aggregate amount required to be paid by
each indemnifying party pursuant to the provisions of this Section or pursuant
to the comparable section of the Asset Purchase Agreement exceed $5,000,000,
except for any Loss or Expense arising out of matters of a nature referred to in
Sections 3.1 and 4.1 and the first paragraph of Section 3.7(b) and 4.7(b) as to
which the limitations set forth in this clause (ii) shall not apply. The
provisions of the immediately preceding sentence of this Section with respect to
the limitation on each indemnifying party's obligation to indemnify the
indemnified party in respect of Loss and Expense shall not be applicable to any
claims which are based on fraud or willful or intentional breach of
representation or warranty.
8.4 Notice of Claims. If an indemnified party believes that it has
suffered or incurred any Loss and Expense, it shall notify the indemnifying
party promptly in writing, and in any event within the applicable time period
specified in Section 8.4, describing such Loss and Expense, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such Loss and Expense shall have occurred. If any Legal Action
is instituted by a third party with respect to which an indemnified party
intends to claim any liability or expense as Loss and Expense under this
Article, such indemnified party shall promptly notify the indemnifying party of
such Legal Action, but the failure to so notify the indemnifying party shall not
relieve such indemnifying party of its obligations under this Article, except to
the extent such failure to notify prejudices such indemnifying party's ability
to defend against such Claim.
8.5 Defense of Third Party Claims. The indemnifying party shall have the
right to conduct and control, through counsel of their own choosing, reasonably
acceptable to the indemnified party, any third party Legal Action or other
Claim, but the indemnified party may, at its election, participate in the
defense thereof at its sole cost and expense; provided, however, that if (a) the
indemnifying party shall fail to defend any such Legal Action or other Claim or
(b) the indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or in
addition to those available to the indemnifying party, then the indemnified
party may defend, through counsel of its own choosing, such Legal Action or
other Claim, and (so long as it gives the indemnifying party at least fifteen
(15) days' notice of the terms of the proposed settlement thereof and permits
the indemnifying party to then undertake the defense thereof) settle such Legal
Action or other Claim and to recover the amount of such settlement or of any
judgment and the reasonable costs and expenses of such defense. The indemnifying
party shall not compromise or settle any such Legal Action or other Claim
without the prior written consent of the indemnified party.
8.6 Exclusive Remedy. Except for fraud or as otherwise provided in Section
9.5, the indemnification provided in this Article shall be the sole and
exclusive post-Closing remedy available to either party against the other party
for any Claim under this Agreement.
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ARTICLE 9
GENERAL PROVISIONS
9.1 Amendment. This Agreement may be amended from time to time by the
parties hereto at any time prior to the Closing Date but only by an instrument
in writing signed by the parties hereto.
9.2 Waiver. At any time prior to the Closing Date, except to the extent
not permitted by Applicable Law, EZ or Evergreen may extend the time for the
performance of any of the obligations or other acts of the other, waive any
inaccuracies in the representations and warranties of the other contained herein
or in any document delivered pursuant hereto, and waive compliance by the other
with any of the agreements, covenants or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
9.3 Fees, Expenses and Other Payments. All costs and expenses, incurred in
connection with any transfer taxes, sales taxes, document stamps or other
charges levied by any Authority in connection with this Agreement, the Exchange
and the other Transactions, shall be borne by EZ insofar as they related to the
EZ Stations and the EZ Assets and by Evergreen insofar as they relate to the
Evergreen Stations and the Evergreen Assets. All filing and similar fees
(including without limitation Hart-Scott-Rodino filings and FCC filing fees)
shall be borne equally by EZ and Evergreen. All other costs and expenses
incurred in connection with this Agreement, the Exchange and the other
Transactions, and in compliance with Applicable Law and Contracts as a
consequence hereof and thereof, including without limitation fees and
disbursements of counsel, financial advisors and accountants incurred by the
parties hereto shall be borne solely and entirely by the party which has
incurred such costs and expenses (with respect to such party, its "Expenses").
9.4 Notices. All notices and other communications which by any provision
of this Agreement are required or permitted to be given shall be given in
writing and shall be (a) mailed by first-class or express mail, or by recognized
courier service, postage prepaid, (b) sent by telex, telegram, telecopy or other
form of rapid transmission, confirmed by mailing (by first class or express
mail, or by recognized courier service, postage prepaid) written confirmation at
substantially the same time as such rapid transmission, or (c) personally
delivered to the receiving party (which if other than an individual shall be an
officer or other responsible party of the receiving party). All such notices and
communications shall be mailed, sent or delivered as follows:
(a) If to any EZ Party:
EZ Communications, Inc.
10800 Main Street
Fairfax, Virginia 22030
Attention: Alan Box, President and Chief Executive Officer
Telecopier No.: (703) 934-1200
with copies to:
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Hunton & Williams
1751 Pinnacle Drive
Suite 1700
McLean, Virginia 22102
Attention: Joseph W. Conroy, Esq.
Telecopier No.: (703) 714-7410
American Radio Systems Corporation
116 Huntington Avenue
Boston, Massachusetts 02116
Attention: Steven B. Dodge, President and Chief Executive Officer
Telecopier No.: (617) 375-7575
and
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Norman A. Bikales, Esq.
Telecopier No.: (617) 338-2880
(b) If to any Evergreen Party:
Evergreen Media Corporation
433 East Las Colinas Boulevard
Irving, TX 75039
Attention: Scott Ginsburg, Chairman and Chief Executive Officer
Telecopier No.: (972) 869-3671
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Washington, DC 20004-2505
Attention: Eric L. Bernthal, Esq.
Telecopier No.: (202) 637-2201
or to such other person(s), telex or facsimile number(s) or address(es) as the
party to receive any such communication or notice may have designated by written
notice to the other party.
9.5 Specific Performance; Other Rights and Remedies. Each party recognizes
and agrees that in the event the other party should refuse to perform any of its
obligations under this Agreement or any Collateral Document, the remedy at law
would be inadequate and agrees that for breach of such provisions, each party
shall, in addition to such other remedies as may be available to it at law or in
equity or as provided in Article 7, be entitled to injunctive relief and to
enforce its rights by an action for specific performance to the extent permitted
by Applicable Law. Each party hereby
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waives any requirement for security or the posting of any bond or other surety
in connection with any temporary or permanent award of injunctive, mandatory or
other equitable relief. Nothing herein contained shall be construed as
prohibiting each party from pursuing any other remedies available to it pursuant
to the provisions of, and subject to the limitations contained in, this
Agreement for such breach or threatened breach.
9.6 Severability. If any term or provision of this Agreement shall be held
or deemed to be, or shall in fact be, invalid, inoperative, illegal or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the
conflicting of any provision with any constitution or statute or rule of public
policy or for any other reason, such circumstance shall not have the effect of
rendering the provision or provisions in question invalid, inoperative, illegal
or unenforceable in any other jurisdiction or in any other case or circumstance
or of rendering any other provision or provisions herein contained invalid,
inoperative, illegal or unenforceable to the extent that such other provisions
are not themselves actually in conflict with such constitution, statute or rule
of public policy, but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative, illegal or unenforceable
provision had never been contained herein and such provision reformed so that it
would be valid, operative and enforceable to the maximum extent permitted in
such jurisdiction or in such case. Notwithstanding the foregoing, in the event
of any such determination the effect of which is to Affect Materially and
Adversely either party, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by Applicable Law in an acceptable
manner to the end that the Exchange and the other Transactions are fulfilled and
consummated to the maximum extent possible.
9.7 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument, binding upon all of the parties. In
pleading or proving any provision of this Agreement, it shall not be necessary
to produce more than one of such counterparts.
9.8 Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
9.9 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts made and
performed in such State and, in any event, without giving effect to any choice
or conflict of laws provision or rule that would cause the application of
domestic substantive laws of any other jurisdiction. Anything in this Agreement
to the contrary notwithstanding, including without limitation the provisions of
Article 8, in the event of any dispute between the parties which results in a
Legal Action, the prevailing party shall be entitled to receive from the
non-prevailing party reimbursement for reasonable legal fees and expenses
incurred by such prevailing party in such Legal Action.
9.10 Further Acts. Each party agrees that at any time, and from time to
time, before and after the consummation of the transactions contemplated by this
Agreement, it will do all such things and execute and deliver all such
Collateral Documents and other assurances, as any other party or its counsel
reasonably deems necessary or desirable in order to carry out the terms and
conditions
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of this Agreement and the transactions contemplated hereby or to facilitate the
enjoyment of any of the rights created hereby or to be created hereunder.
9.11 Entire Agreement. This Agreement (together with the Disclosure
Schedules and the other Collateral Documents delivered in connection herewith),
constitutes the entire agreement of the parties and supersedes all prior
agreements and undertakings, both written and oral, between the parties, with
respect to the subject matter hereof, including without limitation that the
Letter of Intent.
9.12 Assignment. This Agreement shall not be assignable by any party and
any such assignment shall be null and void, except that it shall inure to the
benefit of and by binding upon any successor to any party (including without
limitation, in the case of EZ, American) by operation of law, including by way
of merger, consolidation or sale of all or substantially all of its assets, and
each party may assign its rights and remedies hereunder to (a) any Affiliate of
any party who is a transferee of any Assets or any FCC Licenses on or prior to
the Closing Date and (b) any bank or other financial institution which has
loaned funds or otherwise extended credit to it.
9.13 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party and, so long as the EZ Merger Agreement has
not been terminated and, in any event, after the consummation of the American-EZ
Merger, American, and nothing in this Agreement, express or implied, is intended
to or shall confer upon any Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except as otherwise provided in
Section 9.12.
9.14 Mutual Drafting. This Agreement is the result of the joint efforts of
EZ and Evergreen, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of the parties and there shall be no
construction against either party based on any presumption of that party's
involvement in the drafting thereof.
9.15 EZ Agent for Other EZ Parties. Anything in this Agreement to the
contrary notwithstanding, each of the EZ Parties (other than EZ) hereby grants
EZ an irrevocable power of attorney and hereby irrevocably appoints EZ its agent
for all purposes of this Agreement, including without limitation for the purpose
of executing and delivering extensions of the time for the performance of any of
the obligations or other acts of EZ, waivers, terminations or amendments, and
any action taken by EZ pursuant to such power of attorney and agency, and any
such extension, waiver, termination or amendment executed and delivered by EZ,
shall be binding upon each other EZ Party whether or not it has specifically
approved such action or executed such extension, waiver, termination or
amendment.
9.16 Evergreen Parent Agent for Other Evergreen Parties. Anything in this
Agreement to the contrary notwithstanding, each of the Evergreen Parties (other
than Evergreen Parent) hereby grants Evergreen Parent an irrevocable power of
attorney and hereby irrevocably appoints Evergreen Parent its agent for all
purposes of this Agreement, including without limitation for the purpose of
executing and delivering extensions of the time for the performance of any of
the obligations or other acts of Evergreen Parent, waivers, terminations or
amendments, and any action taken by Evergreen Parent pursuant to such power of
attorney and agency, and any such extension, waiver,
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termination or amendment executed and delivered by Evergreen Parent, shall be
binding upon each other Evergreen Party whether or not it has specifically
approved such action or executed such extension, waiver, termination or
amendment.
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IN WITNESS WHEREOF, the EZ Parties and the Evergreen Parties have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
EZ COMMUNICATIONS, INC.
By: /s/ Alan Box
-------------------------------------
Name: Alan Box
Title: President
PROFESSIONAL BROADCASTING INCORPORATED
By: /s/ Alan Box
-------------------------------------
Name: Alan Box
Title: President
EZ PHILADELPHIA, INC.
By: /s/ Alan Box
-------------------------------------
Name: Alan Box
Title: President
EVERGREEN MEDIA CORPORATION OF LOS ANGELES
By: /s/ Scott K. Ginsburg
-------------------------------------
Name: Scott K. Ginsburg
Title: President
EVERGREEN MEDIA CORPORATION OF CHARLOTTE
By: /s/ Scott K. Ginsburg
-------------------------------------
Name: Scott K. Ginsburg
Title: President
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EVERGREEN MEDIA CORPORATION OF THE EAST
By: /s/ Scott K. Ginsburg
-------------------------------------
Name: Scott K. Ginsburg
Title: President
EVERGREEN MEDIA CORPORATION
OF CAROLINALAND
By: /s/ Scott K. Ginsburg
-------------------------------------
Name: Scott K. Ginsburg
Title: President
WBAV/WBAV-FM/WPEG LICENSE CORP.
By: /s/ Scott K. Ginsburg
-------------------------------------
Name: Scott K. Ginsburg
Title: President
WRFX LICENSE CORP.
By: /s/ Scott K. Ginsburg
-------------------------------------
Name: Scott K. Ginsburg
Title: President
American represents and warrants that it has heretofore entered into the
EZ Merger Agreement with EZ and hereby acknowledges and agrees (a) to be bound
by the provisions of Sections 5.1, (b) that the terms and conditions of the
above Agreement are satisfactory to it, and (c) that it consents to such terms
and conditions.
AMERICAN RADIO SYSTEMS CORPORATION
By: [ILLEGIBLE]
-------------------------------------
Name:
Title: CFO
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APPENDIX A
DEFINITIONS
Accounts Receivable shall mean any and all rights to the payment of money
or other forms of consideration of any kind at any time now or hereafter owing
or to be owing to any EZ Party or any Evergreen Party, as the case may be,
attributable to the sale of time or talent on one of its Stations.
Adverse Change, Effect or Affect, (or comparable terms) shall mean any
Event which has, or is reasonably likely to, (a) adversely affect or affected
the validity or enforceability of this Agreement or the likelihood of
consummation of the Exchange, or (b) adversely affect or affected the ownership
or operation of the Evergreen Assets or the EZ Assets or the conduct of the
business of the Evergreen Stations or the EZ Stations, as the case may be, or
(c) impair the Evergreen Parties' or the EZ Parties', as the case may be,
ability to fulfill their obligations under the terms of this Agreement, or (d)
adversely affect the aggregate rights and remedies of the EZ Parties or the
Evergreen Parties, as the case may be, under this Agreement. Notwithstanding the
foregoing, and anything in this Agreement to the contrary notwithstanding, any
Event affecting the radio broadcasting industry generally shall not be deemed to
constitute an Adverse Change, have an Adverse Effect or to Adversely Affect or
Effect.
Affiliate, Affiliated shall mean, with respect to any Person, any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person,.
Agreement shall mean this Agreement as originally in effect, including,
unless the context otherwise specifically requires, this Appendix A, the EZ
Disclosure Schedule, the Evergreen Disclosure Schedule and all exhibits hereto,
and as any of the same may from time to time be supplemented, amended, modified
or restated in the manner herein or therein provided.
American shall have the meaning given to it in the fifth Whereas
paragraph.
American-EZ Merger shall have the meaning given to it in the fifth Whereas
paragraph.
Applicable Law shall mean any Law of any Authority, whether domestic or
foreign, including without limitation all federal and state securities and
Environmental Laws, to which a Person is subject or by which it or any of its
business or operations is subject or any of its property or assets is bound.
Appraisals shall have the meaning given to it in Section 2.2(a).
Asset Purchase Agreement shall mean the asset purchase agreement, dated as
of the date of this Agreement, among certain of the Evergreen Parties and, among
others, certain of the EZ Parties relating to the purchase of WNKS(FM),
Charlotte, North Carolina.
<PAGE>
Assets shall mean the EZ Assets in the case of the EZ Parties and the
Evergreen Assets in the case of the Evergreen Parties.
Authority shall mean any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or Entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other
political unit or subdivision or other Entity of any of the foregoing, whether
domestic or foreign.
Charlotte Proration Schedule shall have the meaning given to it in Section
2.3(d).
Charlotte Trustee shall have the meaning given to it in Section 5.9(a).
Charlotte Trustee Application shall have the meaning given to it in
Section 5.9(b).
Claims shall mean any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all fees, costs, expenses and disbursements (including
without limitation reasonable attorneys' and other legal fees, costs and
expenses) relating to any of the foregoing.
Closing shall have the meaning given to it in Section 2.4.
Closing Date shall have the meaning given to it in Section 2.4.
COBRA shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as set forth in Section 4980B of the Code and Part 6 of
Subtitle B of Title I of ERISA.
Code shall mean the Internal Revenue Code of 1986, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
Collateral Document shall mean the EZ Stations TBA, the Evergreen Stations
TBA and any other agreement, certificate, contract, instrument, notice, opinion
or other document delivered or required to be delivered pursuant to the
provisions of this Agreement or of any of the foregoing.
Collection Period shall have the meaning given to it in Section 2.5.
Contract shall mean any agreement, arrangement, commitment, contract,
covenant, indemnity, undertaking or other obligation or liability which involves
the ownership or operation of the Evergreen Assets or the EZ Assets or the
conduct of the business of any of the Evergreen Stations or either of the EZ
Stations.
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Control (including the terms "controlled," "controlled by" and "under
common control with") shall mean the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, or the disposition of such Person's assets
or properties, whether through the ownership of stock, equity or other
ownership, by contract, arrangement or understanding, or as trustee or executor,
by contract or credit arrangement or otherwise.
Cut-off Date shall mean (i) with respect to any Contract to be assigned
and the rights and obligations to be assumed pursuant to any TBA (including all
items of revenue and expense relating to such Contract), the applicable TBA Date
for such TBA and (ii) in all other cases, the Closing Date.
Disclosure Schedule shall mean the EZ Disclosure Schedule or the Evergreen
Disclosure Schedule, as the case may be.
EMC-BAV shall have the meaning given to it in the Preamble.
EMC Carolinaland shall have the meaning given to it in the Preamble.
EMC Charlotte shall have the meaning given to it in the Preamble.
EMC East shall have the meaning given to it in the Preamble.
EMC-RFX shall have the meaning given to it in the Preamble.
Employment Arrangement shall mean any employment, consulting, retainer,
severance or similar contract, agreement, plan, arrangement or policy (exclusive
of any which is terminable within thirty (30) days without liability, penalty or
payment of any kind by such Person or any Affiliate), or providing for
severance, termination payments, insurance coverage (including any self-insured
arrangements), workers compensation, disability benefits, life, health, medical,
dental or hospitalization benefits, supplemental unemployment benefits, vacation
or sick leave benefits, pension or retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock purchase or
appreciation rights or other forms of incentive compensation or post-retirement
insurance, compensation or post-retirement insurance, compensation or benefits,
or any collective bargaining or other labor agreement, whether or not any of the
foregoing is subject to the provisions of ERISA.
Encumber shall mean to suffer, accept, agree to or permit the imposition
of a Lien.
Entity shall mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
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Environmental Law shall mean any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment, including without limitation Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials or other
chemicals or industrial pollutants, substances, materials or wastes into the
environment (including, without limitation, ambient air, surface water, ground
water, mining or reclamation or mined land, land surface or subsurface strata)
or otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances, materials
or wastes. Environmental Laws shall include without limitation the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 6901
et seq.), the Hazardous Material Transportation Act (49 U.S.C. Section 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.),
the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control
Act (15 U.S.C. Section 2601 et seq.), the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.), the Federal Insecticide Fungicide and Rodenticide
Act (7 U.S.C. Section 136 et seq.), and the Surface Mining Control and
Reclamation Act of 1977 (30 U.S.C. Section 1201 et seq.), and any analogous
federal, state, local or foreign, Laws, and the rules and regulations
promulgated thereunder all as from time to time in effect, and any reference to
any statutory or regulatory provision shall be deemed to be a reference to any
successor statutory or regulatory provision.
Environmental Permit shall mean any Governmental Authorization required by
or pursuant to any Environmental Law.
ERISA shall mean the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
ERISA Affiliate shall mean any Person that is treated as a single employer
with Evergreen or EZ, as the case may be, under Sections 414(b), (c), (m) or (o)
of the Code or Section 4001(b)(1) of ERISA.
Event shall mean the existence or occurrence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
Evergreen shall have the meaning given to it in the Preamble.
Evergreen Accounts Receivable shall mean the Accounts Receivables of any
Evergreen Party arising in connection with the ownership or operation of any of
the Evergreen Assets or the conduct of the business of any of the Evergreen
Stations prior to the Cut-off Date.
Evergreen AM Stations shall mean WBAV(AM) and WFNZ(AM).
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Evergreen Assets shall mean all assets used or held for use in the
ownership or operation of or the conduct of the business of any of the Evergreen
Stations by any Evergreen Party or any Entity Affiliated with any Evergreen
Party, including without limitation the Evergreen Real Property, the Evergreen
Personal Property, the Evergreen Private Authorizations, the Evergreen
Governmental Authorizations, including the Evergreen FCC Licenses, the Evergreen
Intangible Assets and the Evergreen Assumable Agreements, but excluding the
Evergreen Excluded Assets.
Evergreen Assumable Agreements shall mean the Evergreen Private
Authorizations, the Evergreen Trade Agreements, the Evergreen Leases and the
Evergreen Other Contracts.
Evergreen Disclosure Schedule shall mean the Evergreen Disclosure Schedule
dated as of the date of this Agreement delivered by Evergreen to EZ.
Evergreen Employee Plan shall have the meaning given to in Section
3.12(f).
Evergreen Employment Arrangements shall have the meaning given to it in
Section 3.12(a).
Evergreen Excluded Assets shall mean (i) all cash and cash equivalents of
any Evergreen Party, (ii) all Evergreen Accounts Receivable, (iii) the corporate
names of each Evergreen Party, (iv) all books and records of each Evergreen
Party relating to any of the Evergreen Stations and which any Evergreen Party is
required by Applicable Law, to retain, subject to the right of the other party
to have access and to copy for a period of three (3) years from the Closing
Date, (v) the Evergreen Employee Plans and other Evergreen Employment
Arrangements, (vi) all insurance policies relating to the Evergreen Assets,
(vii) software programs and other assets at the principal executive offices of
any Evergreen Party used to provide certain financial and accounting services
for any of the Evergreen Stations and (viii) any and all products, profits and
proceeds of, and including without limitation any Claims with respect to, any of
the foregoing.
Evergreen FCC Licenses shall have the meaning given to it in the first
Whereas paragraph.
Evergreen Financial Data shall have the meaning given to it in Section
3.2(a).
Evergreen Governmental Authorizations shall have the meaning given to it
in Section 3.7(a).
Evergreen Intangible Assets shall have the meaning given to it in Section
3.8.
Evergreen Leases shall have the meaning given to it in Section 3.5(a).
Evergreen Material Agreements shall have the meaning given to it in
Section 3.16.
Evergreen Nonassumed Liabilities shall have the meaning given to it in
Section 2.3(b).
Evergreen Other Contracts shall mean (a) all Evergreen Material Agreements
set forth on Section 3.15 of the Evergreen Disclosure Schedule excluding those
agreements identified thereon
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as a "retained agreement", (b) all Contracts for the sale of time on any
Evergreen Station for cash entered into in the ordinary course of business
consistent with prior practice, and (c) Contracts not required to be listed on
Section 3.15 of the Evergreen Disclosure Schedule that have been entered into in
the ordinary course of business and involve less than $300,000 per year in the
aggregate.
Evergreen Parent shall have the meaning given to it in the Preamble.
Evergreen Parties shall have the meaning given to it in the Preamble.
Evergreen Personal Property shall mean all items of Personal Property,
used or held for use in the ownership or operation of or the conduct of the
business of any of the Evergreen Stations.
Evergreen Private Authorizations shall mean all Private Authorizations
obtained or held in connection with the ownership or operation of any of the
Evergreen Assets or the conduct of the business of any of the Evergreen
Stations.
Evergreen Proration Schedule shall have the meaning given to it in Section
2.3(d).
Evergreen Real Property shall have the meaning given to it in Section
3.5(a).
Evergreen Station and Evergreen Stations shall have the meaning given them
in the first Whereas paragraph.
Evergreen Station Employees shall have the meaning given it in the Section
3.12(a).
Evergreen Stations TBA shall have the meaning given it in the Section
5.2(d).
Evergreen Studio Facilities shall have the meaning given to it in Section
3.5(b).
Evergreen Trade Agreements shall mean all Trade Agreements in effect on
the date hereof or entered into on or prior to the Cut-Off Date that relate to
the ownership or operation of or the conduct of the business of any of the
Evergreen Stations.
Evergreen's knowledge (including the term "to the knowledge, information
and belief of Evergreen") shall mean the actual knowledge of any Evergreen Party
executive officer or any General Manager of any Evergreen Station.
Exchange shall have the meaning given to it in the third Whereas
paragraph.
Exchange Act shall mean the Securities Exchange Act of 1934, and the rules
and regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
Extra Charlotte FM shall have the meaning given to it in Section 5.9(a).
-6-
<PAGE>
Extra Philadelphia FM shall have the meaning given to it in Section
5.9(a).
EZ shall have the meaning given to it in the Preamble.
EZ Accounts Receivable shall mean the Accounts Receivables of any EZ Party
arising in connection with the ownership or operation of any of the EZ Assets or
the conduct of the business of either of the Evergreen Stations prior to the
applicable Cut-off Date.
EZ Assets shall mean all assets used or held for use in the ownership or
operation of or the conduct of the business of either of the EZ Stations by an
EZ Party or an Entity Affiliated with any EZ Party, including without limitation
the EZ Real Property, the EZ Personal Property, the EZ Private Authorizations,
the EZ Governmental Authorizations, including the EZ FCC Licenses, the EZ
Intangible Assets and the EZ Assumable Agreements, but excluding the EZ Excluded
Assets.
EZ Assumable Agreements shall mean the EZ Private Authorizations, the EZ
Trade Agreements, the EZ Leases and the EZ Other Contracts.
EZ Disclosure Schedule shall mean the EZ Disclosure Schedule dated as of
the date of this Agreement delivered by EZ to Evergreen.
EZ Employee Plan shall have the meaning given to it in Section 4.12(f).
EZ Employment Arrangements shall have the meaning given to it in Section
4.12(a).
EZ Excluded Assets shall mean (i) all cash and cash equivalents of any EZ
Party, (ii) all EZ Accounts Receivable, (iii) the corporate names of each EZ
Party, (iv) all books and records or EZ relating to either of the EZ Stations
and which any EZ Party is required by Applicable Law, to retain, subject to the
right of the other party to have access and to copy for a period of three (3)
years from the Closing Date, (v) the EZ Employee Plans and other EZ Employee
Arrangements, (vi) all insurance policies relating to the EZ Assets, (vii)
software programs and other assets at the principal executive offices of any EZ
Party used to provide certain financial and accounting services for either of
the EZ Stations and (viii) any and all products, profits and proceeds of, and
including without limitation any Claims with respect to, any of the foregoing.
EZ FCC Licenses shall have the meaning given to it in the second Whereas
paragraph.
EZ Financial Data shall have the meaning given to it in Section 4.2(a).
EZ Governmental Authorizations shall have the meaning given to it in
Section 4.7(a).
EZ Intangible Assets shall have the meaning given to it in Section 4.8.
EZ Leases shall have the meaning given to it in Section 4.5(a).
EZ Material Agreement shall have the meaning given to it in Section 4.16.
-7-
<PAGE>
EZ Merger Agreement shall have the meaning given to it in the fifth
Whereas paragraph.
EZ Nonassumed Liabilities shall have the meaning given to it in Section
2.3(a).
EZ Other Contracts shall mean (a) all EZ Material Agreements set forth on
Section 4.15 of the EZ Disclosure Schedule excluding those agreements identified
thereon as a "retained agreement", (b) all Contracts for the sale of time on
either EZ Station for cash entered into in the ordinary course of business
consistent with prior practice, and (c) Contracts not required to be listed on
Section 4.15 of the EZ Disclosure Schedule that have been entered into in the
ordinary course of business and involve less than $300,000 per year in the
aggregate.
EZP shall have the meaning given to it in the Preamble.
EZ Parties shall have the meaning given to it in the Preamble.
EZ Personal Property shall mean all items of Personal Property, used or
held for use in the ownership or operation of or the conduct of the business of
either of the EZ Stations.
EZ Private Authorizations shall mean all Private Authorizations obtained
or held in connection with the ownership or operation of any of the EZ Assets or
the conduct of the business of either of the EZ Stations.
EZ Proration Schedule shall have the meaning given to it in Section
2.3(e).
EZ Real Property shall have the meaning given to it in Section 4.5(a).
EZ Station and EZ Stations shall have the meaning given to them in the
second Whereas paragraph.
EZ Station Employees shall have the meaning given to it in Section
4.12(a).
EZ Stations TBA shall have the meaning given to it in Section 5.2(d).
EZ Trade Agreements shall mean all Trade Agreements in effect on the date
hereof or entered into on or prior to the Cut-Off Date that relate to the
ownership or operation of or the conduct of the business of either of the EZ
Stations.
EZ's knowledge (including the term "to the knowledge, information and
belief of EZ") shall mean the actual knowledge of any EZ Party executive officer
or any General Manager of either EZ Station.
FCA shall mean the Communication Act of 1934, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
-8-
<PAGE>
FCC shall mean the Federal Communications Commission and shall include any
successor Authority.
FCC Consents shall mean the actions of the FCC granting its consents to
the transfer of the FCC Licenses relating to the Evergreen Stations to the
appropriate EZ Parties and the EZ Stations to the appropriate Evergreen Parties.
FCC Licenses shall mean all Governmental Authorizations issued by the FCC
to Evergreen or EZ or its Subsidiaries in connection with the ownership,
operation and conduct of the business of the Evergreen Stations and the EZ
Stations, as the case may be.
Final Order shall mean, with respect to any Authority, including without
limitation the FCC, one with respect to which no appeal, no stay, no petition or
application for rehearing, reconsideration, review or stay, whether on motion of
the applicable Authority or other Person or otherwise, is in effect or pending
and as to which the time or deadline for filing any such appeal, petition or
application has expired or, if filed, has been denied, dismissed or withdrawn,
and the time or deadline for instituting any further Legal Action has expired.
GAAP shall mean generally accepted accounting principles as in effect from
time to time in the United States of America.
Governmental Authorizations shall mean all approvals, concessions,
consents, franchises, licenses, permits, plans, registrations and other
authorizations of all Authorities, including the FCC Licenses, issued by the
FCC, the Federal Aviation Administration and any other Authority in connection
with the ownership or operation of any of the Assets or the conduct of the
business of any of the Stations.
Governmental Filings shall mean all filings, including franchise and
similar Tax filings, submissions, registrations, notices or declarations and the
payment of all fees, assessments, interest and penalties associated with such
filings, with all Authorities.
Hart-Scott-Rodino Act shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, and the rules and regulations thereunder, all as from
time to time in effect, or any successor law, rules or regulations, and any
reference to any such statutory or regulatory provision shall be deemed to be a
reference to any successor statutory or regulatory provision.
Hazardous Materials shall mean and include any substance, material, waste,
constituent, compound, chemical, natural or man-made element or force (in
whatever state of matter): (a) the presence of which requires investigation or
remediation under any Environmental Law, or (b) that is defined as a "hazardous
waste" or "hazardous substance" under any Environmental Law; or (c) that is
toxic, explosive, corrosive, etiologic, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is regulated by any
applicable Authority or subject to any Environmental Law; or (d) the presence of
which on the real property owned or leased by such Person causes or threatens to
cause a nuisance upon any such real property or to adjacent properties or poses
or threatens to pose a hazard to the health or safety of persons on or about any
such real property; or (e) the presence of which on adjacent properties could
constitute a trespass by such
-9-
<PAGE>
Person; or (f) that contains gasoline, diesel fuel or other petroleum
hydrocarbons, or any by-products or fractions thereof, natural gas,
polychlorinated biphenyls ("PCBs") and PCB-containing equipment, radon or other
radioactive elements, ionizing radiation, electromagnetic field radiation and
other non-ionizing radiation, sonic forces and other natural forces, lead,
asbestos or asbestos-containing materials ("ACM"), or urea formaldehyde foam
insulation.
Indebtedness shall mean, with respect to any Person, (a) all items, except
items of capital stock or of surplus or of general contingency or deferred tax
reserves or any minority interest in any Subsidiary of such Person to the extent
such interest is treated as a liability with indeterminate term on the
consolidated balance sheet of such Person, which in accordance with GAAP would
be included in determining total liabilities as shown on the liability side of a
balance sheet of such Person, (b) all obligations secured by any Lien to which
any property or asset owned or held by such Person is subject, whether or not
the obligation secured thereby shall have been assumed, and (c) to the extent
not otherwise included, all Contracts of such Person constituting capitalized
leases and all obligations of such Person with respect to Leases constituting
part of a sale and leaseback arrangement.
Indebtedness for Money Borrowed shall mean, with respect to EZ and
Evergreen, money borrowed and Indebtedness represented by notes payable and
drafts accepted representing extensions of credit, all obligations evidenced by
bonds, debentures, notes or other similar instruments, the maximum amount
currently or at any time thereafter available to be drawn under all outstanding
letters of credit issued for the account of such Person, all Indebtedness upon
which interest charges are customarily paid by such Person, and all Indebtedness
(including capitalized lease obligations) issued or assumed as full or partial
payment for property or services, whether or not any such notes, drafts,
obligations or Indebtedness represent Indebtedness for money borrowed, but shall
not include (a) trade payables, (b) expenses accrued in the ordinary course of
business, or (c) customer advance payments and customer deposits received in the
ordinary course of business.
Intangible Assets shall mean all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means, and shall include, without limitation, concessions, franchises, licenses,
permits and all Intellectual Property.
Intellectual Property shall mean any and all research, information,
inventions, designs, procedures, developments, discoveries, improvements,
patents and applications therefor, trademarks and applications therefor, service
marks, trade names, copyrights and applications therefor, logos, trade secrets,
drawing, plans, systems, methods, specifications, computer software programs,
tapes, discs and related data processing software (including without limitation
object and source codes) owned by such Person or in which it has an ownership
interest and all other manufacturing, engineering, technical, research and
development data and know-how made, conceived, developed and/or acquired by such
Person, which relate to the manufacture, production or processing of any
products developed or sold by such Person or which are within the scope of or
usable in connection with such Person's business as it may, from time to time,
hereafter be conducted or proposed to be conducted.
-10-
<PAGE>
Law shall mean any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order, ordinance,
policy statement, proclamation, promulgation, regulation, requirement, rule,
rule of law, rule of public policy, settlement agreement, statute, or writ or
any Authority, domestic or foreign; (b) the common law, or other legal or
quasi-legal precedent; or (c) arbitrator's, mediator's or referee's award,
decision, finding or recommendation; including, in each such case or instance,
any interpretation, directive, guideline or request, whether or not having the
force of law including, in all cases, without limitation any particular section,
part or provision thereof.
Lease shall mean any lease of property, whether real, personal or mixed,
and all amendments thereto.
Legal Action shall mean, with respect to any Person, any and all
litigation or legal or other actions, arbitrations, counterclaims,
investigations, proceedings, requests for material information by or pursuant to
the order of any Authority or suits, at law, in equity or in arbitration.
Letter of Intent shall have the meaning given to it in Section 5.2(d).
Lien shall mean any mortgage; lien (statutory or other); or other security
agreement, arrangement or interest; hypothecation, pledge or other deposit
arrangement; assignment; charge; levy; executory seizure; attachment;
garnishment; encumbrance (including any easement, exception, reservation or
limitation, right of way, and the like); conditional sale, title retention or
other similar agreement, arrangement, device or restriction; preemptive or
similar right; any financing or capital lease involving substantially the same
economic effect as any of the foregoing; restriction on sale, transfer,
assignment, disposition or other alienation; or any option, equity, claim or
right of or obligation to, any other Person, of whatever kind and character.
Like-Kind Exchange shall mean an exchange of assets of the nature
contemplated by the provisions of Section 1031 of the Code.
Loss and Expense shall have the meaning given to it in Section 8.2.
Material, Materially or materiality for the purposes of this Agreement,
shall, unless specifically stated to the contrary, be determined without regard
to the fact that various provisions of this Agreement set forth specific dollar
amounts.
Material Agreement shall mean, with respect to any Person, any Contract
which (a) was entered into not in the ordinary course of business, (b) was
entered into in the ordinary course of business which (i) involved the purchase,
sale or lease of goods or materials, or purchase of services, aggregating more
than Fifty Thousand Dollars ($50,000) during any of the last three fiscal years,
(ii) extends for more than three (3) months, or (iii) is not terminable on
thirty (30) days or less notice without penalty or other payment, (c) involves
Indebtedness for Money Borrowed, (d) is or otherwise constitutes a written
agency, broker, dealer, license, distributorship, sales representative or
similar written agreement, or (e) accounted for more than three percent (3%) of
the revenues of the EZ Stations or the Evergreen Stations in any of the last
three fiscal years or is likely to account
-11-
<PAGE>
for more than three percent (3%) of revenues of the EZ Stations or the Evergreen
Stations during the current fiscal year.
Multiemployer Plan shall mean a Plan which is a "multiemployer plan"
within the meaning of Section 4001(a)3 of ERISA.
Notice of Disagreement shall have the meaning given to it in Section
2.3(d).
Organic Document shall mean, with respect to a Person which is a
corporation, its certificate or articles of incorporation or organization, its
by-laws and all stockholder agreements, voting trusts and similar arrangements
applicable to any of its capital stock.
PBGC shall mean the Pension Benefit Guaranty Corporation and any Entity
succeeding to any or all of its functions under ERISA.
PBI shall have the meaning given to it in the Preamble
Permitted Liens shall mean (a) any mechanic's or materialmen's Lien or
similar Lien with respect to amounts not yet due and payable or which are being
contested in good faith by appropriate proceedings and for which appropriate
reserves have been established, (b) Liens for taxes not yet due and payable or
which are being contested in good faith by appropriate proceeding, for which
appropriate reserves have been established, and (c) easements, licenses,
covenants, rights of way and similar Liens which, individually or in the
aggregate, would not materially and adversely affect the marketability or value
of the property encumbered thereby or materially interfere with the operations
of the Stations.
Person shall mean any natural individual or any Entity.
Personal Property shall mean all of the machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts and other tangible personal property, plus such additions thereto
and deletions therefrom arising in the ordinary course of business between the
date hereof and the Closing Date.
Philadelphia Proration Schedule shall have the meaning given to it in
Section 2.3(e).
Philadelphia Trustee Application shall have the meaning given to it in
Section 5.9(a).
Plan shall mean, with respect to any Person and at a particular time, any
employee benefit plan which is covered by ERISA and in respect of which such
Person or an ERISA Affiliate is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA, but only to the extent that it covers or relates to any
officer, employee or other Person involved in the ownership and operation of the
Assets or the conduct of the business of any of the Stations.
-12-
<PAGE>
Private Authorizations shall mean all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to copyrights,
computer software programs, patents, service marks, trademarks, trade names,
technology and know-how.
Pro Ratable Taxes shall mean real estate and other property Taxes, ad
valorem Taxes, gross receipts Taxes and similar Taxes, but shall not include
federal, state or local income Taxes, franchise Taxes or other Taxes measured by
or based upon income or gain on sale or other disposition of property or assets.
Real Property shall mean all of the fee estates and buildings and other
improvements thereon, leasehold interest, easements, licenses, rights to access,
right-of-way, and other real property interest.
Referee shall have the meaning given to it in Section 2.3(d).
Regulations shall mean the federal income tax regulations promulgated
under the Code, as such Regulations may be amended from time to time. All
references herein to specific sections of the Regulations shall be deemed also
to refer to any corresponding provisions of succeeding Regulations, and all
references to temporary Regulations shall be deemed also to refer to any
corresponding provisions of final Regulations.
Representatives shall have the meaning given to it in Section 5.1(a).
SEC shall mean the United States Securities and Exchange Commission, or
any successor Authority.
Section 1031 Schedule shall have the meaning given to it in Section
2.2(b).
Securities Act shall mean the Securities Act of 1933, and the rules and
regulations of the SEC thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
Stations shall mean, collectively, the Evergreen Stations and the EZ
Stations.
Subsidiary shall mean, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
Tax (and "Taxable", which shall mean subject to Tax), shall mean, with
respect to any Person, (a) all taxes (domestic or foreign), including without
limitation any income (net, gross or other including recapture of any tax items
such as investment tax credits), alternative or add-on minimum tax, gross
income, gross receipts, gains, sales, use, leasing, lease, user, ad valorem,
-13-
<PAGE>
transfer, recording, franchise, profits, property (real or personal, tangible or
intangible), fuel, license, withholding on amounts paid to or by such Person,
payroll, employment, unemployment, social security, excise, severance, stamp,
occupation, premium environmental or windfall profit tax, custom, duty or other
tax, or other like assessment or charge of any kind whatsoever, together with
any interest, levies, assessments, charges, penalties, addition to tax or
additional amount imposed by any Taxing Authority, (b) any joint or several
liability of such Person with any other Person for the payment of any amounts of
the type described in (a) and (c) any liability of such Person for the payment
of any amounts of the type described in (a) as a result of any express or
implied obligation to indemnify any other Person.
Tax Claim shall mean any Claim which relates to Taxes, including without
limitation the representations and warranties set forth in Section 3.11 or 4.11.
Tax Return or Returns shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
Taxing Authority shall mean any Authority responsible for the imposition
of any Tax.
TBA Date shall mean the date when operations under the TBAs shall become
effective (or in the event such date is not the same for all of the TBAs, the
applicable date of such effectiveness).
TBAs shall mean the Evergreen Stations TBA and the EZ Stations TBA, or the
applicable one of such agreements.
Termination Date shall have the meaning given to it in Section 7.1.
Trade Agreements shall mean any Contract relating to any of the Stations
pursuant to which any EZ Party or any Evergreen Party is required to provide air
time in exchange for property or services other than cash.
Transactions shall mean the Exchange and all of the other transactions
hereunder or under any of the Collateral Documents.
-14-
Exhibit 23.01
Consent of Independent Auditors
We consent to the incorporation by reference in Registration Statement No.
33-69732 of EZ Communications, Inc. on Form S-8 of our report dated February 26,
1997, appearing in this Annual Report on Form 10-K of EZ Communications, Inc.
for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 29, 1997
Exhibit 23.02
Consent of Independent Auditors
We consent to the use of our report, dated February 9, 1996, with respect to the
consolidated balance sheet of EZ Communications Inc. as of December 31, 1995 and
the related consolidated statement of operations, shareholders' equity and cash
flows for the two years in the period ended December 31, 1995 included in this
Annual Report (Form 10-K) of EZ Communications, Inc. for the year ended December
31, 1996 to be filed with the Securities and Exchange Commission on March 31,
1997.
Our audit also included the 1994 and 1995 financial statement schedule of EZ
Communications, Inc. listed in Item 14(a). This schedule is the responsibility
of the Company's Management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Washington, D.C.
March 31, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,053
<SECURITIES> 0
<RECEIVABLES> 24,688
<ALLOWANCES> 1,029
<INVENTORY> 0
<CURRENT-ASSETS> 31,748
<PP&E> 46,164
<DEPRECIATION> 16,007
<TOTAL-ASSETS> 284,408
<CURRENT-LIABILITIES> 26,944
<BONDS> 211,445
0
0
<COMMON> 92
<OTHER-SE> 38,056
<TOTAL-LIABILITY-AND-EQUITY> 284,408
<SALES> 105,963
<TOTAL-REVENUES> 121,219
<CGS> 0
<TOTAL-COSTS> 105,787
<OTHER-EXPENSES> 450
<LOSS-PROVISION> 898
<INTEREST-EXPENSE> 20,360
<INCOME-PRETAX> (6,276)
<INCOME-TAX> (1,590)
<INCOME-CONTINUING> (4,686)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,686)
<EPS-PRIMARY> (0.52)
<EPS-DILUTED> (0.52)
</TABLE>
