UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from _______ to _______
Commission file number 0-16841
OSBORN COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1142367
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
130 Mason Street, Greenwich, Connecticut 06830
(Address of principal executive offices)(Zip Code)
(203) 629-0905
Registrant's telephone number, including area code
____________________________________________________________
(Former name, former address and former fiscal year, if
changed since last report)
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______
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE LAST FIVE YEARS
Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Section
12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan
confirmed by a court. Yes_____ No______
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding in each of
the issuer's classes of common stock, as of the latest
practicable date.
Outstanding
Class at November 7, 1996
Common stock, $.01 par value 5,413,014
Non-voting common stock, $.01 par value -
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
(1) Consolidated Balance Sheets at September 30, 1996
(unaudited) and December 31, 1995
(2) Consolidated Statements of Operations for the three
and nine months ended September 30, 1996 and 1995
(unaudited)
(3) Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 and 1995 (unaudited)
(4) Consolidated Statement of Changes in Stockholders'
Equity for the nine months ended September 30, 1996
(unaudited)
(5) Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
<PAGE>
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
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September 30, December 31,
1996 1995
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $1,216,077 $12,994,779
Accounts receivable, less allowance for doubtful
accounts of $607,404 in 1996 and $518,157 in 1995 5,183,086 5,759,562
Inventory 891,853 889,942
Prepaid expenses and other current assets 1,332,230 1,525,308
Total current assets 8,623,246 21,169,591
Investment in affiliated companies 528,644 524,084
Property, plant and equipment, at cost, less
accumulated depreciation of $15,855,060 in 1996
and $18,624,021 in 1995 16,008,051 15,358,070
Intangible assets, net of accumulated amortization
of $15,194,742 in 1996 and $15,238,193 in 1995 36,398,379 40,463,595
Other noncurrent assets 165,814 118,753
Total assets $61,724,134 $77,634,093
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $4,922,638 $4,509,292
Accrued wages and sales commissions 368,832 434,309
Accrued interest payable 142,806 459,114
Accrued income taxes 1,233,359 825,712
Current portion of long-term debt - 2,718,000
Total current liabilities 6,667,635 8,946,427
Long-term debt 22,200,000 44,482,000
Deferred income taxes 2,275,711 2,275,711
Other noncurrent liabilities 1,325,262 432,916
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized 5,000,000 shares, none issued and outstanding - -
Common stock, par value $.01 per share; authorized
7,425,000 shares, issued and outstanding shares:
5,423,014 and 5,413,014, respectively, in 1996;
5,286,347 and 5,276,347, respectively, in 1995 54,131 52,764
Non-voting common stock, par value $.01 per share;
authorized 75,000 shares, none issued and outstanding - -
Additional paid-in capital 40,829,403 39,694,601
Accumulated deficit (11,628,008) (18,250,326)
Total stockholders' equity 29,255,526 21,497,039
Total liabilities and stockholders' equity $61,724,134 $77,634,093
</TABLE>
See accompanying notes.
<PAGE>
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended September 30, 1996 and 1995
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
<TABLE>
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Net revenues $11,229,162 $12,001,802 $26,503,560 $28,802,257
Operating expenses:
Selling, technical and program 2,480,670 2,817,392 6,918,981 8,869,892
Direct programmed music and
entertainment 4,027,034 3,773,692 8,707,737 7,148,981
General and administrative 1,668,319 2,031,876 5,159,098 5,791,337
Depreciation and amortization 1,262,943 1,398,887 3,673,052 4,315,622
Corporate expenses 465,823 426,674 1,391,609 1,276,051
Total operating expenses 9,904,789 10,448,521 25,850,477 27,401,883
Operating income 1,324,373 1,553,281 653,083 1,400,374
Other income (expense) (279,216) 70,757 (108,948) 1,969,736
Interest expense 500,996 1,290,320 1,713,239 4,137,330
Other gain (loss) - - 8,859,477 -
Income (loss) before income taxes
and extraordinary item 544,161 333,718 7,690,373 (767,220)
Provision for income taxes 118,184 106,824 1,068,055 298,154
Income (loss) before extraordinary item 425,977 226,894 6,622,318 (1,065,374)
Extraordinary item:
Loss on debt extinguishment - (3,921,061) - (3,921,061)
Net income (loss) $425,977 ($3,694,167) $6,622,318 ($4,986,435)
Primary earnings per common share:
Income (loss) before
extraordinary item $0.07 $0.05 $1.17 ($0.20)
Loss on debt extinguishment - (0.75) - (0.75)
Net income (loss) per common share $0.07 ($0.70) $1.17 ($0.95)
Fully diluted earnings per common share:
Income (loss) before
extraordinary item $0.07 $0.05 $1.14 ($0.20)
Loss on debt extinguishment - (0.75) - (0.75)
Net income (loss) per common share $0.07 ($0.70) $1.14 ($0.95)
Weighted average common shares outstanding:
Primary shares 5,813,251 5,256,292 5,653,307 5,258,216
Fully diluted shares 5,848,889 5,256,292 5,788,437 5,258,216
</TABLE>
See accompanying notes.
<PAGE>
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1996 and 1995
(Unaudited)
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1996 1995
Cash flows from operating activities:
Net income (loss) $6,622,318 ($4,986,435)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 3,673,052 4,315,622
Other (gain) loss (8,859,477) -
Transaction costs for proposed merger 296,965 -
Loss on extinguishment of debt - 3,921,061
Deferred income taxes - 150,000
Non-cash interest expense 183,029 291,133
Distributions from affiliated companies (62,500) (1,653,634)
Decrease in accounts receivable 576,476 125,043
(Increase) decrease in inventory (1,911) 1,812
Decrease (increase) in prepaid expenses and
other current assets 193,078 (869,544)
Increase (decrease) in accounts payable and
accrued expenses 413,346 (669,199)
Decrease in accrued wages and sales commissions (65,477) (162,078)
Decrease in accrued interest payable (316,308) (1,364,975)
Increase (decrease) in accrued income taxes 407,647 (61,261)
Total adjustments (3,562,080) 4,023,980
Net cash provided by (used in) operating activities 3,060,238 (962,455)
Cash flows from investing activities:
Payments for acquisition of stations (12,805,470) -
Net proceeds from sale of stations 24,208,295 -
Net proceeds from sale of other assets 580,653 -
Distributions from affiliated companies 62,500 3,918,186
Proceeds from note receivable - 1,620,455
Capital expenditures (1,489,752) (966,132)
Expenditures for intangible assets - (143,044)
Transaction costs for proposed merger (296,965) -
Reclassification of other noncurrent assets (47,061) 91,812
Net cash provided by investing activities 10,212,200 4,521,277
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 44,500,000
Debt issuance costs (79,807) (1,258,640)
Proceeds from exercise of stock options 28,667 154,863
Purchase and retirement of treasury stock - (642,354)
Prepayment penalty - (500,000)
Principal payments on long-term debt (25,000,000) (50,000,000)
Net cash used in financing activities (25,051,140) (7,746,131)
Net decrease in cash and cash equivalents (11,778,702) (4,187,309)
Cash and cash equivalents at beginning of period 12,994,779 6,368,473
Cash and cash equivalents at end of period $1,216,077 $2,181,164
Supplemental cash flow information:
Cash paid for interest $1,846,518 $5,216,445
Cash paid for income taxes $660,408 $209,415
</TABLE>
See accompanying notes.
<PAGE>
OSBORN COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the nine months ended September 30, 1996
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Non-
Voting Non-voting Additional
Par Par paid-in Accumulated
Shares value Shares value capital deficit
Balance at December 31, 1995 5,276,347 $52,764 - - $39,694,601 ($18,250,326)
Exercise of stock options 4,167 42 - - 28,627 -
Issuance of common stock 132,500 1,325 - - 1,106,175 -
Net income - - - - - 6,622,318
Balance at September 30, 1996 5,413,014 $54,131 - - $40,829,403 ($11,628,008)
</TABLE>
See accompanying notes.
<PAGE>
OSBORN COMMUNICATIONS CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
1. Basis of presentation
The financial information included herein is unaudited;
however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) that
are, in the opinion of management, necessary for a fair
presentation of the financial position, results of
operations, and cash flows for the interim periods
presented.
2. Plan of merger
On July 23, 1996, the Company entered into an agreement
and plan of merger with a subsidiary of Capstar Broadcasting
Partners, Inc. ("Capstar") whereby Capstar will acquire all
of the Company's common stock for $15.375 per share.
Consummation of the merger is conditioned upon, among other
things, approval of the transaction by the holders of a
majority of the Company's common stock and the Federal
Communications Commission ("FCC"). The merger is expected
to be completed in February 1997.
Concurrently with the execution of the merger agreement
and as security for liquidated damages that may be payable
by Capstar to the Company for Capstar's failure to
consummate the merger, Capstar has deposited in an escrow
account an irrevocable letter of credit in favor of the
Company for the sum of $5.0 million. If the Company
terminates the merger agreement by reason of receiving an
alternative proposal which is deemed more favorable to the
Company's stockholders, the Company must pay a termination
fee of $3,750,000 to Capstar.
3. Acquisitions and dispositions
On March 29, 1996, the Company acquired substantially
all the assets of radio station WRIR-FM (formerly WHLX-FM),
Wheeling, West Virginia for $0.8 million plus transaction
costs. On June 11, 1996, the Company acquired substantially
all the assets of radio stations WBBD-AM/WKWK-FM (formerly
WKWK-AM/FM), Wheeling, West Virginia from WKWK Radio, Inc.
for $2.7 million plus transaction costs. The Company managed
WBBD-AM/WKWK-FM pursuant to a local marketing agreement
("LMA") from March 1996 through the closing of the
acquisition. On October 28, 1996, the Company acquired
substantially all the assets of radio station WEGW-FM,
Wheeling, West Virginia for $0.8 million. The Company
already owned radio stations WWVA-AM/WOVK-FM in Wheeling.
On April 1, 1996, the Company acquired substantially
all the assets of radio stations WKII-AM/WFSN-FM (formerly
WKII-AM/WEEJ-FM), Port Charlotte, Florida for $2.85 million
plus transaction costs. In the event that the Company is
able to relocate WFSN-FM's broadcast antenna to the
Company's Pine Island, Florida tower in order to better
serve the Port Charlotte/Ft. Myers market, additional
consideration of $750,000 will be paid. The additional
consideration is included in other noncurrent liabilities in
the consolidated balance sheet at September 30, 1996.
Pending the closing of the acquisition, the stations were
managed by the Company pursuant to an LMA since September
1995. The Company already owns radio station WOLZ-FM, Ft.
Myers and has a 50% non-voting ownership interest in radio
station WDRR-FM, San Carlos Park/Ft. Myers.
On May 3, 1996, the Company acquired substantially all
the assets of radio stations KNAX-FM/KRBT-FM, Fresno,
California. Consideration for the acquisition consisted of
$6.0 million plus 120,000 shares of the Company's common
stock. In addition, the seller received an option to
purchase shares of the Company's common stock at $8.00 per
share contingent upon future increases in operating cash
flow by KNAX-FM/KRBT-FM. Pending the closing of the
acquisition, the stations were managed by the Company since
January 1996 pursuant to an LMA. The Company plans to
dispose of these radio stations in the fourth quarter of
1996 (see Note 4).
On January 31, 1996, the Company sold substantially all
the assets of radio station WWRD-FM, Jacksonville,
Florida/Brunswick, Georgia for $2.5 million, resulting in a
pre-tax gain of approximately $0.8 million. The net cash
proceeds were used principally to repay long-term debt and
fund transaction costs.
On February 2, 1996, the Company sold substantially all
the assets of radio stations WNDR-AM/WNTQ-FM, Syracuse, New
York for $12.5 million, resulting in a pre-tax gain of
approximately $6.0 million. Pending the closing of the
disposition, the stations were managed by the purchaser
pursuant to an LMA. The net cash proceeds were used
principally to repay long-term debt and fund transaction
costs.
On June 5, 1996, the Company sold substantially all the
assets of radio station WFXK-FM, Raleigh/Tarboro, North
Carolina to Pinnacle Broadcasting Corporation for $5.9
million, resulting in a pre-tax gain of approximately $2.2
million. Pending the closing of the transaction, the
purchaser managed the station pursuant to an LMA. The net
cash proceeds were used principally to repay long-term debt
and fund transaction costs.
On June 21, 1996, the Company sold substantially all
the assets of radio station WAYV-FM, Atlantic City, New
Jersey to Equity Communications, L.P. for $3.1 million,
resulting in a pre-tax gain of approximately $0.2 million.
Pending the closing of the transaction, the purchaser
managed the station pursuant to an LMA since March 1996. The
net cash proceeds were used principally to repay long-term
debt and fund transaction costs.
On June 28, 1996, the Company sold substantially all
the assets of radio station WFKS-FM, Daytona Beach/Palatka,
Florida to Renda Broadcasting Corporation, the purchaser of
radio station WWRD-FM, for $4.0 million, resulting in a pre-
tax gain of approximately $0.8 million. Pending the closing
of the transaction, the purchaser managed the station
pursuant to an LMA. The net cash proceeds were used
principally to repay long-term debt and fund transaction
costs.
On December 22, 1995, the Company entered into an
option agreement with Allbritton Communications Company for
the sale of television station WJSU-TV, Anniston, Alabama,
and an associated 10-year LMA.
All of the acquisitions have been accounted for using
the purchase method of accounting. Accordingly, the
purchase price of each acquisition has been allocated to the
assets based upon their fair values at the date of
acquisition. The results of operations of the properties
acquired are included in the Company's consolidated results
of operations from the respective dates of acquisition and
until the date of disposition for properties disposed.
4. Pending transactions
In July 1996, the Company agreed to acquire
substantially all the assets of radio station WYNU-FM,
Jackson/Milan, Tennessee from Ohio Broadcast Associates for
$3.6 million, subject to FCC approval. The transaction is
expected to close in the first quarter of 1997. The Company
already owns one FM and one AM radio station in the market.
In July 1996, the Company agreed to sell substantially
all the assets of radio stations KNAX-FM/KRBT-FM, Fresno,
California to American Radio Systems, Inc. for $11.0
million, subject to FCC approval. Pending the closing of
the transaction, which is expected in the fourth quarter of
1996, the purchaser is managing the stations pursuant to an
LMA since August 1, 1996.
In November 1996, the Company agreed to acquire
substantially all the assets of radio station WTXT-FM,
Tuscaloosa/Fayette, Alabama from Tuscaloosa Broadcasting
Company, Inc. for approximately $5.1 million, subject to FCC
approval. The transaction is expected to close in the first
quarter of 1997.
5. Osborn Healthcare
Osborn Healthcare continues to experience operating
losses. Consistent with the Company's previously stated
intention to evaluate options to increase shareholder value,
management has reviewed the strategic direction and long-
term prospects of the Osborn Healthcare operations and has
restructured the operations. The Company plans to focus
resources on only the more profitable product lines. In
conjunction with these plans, the Company has combined the
Osborn Healthcare operations and the Company's programmed
music operations, terminating certain employees of the
Osborn Healthcare operations, and consolidating certain
overhead. In the second quarter of 1996, the Company
accrued costs of approximately $0.3 million, principally
severance costs, in connection with the consolidation of
operations. In addition, the Company has reduced goodwill
by approximately $0.9 million to reflect the anticipated
discounted cash flow from the remaining healthcare
operations. The charges, totalling $1.2 million, are
included in other gain (loss) in the consolidated statement
of operations.
6. Pro forma financial information (unaudited)
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Nine months ended
September 30,
1996 1995
Net revenues $26,679,000 $24,439,000
Loss before extraordinary item (754,000) (1,305,000)
Net loss (754,000) (5,226,000)
Net loss per share ($0.14) ($0.97)
</TABLE>
The unaudited pro forma information for the nine months
ended September 30, 1996 and 1995 assumes that the
acquisitions and dispositions as described in Note 3 had
occurred at the beginning of each respective period. The
gains on the sales of stations and the loss from Osborn
Healthcare's restructuring in 1996 and the distribution from
Northstar Television Group in 1995 are excluded from the pro
forma results because of their nonrecurring nature. The pro
forma information is not necessarily indicative either of
the results of operations that would have occurred had these
transactions been made at the beginning of the period, or of
future results of operations.
Net assets of properties to be disposed in Fresno
aggregated $7.1 million at September 30, 1996, consisting of
net property, plant and equipment of $2.4 million and net
intangible assets of $4.7 million.
7. Debt refinancing
In August 1995, the Company entered into a credit
facility of $56.0 million with Society National Bank. The
credit facility consists of a $46.0 million revolving credit
agreement and a $10.0 million facility which may be used for
acquisitions. The initial drawdown of $44.5 million, along
with the Company's internally generated funds, was used to
repay existing loans from a financial institution totalling
$50.0 million and pay transaction costs. Along with the
repayment of debt, the Company was able to cancel purchase
rights with respect to 676,000 warrant shares of the
1,014,000 warrant shares issued with the previous loans.
As a result of the repayment of the loans, the Company
recorded an extraordinary loss on the early extinguishment
of debt of approximately $3.9 million in 1995. The
extraordinary loss is primarily due to non-cash charges from
the write-off of deferred financing costs and debt discount.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The performance of a broadcasting company is
customarily measured by its ability to generate operating
cash flow. Operating cash flow is defined as operating
income before depreciation, amortization and corporate
expenses. Although operating cash flow is not a measure of
performance calculated in accordance with Generally Accepted
Accounting Principles ("GAAP"), the Company believes that
operating cash flow is useful to investors because it is
accepted by the radio broadcasting industry as a generally
recognized measure of performance and is used by securities
analysts who report publicly on the performance of
broadcasting companies. Operating cash flow should not be
considered in isolation or as a substitute for net income,
cash flows from operating activities and consolidated income
or cash flow statement data prepared in accordance with
GAAP, or as a measure of the Company's profitability or
liquidity.
Plan of merger
On July 23, 1996, the Company entered into an agreement
and plan of merger with a subsidiary of Capstar Broadcasting
Partners, Inc. ("Capstar") whereby Capstar will acquire all
of the Company's common stock for $15.375 per share.
Consummation of the merger is conditioned upon, among other
things, approval of the transaction by the holders of a
majority of the Company's common stock and the Federal
Communications Commission ("FCC"). The merger is expected
to be completed in February 1997.
Concurrently with the execution of the merger agreement
and as security for liquidated damages that may be payable
by Capstar to the Company for Capstar's failure to
consummate the merger, Capstar has deposited in an escrow
account an irrevocable letter of credit in favor of the
Company for the sum of $5.0 million. If the Company
terminates the merger agreement by reason of receiving an
alternative proposal which is deemed more favorable to the
Company's stockholders, the Company must pay a termination
fee of $3,750,000 to Capstar.
Acquisitions and Dispositions
Given the less restrictive regulatory environment
following the passage of the Telecommunications Act of 1996,
the Company intends to own multiple radio stations in
certain of its markets. If the Company determines that
opportunities to acquire additional stations in a particular
market are not satisfactory, it may dispose of its existing
stations in such market. The Company also intends to pursue
the acquisition of multiple stations in other markets.
Consistent with its strategy of owning multiple
stations in a market or leaving markets where opportunities
to acquire additional stations are not satisfactory, the
Company has entered into numerous transactions for the
acquisition or disposition of broadcast properties in 1995
and 1996.
On March 29, 1996, the Company acquired substantially
all the assets of radio station WRIR-FM, Wheeling, West
Virginia for $0.8 million plus transaction costs. On June
11, 1996, the Company acquired substantially all the assets
of radio stations WBBD-AM/WKWK-FM, Wheeling for $2.7 million
plus transaction costs. The Company managed WBBD-AM/WKWK-FM
pursuant to a local marketing agreement ("LMA") from March
1996 through the closing of the acquisition. On October 28,
1996, the Company acquired substantially all the assets of
radio station WEGW-FM, Wheeling, West Virginia for $0.8
million. The Company already owns radio stations WWVA-
AM/WOVK-FM in Wheeling.
On April 1, 1996, the Company acquired substantially
all the assets of radio stations WKII-AM/WFSN-FM, Port
Charlotte, Florida for $2.85 million plus transaction costs.
In the event that the Company is able to relocate WFSN-FM's
broadcast antenna to the Company's Pine Island, Florida
tower in order to better serve the Port Charlotte/Ft. Myers
market, additional consideration of $750,000 will be paid.
Pending the closing of the acquisition, the stations were
managed by the Company pursuant to an LMA since September
1995. The Company already owns radio station WOLZ-FM, Ft.
Myers and has a 50% non-voting ownership interest in radio
station WDRR-FM, San Carlos Park/Ft. Myers.
On May 3, 1996, the Company acquired substantially all
the assets of radio stations KNAX-FM/KRBT-FM, Fresno,
California. Consideration for the acquisition consisted of
$6.0 million plus 120,000 shares of the Company's common
stock. In addition, the seller received an option to
purchase shares of the Company's common stock at $8.00 per
share contingent upon future increases in operating cash
flow by KNAX-FM/KRBT-FM. Pending the closing of the
acquisition, the stations were managed by the Company since
January 1996 pursuant to an LMA. In July 1996, the Company
agreed to sell substantially all the assets of these two
radio stations to American Radio Systems, Inc. for $11.0
million, subject to FCC approval. Pending the closing of
the transaction, which is expected in the fourth quarter of
1996, the purchaser is managing the stations pursuant to an
LMA since August 1, 1996.
On January 31, 1996, the Company sold substantially all
the assets of radio station WWRD-FM, Jacksonville,
Florida/Brunswick, Georgia for $2.5 million, resulting in a
pre-tax gain of approximately $0.8 million. The net cash
proceeds were used principally to repay long-term debt and
fund transaction costs.
On February 2, 1996, the Company sold substantially all
the assets of radio stations WNDR-AM/WNTQ-FM, Syracuse, New
York for $12.5 million, resulting in a pre-tax gain of
approximately $6.0 million. Pending the closing of the
disposition, the stations were managed by the purchaser
pursuant to an LMA. The net cash proceeds were used
principally to repay long-term debt and fund transaction
costs.
On June 5, 1996, the Company sold substantially all the
assets of radio station WFXK-FM, Raleigh/Tarboro, North
Carolina to Pinnacle Broadcasting Corporation for $5.9
million, resulting in a pre-tax gain of approximately $2.2
million. Pending the closing of the transaction, the
purchaser managed the station pursuant to an LMA. The net
cash proceeds were used principally to repay long-term debt
and fund transaction costs.
On June 21, 1996, the Company sold substantially all
the assets of radio station WAYV-FM, Atlantic City, New
Jersey to Equity Communications, L.P. for $3.1 million,
resulting in a pre-tax gain of approximately $0.2 million.
Pending the closing of the transaction, the purchaser
managed the station pursuant to an LMA since March 1996. The
net cash proceeds were used principally to repay long-term
debt and fund transaction costs.
On June 28, 1996, the Company sold substantially all
the assets of radio station WFKS-FM, Daytona Beach/Palatka,
Florida to Renda Broadcasting Corporation, the purchaser of
radio station WWRD-FM, for $4.0 million, resulting in a pre-
tax gain of approximately $0.8 million. Pending the closing
of the transaction, the purchaser managed the station
pursuant to an LMA. The net cash proceeds were used
principally to repay long-term debt and fund transaction
costs.
On December 22, 1995, the Company entered into an
option agreement with Allbritton Communications Company for
the sale of television station WJSU-TV, Anniston, Alabama,
and an associated 10-year LMA.
Pending Transactions
In July 1996, the Company agreed to acquire
substantially all the assets of radio station WYNU-FM,
Jackson/Milan, Tennessee from Ohio Broadcast Associates for
$3.6 million, subject to FCC approval. The transaction is
expected to close in the first quarter of 1997. The Company
already owns one FM and one AM radio station in the market.
In July 1996, the Company agreed to sell substantially
all the assets of radio stations KNAX-FM/KRBT-FM, Fresno,
California to American Radio Systems, Inc. for $11.0
million, subject to FCC approval. Pending the closing of
the transaction, which is expected in the fourth quarter of
1996, the purchaser is managing the stations pursuant to an
LMA since August 1, 1996.
In November 1996, the Company agreed to acquire
substantially all the assets of radio station WTXT-FM,
Tuscaloosa/Fayette, Alabama from Tuscaloosa Broadcasting
Company, Inc. for approximately $5.1 million, subject to FCC
approval. The transaction is expected to close in the first
quarter of 1997.
<PAGE>
Results of Operations
Three months ended September 30, 1996 and 1995
Net revenues of $11,229,000 in the third quarter of
1996 represent a 6% decrease from 1995 quarterly net
revenues of $12,002,000. Total operating expenses decreased
5%, from $10,449,000 in 1995 to $9,905,000 in 1996. The
reduction in net revenues and operating expenses is
attributable to the disposition of the businesses described
in Note 3 to the consolidated financial statements,
partially offset by the Wheeling, Port Charlotte, and Fresno
acquisitions and growth of the Asheville, Gadsden and
Jackson radio stations and the programmed music division.
Operating cash flow (operating income before
depreciation, amortization and corporate expenses) decreased
10%, to $3,053,000 in 1996 from $3,379,000 in 1995. The
decrease is primarily attributable to the disposition of the
Syracuse, Anniston and Atlantic City properties and start-
up costs associated with the Port Charlotte acquisition,
offset by stronger performance at the Asheville and Gadsden
radio stations and the Wheeling and Fresno acquisitions.
EBITDA (earnings before interest, taxes, depreciation and
amortization) of $2,587,000 in the third quarter of 1996
decreased 12%, from $2,952,000 in 1995.
Operating income of $1,324,000 in 1996 compares to
$1,553,000 in 1995. Transaction costs of approximately
$300,000 relating to the proposed merger have been charged
to other income (expense) in 1996. Interest expense
decreased $789,000, or 61%, to $501,000 in 1996 from
$1,290,000 in 1995, primarily attributable to the repayment
of debt. Interest expense in 1996 includes $64,000 of non-
cash interest relating to deferred financing cost
amortization.
Income before extraordinary item in 1996 of $426,000,
or $0.07 per share, compares to income before extraordinary
item of $227,000, or $0.05 per share in 1995. In the third
quarter of 1995, the Company recorded an extraordinary loss
on the early extinguishment of debt of $3,921,000, or $0.75
per share. Along with the repayment of debt, the Company was
able to cancel purchase rights with respect to 676,000
warrant shares of the 1,014,000 warrant shares issued with
the previous loans. Net income of $426,000 in 1996, or $0.07
per share on a fully diluted basis, compares to net loss of
$3,694,000, or $0.70 per share, in 1995.
Nine months ended September 30, 1996 and 1995
Net revenues of $26,504,000 in the first nine months of
1996 represent an 8% decrease from 1995 net revenues of
$28,802,000. Total operating expenses decreased 6%, from
$27,402,000 in 1995 to $25,850,000 in 1996. The reduction in
net revenues and operating expenses is attributable to the
disposition of the businesses described in Note 3 to the
consolidated financial statements, partially offset by the
Wheeling, Port Charlotte, and Fresno acquisitions, and
growth of the Asheville and Gadsden radio stations and the
programmed music division.
Operating cash flow (operating income before
depreciation, amortization and corporate expenses) decreased
18%, to $5,718,000 in 1996 from $6,992,000 in 1995. The
decrease is primarily attributable to the disposition of the
Syracuse, Anniston and Atlantic City properties and start-up
costs associated with the Port Charlotte acquisition,
partially offset by growth of the Asheville, Gadsden and
Jackson radio stations, the Wheeling and Fresno
acquisitions, and the increased level of activity at the
programmed music division. EBITDA (earnings before interest,
taxes, depreciation and amortization) of $4,326,000 in the
first nine months of 1996 decreased 24%, from $5,716,000 in
1995.
Operating income of $653,000 in 1996 compares to
$1,400,000 in 1995. Transaction costs of approximately
$300,000 relating to the proposed merger have been charged
to other income (expense) in 1996. Other income in 1995
includes a distribution from Northstar Television Group of
$1,572,000 (see Management Agreements). Interest expense
decreased $2,424,000, or 59%, to $1,713,000 in 1996 from
$4,137,000 in 1995, primarily attributable to the repayment
of debt and lower cost of capital related to the August 1995
debt refinancing. Interest expense in 1996 includes $183,000
of non-cash interest relating to deferred financing cost
amortization.
Results in 1996 include pre-tax gains on the sales of
the assets of the Syracuse, Jacksonville, Raleigh, Daytona
Beach and Atlantic City radio stations totalling $10.1
million, classified as other gain (loss) in the consolidated
statement of operations. Other gain (loss) also includes a
charge of $1.2 million representing the restructuring charge
for Osborn Healthcare (see Note 5 to the consolidated
financial statements). Income before extraordinary item in
1996 of $6,622,000, or $1.14 per share, compares to loss
before extraordinary item in 1995 of $1,065,000, or $0.20
per share. In the third quarter of 1995, the Company
recorded an extraordinary loss on the early extinguishment
of debt of $3,921,000, or $0.75 per share. Net income of
$6,622,000 in 1996, or $1.14 per share on a fully diluted
basis, compares to net loss of $4,986,000, or $0.95 per
share, in 1995.
Liquidity and Capital Resources
Cash flows from operating activities
In 1996, net cash provided by operating activities was
$3,060,000, compared to net cash used by operating
activities of $962,000 in 1995 (see Results of Operations).
The difference is primarily attributable to the amount and
timing of interest payments.
Cash flows from investing activities
The Company made payments of approximately $12.8
million relating to the acquisition of radio stations and
received net proceeds of approximately $24.2 million for the
sales of radio stations in the first nine months of 1996
(see Acquisitions and dispositions).
The Company received distribution payments in 1995 from
Fairmont Communications Corporation and Northstar Television
Group totalling $3,918,000, of which $2,265,000 related to
income accrued in 1994 (see Results of Operations). The note
receivable of $1,620,000 relating to the 1988 disposition of
the Toledo, Ohio radio station and Muzak franchise was
received in 1995.
In addition to debt service requirements, the Company's
remaining liquidity demands will be for capital expenditures
and to meet working capital needs. The Company made
capital expenditures of $1,490,000 and $966,000 in the first
nine months of 1996 and 1995, respectively, which are
primarily attributable to equipment installations related to
its programmed music franchises and improvements to
technical facilities of certain of the radio stations
acquired in 1996.
For the remainder of 1996, capital expenditures made by
the Company will be a function of the number of
installations by the programmed music franchises, as well as
routine expenditures for the Company's broadcasting
properties. In addition, the Company is in the process of
relocating the newly-acquired FM radio station in Port
Charlotte to its studios in Ft. Myers, and the radio station
acquisitions in Wheeling to its owned facility in that
market. For those acquisitions, the Company expects to make
additional capital expenditures as necessary.
Cash flows from financing activities
The Company made net principal payments of long-term
debt totalling approximately $25.0 million in the first nine
months of 1996, primarily with the proceeds from the
Anniston, Syracuse, Jacksonville, Raleigh, Daytona Beach and
Atlantic City dispositions, offset by additional borrowings
relating to the Wheeling, Port Charlotte and Fresno
acquisitions.
In January 1995, the Company repurchased and
subsequently retired 107,059 unregistered shares of its
common stock which were held by an institution for $642,000.
Also in January 1995, the Company paid $107,000 for the
common shares repurchased in December 1994.
Long-term debt
Long-term debt to total capitalization decreased
between December 31, 1995 and September 30, 1996 from 69% to
43%. The repayments of senior bank debt associated with the
Anniston and Syracuse transactions permanently reduced the
Company's credit facility from $56.0 million to $36.0
million.
Working capital
At September 30, 1996, cash and cash equivalents
totalled $1,216,000, compared to $12,995,000 at December 31,
1995. Working capital decreased from $12,223,000 to
$1,956,000 during the period, primarily due to the repayment
of long-term debt.
The Company believes that cash flows from operations and
existing funds will be sufficient to meet its current cash
requirements in the ordinary course of business. It is not
possible to ascertain the effect on the Company's liquidity
that would result from potential future acquisitions,
dispositions or debt repayments. Subject to limitations
imposed by the proposed merger, the Company expects to
evaluate all viable forms of financing when examining
potential future acquisitions or its capital structure. This
could take the form of, among other things, additional sales
of stock or notes, bank and/or institutional borrowings, or
seller financing, as well as internally generated funds.
Management Agreements
The Company currently owns 25% of the stock of Fairmont
Communications Corporation ("Fairmont"). Fairmont is
currently managed by the Company pursuant to a management
agreement, for which the Company receives a modest
management fee plus reimbursement of out-of-pocket expenses
and allocated overhead costs. All of Fairmont's stations
were sold by the second quarter of 1994. The Company will
continue to manage Fairmont pursuant to the management
agreement which expires upon the liquidation of Fairmont,
which is expected to occur in 1997.
The Company held a 32% interest in Northstar Television
Group, Inc. ("Northstar") and managed Northstar's four
television stations pursuant to a management agreement in
return for reimbursement of out-of-pocket expenses and
allocated overhead costs. In 1994, Northstar's creditors
and equity investors reached an agreement with respect to
restructuring Northstar's highly leveraged capital structure
pursuant to which, among other things, the Company received
a portion of accrued and unpaid management fees and retains
an economic interest. The Company's management agreement
with Northstar terminated following the restructuring. In
January 1995, three of Northstar's four television stations
were sold and the Company received a distribution of
approximately $1.6 million (see Results of Operations).
Osborn Healthcare
Osborn Healthcare continues to experience operating
losses. Consistent with the Company's previously stated
intention to evaluate options to increase shareholder value,
management has reviewed the strategic direction and long-
term prospects of the Osborn Healthcare operations and has
restructured the operations. The Company plans to focus
resources on only the more profitable product lines. In
conjunction with these plans, the Company has combined the
Osborn Healthcare operations and the Company's programmed
music operations, terminating certain employees of the
Osborn Healthcare operations, and consolidating certain
overhead. In the second quarter of 1996, the Company
accrued costs of approximately $0.3 million, principally
severance costs, in connection with the consolidation of
operations. In addition, the Company reduced goodwill by
approximately $0.9 million to reflect the anticipated
discounted cash flow from the remaining healthcare
operations. The charges, totalling $1.2 million, are
included in other gain (loss) in the consolidated statement
of operations.
Seasonality
For broadcasting properties, the first quarter is
expected to reflect the lowest revenues and net income of
the year, while the fourth quarter has historically had the
highest revenues and net income. This is due in part to
increases in retail advertising in the fall in preparation
for the holiday season, with a subsequent reduction of
business after the holidays.
The Company's entertainment properties are expected to
reflect the lowest revenues and net income of the year in
the first quarter due to the planned scheduling of the most
popular performers during the peak spring, summer and fall
seasons. Also, the Company's country music festival,
Jamboree in the Hills, takes place in the third quarter.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a defendant in a purported class action
filed on July 30, 1996, in the Court of Chancery of the
State of Delaware in and for Newcastle County against
the Company and all its directors and executive
officers (the "Individual Defendants"). The complaint
alleges principally that (i) the merger consideration
is unfair and does not constitute a maximization of
shareholder value and (ii) the Individual Defendants
breached their fiduciary duties by failing to take
responsible steps to maximize shareholder value. The
plaintiff seeks injunctive relief to enjoin the
consummation of the merger, but as of the date of this
filing has not moved for preliminary injunctive relief
and has not sought expedited proceedings.
Alternatively, in the event that the merger is
consummated, the plaintiff seeks damages caused by the
alleged breach of fiduciary duties by the Individual
Defendants. The Company believes, based on the facts,
that it has valid defenses to the plaintiff's claims
and intends to vigorously defend the action.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Securities
Holders
Not applicable
Item 5. Other information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Asset Purchase Agreement dated as of
October 28, 1996 by and between Tuscaloosa
Broadcasting Company, Inc. and Osborn
Communications Corporation
(b) Reports on Form 8-K
Form 8-K dated July 23, 1996
Form 8-K dated September 3, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
OSBORN COMMUNICATIONS CORPORATION
(Registrant)
Date: November 11, 1996 /s/ Frank D. Osborn
(Signature)
Frank D. Osborn
President and Chief Executive Officer
Date: November 11, 1996 /s/ Thomas S. Douglas
(Signature)
Thomas S. Douglas
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,216,077
<SECURITIES> 0
<RECEIVABLES> 5,790,490
<ALLOWANCES> 607,404
<INVENTORY> 891,853
<CURRENT-ASSETS> 8,623,246
<PP&E> 31,863,111
<DEPRECIATION> 15,855,060
<TOTAL-ASSETS> 61,724,134
<CURRENT-LIABILITIES> 6,667,635
<BONDS> 22,200,000
0
0
<COMMON> 54,131
<OTHER-SE> 29,201,395
<TOTAL-LIABILITY-AND-EQUITY> 61,724,134
<SALES> 26,503,560
<TOTAL-REVENUES> 26,503,560
<CGS> 0
<TOTAL-COSTS> 25,850,477
<OTHER-EXPENSES> 108,948
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,713,239
<INCOME-PRETAX> 7,690,373
<INCOME-TAX> 1,068,055
<INCOME-CONTINUING> 6,622,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,622,318
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.14
</TABLE>
ASSET PURCHASE AGREEMENT
dated as of November 4, 1996
by and between
TUSCALOOSA BROADCASTING COMPANY, INC.
(Seller)
and
OSBORN COMMUNICATIONS CORPORATION
(Buyer)
<PAGE>
Page i
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF ASSETS....................1
1.1 TRANSFER OF ASSETS.............................1
(a)LICENSES AND AUTHORIZATIONS.................1
(b)TANGIBLE PERSONAL PROPERTY..................2
(c)REAL ESTATE CONTRACTS.......................2
(d)INTELLECTUAL PROPERTY.......................2
(e)LEASES AND CONTRACTS........................2
(f)CONTRACTS FOR SALE OF BROADCAST TIME........2
(g)OPERATING AND BUSINESS RECORDS..............2
(h)FUTURE CONTRACTS............................3
(i)INVENTORY AND COMPUTER SOFTWARE.............3
(j)OTHER RIGHTS AND PRIVILEGES.................3
1.2 EXCLUDED ASSETS................................3
(a)CASH AND DEPOSITS...........................3
(b)ACCOUNTS RECEIVABLE.........................3
(c)PROPERTY CONSUMED...........................3
(d)EXPIRED LEASES, CONTRACTS AND AGREEMENTS....3
(e)PENSION AND PROFIT-SHARING PLANS............3
(f)OTHER EMPLOYEE BENEFIT PLANS................4
(g)EMPLOYMENT AND COLLECTIVE BARGAINING
AGREEMENTS.....................................4
(h)TRADE AGREEMENTS............................4
(i)OTHER ASSETS................................4
1.3 LIABILITIES TO BE ASSUMED......................4
1.4 CONSIDERATION..................................4
1.5 PRORATION OF INCOME AND EXPENSES...............4
(a) PRORATION.................................4
(b)TIME FOR PAYMENT............................5
(c)DISPUTE RESOLUTION..........................5
1.6 ALLOCATION OF PURCHASE PRICE...................5
1.7 ESCROW.........................................5
ARTICLE II CLOSING, TERMINATION AND RISK OF LOSS..........6
2.1 CLOSING........................................6
2.2 TRANSACTIONS AT THE CLOSING....................6
2.3 TERMINATION....................................8
2.4 RISK OF LOSS...................................9
2.5 INTERRUPTION OF BROADCAST TRANSMISSIONS.......10
<PAGE>
Page ii
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER......10
3.1 DUE INCORPORATION.............................10
3.2 AUTHORITY; NO CONFLICT........................10
3.3 GOVERNMENT AUTHORIZATIONS.....................11
3.4 COMPLIANCE WITH REGULATIONS...................11
3.5 TAXES.........................................12
3.6 PERSONAL PROPERTY.............................12
3.7 REAL PROPERTY.................................12
3.8 REAL ESTATE CONTRACTS.........................12
3.9 CONSENTS......................................13
3.10 CONTRACTS.....................................13
3.11 ENVIRONMENTAL.................................13
3.12 INTELLECTUAL PROPERTY.........................14
3.13 FINANCIAL STATEMENTS..........................14
3.14 PERSONNEL INFORMATION; LABOR CONTRACTS........14
3.15 EMPLOYEE BENEFIT PLANS........................15
3.16 LITIGATION....................................15
3.17 COMPLIANCE WITH LAWS..........................16
3.18 INSURANCE.....................................16
3.19 UNDISCLOSED LIABILITIES.......................16
3.20 ABSENCE OF CERTAIN CHANGES....................16
3.21 INSOLVENCY PROCEEDINGS........................17
3.22 FINDERS AND BROKERS...........................18
3.23 FULL DISCLOSURE...............................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.......18
4.1 DUE INCORPORATION.............................18
4.2 AUTHORITY; NO CONFLICT........................18
4.3 CONSENTS......................................19
4.4 LITIGATION....................................19
4.5 COMPLIANCE WITH LAWS..........................19
4.6 QUALIFICATION.................................19
4.7 FINDERS AND BROKERS...........................19
4.8 INSOLVENCY PROCEEDINGS........................19
4.9 FULL DISCLOSURE...............................20
<PAGE>
Page iii
ARTICLE V COVENANTS OF SELLER...........................20
5.1 CONTINUED OPERATION OF STATION................20
5.2 FINANCIAL OBLIGATIONS.........................20
5.3 REASONABLE ACCESS.............................20
5.4 MAINTENANCE OF ASSETS.........................21
5.5 NOTIFICATION OF DEVELOPMENTS..................21
5.6 PAYMENT OF TAXES..............................21
5.7 AUDITED FINANCIAL STATEMENTS..................21
5.8 THIRD PARTY CONSENTS..........................21
5.9 ENCUMBRANCES..................................22
5.10 ASSIGNMENT OF ASSETS..........................22
5.11 COMMISSION LICENSES AND AUTHORIZATIONS........22
5.12 TECHNICAL EQUIPMENT...........................22
5.13 COMPENSATION INCREASES........................22
5.14 SALE OF BROADCAST TIME........................22
5.15 INSURANCE.....................................22
5.16 NEGOTIATIONS WITH THIRD PARTIES...............22
5.17 COVENANT NOT TO COMPETE.......................23
5.18 CONTINUED EXISTENCE OF SELLER.................24
5.19 UPDATED MONTHLY FINANCIAL STATEMENTS..........24
ARTICLE VI JOINT COVENANTS OF BUYER AND SELLER...........25
6.1 ASSIGNMENT APPLICATION........................25
6.2 PERFORMANCE...................................25
6.3 CONDITIONS....................................25
6.4 CONFIDENTIALITY...............................25
6.5 COOPERATION...................................25
6.6 ENVIRONMENTAL REPORTS.........................26
6.7 BULK SALES LAWS...............................26
6.8 EMPLOYEE MATTERS..............................26
6.9 SURVEY........................................27
ARTICLE VII CONDITIONS TO OBLIGATIONS OF BUYER............28
7.1 COMMISSION APPROVALS..........................28
7.2 PERFORMANCE...................................28
7.3 REPRESENTATIONS AND WARRANTIES................28
7.4 CONSENTS......................................29
7.5 NO LITIGATION.................................29
<PAGE>
Page iv
7.6 DOCUMENTS.....................................29
7.7 OPINIONS OF COUNSEL...........................29
7.8 SURVEY........................................29
7.9 NON-COMPETITION AGREEMENT.....................29
7.10 ABSENCE OF CERTAIN CHANGES....................29
ARTICLE VIIICONDITIONS TO OBLIGATIONS OF SELLER...........31
8.1 PERFORMANCE...................................31
8.2 REPRESENTATIONS AND WARRANTIES................31
8.3 COMMISSION APPROVALS..........................31
8.4 NO LITIGATION.................................31
8.5 NON-COMPETITION AGREEMENT.....................31
8.6 DOCUMENTS.....................................31
8.7 OPINION OF COUNSEL............................32
ARTICLE IX INDEMNIFICATION...............................32
9.1 INDEMNIFICATION BY SELLER.....................32
9.2 INDEMNIFICATION BY BUYER......................32
9.3 NOTIFICATION OF CLAIMS........................33
9.4 LIMITATIONS ON INDEMNIFICATION................34
ARTICLE X MISCELLANEOUS.................................34
10.1 ASSIGNMENT....................................34
10.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF
THE PARTIES...................................35
10.3 BROKERAGE.....................................36
10.4 EXPENSES OF THE PARTIES.......................36
10.5 ENTIRE AGREEMENT..............................36
10.6 HEADINGS......................................36
10.7 GOVERNING LAW.................................36
10.8 COUNTERPARTS..................................36
10.9 NOTICES.......................................36
10.10 SPECIFIC PERFORMANCE..........................37
10.11 CONSENT TO JURISDICTION.......................38
10.12 FURTHER ASSURANCES............................38
10.13 PUBLIC ANNOUNCEMENTS..........................38
10.14 MERGER AGREEMENT.............................38
TABLE ...............................................i
<PAGE>
Page v
EXHIBITS
A: Form of Non-Competition Agreement
B: Form of Legal Opinion of Lanier, Ford, Shaver & Payne
C: Form of Legal Opinion of Gardner, Carton & Douglas
D: Form of Legal Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
E: Form of Legal Opinion of Buyer's Alabama Counsel
<PAGE>
Page 1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into this 4th day of
November, 1996 by and between TUSCALOOSA BROADCASTING COMPANY, INC. a
corporation formed under the laws of the State of Alabama ("Seller"), and
OSBORN COMMUNICATIONS CORPORATION, a corporation formed under the laws of
the State of Delaware ("Buyer").
R E C I T A L S
WHEREAS, Seller owns and operates and has been duly licensed by
the Federal Communications Commission (the "FCC" or the "Commission") to
operate radio station WTXT (FM), Fayette, Alabama (the "Station"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase, the assets utilized in connection with the operation of the
Station, and Seller and Buyer further desire that Seller assign to Buyer
the licenses and other authorizations issued to Seller by the Commission
for the purpose of operating the Station.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 TRANSFER OF ASSETS. Seller agrees to assign, transfer,
convey and deliver to Buyer and Buyer agrees to acquire, accept and
receive from Seller, on the Closing Date, all of Seller's right, title
and interest in and to the following assets relating to the Station (the
"Station Assets") free and clear of all liens and encumbrances:
(a) LICENSES AND AUTHORIZATIONS. All licenses, permits
and other authorizations issued by the FCC or any other state or federal
regulatory agency pertaining to the Station, including, without
limitation, those licenses, permits or authorizations listed in Section
1.1(a) of the disclosure schedule delivered by Seller to Buyer and dated
of even date herewith (the "Disclosure Schedule"), together with any
renewals, extensions or modifications thereof and additions thereto made
between the date of this Agreement and the Closing Date (the "Licenses").
The Licenses include
<PAGE>
Page 2
the right to use the call letters of the Station,
including but not limited to the call letters WTXT(FM).
(b) TANGIBLE PERSONAL PROPERTY. All of the tangible
personal property owned by Seller and used or useable in the operation of
the Station, including but not limited to the items of personal property
listed in Section 1.1(b) of the Disclosure Schedule, together with all
additions, modifications or replacements thereto made in the ordinary
course of business between the date of this Agreement and the Closing
Date, as hereafter defined (the "Personal Property").
(c) REAL ESTATE CONTRACTS. All of the leasehold
interests in real property leased by Seller and used by the Station,
including all agreements, leases, and contracts of Seller relating to the
tower, transmitter, studio site, and offices of the Station (the "Real
Estate Contracts"), including all security or other deposits made with
respect to such Real Estate Contracts, all as described in Section 1.1(c)
of the Disclosure Schedule. Buyer shall assume, pay and perform all
obligations under such Real Estate Contracts arising after the Closing
Date.
(d) INTELLECTUAL PROPERTY. All of Seller's trade names,
copyrights, trademarks, service marks, patents, patent applications or
other similar rights relating to the operation of the Station, (the
"Intellectual Property"), if any.
(e) LEASES AND CONTRACTS. All leases, contracts,
agreements and franchises relating to the operation of the Station (other
than contracts for the sale of broadcast time and leases for real
property) listed and identified in Section 1.1(e) of the Disclosure
Schedule and those leases, contracts and agreements described in
Section 1.1(h) of this Agreement (the "Contracts"). Buyer shall assume,
pay and perform all obligations under such Contracts arising after the
Closing Date.
(f) CONTRACTS FOR SALE OF BROADCAST TIME. All contracts
for sale of broadcast time on the Station that provide for payment by the
customer solely on a cash basis and that are to be in effect on the
Closing Date as listed and identified in Section 1.1(f) of the Disclosure
Schedule (the "Broadcast Agreements"). Buyer shall assume, pay and
perform all obligations under the Broadcast Agreements arising after the
Closing Date, PROVIDED, HOWEVER, Buyer will not assume any contract for
the sale of time entered into prior to the date of this Agreement
pursuant to which payment is to be received in whole or in part in
services, merchandise or other non-cash considerations ("Trade
Agreements"), except as agreed to by Buyer and set forth in Section
1.1(f) of the Disclosure Schedule, and Buyer will not assume any contract
for the sale of time pursuant to such a Trade Agreement entered into
subsequent to the date of this Agreement unless Buyer has consented in
writing to the execution of such contract.
(g) OPERATING AND BUSINESS RECORDS. All files, records,
logs and program materials pertaining to the operation of the Station
required to be
<PAGE>
Page 3
maintained and kept under the rules of the Commission and
such other files and records as Buyer shall reasonably require for the
continuing business and operation of the Station. Seller shall have the
right to reasonable access to such business records that Seller delivers
to Buyer under this Section 1.1(g) upon Seller's request for five years
after the Closing Date.
(h) FUTURE CONTRACTS. All leases, contracts and
agreements entered into between the date hereof and the Closing Date in
the usual and ordinary course of business, except that those exceeding
two months in duration or $5,000.00 in amount will not be assumed by
Buyer unless consented to by Buyer in writing and set forth in Section
1.1(h) of the Disclosure Schedule as amended from time to time, subject
to the Buyer's consent prior to the Closing.
(i) INVENTORY AND COMPUTER SOFTWARE. All of Seller's
items of inventory related to the business of the Station, including,
without limitation, broadcast programs, if any, as well as all computer
software used or useable by the Station.
(j) OTHER RIGHTS AND PRIVILEGES. Any and all other
franchises, materials, supplies, easements, rights-of-way, licenses, and
other rights and privileges of Seller relating to and used, useable or
necessary in the operation of the Station.
1.2 EXCLUDED ASSETS. There shall be excluded from the sale
transaction described herein the following assets relating to the
Station:
(a) CASH AND DEPOSITS. Cash-on-hand or in banks (or
their equivalents) and other investments belonging to Seller and relating
to the operation of the Station as of the Closing Date.
(b) ACCOUNTS RECEIVABLE. All accounts receivable of the
Seller with regard to the operation of the Station prior to the Closing
Date.
(c) PROPERTY CONSUMED. All property of the Station
disposed of or consumed (including ordinary wear and tear) in the
ordinary course of business between the date hereof and the Closing Date.
(d) EXPIRED LEASES, CONTRACTS AND AGREEMENTS. All
contracts described in Sections 1.1(e), (f) and (h) to the Disclosure
Schedule that are terminated or will have expired prior to the Closing
Date in the ordinary course of business.
(e) PENSION AND PROFIT-SHARING PLANS. All pension and
profit-sharing plans, trusts established thereunder and assets thereof,
if any, of Seller.
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(f) OTHER EMPLOYEE BENEFIT PLANS. All other employee
benefit plans (including health insurance) of Seller and the assets
thereof.
(g) EMPLOYMENT AND COLLECTIVE BARGAINING AGREEMENTS. All
employment agreements and collective bargaining agreements of Seller.
(h) TRADE AGREEMENTS. Any and all Trade Agreements.
(i) OTHER ASSETS. Those assets, if any, listed in
Section 1.2(h) of the Disclosure Schedule.
1.3 LIABILITIES TO BE ASSUMED. Except as otherwise expressly
provided herein, Buyer assumes no liabilities or obligations of Seller of
any nature whatsoever, contingent or otherwise, except for post-closing
obligations related to Real Estate Contracts, Contracts, and Broadcasting
Agreements and future contracts set forth on Schedule 1.1(h) of the
Disclosure Statement on the Closing Date (together, the "Assumed
Contracts") assigned to and specifically assumed by Buyer.
1.4 CONSIDERATION. In consideration of Seller's performance
of this Agreement and the sale, assignment, transfer, conveyance and
delivery of the Station Assets to Buyer free and clear of all liens and
encumbrances, Buyer shall pay to Seller on the Closing Date, by wire
transfer, the excess over $1 million of the sum of 8.5x Broadcast Cash
Flow, less the amount of the Escrow Deposit. The excess over $1 million
of the sum of 8.5x Broadcast Cash Flow and the Escrow Deposit is referred
to herein as the "Purchase Price." For purposes of this Agreement,
"Broadcast Cash Flow" shall mean Seller's time sales revenue, net of
agency commission and sales representative fees, plus tower rental
income, plus revenue received from the Seller's Family Reunion Concert
less direct expenses (selling, programming, news, engineering, general
and administrative and expenses relating to the Family Reunion Concert
and before depreciation, amortization and interest expense) plus expenses
for (i) officers and directors insurance premium, (ii) directors fees,
(iii) salary in excess of $20,000 paid by Seller to Mary Dunnavant and
(iv) sales commissions paid to William Dunnavant. All such revenue and
expense figures used in this calculation shall be as reflected in the
12/31 Financials.
1.5 PRORATION OF INCOME AND EXPENSES. (a) PRORATION. Except
as otherwise provided herein, all income and expenses arising from the
conduct of the business and operations of the Station shall be prorated
between Buyer and Seller in accordance with generally accepted accounting
principles as of 11:59 p.m., Eastern time, on the date immediately
preceding the Closing Date. Such prorations shall include, without
limitation, all AD VALOREM and other property taxes (but excluding taxes
arising by reason of the transfer of Station Assets as contemplated
hereby, which shall be paid as set forth in Section 10.4 of this
Agreement), business and license fees, music and other license fees
(including any retroactive adjustments thereof, which retroactive
adjustments shall not be subject to the ninety day limitation
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set forth in Section 1.5(b)), wages and salaries of employees hired by Buyer,
including accruals up to the Closing Date for bonuses, commissions,
vacation and sick pay, and related payroll taxes, utility expenses, time
sales agreements, rents and similar prepaid deferred items attributable
to the ownership and operation of the Station.
(b) TIME FOR PAYMENT. The prorations and adjustments
contemplated by Section 1.5 (a), to the extent practicable, shall be made
on the Closing Date. As to those prorations and adjustments not capable
of being ascertained on the Closing Date, an adjustment and proration
shall be made within 90 days of the Closing Date.
(c) DISPUTE RESOLUTION. In the event of any disputes
between the parties as to such adjustments, the amounts not in dispute
shall nonetheless be paid at the time provided in Section 1.5(b) and such
disputes shall be determined by an independent certified public
accountant mutually acceptable to the parties whose determination shall
be final, and the fees and expenses of such accountant shall be paid one-
half by Seller and one-half by Buyer.
1.6 ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree that
the Purchase Price shall be allocated among the Station Assets in a
manner to be determined by Buyer based on the advice or recommendation of
a nationally recognized appraisal firm. Buyer and Seller agree to use
such allocation in completing and filing Internal Revenue Service Form
8594 for federal income tax purposes. Buyer and Seller further agree
that they shall not take any position inconsistent with such allocation
upon examination of any return, in any refund claim, in any litigation,
or otherwise.
1.7 ESCROW. As security for Buyer's failure to Close and for
Seller to perform its obligations hereunder, Buyer shall deposit with
AmSouth Bank N.A., Huntsville, Alabama (the "Escrow Agent") a sum equal
to $200,000 (the amount so deposited, together with interest accrued
thereon from time to time, is referred to herein as the "Escrow
Deposit"). The Escrow Deposit shall be held and disbursed by the Escrow
Agent as follows: on the Closing (the "Release Date"), the Escrow
Deposit shall be delivered to Seller in partial satisfaction of the
Purchase Price; PROVIDED, HOWEVER, that (i) in the event this Agreement
is terminated pursuant to Sections 2.3(a), (iii) or (iv), 6.6 or 6.9 of
this Agreement and in each such case Buyer is not in default hereunder,
the Escrow Deposit shall be returned to Buyer; (iii) in the event this
Agreement is terminated pursuant to Sections 2.3(a), (iii) or (v) and in
each such case Seller is not in default hereunder, the Escrow Deposit
shall be delivered to Seller; and (iii) in the event this Agreement is
terminated pursuant to Section 2.3(a)(i), the Closing does not occur on
or before June 1, 1997 and neither Buyer nor Seller is in default under
this Agreement, the Escrow Deposit shall be returned to Buyer.
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ARTICLE II
CLOSING, TERMINATION AND RISK OF LOSS
2.1 CLOSING. The purchase and sale of the Station Assets
contemplated by this Agreement (the "Closing") shall take place at 10:00
a.m. on a mutually agreed upon day within five (5) days after the later
of (i) the Commission's approval of the Assignment Application, as
defined in Section 6.1 below, becomes a Final Order and (ii) the date on
which the 12/31 Financials (as defined in Section 5.7) are delivered by
Seller to Buyer, or such other time and place as shall be mutually agreed
upon in writing by the parties (the "Closing Date"). For purposes of
this Agreement, a "Final Order" shall mean any action of the Commission
which has not been reversed, stayed, enjoined, set aside, annulled or
suspended and with respect to which no requests are pending for
administrative or judicial review, reconsideration, appeal or stay, and
the time for filing any such requests and the time for the Commission to
set aside the action on its own motion shall have expired.
2.2 TRANSACTIONS AT THE CLOSING.
(a) At the Closing, Seller shall deliver or cause to be
delivered to Buyer the following:
(i) assignments of the Licenses and other pertinent
authorizations transferring the same to the Buyer in customary form
and substance;
(ii) the certificates contemplated by Sections 7.2 and
7.3;
(iii) a copy of the resolutions of the board of
directors of Seller authorizing the execution, delivery and
performance of this Agreement, the Non-Competition Agreement and the
Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby, together with a certificate of the
Secretary of Seller, dated as of the Closing Date, that such
resolutions were duly adopted and are in full force and effect;
(iv) a bill of sale and all other appropriate
documents and instruments assigning to Buyer good and marketable
title to the Station Assets free and clear of any security
interests, mortgages, liens, pledges, attachments, conditional sales
contracts, claims, charges or encumbrances of any kind whatsoever;
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(v) a Non-Competition Agreement, substantially in the
form of Exhibit A hereto (the "Non-Competition Agreement"), duly
executed by each of Seller, William Dunnavant and Mary Dunnavant;
(vi) written consents of the respective lessors,
landowners, and any other persons or entities whose consents may be
required to permit Buyer to assume the liabilities, contracts,
leases, licenses, understandings and agreements constituting the
Assumed Contracts;
(vii) evidence satisfactory to Buyer's counsel that no
financing statements are outstanding on the Station Assets;
(viii) all files, records, logs, and program materials
relating to the Station;
(ix) the opinion of counsel for Seller, dated the
Closing Date, as described in Section 7.7;
(x) assignments to Buyer of all the Assumed
Contracts; and
(xi) such other documents and instruments as Buyer may
reasonably request to consummate the transactions contemplated
hereby.
(b) At the Closing, Buyer shall deliver or cause to be
delivered to Seller the following:
(i) the Purchase Price;
(ii) a copy of the resolutions of the board of
directors of Buyer authorizing the execution, delivery and
performance of this Agreement the Escrow Agreement and the Non-
Competition Agreement, and the consummation of the transactions
contemplated hereby and thereby, together with a certificate of the
Secretary of Buyer dated as of Closing Date, that such resolutions
were duly adopted and are in full force and effect;
(iii) the certificates contemplated by Sections 8.1 and
8.2;
(iv) the opinion of counsel for Buyer, dated the
Closing Date, as described in Section 8.7;
(v)an assumption of Sellers' obligations under the
Contracts, Real Estate Contracts and Broadcast Agreements assigned
to Buyer pursuant to this Agreement; and
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(vi) such other documents and instruments as Seller
may reasonably request to consummate the transactions contemplated
hereby.
(c) At the Closing, Buyer shall deliver or cause to be
delivered to Seller, William Dunnavant and Mary Dunnavant, the Non-
Competition Agreement duly executed by the Buyer, and the aggregate $1
million payment to be made by the Buyer pursuant thereto shall be paid by
wire transfer of same day funds to the account or accounts specified in
writing by the Seller to Buyer at least two business days prior to the
Closing Date.
2.3 TERMINATION.
(a) Notwithstanding anything to the contrary contained
in this Agreement, this Agreement may be terminated at any time by:
(i) the mutual written consent of the parties hereto;
(ii) either Buyer or Seller if the Closing does not
occur on or before June 1, 1997, provided, however, that the party
seeking termination under this Section 2.3(a)(ii) shall not, as a
result of a default under this Agreement by such party have
prevented the Closing from occurring;
(iii) either Buyer or Seller if the Assignment
Application is not granted on or prior to June 1, 1997 or is denied
by the Commission by a Final Order or, subject to Section 2.3(c)
hereof, is at any time set by the Commission for a formal hearing;
(iv) Buyer, if any of the conditions set forth in
Article VII shall have become incapable of fulfillment, and shall
not have been waived by Buyer, or if Seller shall be in default
hereunder and such default shall not have been cured or waived prior
to the Closing; or
(v) Seller, if any of the conditions set forth in
Article VIII shall have become incapable of fulfillment, and shall
not have been waived by Seller, or if Buyer shall be in default
hereunder and such default shall not have been cured or waived prior
to the Closing.
(b) In the event of the termination of this Agreement by
Buyer or Seller pursuant to this Section 2.3, written notice thereof
shall promptly be given to the other party and, except as otherwise
provided herein, the transactions contemplated by this Agreement shall be
terminated, without further action by any party. Nothing in this Section
2.3 shall be deemed to release any party from any liability for any
breach by such party of the terms and provisions of this Agreement or to
impair the right of Buyer to compel specific performance of Seller of its
obligations under this Agreement.
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(c) The time for Commission approval provided in Section
2.3(a)(iii) notwithstanding, either party may terminate this Agreement
upon written notice to the other, if, for any reason, the Assignment
Application is designated for hearing by the Commission, PROVIDED,
HOWEVER, that written notice of termination must be given within twenty
(20) days after release of the Hearing Designation Order and that the
party giving such notice is not in default and has otherwise complied
with its obligations under this Agreement. Upon termination pursuant to
this Section, the parties shall be released and discharged from any
further obligation hereunder.
(d) It is further PROVIDED, HOWEVER, that no party may
terminate this Agreement if such party is in default hereunder, or if a
delay in any decision or determination by the Commission respecting the
Assignment Application has been caused or materially contributed to
(i) by any failure of such party to furnish, file or make available to
the Commission information within its control; (ii) by the willful
furnishing by such party of incorrect, inaccurate or incomplete
information to the Commission; and (iii) by any other action taken by
such party for the purpose of delaying the Commission's decision or
determination respecting the Assignment Application. Upon such
termination for failure of the Commission to act, the parties shall be
released and discharged from any further obligation hereunder.
(e) A party shall be deemed to be in default under this
Agreement only if such party has materially breached or failed to perform
its obligations hereunder, and non-material breaches or failures shall
not be grounds for declaring a party to be in default, postponing the
Closing, or terminating this Agreement.
2.4 RISK OF LOSS. The risk of any loss, damage or destruction
to any of the Station Assets from fire or other casualty or cause shall
be borne by Seller at all times prior to the Closing Date hereunder.
Upon the occurrence of any loss or damage to any of the Station Assets as
a result of fire, casualty, accident or other causes prior to the Closing
Date, Seller shall notify Buyer of same in writing immediately stating
with particularity the extent of loss or damage incurred, the cause
thereof if known and the extent to which restoration, replacement and
repair of the Station Assets lost or destroyed will be reimbursed under
any insurance policy with respect thereto. In the event the loss exceeds
$50,000 and the Station Assets cannot be substantially repaired or
restored within forty-five (45) days after such loss, Buyer shall have
the option, exercisable within ten (10) days after receipt of written
notice from Seller, to: (i) terminate this Agreement; (ii) postpone the
Closing until such time as the property has been completely repaired,
replaced or restored to the satisfaction of Buyer, unless the same cannot
be reasonably effected within thirty (30) days of notification; or
(iii) elect to consummate the Closing and accept the property in its
damaged condition, in which event Seller shall assign to Buyer all rights
under any insurance claim covering the loss and pay over to Buyer any
proceeds under any such insurance policy thereto received by Seller with
respect thereto.
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2.5 INTERRUPTION OF BROADCAST TRANSMISSIONS. Notwithstanding
any other provision hereof, if prior to the Closing any event occurs
which prevents the broadcast transmission by the Station with
substantially full licensed power and antenna height as described in the
applicable FCC Licenses and in the manner it has heretofore been
operating for periods of time in excess of six (6) hours, the Seller will
give prompt written notice thereof to Buyer. If such facilities are not
restored so that operation is resumed with substantially full licensed
power within three (3) days of such event, or, in the case of more than
one event, the aggregate number of days preceding such restorations from
all such events is more than six (6) days, or if the Station is off the
air more than three (3) times for a period in each case exceeding six (6)
hours, Buyer shall have the right, by giving written notice to Seller of
its election to do so, to terminate this Agreement.
2.6 COOPERATION REGARDING ACCOUNTS RECEIVABLE. If at
any time following the Closing, Buyer or Seller receives any third party
payment to which the other party hereto is entitled, such receiving party
shall promptly (and in any event within 10 days following receipt
thereof) deliver such payment to the party entitled to receipt thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 DUE INCORPORATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Alabama, and is duly qualified to do business in and is in good
standing in the State of Alabama. Seller has the corporate power and
authority to own and to operate the Station and the Station Assets.
3.2 AUTHORITY; NO CONFLICT. The execution and delivery of
this Agreement and the Escrow Agreement have been duly and validly
authorized and approved by the board of directors of Seller, and Seller
has the corporate power and authority to execute, deliver and perform
this Agreement and the Escrow Agreement and to consummate the
transactions contemplated hereby and thereby. Neither such execution,
delivery or performance nor compliance by Seller with the terms and
provisions hereof and thereof will (assuming receipt of all necessary
approvals from the Commission) conflict with or result in a breach of any
of the terms, conditions or provisions of (a) the Certificate of
Incorporation or Bylaws of Seller,(b) any judgment, order, injunction,
decree, regulation or ruling of any court or other governmental authority
to which Seller is subject, or (c) any material agreement, lease or
contract, written or oral, to which Seller is subject. This Agreement
and the Escrow Agreement shall each constitute the valid and binding
obligation of Seller
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with respect to the terms hereof and thereof,
subject, in the case of this Agreement, to Commission approval of the
transactions contemplated hereby.
3.3 GOVERNMENT AUTHORIZATIONS. Section 1.1(a) of the
Disclosure Schedule contains a true and complete list of all the
Licenses, which Licenses are sufficient for the lawful conduct of the
business and operation of the Station in the manner and to the full
extent they are currently conducted. Seller is the authorized legal
holder of the Licenses, none of which is subject to any restriction or
condition which would limit in any material respect the full operation of
the Station as now operated. To Seller's knowledge, there are no
applications, complaints or proceedings pending or threatened as of the
date hereof before the Commission or any other governmental authority
relating to the business or operations of the Station, other than
applications, complaints or proceedings which generally affect the
broadcasting industry as a whole, and other than reports and forms filed
in the ordinary course of the Station's business. Seller has delivered
to Buyer true and complete copies of the Licenses, including any and all
additions, amendments and other modifications thereto. The Licenses are
in good standing, are in full force and effect and are unimpaired by any
act or omission of Seller or its officers, directors or employees; and
the operation of the Station is in accordance with the Licenses and the
underlying construction permits. Seller has no notice of, and to
knowledge of Seller, no proceedings are pending or threatened which may
result in the revocation, modification, non-renewal or suspension of any
of the Licenses, the denial of any pending applications, the issuance of
any cease and desist order, the imposition of any administrative actions
by the Commission with respect to the Licenses or which may affect
Buyer's ability to continue to operate the Station as it is currently
operated. Seller has taken no action which, to its knowledge, could lead
to revocation or non-renewal of the Licenses, nor to Seller's knowledge
has it omitted to take any action which, by reason of its omission, could
lead to revocation of the Licenses. All material reports, forms and
statements required to be filed with the Commission with respect to the
Station since the grant of the last renewal of the Licenses have been
filed and are complete and accurate in all material respects. To the
knowledge of Seller, there are no facts which, under the Communications
Act of 1934, as amended, or the existing rules and regulations of the
Commission, would disqualify Seller as assignor in connection with the
Assignment Application.
3.4 COMPLIANCE WITH REGULATIONS. To knowledge of Seller, the
operation of the Station is in compliance in all material respects with
(i) all applicable engineering standards required to be met under
Commission rules, and (ii) all other applicable rules, regulations,
requirements and policies of the Commission and all other applicable
governmental authorities, including, but not limited to, ANSI Radiation
Standards, to the extent required to be met under applicable Commission
rules and regulations; and there are no existing claims known to Seller
to the contrary.
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Page
3.5 TAXES. To knowledge of Seller, Seller has timely filed
all federal, state, local and foreign income, franchise, sales, use,
property, excise, payroll and other tax returns required by law and has
paid in full all taxes, estimated taxes, interest, assessments, and
penalties due and payable as shown thereon. All returns and forms which
have been filed have been true and correct in all material respects and
no tax or other payment in a material amount other than as shown on such
returns and forms are required to be paid or have been paid by Seller.
There are no present disputes as to taxes of any nature payable by Seller
which in any event could materially adversely affect the Station Assets
or operation of the Station.
3.6 PERSONAL PROPERTY. Section 1.1(b) of the Disclosure
Schedule contains a true and complete list of all the Personal Property.
Except for those assets designated on Section 1.1(b) of the Disclosure
Schedule as being subject to lease agreements, Seller owns and has, and
will have on the Closing Date, good and marketable title to such Personal
Property, and none of such Personal Property on the Closing Date will be
subject to any security interest, mortgage, pledge, conditional sales
agreement or other lien or encumbrance. All items of Personal Property
are in all material respects in good operating condition, ordinary wear
and tear excepted, and are available for immediate use in the conduct of
the business and operation of the Station. To Seller's knowledge, the
technical equipment, including, without limitation, all transmitters and
studio equipment, constituting part of the Personal Property, has been
maintained in accordance with industry practice and is in good operating
condition, ordinary wear and tear excepted, and complies in all material
respects with all applicable rules and regulations of the Commission and
the terms of the Licenses. The Personal Property includes all such items
and equipment necessary to conduct in all material respects the business
and operations of the Station as now conducted.
3.7 REAL PROPERTY. Neither Seller nor any affiliate of Seller
owns any real property used in connection with the operation of the
Station.
3.8 REAL ESTATE CONTRACTS.
(a) Section 1.1(c) of the Disclosure Schedule contains a
true and complete list and summary of all the Real Estate Contracts. To
Seller's knowledge, the present use by the Station of all real property
leased pursuant to the Real Estate Contracts conforms in all material
respects with all applicable building, zoning, land use and other laws,
ordinances, codes, orders and regulations, and, to the knowledge of
Seller, all other governmental regulations.
(b) The Real Estate Contracts constitute valid and
binding obligations of Seller and, to the best of Seller's knowledge, of
all other persons purported to be parties thereto, and are in full force
and effect as of the date hereof. To Seller's knowledge, the Seller is
not in default under any of the Real Estate Contracts and has not
received or given written notice of any default thereunder from
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or to any of the other parties thereto. Seller shall use reasonable efforts
to obtain valid and binding third-party consents, if any are necessary, from
all required third parties to the Real Estate Contracts to be conveyed
and assigned to Buyer as part of the Station Assets. Subject to any
required third-party consents, Seller will have full legal power and
authority to assign its rights under the Real Estate Contracts of Buyer
in accordance with this Agreement on terms and conditions no less
favorable than those in effect on the date hereof, and such assignment
shall not affect the validity, enforceability and continuity of any of
the Real Estate Contracts.
3.9 CONSENTS. No consent, approval, authorization or order
of, or registration, qualification or filing with, any court, regulatory
authority or other governmental body is required for the execution,
delivery and performance by Seller of this Agreement, the Non-Competition
Agreement, or the Escrow Agreement or the execution, delivery and
performance by each of William Dunnavant and Mary Dunnavant of the Non-
Competition Agreement, other than approval by the Com-mission of the
Assignment Application as contemplated hereby. Except as set forth in
Section 3.9 of the Disclosure Schedule, no consent of any other party
(including, without limitation, any party to any Assumed Contract) is
required for the execution, delivery and performance by Seller of this
Agreement, the Non-Competition Agreement, or the Escrow Agreement or the
execution, delivery and performance by each of William Dunnavant and Mary
Dunnavant of the Non-Competition Agreement.
3.10 CONTRACTS. Section 1.1(e) of the Disclosure Schedule
contains a true and complete list of all Contracts, and Section 1.1(f)
contains a true and complete list of all Broadcast Agreements. The
Seller is not currently party to, and prior to the Closing Date will not
enter into any Trade Agreements. Seller has delivered to Buyer true and
complete copies of all written Contracts and Broadcast Agreements in the
possession of Seller, including any and all amendments and other
modifications to same. To Seller's knowledge, all such Contracts and
Broadcast Agreements are valid, binding and enforceable by Seller in
accordance with their respective terms, except as limited by laws
affecting creditors' rights or equitable principles generally. To
Seller's knowledge, Seller has complied in all material respects with all
such Contracts and Broadcast Agreements, and Seller is not in default
beyond any applicable grace periods under any of same, and no other
contracting party is in material default under any of same. Subject to
obtaining the consents set forth on Schedule 3.9, Seller has full legal
power and authority to assign its respective rights under such Contracts
and Broadcast Agreements to Buyer in accordance with this Agreement on
terms and conditions no less favorable than those in effect on the date
hereof, and such assignment will not materially affect the validity,
enforceability and continuity of any such Contracts and Broadcast
Agreements.
3.11 ENVIRONMENTAL. Seller has not unlawfully disposed of any
Hazardous Waste in a manner which has caused, or could cause, Buyer to
incur a material liability under applicable law in connection therewith;
and Seller warrants
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that the technical equipment included in the Personal
Property does not contain any Hazardous Waste, including any
Polychlorinated Biphenyls ("PCBs") that are required by law to be
removed, or if any equipment does contain Hazardous Waste, including any
PCBs, that such equipment is stored and maintained in compliance with
applicable law. To Seller's knowledge, Seller has complied in all
material respects with all federal, state and local environmental laws,
rules and regulations applicable to the Station and its operations,
including but not limited to the Commission's guidelines regarding RF
radiation. No Hazardous Waste has been disposed of by Seller, and to the
best of Seller's knowledge, no Hazardous Waste has been disposed of by
any other person on the property subject to Real Estate Contracts. As
used herein, the term "Hazardous Waste" shall mean all materials
regulated by any federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, ground water, land
surface or subsurface strata). If Seller learns between the date of this
Agreement and the Closing Date that Seller is in breach of the
representation and warranty set forth in this Section 3.11, Seller shall
begin remedial action promptly and shall use reasonable best efforts to
complete such remedial action to the satisfaction of Buyer before the
Closing Date.
3.12 INTELLECTUAL PROPERTY. Section 3.12 of the Disclosure
Schedule identifies all Seller's proprietary Intellectual Property used
in the operation of the Station. Seller has not received any written
notice of any infringement or unlawful use by the Station of any
proprietary intellectual property of any other person and, to Seller's
knowledge, Seller has not violated or infringed any patent, trademark,
trade secret or copyright held by others or any license, authorization or
permit held by it.
3.13 FINANCIAL STATEMENTS. Section 3.13 of the Disclosure
Schedule contains complete unaudited copies of the statements of income,
the related balance sheets, and the notes thereto, of Seller relating to
the Station for the twelve month period ended December 31, 1995 and for
the nine months ended and on September 30, 1996 (the "Financial
Statements"). To Seller's knowledge, the Financial Statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") and in accordance with the policies and procedures of the Seller
applicable thereto, consistently applied. To Seller's knowledge, the
Financial Statements present fairly the financial condition and results
of operations of the Station for the periods indicated.
3.14 PERSONNEL INFORMATION; LABOR CONTRACTS.
(a) Section 3.14 of the Disclosure Schedule contains a
true and complete list of all persons employed at the Station, including
the date of hire, a description of material compensation arrangements
(other than employee benefit plans set forth in Section 3.15 of the
Disclosure Schedule) and a list of other terms of any and all material
agreements affecting such persons.
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(b) Seller is not a party to any contract with any labor
organization, nor has Seller agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective
bargaining unit been certified as representing any of Seller's employees.
Seller has no knowledge of any organizational effort currently being made
or threatened by or on behalf of any labor union with respect to
employees of the Station. During the past two years, Seller has not
experienced any strikes, work stoppages, grievance proceedings, claims of
unfair labor practices filed, or other significant labor difficulties of
any nature.
(c) To Seller's knowledge, Seller has complied in all
material respects with all laws relating to the employment of labor,
including, without limitation, the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and those laws relating to wages,
hours, collective bargaining, unemployment insurance, workers'
compensation, equal employment opportunity and the payment and
withholding of taxes.
3.15 EMPLOYEE BENEFIT PLANS. Section 3.15 of the Disclosure
Schedule contains a true and complete list and summary, as of the date of
this Agreement, of all employee benefit plans (as that term is defined in
Section 3(3) of ERISA) applicable to the employees of Seller. Seller
maintains no other employee benefit plan. Each of Seller's employee
benefit plans has been operated and administered in all material respects
in accordance with its terms and applicable law, including, without
limitation, ERISA and the Internal Revenue Code.
3.16 LITIGATION. To Seller's knowledge, except as set forth in
Section 3.16 of the Disclosure Schedule, Seller is not subject to any
judgment, award, order, writ, injunction, arbitration decision or decree,
and except as set forth in Section 3.16 of the Disclosure Schedule or as
otherwise identified in Section 3.3 of the Disclosure Schedule there is
no litigation, proceeding or investigation pending or, to the best of
Seller's knowledge, threatened against Seller or the Station in any
federal, state or local court, or before any administrative agency or
arbitrator (including, without limitation, any proceeding which seeks the
forfeiture of, or opposes the renewal of, any of the Licenses), or before
any other tribunal duly authorized to resolve disputes, which would
reasonably be expected to have any material adverse effect upon the
business, property, assets or condition (financial or otherwise) of the
Station or which seeks to enjoin or prohibit, or otherwise questions the
validity of, any action taken or to be taken pursuant to or in connection
with this Agreement. In particular, but without limiting the generality
of the foregoing, except as set forth in Section 3.16 of the Disclosure
Schedule, to Seller's knowledge, there are no applications, complaints or
proceedings pending or, to the best of Seller's knowledge, threatened
before the Commission or any other governmental organization with respect
to the business or operation of the Station, other than applications,
complaints or proceedings which affect the broadcast industry generally.
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3.17 COMPLIANCE WITH LAWS. Seller has not received any notice
asserting any non-compliance with any applicable statute, rule or
regulation (federal, state or local) whether or not related to the
business or operation of the Station. To Seller's knowledge, Seller is
not in default with respect to any judgment, order, injunction or decree
of any court, administrative agency or other governmental authority or to
any other tribunal duly authorized to resolve disputes in any respect
material to the transactions contemplated hereby. To Seller's knowledge,
Seller is in compliance in all material respects with all laws,
regulations and governmental orders whether or not applicable to the
conduct of the business and operation of the Station and any other
business or operations conducted by Seller.
3.18 INSURANCE. Section 3.18 of the Disclosure Schedule
contains a true and complete list of all Seller's insurance policies
relating to all Personal Property and real property subject to a Real
Estate Contract and all other Station Assets. To Seller's knowledge, all
such policies are in full force and effect and Seller has received no
notice of cancellation with respect thereto.
3.19 UNDISCLOSED LIABILITIES. Except as to, and to the extent
of, the amounts specifically reflected or reserved against in Seller's
balance sheets for the period ending September 30, 1996 (the "Balance
Sheet Date"), and except for liabilities and obligations incurred since
the Balance Sheet Date in the ordinary and usual course of business,
Seller has no material liabilities or obligations of any nature whether
accrued, absolute, contingent or otherwise and whether due or to become
due, and, to the best of Seller's knowledge, there is no basis for the
assertion against Seller of any such liability or obligations.
3.20 ABSENCE OF CERTAIN CHANGES. As of the date of this
Agreement, except as disclosed in Section 3.20 of the Disclosure
Schedule, since the Balance Sheet Date there has not been:
(a) Any material adverse change in the working capital,
financial condition, business, results of operations, assets or
liabilities of Seller;
(b) Any change in the manner in which Seller conducts
its business and operations other than changes in the ordinary and usual
course of business consistent with past practice;
(c) Any amendment to the Articles of Incorporation or
Bylaws of Seller that would materially adversely affect Seller's ability
to perform its obligations under this Agreement or the Escrow Agreement
or materially adversely affect the Station Assets or the operation of the
Station;
(d) Any contract or commitment, to which Seller is a
party, entered into, modified or terminated, except in the ordinary and
usual course of business or as required under the terms of this
Agreement;
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(e) Any creation or assumption of any mortgage, pledge
or other lien or encumbrance upon any of the Station Assets except in the
ordinary and usual course of business;
(f) Any sale, assignment, lease, transfer, or other
disposition of any of the Station Assets, except in the ordinary and
usual course of business;
(g) The incurring of any liabilities or obligations,
except items incurred in the ordinary and usual course of business;
(h) The write-off or determination to write off as
uncollectible any accounts receivable or portion thereof, except for
write-offs in the ordinary course of business consistent with past
practice at a rate no greater than during the twelve months prior to the
Balance Sheet Date;
(i) The cancellation of any debts or claims, or waiver
of any rights, having an aggregate value in excess of $10,000;
(j) The disposition, lapse or termination of any
Intellectual Property;
(k) The increase or promise to increase the rate of
commissions, fixed salary or wages, draw, bonus or other compensation
payable to any employee of Seller, except in the ordinary and usual
course of business consistent with past practice;
(l) To Seller's knowledge, any default under any
contract or lease to which Seller is a party that would materially
adversely affect the Seller's ability to perform its obligations under
this Agreement or the Escrow Agreement or that would materially adversely
affect the Station Assets or the operation of the Station; or
(m) Any change in any method of accounting or accounting
practice used by Seller.
3.21 INSOLVENCY PROCEEDINGS. No insolvency proceedings of any
character including, without limitation, bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting Seller or the Station Assets are pending or, to
Seller's knowledge, 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.
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3.22 FINDERS AND BROKERS. Neither the Seller nor any person
acting for or on behalf of the Seller has entered into any contract,
agreement or understanding with any person which will result in the
obligation of Buyer or Seller to pay any finder's fees, brokerage or
agents commission or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
transactions contemplated by this Agreement.
3.23 FULL DISCLOSURE. To Seller's knowledge, no representation
or warranty by Seller in this Agreement or in any agreement, document,
exhibit or certificate furnished or to be furnished by Seller to Buyer
pursuant hereto or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of material fact,
or omits or will omit to state a material fact necessary to make the
statement contained herein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 DUE INCORPORATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and as of the Closing Date shall be duly qualified to do
business in and be in good standing in the State of Alabama.
4.2 AUTHORITY; NO CONFLICT. The execution and delivery of
this Agreement, the Escrow Agreement and the Non-Competition Agreement
have been duly and validly authorized and approved by the board of
directors of Buyer, and Buyer has the corporate power and authority to
execute, deliver and perform this Agreement, the Escrow Agreement and the
Non-Competition Agreement, to consummate the transactions contemplated
hereby and thereby and, following the Closing, to operate the Station.
The execution, delivery, performance hereof, and compliance by Buyer with
the terms and provisions hereof and thereof, will not (assuming receipt
of all necessary approvals from the Commission) conflict with or result
in a breach of any of the terms, conditions or provisions of (a) the
Certificate of Incorporation or Bylaws of Buyer, (b) any judgment, order,
injunction, decree, regulation or ruling of any court or other
governmental authority to which Buyer is subject, or (c) any material
agreement, lease or contract, written or oral, to which Buyer is subject.
This Agreement, the Escrow Agreement and the Non-Competition Agreement
will each constitute the valid and binding obligation of Buyer with
respect to the terms hereof and thereof, subject, in the case of this
Agreement, to Commission approval of the transactions contemplated
hereby.
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4.3 CONSENTS. No consent, approval, authorization or order
of, or registration, qualification or filing with, any court, regulatory
authority or other governmental body is required for the execution,
delivery and performance by Buyer of this Agreement, the Escrow Agreement
and the Non-Competition Agreement, other than the approval by the
Commission of the Assignment Application as contemplated hereby. Except
as set forth in Section 4.3 of the Disclosure Schedule, no consent of any
other party is required for the execution, delivery and performance by
Buyer of this Agreement, the Escrow Agreement and the Non-Competition
Agreement.
4.4 LITIGATION. There is no litigation, proceeding or
investigation pending or, to the best of Buyer's knowledge, threatened
against Buyer in any federal, state or local court, or before any
administrative agency or arbitrator, or before any other tribunal duly
authorized to resolve disputes, that would reasonably be expected to have
any material adverse effect upon the ability of Buyer to perform its
obligations hereunder or under the Escrow Agreement or the Non-
Competition Agreement, or that seeks to enjoin or prohibit, or otherwise
questions the validity of, any action taken or to be taken pursuant to or
in connection with this Agreement, the Escrow Agreement and the Non-
Competition Agreement.
4.5 COMPLIANCE WITH LAWS. Buyer is not in default with
respect to any judgment, order, injunction or decree of any court,
administrative agency or other governmental authority or of any other
tribunal duly authorized to resolve disputes in any respect material to
the transactions contemplated hereby. Buyer is not in violation of any
law, regulation or governmental order, the violation of which would have
a material adverse effect on Buyer or its ability to perform its
obligations pursuant to this Agreement, the Escrow Agreement and the Non-
Competition Agreement.
4.6 QUALIFICATION. To the best of Buyer's knowledge, Buyer is
and on the Closing Date will be legally, technically and financially
qualified to be the assignee of the Licenses and the other Station
Assets, and, prior to the Closing Date, Buyer will exercise its best
efforts to refrain from doing any act which would disqualify Buyer or any
successor to its rights or interests hereunder from being the assignee of
the Licenses and the other Station Assets.
4.7 FINDERS AND BROKERS. Neither the Buyer nor any person
acting for or on behalf of the Buyer has entered into any contract,
agreement or understanding with any person other than Stan Raymond
Associates ("Raymond") which will result in the obligation of Buyer or
Seller to pay any finder's fees, brokerage or agents commission or other
like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated by this
Agreement.
4.8 INSOLVENCY PROCEEDINGS. No insolvency proceedings of any
character including, without limitation, bankruptcy, receivership,
reorganization,
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composition or arrangement with creditors, voluntary or
involuntary, affecting Buyer are pending or, to Buyer's knowledge,
threatened, and Buyer 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.
4.9 FULL DISCLOSURE. No representation or warranty by Buyer
in this Agreement or in any agreement, document, exhibit or certificate
furnished or to be furnished to by Buyer to Seller pursuant hereto, or in
connection with the Non-Competition Agreement, or in connection with the
transactions contemplated hereby, contains or will contain any untrue
statement of material fact, or omits or will omit to state a material
fact necessary to make the statement contained herein not misleading.
ARTICLE V
COVENANTS OF SELLER
Between the date of this Agreement and the Closing Date, Seller
shall have complete control of the Station and its operations, and Seller
covenants as follows with respect to such period:
5.1 CONTINUED OPERATION OF STATION. Seller shall use its best
efforts to continue to operate the Station under the terms of the
Licenses in the manner in which the Station has been operated heretofore,
in the usual and ordinary course of business, in conformity with all
material applicable laws, ordinances, regulations, rules and orders, and
in a manner so as to preserve and foster the goodwill and business
relationships of the Station and Seller, including, without limitation,
relationships with advertisers, suppliers, customers, and employees.
Seller shall file with the Commission and any other applicable
governmental authority all applications and other documents required to
be filed in connection with the continued operation of the Station.
5.2 FINANCIAL OBLIGATIONS. Seller shall use its best efforts
to continue to conduct the financial operations of the Station, including
its credit and collection policies, in the ordinary course of business
with the same effort, to the same extent, and in the same manner, as in
the prior conduct of the business of the Station; and shall continue to
pay and satisfy all expenses, liabilities and obligations arising in the
ordinary course of business in accordance with past accounting practices.
Seller shall not enter into or amend any contracts or commitments
involving expenditures by Seller in an aggregate amount in excess of
$10,000 without the prior written consent of Buyer.
5.3 REASONABLE ACCESS. Seller shall provide Buyer, and
representatives of Buyer, with reasonable access during normal business
hours to the
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Station and shall furnish such additional information
concerning the Station as Buyer from time to time may reasonably request.
5.4 MAINTENANCE OF ASSETS. Seller shall maintain the Personal
Property and all other tangible assets in their present good operating
condition, repair and order, reasonable wear and tear in ordinary usage
excepted. Seller shall not waive or cancel any claims or rights of
substantial value or transfer or otherwise dispose of any Personal
Property.
5.5 NOTIFICATION OF DEVELOPMENTS. Seller shall notify Buyer
of any materially adverse developments with respect to the Station Assets
or operation of the Station; and provide Buyer with prompt written notice
of any change in any of the information contained in the representations
and warranties made herein or in the Disclosure Schedule or any other
documents delivered in connection with this Agreement.
5.6 PAYMENT OF TAXES. Seller shall pay or cause to be paid
when due all property and all other taxes relating to the Station and the
assets and employees of the Station required to be paid to city, county,
state, federal and other governmental units through the Closing Date;
PROVIDED, HOWEVER, Seller may appeal or contest any such tax, it being
understood that Seller shall indemnify and hold harmless Buyer, its
successors and assigns, from any and all labilities relating to or in
respect of taxes (including any interest or penalties assessed in
connection therewith) relating to operation of the Station prior to the
Closing Date.
5.7 AUDITED FINANCIAL STATEMENTS. As soon as practicable
following December 31, 1996, but in any event not later than January 31,
1997, Seller shall deliver to Buyer a balance sheet as of December 31,
1996, and statement of income and of expenses, together with notes
thereto, of the Station for the 12 month period ended December 31, 1996,
together with notes thereto (the "12/31 Financials"). The 12/31
Financials shall be audited by and accompanied by the report of an
independent accounting firm (the "Independent Accounting Firm") selected
by the Buyer, subject to Seller's consent, which shall not be
unreasonably withheld. Such statement be prepared in accordance with
GAAP and consistent with the policy and procedure applied by the Seller
in the Financial Statements. The report of such Independent Accounting
Firm shall state that in the opinion of such firm the 12/31 Financials
fairly present the financial condition and results of the operation of
the Station for the period covered by such statements.
5.8 THIRD PARTY CONSENTS. Seller shall use commercially
reasonable efforts to obtain from any third party waivers, permits,
licenses, approvals, authorizations, qualifications, orders and consents
necessary for the consummation of the transactions contemplated by this
Agreement, including, without limitation, approval from the Commission of
the Assignment Application contemplated hereby.
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5.9 ENCUMBRANCES. Except as otherwise permitted in this
Agreement, Seller shall not knowingly or willingly suffer or permit the
creation of any mortgage, conditional sales agreement, security interest,
lease, lien, hypothecation, deed of trust or pledge, encumbrance,
restriction, liability, charge, or imperfection of title with respect to
the Station Assets.
5.10 ASSIGNMENT OF ASSETS. Seller shall not sell, assign,
lease or otherwise transfer or dispose of any Station Assets, whether now
owned or hereafter acquired, except for retirements in the normal and
usual course of business or in connection with the acquisition of similar
property or assets, as provided for herein.
5.11 COMMISSION LICENSES AND AUTHORIZATIONS. Seller shall use
its best efforts to not, by any act or omission surrender, modify
adversely, forfeit or fail to renew under regular terms the Licenses,
cause the Commission or any other governmental authority to institute any
proceeding for the revocation, suspension or modification of any such
License, or fail to prosecute with due diligence any pending applications
with respect to the Licenses at the Commission or any other applicable
governmental authority.
5.12 TECHNICAL EQUIPMENT. Seller shall not fail to repair,
maintain or replace the technical equipment transferred hereunder in
accordance with the normal standards of maintenance applicable in the
broadcast industry.
5.13 COMPENSATION INCREASES. Except for normally scheduled
increases to be made consistent with past practice, Seller shall not
permit any increase in the rate of commissions, fixed salary or wages,
draw or other compensation payable to any employees of Seller.
5.14 SALE OF BROADCAST TIME. Seller shall not enter into,
extend or renew any Broadcast Agreement not consistent with the usual and
ordinary course of business for the Station and the market in which it
conducts its operations. Seller shall not enter into any Trade Agreement
without the prior written consent of Buyer.
5.15 INSURANCE. Seller shall maintain at all times between the
date hereof and the Closing Date, all insurance policies listed in
Section 3.18 of the Disclosure Schedule.
5.16 NEGOTIATIONS WITH THIRD PARTIES. Seller shall not, before
either the Closing Date or the termination of this Agreement, enter into
discussions with respect to any sale or offer of the Station, any Station
Assets or any stock of Seller to any third party, nor shall Seller offer
the Station, any Station Assets or any stock of Seller to any third
party.
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5.17 COVENANT NOT TO COMPETE.
(a) RESTRICTIVE COVENANT. During the three (3) year
period commencing on the Closing Date, Seller shall not:
(i)Directly or indirectly engage in, whether as an
owner, operator, partner, consultant, advisor, independent
contractor or otherwise, or assist any other person or entity in
engaging in, the radio broadcasting business within a 65-mile radius
of the center of Fayette, Alabama (such 65-mile radius being
referred to herein as the "Covenant Area"); or
(ii)Hold a legal or beneficial interest in any
person or entity which is engaged in the radio broadcasting or
digital cable radio business within the Covenant Area, whether such
interest is as an owner, investor, partner, creditor (other than as
a trade creditor in the ordinary course of business), joint venturer
or otherwise; or
(iii)Directly or indirectly, through any agent or
otherwise, solicit the employment of or hire any of the employees
(or independent contractors) listed on Schedule 3.14 of the Purchase
Agreement, except as agreed in writing by Buyer and Seller.
The foregoing restrictions shall not, however, prevent the
Seller from owning in the aggregate not more than five percent (5%) of
the outstanding capital stock or other equity securities in any person or
entity with shares or other equity interests registered pursuant to
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as
amended, which is engaged in the radio broadcasting or digital cable
radio business within the Covenant Area.
(b) NON-COMPETITION AGREEMENT. Seller shall cause each
of William Dunnavant and Mary Dunnavant to, deliver to Buyer on or prior
to the Closing Date a suitable non-competition agreement, substantially
in the form of Exhibit A attached hereto (the "Non-Competition
Agreement"), pursuant to which (i) William Dunnavant and Mary Dunnavant
each agree for a period of three (3) years from the Closing Date, not to
directly or indirectly own, manage, operate, control or be connected in
any other manner with any radio station located in the Covenant Area, and
(ii) William Dunnavant and Mary Dunnavant, as controlling shareholders of
Seller's parent corporation, agree to use their best efforts to cause
Seller to comply with its obligations under Section 5.18 hereof.
(c) COVENANT CONSIDERATION. Seller acknowledges that
its agreement to be bound by the covenants set forth in this Section 5.17
represent a material inducement to the Buyer's entering into this Asset
Purchase Agreement and
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for Buyer's purchase of the Station Assets from
the Seller and that Buyer would not enter into this Asset Purchase
Agreement but for the provisions of this Section 5.17.
(d) SEVERABILITY OF COVENANTS; BLUE-PENCILLING. Seller
acknowledges and agrees that the covenants set forth in Subsection (a) of
this Section 5.17 (the "Restrictive Covenants") are reasonable and valid
in geographic and temporal scope and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part thereof,
are invalid or unenforceable, the remainder of the Restrictive Covenants
shall not thereby be affected and shall be given full force and effect,
without regard to the invalid portion or portions. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
unenforceable because of the duration or geographic scope of such
provision, such court shall have the power to reduce the duration or
scope of such provision, as the case may be, and in its reduced form,
such provision shall then be enforceable.
(e) INJUNCTIVE RELIEF. Seller acknowledges that Buyer
will be irreparably harmed in the event of a breach by Seller of the
Restrictive Covenants, and that in such event, Buyer shall be entitled to
injunctive relief to secure enforcement of such covenants.
5.18 CONTINUED EXISTENCE OF SELLER. The Seller agrees
that following the Closing it shall maintain its corporate existence
shall maintain a net cash balance of not less than $300,000 at all times
prior to the later of (i) the date that is the first anniversary of the
Closing Date, and (ii) the date following the first anniversary of the
Closing Date on which any and all claims made by the Buyer against the
Seller prior to the first anniversary of the Closing Date alleging a
breach by the Seller of the representations, warranties, covenants or
agreements of the Seller contained in or made pursuant to this Agreement
or the Non-Competition Agreement, or for indemnification under Section
9.1 of this Agreement, have been finally resolved.
5.19 UPDATED MONTHLY FINANCIAL STATEMENTS. As soon as
practicable following the end of each month ending prior to the Closing
Date, Seller shall, at its own expense, deliver to Buyer an unaudited
statement of income and expenses of the Station for the month then ended.
To Seller's knowledge such monthly financial statements shall be true,
complete and fairly represent the results of the operation of the Station
for the period covered by thereby. Buyer acknowledges that Seller's
representations, warranties, covenants and agreements made in Sections
3.13, 5.7 and 5.19 of this Agreement shall not constitute a projection of
or a representation or agreement as to the financial condition or
performance of the Station for any period commencing after the Closing
Date.
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ARTICLE VI
JOINT COVENANTS OF BUYER AND SELLER
Buyer and Seller covenant and agree that between the date
hereof and the Closing Date, they shall act in accordance with the
following:
6.1 ASSIGNMENT APPLICATION. As promptly as practicable after
the date of this Agreement, and in no event later than ten (10) days
after execution of this Agreement, Seller and Buyer shall join in and
file an application on FCC Form 314 with the Commission requesting its
consent to the assignment of the Licenses from Seller to Buyer (the
"Assignment Application"). Seller and Buyer agree to prosecute the
Assignment Application with all reasonable diligence and to use their
best efforts to obtain prompt Commission grant of the Assignment
Application filed at the Commission.
6.2 PERFORMANCE. Buyer and Seller shall perform all acts
required of them under this Agreement and refrain from taking or omitting
to take any action that would violate their representations and
warranties hereunder or render same inaccurate as of the Closing Date.
6.3 CONDITIONS. If any event should occur, either within or
without the control of any party hereto, which would prevent fulfillment
of the conditions placed upon the obligations of any party hereto to
consummate the transactions contemplated by this Agreement, the parties
hereto shall use their best efforts to cure the event as expeditiously as
possible.
6.4 CONFIDENTIALITY. Buyer and Seller shall each keep
confidential all information they obtain with respect to any other party
hereto in connection with this Agreement and the negotiations preceding
this Agreement, and will use such information solely in connection with
the transactions contemplated by this Agreement. If the transactions
contemplated hereby are not consummated for any reason, each party hereto
shall return to the party so providing, without retaining a copy thereof,
any schedules, documents or other written information obtained from the
party so providing such information in connection with this Agreement and
the transactions contemplated hereby. Notwithstanding the foregoing, no
party shall be required to keep confidential or return any information
which (i) is or becomes publicly known through no fault of the receiving
party or its agents, or (ii) is required to be disclosed pursuant to an
order or request of a judicial or governmental authority (provided the
disclosing party is given reasonable prior notice).
6.5 COOPERATION. Buyer and Seller shall cooperate fully and
with each other in taking any commercially reasonable actions consistent
with this Agree-
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ment to obtain the required consent of any governmental
instrumentality or any third party necessary or helpful to accomplish the
transactions contemplated by this Agreement; PROVIDED, HOWEVER, that no
party shall be required to take any action which would have a material
adverse effect upon it or any entity affiliated with it.
6.6 ENVIRONMENTAL REPORTS. If desired by Buyer, Buyer may
arrange for the preparation of, at the expense of Buyer, appropriate
environmental reports for the real property subject to Real Estate
Contracts. Such environmental reports shall conclude that: (i) the real
property subject to Real Estate Contracts is not in any way contaminated
with any Hazardous Waste requiring remediation, clean-up or removal under
applicable laws relating to Hazardous Waste; (ii) the real property
subject to Real Estate Contracts is not subject to any federal, state or
local "superfund" or "Act 307" lien, proceeding, claim, liability or
action, or the threat or likelihood thereof, for the clean-up, removal or
remediation of any Hazardous Waste from same; (iii) there is no asbestos
located in the buildings situated on the real property subject to Real
Estate Contracts requiring remediation, encapsulation or removal under
applicable laws relating to asbestos clean-up; and (iv) there are no
underground storage tanks located at the real property subject to Real
Estate Contracts requiring remediation, clean-up or removal under
applicable laws relating to Hazardous Waste, and if any have previously
been removed, such removal was done in accordance with all applicable
laws, rules and regulations. The environmental review to be conducted
shall initially be a Phase I review. Any further investigations
recommended in the environmental reports obtained pursuant to this
Section 6.6 shall be conducted with the cost to be paid by Buyer. In the
event Buyer desires to conduct tests pursuant to this Section, Buyer
shall initiate the same within thirty (30) days of the date hereof, and
shall use its reasonable best efforts to cause such tests within four (4)
months, or thirty (30) days prior to Closing Date, whichever is first.
In the event such tests disclose a material and adverse condition which
is inconsistent with (i) through (iv) above, and after written notice of
such test results, Seller indicates it chooses not to take actions to
resolve or rectify the same within forty-five (45) days of such notice,
Buyer may at its option either accept the property in its then condition
or terminate this Agreement in which event neither party shall be
obligated to the other hereunder, the Escrow Deposit shall be returned to
Buyer. If Seller believes the condition can be resolved or rectified
within a reasonable amount of time not to exceed ninety (90) days, the
parties agree to extend the Closing Date on request of Seller for a
period of ninety (90) days.
6.7 BULK SALES LAWS. Buyer hereby waives compliance by Seller
with the provisions of the "bulk sales" or similar laws of any state.
Seller agrees to indemnify Buyer and hold it harmless against any and all
claims, losses, damages, liabilities, costs and expenses incurred by
Buyer or any affiliate as a result of any failure to comply with any
"bulk sales" or similar laws.
6.8 EMPLOYEE MATTERS. While under no obligation to hire any
employees of the Station, Buyer shall make reasonable efforts to offer
employment at
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will to certain employees of the Station. Upon review of a
full list of employees and salaries, Buyer shall notify Seller of those
employees to whom it will so offer employment as soon as practicable, and
in any event prior to making offers of employment such employees. Seller
shall be responsible for all salary and benefits of the employees of the
Station who do not accept, or are not offered, employment with Buyer.
Seller shall be responsible for all salary and other compensation due to
be paid for work for Seller for employees of the Station who become
employees of Buyer and Buyer shall be responsible for the salary and
other compensation due to be paid for work for Buyer on or after the date
of hire by Buyer for such employees. Seller shall be responsible for
severance payments which may be applicable under its employee benefit
plans to any employees not so offered employment and hired by Buyer.
6.9 SURVEY. Buyer and Seller shall obtain, at Seller's
expense, a survey of the real property subject to Real Estate Contracts
(the "Real Property") certified to Buyer or its permitted assigns. The
certification shall be by a Registered Land Surveyor and shall be made on
the ground in accordance with the minimum technical standards of land
surveying in Alabama. The survey shall be delivered to Buyer at least
fifteen (15) days prior to the Closing Date. If the survey shows:
(i) the Real Property does not have access to an abutting public road,
(ii) easements exist that are not approved by Buyer, (iii) violations of
restrictions or governmental zoning or building regulations,
(iv) buildings, structures or other improvements are constructed over any
easement, (v) any building, structure or other improvement is not
entirely within the boundaries of the Real Property, (vi) any drainage
facilities are not entirely within the Real Property or appropriate
public or private easements, or (vii) there are other material
encroachments, gaps or overlaps rendering title to the Real Property
unmarketable; then Buyer shall within seven (7) days of receipt of the
survey notify Seller in writing specifying the defects and encroachments
reflected by the survey, and Seller shall have ten (10) days within which
to remove such defects and encroachments. In the event Seller does not
remove such defects and encroachments by Closing Date, Buyer may either
chose to consummate this Agreement accepting the defects and
encroachments, or may elect to terminate this Agreement. In the event
Buyer terminates this Agreement neither party will be obligated to the
other, and the Escrow Deposit shall be returned to Buyer and this
Agreement shall be null and void. If Seller believes the defects or
encroachments can be removed within a reasonable time after the scheduled
date of closing, not to exceed sixty (60) days, then upon request of
Seller, the parties agree to extend the Closing Date for up to sixty (60)
days.
6.10 COOPERATION WITH INDEPENDENT ACCOUNTING FIRM IN PAYMENT OF
FEES. Seller shall cooperate fully with the Independent Accounting Firm
selected by Buyer for purposes of permitting such firm to conduct the
audit contemplated by Section 5.7, and in connection therewith Seller
shall cause its officers, employees, consultants, agents, accountants and
attorneys to cooperate fully with such Independent Accounting Firm. Such
cooperation shall include but not be limited to
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providing such Independent Accounting Firm with access to all books and
records of the Seller that relate to the Station and its operations. Buyer
agrees that it shall pay and be solely responsible for all fees and expenses
of the Independent Accounting Firm incurred in connection with its duties
under this Agreement and Buyer agrees to indemnify Seller and hold it harmless
against any claim which may be made against it by the Independent
Accounting Firm in connection with such fees and expenses.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
The performance of the obligations of the Buyer hereunder is
subject, at the election of the Buyer, to the following conditions
precedent:
7.1 COMMISSION APPROVALS. Notwithstanding anything herein to
the contrary, the consummation of this Agreement is conditioned upon
(a) a grant by the Commission of the Assignment Application, and
(b) compliance by the parties with the conditions, if any, imposed by the
Commission in connection with the grant of the Assignment Application
(provided that neither party shall be required to accept or comply with
any condition which would be unreasonably burdensome or which would have
a materially adverse effect upon it). All required governmental filings
shall have been made, and all requisite governmental approvals for the
consummation of the transactions contemplated hereby shall have been
granted. The Licenses shall be in unconditional full force and effect in
accordance with the terms thereof, shall be valid for the balance of the
current license term applicable generally to radio stations licensed to
communities located in the State of Alabama, and shall be unimpaired in
any material respect by any acts or omissions of Seller's employees or
agents, or Seller.
7.2 PERFORMANCE. The Station Assets shall have been
transferred to Buyer by Seller, and all of the terms, conditions and
covenants to be complied with or performed by Seller on or before the
Closing Date shall have been duly complied with and performed in all
material respects, and Buyer shall have received from Seller a
certificate or certificates to such effect, in form and substance
reasonably satisfactory to Buyer.
7.3 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller to Buyer shall be true, complete and correct in all
material respects as of the Closing Date with the same force and effect
as if then made, and Buyer shall have received from Seller a certificate
or certificates to such effect, in form and substance reasonably
satisfactory to Buyer.
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7.4 CONSENTS. Seller shall have received all consents
(including landlords' consents for assignment of the Real Estate
Contracts) specified in Section 3.9 of the Disclosure Schedule.
7.5 NO LITIGATION. No litigation, proceeding, or
investigation of any kind shall have been instituted or, to Seller's
knowledge, threatened which would materially adversely affect the ability
of Seller to comply with the provisions of this Agreement or the Non-
Competition Agreement or would materially adversely affect the operation
of the Station.
7.6 DOCUMENTS. Seller shall have obtained, executed, where
necessary, and delivered, to Buyer where applicable, all of the
documents, reports, orders and statements required of it herein, as well
as any other documents (including collateral assignments) required by any
entity providing financing for the transactions contemplated by this
Agreement and the Non-Competition Agreement.
7.7 OPINIONS OF COUNSEL. Seller shall have delivered to Buyer
an opinion of Lanier, Ford, Shaver & Payne, counsel to Seller, addressed
to Buyer and in substantially the form attached hereto as Exhibit B. In
addition, Seller shall have delivered to Buyer a written opinion of
Seller's FCC counsel, dated as of the Closing Date, addressed to Buyer
and in substantially the form attached hereto as Exhibit C.
7.8 SURVEY. Buyer shall have received the survey of the Real
Property in accordance with Section 6.9 herein.
7.9 NON-COMPETITION AGREEMENT. Seller, William Dunnavant and
Mary Dunnavant shall have executed and delivered to Buyer the Non-
Competition Agreement.
7.10 ABSENCE OF CERTAIN CHANGES. Buyer shall have received
from Seller a certificate dated the Closing Date, to the effect that
since the date of this Agreement there has not been:
(a) Any material adverse change in the working capital,
financial condition, business, results of operations, assets or
liabilities of Seller;
(b) Any change in the manner in which Seller conducts
its business and operations other than changes in the ordinary and usual
course of business consistent with past practice;
(c) Any amendment to the Articles of Incorporation or
Bylaws of Seller that would materially adversely affect Seller's ability
to perform its obligations under this Agreement or the Escrow Agreement
or materially adversely affect the Station Assets or the operation of the
Station;
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(d) Any contract or commitment, to which Seller is a
party, entered into, modified or terminated, except in the ordinary and
usual course of business or as required under the terms of this
Agreement;
(e) Any creation or assumption of any mortgage, pledge
or other lien or encumbrance upon any of the Station Assets except in the
ordinary and usual course of business;
(f) Any sale, assignment, lease, transfer, or other
disposition of any of the Station Assets, except in the ordinary and
usual course of business;
(g) The incurring of any liabilities or obligations,
except items incurred in the ordinary and usual course of business;
(h) The write-off or determination to write off as
uncollectible any accounts receivable or portion thereof, except for
write-offs in the ordinary course of business consistent with past
practice at a rate no greater than during the twelve months prior to the
Balance Sheet Date;
(i) The cancellation of any debts or claims, or waiver
of any rights, having an aggregate value in excess of $10,000;
(j) The disposition, lapse or termination of any
Intellectual Property;
(k) The increase or promise to increase the rate of
commissions, fixed salary or wages, draw, bonus or other compensation
payable to any employee of Seller, except in the ordinary and usual
course of business consistent with past practice;
(l) To Seller's knowledge, any default under any
contract or lease to which Seller is a party that would materially
adversely affect the Seller's ability to perform its obligations under
this Agreement or the Escrow Agreement or that would materially adversely
affect the Station Assets or the operation of the Station; or
(m) Any change in any method of accounting or accounting
practice used by Seller.
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ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The performance of the obligations of Seller hereunder is
subject, at the election of Seller, to the following conditions
precedent:
8.1 PERFORMANCE. The consideration set forth in Section 1.4
hereof shall have been paid to Seller, the amount payable by Buyer under
the Non-Competition Agreement shall have been paid in acordance with the
terms of such agreement, all of the terms, conditions and covenants to be
complied with or performed by Buyer on or before the Closing Date shall
have been duly complied with and performed in all material respects, and
Seller shall have received from Buyer a certificate or certificates to
such effect, in form and substance reasonably satisfactory to Seller.
8.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer to Seller shall be true, complete and correct in all
material respects as of the Closing Date with the same force and effect
as if then made, and Seller shall have received from Buyer a certificate
or certificates to such effect, in form and substance reasonably
satisfactory to Seller.
8.3 COMMISSION APPROVALS. Notwithstanding anything herein to
the contrary, the consummation of this Agreement is conditioned upon
(a) a grant by the Commission of the Assignment Application, and
(b) compliance by the parties with the conditions, if any, imposed by the
Commission in connection with the grant of the Assignment Application
(provided that neither party shall be required to accept or comply with
any condition which would be unreasonably burdensome or which would have
a materially adverse effect upon it). All required governmental filings
shall have been made, and all requisite governmental approvals for the
consummation of the transactions contemplated hereby shall have been
granted.
8.4 NO LITIGATION. No litigation, proceeding, or
investigation of any kind shall have been instituted or, to Buyer's
knowledge, threatened which would materially adversely affect the ability
of Buyer to comply with the provisions of this Agreement or the Non-
Competition Agreement.
8.5 NON-COMPETITION AGREEMENT. The Buyer shall have executed
and delivered to the Seller, William Dunnavant and Mary Dunnavant the
Non-Competition Agreement.
8.6 DOCUMENTS. Buyer shall have obtained, executed, where
necessary, and delivered to Seller where applicable, all of the
documents, reports, orders and statements required of it herein.
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Page 32
8.7 OPINION OF COUNSEL. Buyer shall have delivered to Seller
an opinion of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to Buyer,
addressed to Seller and in substantially the form attached hereto as
Exhibit D, and an opinion of Buyer's local Alabama counsel, addressed to
the Seller and in substantially the form attached hereto as Exhibit E.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLER. Subject to the limitations set
forth in Section 9.4 hereof, from and after the Closing Date, Seller
agrees to and shall jointly and severally indemnify, defend and hold
Buyer, as well as its officers, directors and direct and indirect
shareholders, harmless, and shall reimburse Buyer, as well as its
officers, directors and direct and indirect shareholders, for and against
any and all actions, losses, expenses, damages, liabilities, taxes,
penalties or assessments, judgments and costs (including reasonable legal
expenses related thereto) (the foregoing being "Losses") resulting from
or arising out of:
(a) Any breach by Seller of any representation, or
warranty contained in this Agreement, or the Non-Competition Agreement or
in any certificate, exhibit, schedule, or other document furnished to or
to be furnished pursuant hereto or in connection with the transactions
contemplated hereby;
(b) Any non-fulfillment or breach by Seller of any
covenant, agreement, term or condition contained in this Agreement, or
the Non-Competition Agreement or in any certificate, exhibit, schedule,
or other document furnished or to be furnished pursuant hereto or in
connection with the transactions contemplated hereby; and
(c) Any liabilities of any kind or nature, absolute or
contingent, not assumed by Buyer, relating to the Station, the Station
Assets or the Seller, including, without limitation, any liabilities
relating to or arising from the business and operation of the Station by
Seller prior to the Closing Date.
Notwithstanding any other provision contained herein, Seller
shall be solely responsible for any fine or forfeiture imposed by the
Commission relating solely to the operation of the Station prior to the
Closing Date.
9.2 INDEMNIFICATION BY BUYER. Subject to the limitations set
forth in Section 9.4 hereof, from and after the Closing Date, Buyer
agrees to and shall indemnify, defend and hold Seller, as well as its
officers, directors and direct and indirect shareholders, harmless, and
shall reimburse Seller, as well as its officers,
<PAGE>
Page 33
directors and direct and indirect shareholders, for and against any and
all Losses resulting from or arising out of:
(a) Any breach by Buyer of any representation, or
warranty contained in this Agreement, or the Non-Competition Agreement or
in any certificate, exhibit, schedule, or any other document furnished or
to be furnished pursuant hereto or in connection with the transactions
contemplated hereby;
(b) Any non-fulfillment or breach by Buyer of any
covenant contained in this Agreement, or the Non-Competition Agreement or
in any certificate, exhibit, schedule, or other document furnished or to
be furnished pursuant hereto or in connection with the transactions
contemplated hereby; and
(c) Any liabilities of any kind or nature, absolute or
contingent assumed by Buyer, including without limitation, any
liabilities relating to or arising from the business and operation of the
Station subsequent to the Closing Date.
Notwithstanding any other provision contained herein, Buyer
shall be solely responsible for any fine or forfeiture imposed by the
Commission relating solely to operation of the Station after the Closing
Date.
9.3 NOTIFICATION OF CLAIMS.
(a) A party entitled to be indemnified pursuant to
Sections 9.1 or 9.2 (the "Indemnified Party") shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of
any claim or demand which the Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement.
Subject to the Indemnifying Party's right to defend in good faith third
party claims as hereinafter provided, the Indemnifying Party shall
satisfy its obligations under this Article IX within thirty (30) days
after the receipt of a written notice thereof from the Indemnified Party.
(b) If the Indemnified Party shall notify the
Indemnifying Party of any claim or demand pursuant to Section 9.3(a), and
if such claim or demand relates to a claim or demand asserted by a third
party against the Indemnified Party which the Indemnifying Party
acknowledges is a claim or demand for which it must indemnify or hold
harmless the Indemnified Party under Sections 9.1 or 9.2, the
Indemnifying Party shall have the right to employ counsel reasonably
acceptable to the Indemnified Party to defend any such claim or demand
asserted against the Indemnified Party or the settlement thereof. The
Indemnified Party shall have the right to participate in the defense of
any such claim or demand. The Indemnifying Party shall notify the
Indemnified Party in writing, as promptly as possible (but in any case
before the due date for the answer or response to a claim) after the date
of the notice of claim given by the Indemnified Party to the Indemnifying
Party under
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Section 9.3(a) of its election to defend in good faith any
such third party claim or demand. So long as the Indemnifying Party is
defending in good faith any such claim or demand asserted by a third
party against the Indemnified Party, the Indemnified Party shall not
settle or compromise such claim or demand. The Indemnified Party shall
make available to the Indemnifying Party or its agents all records and
other materials in the Indemnified Party's possession reasonably required
by it for its use in contesting any third party claim or demand. Whether
or not the Indemnifying Party elects to defend any such claim or demand,
the Indemnified Party shall have no obligations to do so if the
Indemnified Party has complied with Section 9.3(a) hereof. Upon payment
of any claim or demand pursuant to this Article IX, the Indemnifying
Party shall, to the extent of payment, be subrogated to all rights of the
Indemnified Party.
9.4 LIMITATIONS ON INDEMNIFICATION. The indemnification
provided for in Sections 9.1 and 9.2 shall be subject to the following
limitations:
(i) The Seller shall have indemnification obligations
pursuant to Section 9.1 respecting Losses that result from actual or
claimed inaccuracies in or breaches of (A) representations or
warranties set forth in Section 3 of this Agreement and (B) the
covenants and agreements set forth in Section 5.1, only to the
extent that the aggregate of all such Losses shall exceed $10,000.
The foregoing limitation shall not apply to Losses relating to any
other provisions of this Agreement.
(ii) The Buyer shall have indemnification obligations
pursuant to Section 9.2 respecting Losses that result from actual or
claimed inaccuracies in or breaches of representations or warranties
set forth in Section 4 of this Agreement, only to the extent that
the aggregate of all such Losses shall exceed $10,000. The
foregoing limitation shall not apply to Losses relating to any other
provisions of this Agreement.
(iii) The Seller shall not be liable to pay any amount in
respect of its indemnification obligations hereunder in excess of an
amount in the aggregate equal to $1 milion over the Purchase Price.
ARTICLE X
MISCELLANEOUS
10.1 ASSIGNMENT.
(a) This Agreement shall not be assigned or conveyed by
either party hereto to any other person or entity without the prior
written consent of the other parties hereto; PROVIDED, HOWEVER, that
Buyer may assign this Agreement
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Page 35
without Seller's prior consent to one or
more corporations or other entities controlled by Buyer. Subject to the
foregoing, this Agreement shall be binding and shall inure to the benefit
of the parties hereto, their successors and assigns.
(b) Notwithstanding anything to the contrary set forth
herein, Buyer may assign and transfer to any commercial bank or similar
financial institution providing financing for the transactions
contemplated by this Agreement (or any refinancing by any commercial bank
or similar financial institution of such financing) as security for such
financing all of the interest, rights and remedies of Buyer with respect
to this Agreement and the Non-Compete Agreement, and Seller shall
expressly consent to such assignment. Any such assignment will be made
for collateral security purposes only and will not release or discharge
Buyer from any obligations it may have pursuant to this Agreement.
Notwithstanding anything to the contrary set forth herein, Buyer may
(i) authorize and empower such commercial bank or similar financial
institution, either directly or on behalf of Buyer, any claims Buyer may
have against Seller under this Agreement or the Non-Competition Agreement
and (ii) make, constitute and appoint one agent bank in respect of such
financing (and all officers, employees and agents designated by such
agent) as the true and lawful attorney and agent-in-fact of Buyer for the
purpose of enabling such financing sources to assert and collect any such
claims.
10.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
Notwithstanding any right of the parties to investigate the affairs of
any other party and notwithstanding any knowledge of facts determined or
determinable by the parties pursuant to such investigation or right of
investigation, each party has the right to rely fully upon the
representations, warranties, covenants and agreements of the other party
contained in this Agreement or in any certificate delivered pursuant to
any of the foregoing. All such representations, warranties, covenants
and agreements shall survive the execution and delivery of this Agreement
and the Closing hereunder and shall thereafter continue in full force and
effect until any liability relating thereto is barred by all applicable
statutes of limitations. Notwithstanding the foregoing, (i) liability
with respect to any claim (other than a Tax Claim, as such term is herein
defined) based upon, arising out of or otherwise in respect of any
inaccuracy in or breach of any representation or warranty contained in
Article 3, or for breach of any of the covenants set forth in
Section 5.1, 5.2, 5.3, 5.4, 5.5, 5.7, 5.10, 5.11, 5.12, 5.13, 5.15 and
5.19 shall terminate and expire on the date that is 12 months following
the Closing Date except for liability with respect to which notice shall
have been given on or prior to such date to the party against which such
claim is asserted, and (ii) liability with respect to any Tax Claim shall
terminate and expire on the later of (a) the date upon which the
liability to which any such Tax Claim may relate is barred by all
applicable statutes of limitation and (b) the date upon which any claim
for refund or credit related to such Tax Claim is barred by all
applicable statutes of limitations. As used in this Agreement, "TAX
CLAIM" means any claim based upon, arising out of or otherwise in respect
of any inaccuracy in or any breach of any representation, warranty,
covenant or agreement of any party contained in this
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Agreement related to Taxes including, without limitation, Sections 1.5(a),
1.6, 3.5 and 5.6 hereof.
10.3 BROKERAGE. Buyer shall be wholly responsible for, and
shall indemnify and hold Seller harmless against, any brokerage or other
fee due to Raymond.
10.4 EXPENSES OF THE PARTIES. It is expressly understood and
agreed that all expenses of preparing this Agreement and of preparing and
prosecuting the Assignment Application with the Commission, and all other
expenses, whether or not the transactions contemplated hereby are
consummated, shall be borne solely by the party who shall have incurred
the same and the other party shall have no liability in respect thereto,
except as otherwise provided herein. All costs of transferring the
Station Assets in accordance with this Agreement, including recordation,
transfer and documentary taxes and fees, and any excise, sales or use
taxes, shall be borne equally by Seller and Buyer. Any filing or grant
fees imposed by any governmental authority the consent of which is
required for the transactions contemplated hereby shall be borne equally
by Seller and Buyer.
10.5 ENTIRE AGREEMENT. This Agreement, together with any
related Schedules or Exhibits, contains all the terms agreed upon by the
parties with respect to the subject matter herein, and supersedes all
prior agreements and understandings among the parties and may not be
changed or terminated orally. No attempted change, termination or waiver
of any of the provisions hereof shall be binding unless in writing and
signed by the party against whom the same is sought to be enforced.
10.6 HEADINGS. The headings set forth in this Agreement have
been inserted for reference only and shall not be deemed to limit or
otherwise affect, in any manner, or be deemed to interpret in whole or in
part, any of the terms or provisions of this Agreement. Unless otherwise
specified herein, the section references contained herein refer to
sections of this Agreement.
10.7 GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the internal laws of the State of Alabama.
10.8 COUNTERPARTS. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be
deemed an original, but all of such shall constitute one and the same
instrument.
10.9 NOTICES. Any notices or other communications shall be in
writing and shall be considered to have been duly given when deposited
into first class, certified mail, postage prepaid, return receipt
requested, delivered personally (which shall include delivery by Federal
Express or other recognized overnight courier service that issues a
receipt or other confirmation of delivery) or delivered via facsimile
machine;
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IF TO SELLER:
William Dunnavant
President
Athens Broadcasting Company, Inc.
1717 Highway 72 East
Athens, Alabama 35611-2364
Fax: (205) 232-6842
Phone: (205) 233-3000
With a copy to:
M. Scott Johnson, Esq.
Gardner, Carton & Douglas
1301 K Street, N.W.
Suite 900, East Tower
Washington, DC 20005
Fax: (202) 289-2504
Phone: (202) 408-7122
IF TO BUYER:
Mr. Frank D. Osborn
Osborn Communications Corp.
130 Mason Street
Greenwich, CT 06830
Fax: (203) 629-1749
Phone: (203) 629-0905
With a copy to:
Robert M. Hirsh, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Fax: (212) 757-3990
Phone: (212) 373-3000
Any party may at any time change the place of receiving notice
by giving notice of such change to the other as provided herein.
10.10 SPECIFIC PERFORMANCE. Seller acknowledges that the
Station is of a special, unique and extraordinary character and that
damages are inadequate to compensate Buyer for Seller's breach of this
Agreement. Accordingly, in the event of a material breach by Seller of
its representations, warranties, covenants and
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Page 38
agreements under this Agreement, Buyer, not being in material default
hereunder, shall be entitled to specific performance of this Agreement by
Seller. In the event Buyer elects to institute any action specifically to
enforce Seller's performance, Seller agrees to waive any claim or defense that
Buyer has an adequate remedy at law, and Seller will interpose no
opposition legally or otherwise to the propriety of specific performance.
Buyer's right to specific performance, if exercised, shall be an
alternative to, and not in addition to, the right to pursue through legal
proceedings an award of damages or expenses arising from a material
default by Seller.
10.11 CONSENT TO JURISDICTION. Seller and Buyer hereby submit
to the nonexclusive jurisdiction of the courts of the State of Alabama
and the federal courts of the United States of America located in such
state solely in respect of the interpretation and enforcement of the
provisions hereof and of the documents referred to herein, and hereby
waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such
document, that they are not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or
that this Agreement or any of such documents may not be enforced in or by
said courts or that the Station property is exempt or immune from
execution, that the suit, action or proceeding is brought in an
inconvenient forum, or that the venue of the suit, action or proceeding
is improper.
10.12 FURTHER ASSURANCES. Seller and Buyer agree to execute all
such documents and take all such actions after the Closing Date as any
other party shall reasonably request in connection with carrying out and
effectuating the intent and purpose hereof and all transactions and
things contemplated by this Agreement, including, without limitation, the
execution and delivery of any and all confirmatory and other documents in
addition to those to be delivered on the Closing Date and all actions
which may reasonably be necessary or desirable to complete the
transactions contemplated hereby.
10.13 PUBLIC ANNOUNCEMENTS. No public announcement (including
an announcement to employees) or press release concerning the
transactions provided for herein shall be made by either party without
the prior approval of the other party, except as required by law.
10.14 MERGER AGREEMENT. Buyer has notified Seller that Buyer
has entered into an Agreement and Plan of Merger, dated as of July 23,
1996 (the "Merger Agreement"), among Buyer, OCC Acquisition Company,
Inc., a Delaware corporation ("OCC Acquisition"), and, with respect to
certain specified provisions of the Merger Agreement, OCC Holding
Corporation, a Delaware corporation and the owner of all of the issued
and outstanding shares of OCC Acquisition ("OCC Holding"), pursuant to
which OCC Acquisition will be merged with and into Buyer (the "Merger"),
and Buyer will become a direct wholly owned subsidiary of OCC Holding, a
corporation organized by Hick, Muse, Tate & Furst Incorporated. The
Buyer and Seller acknowledge that their respective rights and obligations
under this
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Agreement, the Escrow Agreement and the Non-Competition
Agreement and the consummation of the transactions contemplated by this
Agreement, the Escrow Agreement and the Non-Competition Agreement are not
conditioned upon either the closing or abandonment of the transactions
contemplated by the Merger Agreement and shall survive and be unaffected
by the closing or abandonment of the Merger.
The Parties agree that for purposes of this Agreement, the
consummation of the Merger shall not be deemed an act by the Buyer which
would disqualify Buyer from being the assignee of the Licenses and the
other Station Assets within the meaning of Section 4.6 hereof, provided
that any successor to the Buyer resulting from the Merger, for purposes
of the Commission's analyses, is legally, technically and financially
qualified to be the assignee of the Licenses and other Station Assets.
IN WITNESS WHEREOF, the parties hereto have executed or have
caused this Agreement to be executed by a duly authorized officer on the
day and year first above written.
SELLER
TUSCALOOSA BROADCASTING COMPANY, INC.
/S/ WILLIAM DUNNAVANT
BY: WILLIAM DUNNAVANT
TITLE: PRESIDENT
BUYER
OSBORN COMMUNICATIONS CORPORATION
/S/ FRANK D. OSBORN
BY: FRANK D. OSBORN
TITLE: PRESIDENT
